Manak Chand v. State of Rajasthan (161) — 1992 DIGILAW 649 (RAJ)

BALIA, J.—Petitioner Manak Chand and respondents No. 3 and 4 formed a partnership firm known as United Trading Company. They constructed a Factory at Bhagat-ki-Kothi, Jodhpur. It is alleged that since 1954-5, the business of the Firm was closed and the partners of the Firm started their separate business. While petitioner was residing at Jaipur, the respondents No. 3 and 4 were residing at Calcutta in connection with their business. The factory was let out to the Food Corporation of India in 1958-59, and thereafter it was requisitioned by the State of Rajasthan and presently it is being used as Godown for Rajasthan State Ware Housing Corporation. It is alleged by the petitioner that when they were served with Notice Ex. 2 dated January 14, 1985 from the office of the Naib-Tehsildar (Public Demand Recovery), Jodhpur raising a demand of Rs. 2,23,000/- as arrears of the Land and Building Tax, Rs. 4800/- as penalty, and Rs. 11,390/- as interest for late payment the petitioner came to know for the first time about the proceedings under Land and Building Tax. (2) It was then came to the notice of the petitioner that the property of the Firm known as United Trading Company, situated at Bhagat-ki-Kothi, Jodhpur was assessed by the respondent No. 2 under the Land and Building Tax vide assessment order dated August 20, 1977 which is Ex. 3. It is further alleged by the learned counsel for the petitioner that by coming to know of these proceedings, during the course of file inspection the petitioner came to know that respondent No. 2 also provisionally assessed the property as Rs. 20,00,000/- vide Ex. 6 which did not show on what basis the respondent No. 2 had arrived at the estimated market value to be of Rs. 20,00,000/-. Ex. 6 reads as under :— "VALUATION OF P.T.P.O. (BEST JUDGMENT METHOD) Building occupied by P.C.I., in Industrial area of Bhagat-ki- Kothi, Opp. Alcobax. Looking to the domination of plot and garage numbers of sheds constructed within the premises. Provisional value of Building including land is Rs. 20,00,000/- Twenty Laks only by BEST JUDGMENT METHOD. Sd/- 19.2.77" (3) It was solely on the basis of Ex. 6 that best Judgment Assessment Order was made by the Assessing Authority. Alcobax. Looking to the domination of plot and garage numbers of sheds constructed within the premises. Provisional value of Building including land is Rs. 20,00,000/- Twenty Laks only by BEST JUDGMENT METHOD. Sd/- 19.2.77" (3) It was solely on the basis of Ex. 6 that best Judgment Assessment Order was made by the Assessing Authority. It is alleged by the learned counsel for the petitioner that no notice of whatever kind was served on the petitioner or any of his partners before passing of this Assessment Order. According to him, the order suffers from the error on the face of record inasmuch, the order do not confirm with the requirement of S. 11. Vide order dated March 16, 1985, application of the petitioner for rectification of order was rejected inter alia on the ground that the mistake pointed by the petitioner do not come within the perview of error apparent on the face of record the order is Ex.7. (4) In the aforesaid circumstances, petitioner has challenged best judgment assessment order dated August, 20, 1977 (Ex.3), order rejecting his application under S. 22A dated March 16, 1985 (Ex. 7) and demand notice dated January 14, 1985 (Ex.2). (5) Return has been filed in which it has been stated that the property belonging to United Trading Co. has been under the attachment proceedings and the rent is being recovered by the Tax Recovery Officer who is deemed to be owner as per provisions of the Act. Notice has been sent to the Tax Recovery Officer. In view thereof, it has been claimed that the provisions of S. 11 has been duly complied with. In the return it has been stated that notices addressed to the petitioner were served on one Vimal Kanwar W/o Mangilal Sancheti. However, it has not been shown how Smt. Vimal Kanwar was connected with the Firm or with any other partners of the Firm. In the return, the respondents have also supported the order of the best assessment judgment on the merits. (6) A rejoinder has also been filed on behalf of the petitioner. (7) In the first instance it has been submitted that the order of the best assessment is not at all in compliance with the provisions of the Act and suffers from patent errors and illegalities. It was pointed out that all the relevant columns of the Assessment order are blank. (7) In the first instance it has been submitted that the order of the best assessment is not at all in compliance with the provisions of the Act and suffers from patent errors and illegalities. It was pointed out that all the relevant columns of the Assessment order are blank. The Assessment order is required to be made in Form LBT-7 under R. 10, where the assessment is made on the failure on the part of the owner to file return. It does not disclose the necessary information on the basis of which best judgement is required to be framed under the statutory provisions. My attention was invited to the provisions of Sections 7,9, and 11 which are relevant for the purpose of framing an assessment under the Land and Building Tax Act, 1954, where no return has been filed by the owner of the land and building. It is not disputed that this is the case which is covered by these provisions. (8) Principles on which best judgment assessment ought to be framed under various taxing statutes are well established. Reference in this connection may be made to the principles enunciated in the case of Oceanic Industries (India) Pvt. Ltd. vs. The Commercial Tax Officer, Bhowanipore Charge and Ors. (1) wherein it was observed as under : "It is implicit in the section that the Commercial Tax Officer should consider all relevant material he has gathered before making the assessment. Even in making best judgment assessment he has to give a dealer a reasonable opportunity of being heard. It is also implicit that he should give his reasons for arriving at a particular figure for enabling the assessee to appreciate the mental process leading to the assessment, and such order being subject to appear need also be a speaking order." (9) While considering the scope of jurisdiction to make best judgment assessment under Income Tax Act, 1922, the Privy Council in the Case of Commissioner of Income Tax vs. Laxminarain Badridas (2), observed as under:— "The Officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying information. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must not act dishonestly, or vindictively or capriciously because he must exercise judgment in the matter. He must make what he honestly believes to be a fair estimate of the proper figure of assessment, and for this purpose he must, their Lordships think, be able to take into consideration local knowledge and repute in regard to the assessees circumstances and his own knowledge of previous returns by an assessment of the assessee and all other matters which he thinks will assist him in arriving at a fair and proper estimate; and though there must necessarily be guess-work in the matter, it must be honest guess-work." (10). The principle was thus enunciated by their Lordships of Supreme Court in this regard as under in the case of State of Orissa vs. B.P. Singh Deo (3) :— "The power to levy assessment on the basis of best judgment is not an arbitrary power; it is an assessment on the basis of best judgment. In other words that assessment must be based on some relevant materials. It is not a power that can be exercised under the sweet-will and pleasure of the concerned authorities." (11) Their Lordships of the Supreme Court in the case of the Siemens Engineering and Manufacturing Co. of India Ltd. vs.The Union of India and Another (4) observed as under :— "It is now settled law that where an authority makes an order in exercise of a quasi-judicial function, it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. "The rule requiring reasons to be given in support of an order is, like the principle of audi alteram partem a basic principle of natural justice which must inform every quasi-judicial process and this rule must be observed in its proper spirit and mere pretence of compliance with it would not satisfy the requirement of law." (12) It cannot be disputed that the assessment made by the assessing authority is the quasi-judicial function and must conform to the aforesaid norms. (13) Scheme of the Land and Building Tax Act may now be examined. Sections 7, 9 and 11 read as under : "7. (13) Scheme of the Land and Building Tax Act may now be examined. Sections 7, 9 and 11 read as under : "7. Owner of land or building liable to submit return : (1) Every owner of land or building or both liable to pay tax shall within a period of ninety days from the date of commencement of Rajasthan Urban Lands Tax (Amendment) Act 1973, furnish to the Assessing Authority a return for the first year in respect of lands & buildings in the Urban area containing the following particulars namely :— (a) name and address of the owner of the land and building; (b) The extent of the land or building or both; (c) The name of the mohalla or ward and of the street, survey number and sub-division number of the urban land or building and other particulars thereof; (d) the amount which in the opinion of the owner is the market value of the land or building or both; and, (e) the amount of land building tax payable for the year. (2) Subject to the provisions of section 15A the tax due according to such return shall be payable in advance on or before the last day of June. Every return under sub-section (1) shall be accompanied by a treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government showing payment of the full amount of tax due on the basis of the return in the State Government treasury or bank concerned. 9. Collection of information. — If any owner of land or building fails to furnish the return under Section 7, the Assessing Authority may obtain the necessary information in respect of the particulars specified in Sec. 7 either by himself or through such agency as he thinks fit. 11. Procedure in case where no return is filed — (1) Where the owner of land or buildings has failed to furnish the return under section 7 and the Assessing Authority has obtained the necessary information under section 9, he shall serve a notice on the owner in respect of land or building specifying therein :— (a) the extent of the land building. (b) the amount which, in the opinion of the Assessing Authority is the correct market value of the land or building, and direct him either to attend in person or be an-authorised agent on a date & place to be specified in the notice or to produce or cause to be produced on that date any evidence on which the owner may rely. (2) After hearing such evidence, as the owner may produce and such other evidence as the Assessing Authority may require on any specified points, the Assessing Authority shall, by order in writing, assess the market value of the land or building or both, as the case may be and determine the amount of tax payable in respect thereof. (3) Where the owner has failed to attend or produce evidence in pursuance of the notice under sub-section (1), the Assessing Authority shall on the basis of the information obtained by him under section 9 by order in writing, assess the market value of the land or building and determine the amount of tax payable in respect thereof." (14) From the Scheme of the Act as appearing from the aforesaid provisions, it is apparent that if any owner fails to furnish the return, the Assessing Authority is required under S. 9 of the Act to obtain the necessary information in respect of the particulars specified in Section 7 either by himself or through such agency as he thinks fit. (15). Under S. 11, the Assessing Authority is under obligation to serve a notice on the owner of the land after obtaining necessary information as required under S. 9 read with Sec. 7. He has to specify in the notice, the extent of the land and building and the amount which in the opinion of the Assessing Authority is market value of land and building and is required to afford an opportunity of hearing to the owner to produce evidence in support of owners case. On failure of the owner to appear or produce evidence, the Assessing Authority is authorised to pass an order on the basis of the information obtained by him under S. 9 read with Sec. 7 by an order in writing. Such as Assessment Order under R. 10 is required to be made in Form LBT-7. On failure of the owner to appear or produce evidence, the Assessing Authority is authorised to pass an order on the basis of the information obtained by him under S. 9 read with Sec. 7 by an order in writing. Such as Assessment Order under R. 10 is required to be made in Form LBT-7. The form also requires the Assessment order to contain all the particulars of land and building about which information is required to be gathered by assessing authority under S.9 read with S. 7 that is to say, the assessment order must disclose in relation to the property in question, name and address of the owner, name of the mohalla or ward and of the street, survey number and sub-division number of the Urban land or building and other particulars thereof. The value of the land and building is to be determined with reference to the total area of land. The area constructed thereon and with reference to the situation of the property in question and also with reference to the fact whether entire property is as a whole one unit or there are separate taxable units. (16) A bare look at the Ex. 3 goes to show that information which is required to form the basis of assessment concerning the situation of the land and building and the extent of the land and building has not been disclosed in the assessment order. The assessment order contains merely a statement that the property is assessed to be 20 lacs on the basis of information collected. The information which is alleged to have been collected does not find any expression in the assessment order. (17) It has also not been disputed that before passing of the final order, a provisional assessment Ex. 6 was also made which has formed the basis of assessment in the final assessment order. Even provisional order does not disclose the so called information that has been collected and the details of the property which is said to be assessed as land and building tax. It is rather curious to note that now best judgment assessment has been framed in the present case without reference of the extent of land which is covered by the property in question and extent of construction thereon and without reference to the locality in which the property is situated. It is rather curious to note that now best judgment assessment has been framed in the present case without reference of the extent of land which is covered by the property in question and extent of construction thereon and without reference to the locality in which the property is situated. While in the provisional assessment, the property has been described to be situated at Bhagat-ki-Kothi, Jodhpur, the property in the Assessment Order has been described as Soda Factory Godown. It has not even disclosed on which place the factory is situated. It has also not been disclosed what is the total area of land and what buildings are constructed which are included in the Assessment. (18). Thus having come to the conclusion as to what is required as essential part of an assessment order passed under S.ll and having come to the conclusion that the order Ex. 3, does not conform to such requirement which an assessment order under S.ll read with S. 13 must contain, it must be held that the order suffers from the error apparent on the face of record & was required to be corrected even under the provisions of S. 22A. (19) It was also contended by the learned counsel for the petitioner that no notice has been served on the petitioner or any partner of the Firm. (20) The learned counsel for the respondent has refuted this allegation in the return and has sought to support the order as having been made after service of notice. It is apparent from the impugned order Ex. 3 itself that notice had not been served on any of the partners. It has clearly been mentioned in the order that property in question was presently in occupation of Rajasthan State Ware Housing Corporation. The order also speaks that the present address of the partners could not be known. This clearly goes to show that no notice has been issued to the partners and it could not have been served. (21) In the return it has not been shown as to what attempts have been made to know the present address of the partners whose names were known to the assessing authority and what efforts were made to effect service on those partners namely the owner concern, when admittedly they were not residing at Jodhpur. (21) In the return it has not been shown as to what attempts have been made to know the present address of the partners whose names were known to the assessing authority and what efforts were made to effect service on those partners namely the owner concern, when admittedly they were not residing at Jodhpur. (22) No clue has been given as to why notice has been served on Smt. Vimal Kanwar wife of Mangilal Sancheti and delivery of notice on her cannot be treated as notice to any partner of the firm. In the return it has also been stated that notice has been served on Tax Recovery Officer. However, from the order it appears that notice was served on Tax Recovery Officer merely to know from him current addresses of the partners of Firm United Trading Co. There is no indication that notice on him was served for the purpose of treating him assessee and calling upon him to participate in proceedings. (23) Therefore, it can reasonably be held in the facts and circumstances of the case that assessment order has been passed without notice to the owners of the property or at least without serving appropriate notice on the persons who were required to be served with notice. The order Ex. 3 is thus also bad on the ground that it has been made in breach of principles of natural justice. (24) As a result of the above discussion, the Assessment Order Ex. 3 dated August 20,1977 is not sustainable and is quashed. Consequently, demand notice Ex. 2 dated January 14, 1985 and the order Ex. 7 dated March 16, 1985 rejecting the application for rectification are also quashed. The Assessing Authority is directed to make a fresh assessment of the land and buildings tax in question after affording a proper opportunity of hearing to the petitioner who was erstwhile partner of the United Trading Company. The petitioner is directed to appear before the Assessing Authority viz. Assistant Director, Land and Buildings Tax Department, Jodhpur on August 27, 1992. The other partners of the Firm may also participate in the proceedings, if they so like. (25) It may be stated that the petitioner has deposited rupees one lac under the direction of this Court on April 23, 1990 as Land and Building Tax. Assistant Director, Land and Buildings Tax Department, Jodhpur on August 27, 1992. The other partners of the Firm may also participate in the proceedings, if they so like. (25) It may be stated that the petitioner has deposited rupees one lac under the direction of this Court on April 23, 1990 as Land and Building Tax. The amount will be adjusted against any liability that may arise as a result of fresh assessment made by the Assessing Authority and if after such adjustment any amount is found to be excess, it may be refunded to the petitioner. Until the final assessment is made, the amount shall remain with the Assessing Authority.