IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. W.T.A. No. 12 of 2009 (O&M) Date of Decision: September 15, 2009 Amrit Lal Jindal & Sons (HUF) …Appellant Versus The Wealth Tax Officer, Sunam …Respondent CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. K.L. Goyal, Senior Advocate, with Mr. Sandeep Goyal, Advocate, for the assessee-appellant. Mr. Rajesh Katoch, Advocate, for the revenue-respondent. 1. To be referred to the Reporters or not? Yes 2. Whether the judgment should be reported in the Digest? Yes M.M. KUMAR, J. This order shall dispose of W.T.A. Nos. 12, 13 and 14, filed by the assessee-appellant under Section 27A of the Wealth Tax Act, 1957 (for brevity, ‘the Act’) challenging common order dated 16.6.2008 passed by the Income Tax Appellate Tribunal, Chandigarh Bench-A, Chandigarh (for brevity, ‘the Tribunal’). The Tribunal has rejected the appeals of the assessee-appellant, bearing W.T.A. Nos. 39/Chandi/1999, 49/Chandi/1998 and 40/Chandi/1999 in respect of Assessment Years 1993-94, 1994-95 and 1995-96 respectively. Since common questions of law and facts are involved, therefore, these appeals have been clubbed together. WTA No. 12 of 2009 (O&M) FACTS: 2. Amrit Lal Jindal & Sons-assessee-appellant was an HUF. The HUF owned 106 Kanals and 15 Marlas of agricultural land at Sangrur. On 15.7.1992, the Improvement Trust, Sangrur, passed a resolution to acquire 78 Kanals and 1 Marla of land out of aforesaid total land owned by HUF under the provisions of Sections 24 and 28 of the Punjab Town Improvement Trust Act, 1922 (for brevity, ‘the 1922 Act’) for formation of Transport Nagar Sangrur under a Scheme. On 22.7.1994, 29.7.1994 and 5.8.1994, notifications under Section 36 of the 1922 Act (which is equivalent to Section 4 of the Land Acquisition Act, 1894) were issued acquiring the said land. The assessee-appellant has claimed that the compensation of the acquired land was disbursed in the year 1997. It is relevant and pertinent to mention here that upto the assessment year 1995- 96 the assessee-appellant used to file the returns of net wealth in the status of HUF. However, on 21.3.1996 there was a partition of the HUF, therefore, the individual members of the HUF had filed returns of net wealth in respect of taxable wealth owned by them. 3. The assessee-appellant filed two returns on 29.3.1996 in respect of assessment year 1994-95 & 1995-96 and one return on 2.9.1996 in respect of assessment year 1993-94. In respect of assessment years 1993- 94 to 1995-96, the assessee-appellant declared the total wealth as under:- 1993-94 Rs. 30,28,000/- 1994-95 Rs. 32,73,000/- 1995-96 Rs. 33,36,000/- 4. The case of the assessee-appellant was selected for scrutiny. For the purposes of determination of the value of wealth, the Assessing Authority took the dates as 31.3.1993, 31.3.1994 and 31.3.1995 in respect 2 WTA No. 12 of 2009 (O&M) of the assessment years in question. The Assessing Authority assessed the value of total land measuring 106 Kanals 15 Marlas inclusive of acquired land measuring 78 Kanals 1 Marla. The value of the agricultural land was assessed at Rs. 2,31,09,000/- by the Assessing Authority. However, the total wealth in respect of each assessment year was computed separately, which is tabulated as under:- 1993-94 Rs. 2,34,03,100/- Vide order dated 12.12.1997 1994-95 Rs. 2,31,79,000/- Vide order dated 27.3.1997 1995-96 Rs. 2,31,79,000/0 Vide order dated 12.12.1997 5. Against the assessment orders passed by the Assessing Authority, the assessee-appellant filed separate appeals under Section 16(3) of the Act before the Commissioner of Wealth Tax (Appeal) Patiala. The Appellate Authority after adjudication reduced the valuation of the property from Rs. 2,31,09,000/- to Rs. 1,26,45,249/- for the entire land measuring 106 Kanals 15 marlas granting relief of Rs. 1,04,63,751/-, vide orders dated 3.3.1998 and 20.4.1999, . The Appellate Authority also found that the entire land falls within the definition of ‘asset’ as defined in clause 2(ea) of the Act. The Appellate Authority, however, rejected the claim of the assessee-appellant for exemption of the agricultural land from Wealth Tax. The Appellate Authority also deleted addition of Rs. 70,000/- pertaining to valuation of the residential house of the assessee-appellant. The Assessing Authority was also directed to give consequential benefit of charging of interest under Section 17-B of the Act. 6. The assessee-appellant as well as the revenue both filed appeals before the Tribunal challenging the order of the Appellate Authority. It is pertinent to mention here that the family members, who were earlier part of 3 WTA No. 12 of 2009 (O&M) the HUF, also filed their separate appeals before the Tribunal. In this manner, in all 12 appeals were filed before the Tribunal, which were clubbed together. The Tribunal disposed of all the appeals vide common order dated 5.11.2004. The Tribunal considered the issues relating to the assessment of the value of acquired land measuring 78 Kanals 1 Marla; the right to receive compensation and exemption in respect of the residential house owned by the HUF. With regard to first issue relating to assessment of the value of acquired land, after discussing the provisions of Sections 3, 2 (m), 2(e), 2(ea) and Explanation-I below Section 2(b) of the Act, the Tribunal in para Nos. 13 to 16 of its order observed as under:- “13. Any land situated in the jurisdiction of the municipality etc. is included in the definition of urban land. The land belonging to the assessee falls within the jurisdiction of the municipal corporation and accordingly, would fall within the definition of urban land. As admitted before us, the assessee has not carried on any agricultural operations on the portion of the land not acquired by the Govt. Therefore, the said portion of the land is included in the definition of the assets u/s 2(ea) of the Wealth-tax Act, 1957. The value of such land is accordingly, liable to wealth-tax. We accordingly hold that the value of land measuring 28 kanals 14 marlas is includable in the net wealth of the respective owners. The appeal of the assessee to that extent is dismissed. 14. As far as the value of this land is concerned, the Assessing Officer has determined the same on the basis of two sale instances which have been made by the assessee in the year 4 WTA No. 12 of 2009 (O&M) 1994. There cannot be a better evidence of the market rate then the sale made by one of the assessee. No cognizance can be taken of the claim that the said sale was conducted with a view to claim higher compensation as it is unethical. Besides, no evidence has been filed to establish the claim. The Assessing Officer has given a relief of 25% on account of certain disadvantages in comparison to the sale rate for the land sold by the assessee. The Commissioner of Income-tax (Appeals) has allowed further relief of 15%. In other words, the value adopted by the Commissioner on Income-tax (Appeals) is 40% less than the market value determined with reference to two sale instances. In our considered view, the value adopted by the Assessing Officer by allowing deduction of 25% is reasonable. The 15% on account of the provision of roads etc. compulsorily to be made by the assessee as per PUDA rules is also taken care of in allowance of 25%. We accordingly modify the order of the Commissioner of Income-tax (Appeals) and hold that the value of land not acquired by the Government measuring 28 kanals 14 marlas be adopted as per rate fixed by the Assessing Officer. 15. As far as the value of the land measuring 78 kanals and one marlas is concerned, it is not disputed before us that the said land was acquired by the Government by notification dated 15.7.1992. The compensation was also fixed on 22.7.1994 and the same was paid on 30.7.1997. It is evident from the facts stated above that the land measuring 78 kanals and 1 marla 5 WTA No. 12 of 2009 (O&M) vested with the Government after the issue of notification for acquisition of land. The findings of Commissioner of Wealth- tax (Appeals) in the case of Amrit Lal Jindal & Sons being relevant is reproduced hereunder:- “In this connection, it is relevant that so far as the 78 kanals 1 marla land is concerned, the same was the subject matter of notification for acquisition by the Improvement Trust, Sangrur. No doubt, the appellant due to this reason was barred from either selling of this land or carrying out any construction thereof but at the same time, the appellant was entitled to receive compensation to be fixed by the land acquisition collector improvement trust, Sangrur. This compensation was ultimately fixed at Rs. 77,20,329/- and in addition to this, the appellant also solution for compulsory acquisition and also a sum of Rs. 27,12,92.66 as increase from 22.7.94 (first notification till the date of payment). The right to receive compensation vested in the appellant from the date when the acquisition proceedings started.” 16. The assessee had admittedly the right to receive compensation. Their Lordships of the Supreme Court in the case of CWT Vs. U.C. Mehatab, 231 ITR 501, (supra) held that the right to receive compensation is a valuable right and an assets within the meaning of Wealth-tax Act, 1957. So however, w.e.f. 1.4.1993, the definition of assets has undergone a change. As already pointed out, it is not every asset which is assessable to tax from 1.4.1993 as per the provisions of the Wealth-tax Act. Only such assets which are included in the 6 WTA No. 12 of 2009 (O&M) definition of the assets u/s 2(ea) elsewhere in this order and we are unable to find the “right to receive the compensation” to fall within the category of any assets referred to in section 2(ea) of the Wealth-tax Act, 1957 as applicable w.e.f. 1.4.1993. Therefore, though the right to compensation is a valuable right and as an asset for the purpose of Wealth-tax Act, 1957 before 1.4.1993 but as per section 2(ea) w.e.f. 1.4.1993 the right to receive compensation is not a asset liable to tax. The decision of the Supreme Court in the case of CWT Vs. U.C. Mehatab, 231 ITR 501, (supra) is thus inapplicable. We, therefore, hold that the value of 78 kanals and 1 marla of land which has been acquired by the Govt. has wrongly been included in the net wealth of the assessee. The same is accordingly, deleted.” 7. The Tribunal also modified the order of the Appellate Authority to the extent it has granted relief of 15% while determining the value of the un-acquired land as against 25% assessed by the Assessing Authority. The Tribunal accordingly ordered that the value of the un-acquired land be adopted as per the rate fixed by the Assessing Officer. The Tribunal, however, deleted inclusion of the value of the acquired land measuring 78 Kanals and 1 Marlas from assessment. On the issue of exemption in respect of residential house owned by the HUF, the Tribunal has held that the assessee was not entitled to exemption in respect of more than one house. Accordingly, the Tribunal restored the addition of Rs. 70,000/- for the relevant assessment years. 8. Thereafter, the revenue filed a rectification application under Section 35(3) of the Act before the Tribunal for rectification of the order 7 WTA No. 12 of 2009 (O&M) dated 5.11.2004 claiming that there was mistake in para 15 (supra) of the said order. It was asserted that the Tribunal proceeded on the basis that the land was acquired by the Government vide notification dated 15.7.1992 and as such the assessee was not the owner of the said land as on 31.3.1993, 31.3.1994 and 31.3.1995 for the purpose of the Act. It was further claimed by the revenue that the acquisition proceedings were initiated on 21.3.1997 and, thus, the basis of the Tribunal to decide the issue was factually incorrect. The Tribunal has accepted the aforementioned rectification application vide order dated 18.9.2007 and partially recalled its order dated 5.11.2004 relating to taxability of the value of the land measuring 78 Kanals and 1 Marlas. Thereafter the matter was again listed before the same Bench of the Tribunal, which had passed the order dated 5.11.2004. The final order on rectification was passed by the Tribunal on 16.6.2008. After noticing paras 15 and 16 of the earlier order dated 5.11.2004, the Tribunal has passed the following order:- “4. It has been pointed out before us that in respect of the land measuring 78 kanal and one marla the Land Acquisition Collector Improvement Trust had initiated the acquisition proceedings on 21.3.1997 and therefore, the value of the said land was assessable to Wealth-tax for the assessment year 1993-94, 1994-95 and 1995-96. We accordingly reject the ground of appeal raised by the assessee and hold that the value of the land measuring 78 kanal and one marla was rightly assessed to Wealth-tax for the aforementioned assessment years. We hold accordingly. The earlier order of the Tribunal is modified accordingly.” 8 WTA No. 12 of 2009 (O&M) QUESTIONS OF LAW: 9. In the backdrop of the aforementioned factual matrix, the assessee-appellant has filed the instant appeals raising the following substantial questions of law for determination of this Court:- “(i) Whether on the facts and circumstances of the case, the Ld. ITAT has erred in law in modifying its earlier order Annexure A-5 by passing orders Annexure A-11 and A- 12, when the matter relating to date of acquisition of property measuring 78 Kanal 1 Marla and the date on which the Right to receive compensation accrued to the assessee, was a debatable issue? (ii) Whether on the facts and circumstances of the case, the acquisition proceedings in the present case were initiated on 15.7.1992 when the Resolution was passed by Improvement Trust and alternatively on 22.7.1994, 29.7.1994 or 5.8.1994, when the Notifications as such were published in the Official Gazette of Punjab Govt.? Therefore, the Ld. ITAT has erred in law to hold that the proceedings of acquisition were initiated in 1997. (iii) Whether on the facts and circumstances of the case, the right to receive compensation is vested in the owner of the property on the date of passing of the Resolution by Improvement Trust or its vests on the date of notification in the Official Gazette or on the date when the property is actually acquired? (iv) Whether on the facts and circumstances of the case, the 9 WTA No. 12 of 2009 (O&M) Ld. ITAT has erred in law in upholding the order of the lower authorities, whereby the entire chunk of land measuring 106 Kanal 15 Marla was included in the urban land as defined in Section 2(ea) of the Act ibid, when no construction activity was possible on the land under the provisions of local Acts of Punjab as in force during those assessment years and also after the passing of the Resolution by the Improvement Trust before 31.3.1993? (v) Whether the Ld. ITAT has erred in law in accepting the application for rectification filed by the Department that land measuring 78 Kanal 1 Marla was includible in the net wealth of the assessee, when the Department has not challenged the finding of the 1st Appellate Authority to the extent that it was only a right to receive compensation as no construction activity was possible on that land during the impugned assessment year. ARGUMENTS: 10. Mr. K.L. Goyal, learned counsel for the appellant has argued that under Section 35 of the Act the scope of rectification is limited to rectify the mistake apparent on the face of the record. According to the learned counsel under the garb of exercising jurisdiction for rectification of the order, the Tribunal cannot assume the appellate power or power of review. He has firstly referred to the order dated 5.11.2004 (A-5) passed by the Tribunal to highlight that the Tribunal has partly allowed the appeal of the assessee holding that value of 78 Kanals 1 Marla of land, which has been acquired by the Government, was wrongly included in the net wealth 10 WTA No. 12 of 2009 (O&M) of the assessee for the purposes of assessment under the Act. Accordingly assessment in respect of the value of 78 Kanals 1 Marla of land was deleted. In respect of the remaining land measuring 28 Kanals 14 Marlas, the Tribunal had held that it was not acquired by the Government and the value was as per the rate fixed by the Assessing Authority. In the process the Tribunal has referred to the definition of expressions ‘asset’ as well as ‘urban land’ given in Section 2(ea) of the Act. Learned counsel then referred to the order of rectification dated 16.6.2008, whereby the Tribunal has excluded land measuring 78 Kanals 1 Marla by stating that the acquisition proceedings were initiated on 21.3.1997 and, therefore, the value of the land was assessable to wealth tax for the assessment years 1993-94, 1994-95 and 1995-96. On that basis the grounds of appeal raised by the assessee which were earlier accepted, stood rejected. According to the learned counsel such is not the scope of rectification proceedings under Section 35 of the Act. In support of his submission, he has placed reliance on a judgment of Hon’ble the Supreme Court in the case of T.S. Balaram v. M/s Vokart Brothers, AIR 1971 SC 2204, and argued that a mistake apparent from the record must be obvious and patent mistake. Referring to para 8 of the judgment, learned counsel submits that such a mistake is not required to be established by long drawn process of reasoning on points on which there may be conceivably two opinions. 11. On the other issue, Mr. Goyal, learned counsel for the assessee- appellant has further submitted that notification under Section 36 of the Punjab Town Improvement Act, 1922, was issued on 22.7.1994. Thereafter award was announced and compensation was disbursed on 21.3.1997/30.7.1997. Learned counsel has maintained that by virtue of 11 WTA No. 12 of 2009 (O&M) acquisition process having been initiated on 22.7.1994, the assessee- appellant in any case was not assessable to wealth tax in respect of assessment years 1993-94, 1994-95 and 1995-96 because no construction could be raised by the assessee-appellant on the land. In that regard, he has placed reliance on Section 2(ea) of the Act, which defines the expression ‘asset’. He has also referred to the expression ‘urban land’, defined in Section 2(ea) Explanation 1(b) of the Act and argued that ‘urban land’ is not to include any land on which construction of building is not permissible in any law for the time being in force in the area in which such land is situated. According to the learned counsel once notification under Section 36 of the 1922 Act was issued on 22.7.1994, which resulted into acquisition of land measuring 78 Kanals 1 Marla in the year 1997 then no construction on the aforesaid land was possible. Therefore, the land was not assessable to wealth tax as per the provisions of Section 2(ea) of the Act. To buttress his stand, learned counsel has referred to Section 49 of the 1922 Act, which provides that after issuance of notification under Section 36 of the 1922 Act, the provisions of the Punjab Municipal Act, 1911, would apply which includes Section 189(1) & (2) and Section 193. In support of his submission, learned counsel has placed reliance on a Division Bench judgment of Delhi High Court rendered in the case of Commissioner of Wealth-Tax v. D.C.M. Ltd., [2007] 290 ITR 615 (Delhi), which has taken the view that if the sanction of the site plan for construction on the land has not been obtained then such a land would not be assessable to wealth tax as it cannot be regarded as ‘urban land’ and ‘asset’. 12. Mr. Rajesh Katoch, learned counsel for the revenue-respondent has, however, submitted that there is no prohibition of raising construction 12 WTA No. 12 of 2009 (O&M) nor any provision has been cited by the assessee-appellant showing that in any case construction cannot be raised on the land in respect of which declaration under Section 36 of the 1922 Act has been issued. According to the learned counsel in the absence of any prohibition, the assessee-appellant cannot place any reliance on the notification under Section 36 which might have culminated into passing of an award and taking of compensation of the land belonging to the assessee-appellant. He has maintained that right to receive compensation has not extinguished by virtue of notification under Section 36 and by virtue of pronouncement of award. The payment in any case has been received by the assessee-appellant. Re: Question Nos. (ii), (iii) and (iv) 13. It would first be appropriate to answer question Nos. (ii), (iii) and (iv) first because all the questions are inter-connected. Accordingly, we proceed to answer these questions jointly. One of significant issue which permeate all the questions is the date on which the assessee became disenti- tled to raise construction on the acquired land by virtue of acquisition of land by Improvement Trust, Sangrur. Would it be the date when the Trust has passed the resolution for framing the scheme or the date when declara- tion is made under Section 36 of the 1922 Act (which is equivalent to Sec- tion 4 of the Land Acquisition Act, 1894). The answer to the aforesaid ques- tion would depend upon the possibility of the assessee to raise construction by erecting or re-erecting the building. In that regard it would be necessary to read the provisions of the 1922 Act. Chapter IV of the 1922 Act, from Sections 22 to 24 deals with various types of Schemes and the matter which are required to be provided for, mode and manner of framing of the scheme leading to the sanctioning of the same by the Government under Section 42. 13 WTA No. 12 of 2009 (O&M) If any of the schemes as contemplated by Sections 23, 24, 25, 26, 27 and 28 is framed then the owner of the land is covered by the Scheme and could be refused permission to raise construction by virtue of the provisions made in Section 31 of the 1922 Act, which reads thus: “31. Prohibiting of building beyond a street alignment.- (1) In the locality comprised in a scheme under this Act, no person, shall, except with the written permission of the Trust, erect, re-erect, add to or alter any building so as to make the same project beyond a street alignment or building line duly prescribed by the Trust. (2) In the locality comprised in a development scheme or an expansion scheme, if any person desires to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or a building line duly pre- scribed by the Trust, he shall apply to the Trust for permission to do so, and if the Trust refuses to grant permission to such person according to his application, and does not proceed to ac- quire such land within one year from the date of such refusal, it shall pay reasonable compensation to such person for any dam- age or loss sustained by him in consequence of such refusal.” 14. A perusal of the aforesaid section shows that there is express prohibition of building. According to sub-section (1) of Section 31 of the 1922 Act in the locality comprised in a scheme framed under this Act no person is permitted to erect and re-erect, add to or alter any building so as to make the same project beyond a street alignment or building line duly pre- scribed by the trust. According to sub-section (2) of Section 31 of the 1922 Act in the locality comprised in a development scheme or an expansion 14 WTA No. 12 of 2009 (O&M) scheme, if any person keen to erect, re-erect, add to or alter any building on his land so as to make the same project beyond a street alignment or