Case: Khorshed Shapoor Chenai &amp; Ors.  Vs. Assistant Controller of Estate Duty

These two appeals by certificates granted by the High Court of Andhra Pradesh raise the question of legality and or validity of two notices issued by the Assistant Controller of Estate Duty, Hyderabad, one under s. 59(a) and the other under s. 61 of the Estate Duty Act. 1953 (hereinafter called the Act)Two parcels of agricultural land (admeasuring 22 Acres 24 Guntas and 8 Acres 23 Guntas) situated in Moosapet village, belonging to one Rashid Shapoor Chenai were during his lifetime, acquired for the Synthetic Drugs Project Factory of the Indian Drugs and Pharmaceutical Ltd. by the Andhra Pradesh Government by Notifications issued on June 19, 1961 and January 18, 1962 under the Land Acquisition Act. D Possession of the lands was taken in January 1963 and by two separate awards both made on January 31, 1963 the Special Deputy Collector of Land Acquisition awarded a total compensation of Rs. 20, 000. This compensation was received by Rashid himself during his lifetime. Later two more parcels of agricultural land (admeasuring 131 Acres 10 Guntas and 224 Acres 22 Guntas) situated at Qutbillapur in Medchal Taluk belonging to Rashid where acquired for Hindustan Machine Tools, Units I and II by the Andhra Pradesh Government by Notifications issued on November 1, 1963 and February l, 1964 under the Land Acquisition Act. Though the former notification was issued during his lifetime and the latter after death, possession of both the lands was taken after his death by the Government on December 4, 1963 and March 15, 1964 and by two separate awards made on March 12, 1965 and March 19, 1965, the Special Deputy Collector awarded a total compensation of Rs. 4, 29, 360. This compensation was received in April ]965 by the heirs of Rashid, namely, his widow Mrs. Freny Chenai and son Shapoor Rashid Chenai on whom the estate of Rashid devolved in equal shares.On the death of Rashid on November 4, 1963, Mrs. Freny Chenai (the appellant in C.A. No. 2206 of 1972) as his widow and the accountable person filed before the respondent on December 26, 1963 on account of the properties passing on the death of her husband under s. 53(3) of the Act. The estate duty assessment was completed by the respondent on March 29, 1966. With regard to the lands acquired both during the lifetime of Rashid as well as after their values were taken at the respective figures of compensation (Rs. 20, 000 and Rs. 4, 29, 360) awarded for them by the Special Deputy CollectorUnfortunately, within two years of his fathers death, Shapoor Rashid Chenai (the son) died on May 7, 1965. As stated earlier he had one half share in the undivided estate of his late father Rashid. As required by s.53 of the Act, (Mrs. Khorshed Chebai) (the appellant in C.A. No. 2205/1972) as his widow and the accountable person filed before the respondent on November 6, 1965 on account of the properties passing on the death of her husband and the Respondent completed the estate duty assessment on December 30, 1966. In making this assessment also the respondent as in the case of estate duty assessment in respect of the properties passing on the death of Rashid, adopted the values of the lands acquired by the Government at figures awarded by the Special Deputy Collector for those landsIt appears that the legal heirs of Rashid did not accept the awards made by the Special Deputy Collector in respect of the aforesaid lands and requested the Special Deputy Collector to refer the question of compensation to Civil Court under s.18 of the Land Acquisition Act. References were, accordingly, made and the Civil Court by its order dated March 6, 1967 enhanced the compensation awarded by the Special Deputy Collector in respect of Moosapet land by Rs. 1, 90 , 000 and by its order dated October 30, 1967 enhanced the compensation in respect of Qutbillapur lands by Rs. 20, 45, 000. The Government did not accept the decisions of the Civil Court and filed appeals to the High Court challenging the enhancement, which appeals are still pending in the High Court. On receipt of information that enhanced compensation was awarded by the Civil Court in respect of the above lands the respondent issued two notices both dated November 14, 1969, one addressed to Mr s. Khorshed Shapoor Chenai and the other to Mrs. Freny Rashid Chenai. The former notice was issued under s. 59(a) of the Act calling upon Mrs. Khorshed Chenai to show cause why the estate duty assessment made on December 30, ]966 should not be reopened and revised in view of the extra compensations awarded by the Civil Court in respect of the lands acquired by the Government, while the latter notice was issued under s. 61 of the Act requiring Mrs. Freny Chenai to show cause why the mistake apparent from the record should not be rectified and the enhanced compensation included in the principal value of the estate. These notices were challenged by the recepients by filing writ petitions in the High Court.The notice under s. 59(a) of the Act issued for the reopening of the assessment completed on December 30, 1966 was challenged in writ petition No. 54 of 1970 on two grounds: (a) that after compensation had been awarded by the Special Deputy Collect or under s. 11 of the Land Acquisition Act the heirs of the deceased Rashid had merely exercised a right to sue for further compensation which was merely a hope or a chance that the compensation might be enhanced, that such hope or chance could not b e elevated to the status of an assets or property and as such not asset or property chargeable to estate duty had escaped assessment and (b) that even assuming that any asset or property chargeable to estate duty had escaped assessment the notice was illegal and without jurisdiction because such escapement was not due to any omission or failure on the part of the.accountable person to disclose fully and truly material facts necessary for making the assessment. As regards the first ground, the High Court took the view that the right to receive compensation equivalent to market value of the lands on the dates of notifications which sprang directly from the acquisition was property, that no fresh or independent right to receive extra compensation accrued to the heirs of the deceased and that since compensation awarded by Special Deputy Collector had been enhanced by Rs. 1, 90, 000 for the lands acquired for the Synthetic Drugs Project and by Rs. 20, 45, 000 for the lands acquired for the Hindustan Machine Tools by the Civil Court, these facts, which came into existence subsequent to the making of the original assessment, easily led to the conclusion that the values adopted by the respondent for these lands were far below their real and true market value and as such property (meaning lands) chargeable to estate duty having been undervalued had escaped assessment of the duty. On the second aspect the High Court held that the fact that land References were filed against the awards of the Special Deputy Collector under s. 18 of the land Acquisition Act and were pending in the Civil Court was not disclosed by the account. able person, that the said fact was a primary and material fact and not an inferential fact and its nondisclosure amounted to omission or failure which could lead the assessing authority to a reasonable belief that property chargeable to estate duty had escaped assessment and a s such the respondent had jurisdiction to issue the notice. In this view of the matter, the High Court upheld the notice issued under s. 59(a) of the Act and dismissed the writ petition. This decision of the High Court is being challenged before us in Civil Appeal No. 2205 of 1972The issuance of the notice under s. 61 of the Act was challenged in Writ Petition No. 4059 of 1969 principally on three grounds: (i) that the accountable person had only a claim lo get an extra compensation which was an inchoate right which could not be called property and whether that claim amounted to a right to property capable of sale in open market was a highly debatable question and a mistake which had to be discovered after lengthy discussion and debate could not be said to be a mistake apparent on the record, (ii) that land acquisition proceedings and land References in Civil Court not being part of the assessment record a mistake discovered by reference to such other record was not a mistake apparent from the record of the case and (iii) that the extra compensation received by the legal heirs of Rashid belonged to them and not to the deceased and hence it was not property that passed on the death of the deceased an d, therefore, no property escaped assessment. In other words, under the guise of rectification, the enhanced compensation could not be taken into account and, therefore, the impugned notice was illegal and without jurisdiction. The High Court negatived the contentions and upheld the impugned notice. This decision is challenged in Civil Appeal No. 2206 of 1972.

Reasoning: In our opinion the High Court was right in holding that there are no two separatee a right to receive compensation and other a right to receive extra or further compensation. Upon acquisition of his lands under the Land Acquisition Act the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under s.11 and by the Civil Court under s.26 of the Land Acquisition Act. It is true that under s.11 the Collector after holding the necessary inquiry determines the quantum of compensation by fixing the market value of the land and in doing so is guided by the provisions contained in ss. 23 and 24 of Actthe very provisions by reference to which the Civil Court fixes the valuation. It is also true that the Collectors award is, under s.12, declared to be, except as otherwise provided, final and conclusive evidence as between him and the persons interested. Even so, it is well settled that in law the Collectors award under s.11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired (vide Privy Council decisions in Ezra v. Secretary of State for India and this Courts decision in Raja Harish Chandra v. Dy. Land Requisition Officer and Dr. G. H. Grant v. State of Bihar. If that be the true nature of the award made by the Collector then the question whether the right to receive compensation survives the award must depend upon whether the claimant acquiesces therein fully or not. If the offer is acquiesced in by total acceptance the right to compensation will not survive but if the offer is not accepted or is accepted under protest and a land reference is sought by the claimant under s.18, the right to receive compensation must be regarded as having survived and kept alive which the claimant prosecutes in Civil Court. It is impossible to accept the contention that no sooner the Collector has made his award under s.11 the right to compensation is destroyed or ceases to exist or is merged in the award, or what is left with the claimant is a mere right to litigate the correctness of the award. The claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remains alive which he prosecutes in Civil Court. That is why when a claimant dies in a pending reference his heirs are brought on record and are permitted to prosecute the reference. This, however, does n ot mean that the Civil Courts evaluation of this right done subsequently would be its valuation as at the relevant date either under the Estate Duty Act or the Wealth Tax Act. It will be the duty of the assessing authority under either of the enactments to evaluate this property (right to receive compensation at market value on the date of relevant notification) as oh the relevant date (being the date of death under the Estate Duty and valuation date under the Wealth Tax Act). Under s.36 of the Estate Duty Act the assessing authority has to estimate the value of this property at the price which it would fetch if sold in the open market at the time of the deceaseds death. In the case of the right to receive compensation, which is property, where the Collectors award has been made but has not been accepted or has been accepted under protest and a reference is sought or is pending in Civil Court at the date of the deceaseds death, the estimated value can never b e below the figure quantified by the Collector because under s. 25(1) or the Land Acquisition Act, Civil Court cannot award any amount below that awarded by the Collector; the estimated value may be equal to the Collectors award or more but can never be equal to the tall claim made by the claimant in the Reference nor equal to the claim actually awarded by the Civil Court inasmuch as the risk or hazard of litigation would be a detracting factor while arriving at a reasonable and proper value of this property as on the date of the deceaseds death. The assessing authority will have to estimate the value having regard to the peculiar nature of the property, its marketability and the surrounding circumstances including the link or hazard of litigation looming large at the relevant date. The first contention of counsel for the appellant, therefore, fails.The second contention urged by the counsel for the appellant, however, appears to us to bed and the impugned notice issued under s.59(a) of the Act will have to be quashed on that ground. As we have said, above, since in the instant case the wards made by the Special Deputy Collector were not accepted by the heirs of the deceased and Lan d References were sought by them and the same were pending in Civil Court at the relevant date (being the date of Shapoors death) the notice under s.59(a) would have been valid if the same had been issued on the basis that such right to compensation had been undervalued on the earlier occasion and required to be properly valued as on the date of the death, but what we find is that the said notice was issued by the respondent on the wrong assumption that the acquired lands still formed part of the estate of the deceased and that having regard to the glaring enhanced compensation granted by the Civil Court for the lands, the said lands had been undervalued in the original assessment and as such the same had escaped assessment t o duty. In the notice issued to the appellant under s.59(a) of the Act a bald statement was made by the respondent to the effect that he had reason to believe that property chargeable to estate duty (a) had escaped assessment and (b) had been und er assessed, and, therefore, the appellant was called upon to deliver a further statement of AccountThe aforesaid communication clearly brings out the fact in the respondents view the extra compensation (meaning the enhanced amounts) received by the appellant under the Civil Court decrees in Land References had escaped assessment in the earlier assessment proceedings and since such escapement was due to the appellants failure to disclose full particulars regarding the land acquisition proceedings, the reassessment proceedings were being initiated. In other words, the assessment was being reopened for the purpose of including the enhanced amounts received by the appellant is the principal value of the property passing on the death and assessing the same to duty and not for the purpose of evaluating the right to compensation which had been undervalued on the earlier occasionIn our view, therefore, the very issuance of the notice under s.59(a) which was done on a basis clearly unsustainable in law is liable to be quashed on this ground. Consequently, reassessment which has been made by the Respondent, is also liable to be quashed.In view of the aforesaid conclusion, it is unnecessary for us to deal with the last contention urged by the counsel for the appellant that seeking of land References and their pendency in Civil Court were not primary facts but inferential facts ande thereof would not amount to failure or omission on the part of the accountable person to disclose full particulars leading to escapement of assessment to dutyTurning to Civil Appeal No. 2206 of 1972, counsel for the appellant challenged the impugned notice issued under s.61 of the Act on two grounds: (a) it was case of change of opinion as regards the valuation of lands acquired and not a c ase of mistake apparent from the record and as such the impugned notice was issued under s.61 with a view to get over the bar of limitation under s.73A, which would otherwise be applicable to a notice under s.59(a) of the Act and (b) that for purposes of s. 61 the land acquisition proceedings and Land References in the Civil Court could not be regarded as part of the assessment record and he socalled mistake discovered by reference to such other record was not a mistake apparent from the record of the case and as such the impugned notice was liable to be quashed. In our view, the first ground is sufficient to dispose of the appealIt is thus clear that the rectification is being undertaken on the ground that the initial valuation adopted in respect of the acquired lands was based at rates fixed by the Land Acquisition. Officer, that such valuation was obviously wrong in view of the enhanced compensation awarded by the , Civil Court and, therefore, the enhanced compensation was sought to be included in the principal value of the estate by undertaking the rectification proceedings. In substance it cannot be said to be a case of rectification ofe apparent from the record but the respondent is really seeking to change his opinion about the valuation of the acquired lands because some other authority, namely the Civil Court has valued the same differently. Now, for the purpose of enhancing the value of the acquired lands on the. basis of their value.as determined by the Civil Court the respondent must resort to provisions of s. 59 and proceed to make reassessment but such reassessment has to be done within the period of three years from the date of the original assessment under s. 73 A of the Act. It seems to us that in the instant case the respondent resorted to s.61 because the rectification of any mistake apparent from the record could be done at any time within five years from the date of the original assessmentIn our view, the facts of the instant case clearly come within the ratio of the aforesaid decision. The High Court has attempted to distinguish the above decision by stating that in the instant case the respondent ha d merely accepted the value of the acquired lands as determined by the Special Deputy Collector in his award and the accountable person had no objection to this course and, therefore, the respondent himself did not estimate the market value of the lands on the date of death of Rashid and as such it was not a case of change of opinion on his part as regards the correct valuation of the lands. It is difficult to accept this view. It cannot be disputed that when the original assessment was made it was the duty of the respondent, after scrutinising the Account filed and examining the materials produced before him, to value the estate of the deceased properly under s.36 of the Act and when he accepted the compensation fixed by the Special Deputy Collector as the proper valuation he must be deemed to have adopted that evaluation as his own estimated value of the lands which he wanted to enhance by relying upon the valuation made by the another authority, namely, the City Civil Court. To such a case s.59 is clearly attracted but obviously with a view to avoid the bar of s.he purported to. issue the impugned notice under s.61 and therefore the same is liable to be quashed. The aforesaid decision seems to lend support to the second ground urged by counsel for the appellant for quashing the impugned notice but we would like to base our decision on the first ground discussed above. In this case also we are told t hat the rectification proceedings have been completed pursuant to the impugned notice, which also must be quashed.