The Judgment of the Court was delivered by

T.N.C Rangarajan, J.

These two writ petitions have been filed by the Secretary of H.E.H the Nizam's Jewellery Trust challenging the validity of the notices issued under Section 17 of the Wealth Tax Act in respect of the assessment years 1984-85 to 1989-90.

2. The H.E.H Nizam's Jewellery Trust was declared on 29-3-1951 in respect of 107 items of jewellery for the benefit of various beneficiaries mentioned in the deed. According to this Trust, 24 items were directly given to the beneficiaries and out of the balance of 83 items, 40 items were to be disposed of either in India or abroad within three years after the death of the Nizam and his son, while the balance of 49 (sic. 43) items were not to be sold except in grave financial emergency. Subsequently on27-1-1952, a supplementary Trust was declared in respect of 90 more items of jewellery. In both the trust deeds, a representative of the Government was a trustee and at all material times the Additional Finance Secretary of the Union of India was a trustee. The Nizam died on 24-7-1967 and his son also died on 9-10-1970. Consequently, in July, 1972, the Trust made an offer to the Government of India to sell the collection of 173 items of jewellery to the Government, after handing over heir loom of 24 items to the beneficiaries directly. This was considered by two expert committees who inspected the jewellery and classified the same. In the meanwhile, the Antiquities and Art Treasures Act, 1972 came into force. 65 Items of jewellery were declared to be not antiquities and 23 as antiquities and in respect of one item, Jacab diamond, no decision was taken. The trustees were told that they were free to sell the rest. But one of the beneficiaries filed an Original Petition No. 141/1978 in the City Civil Court, Hyderabad, for removal of the trustees and for an interim injunction against the sale. The matter went up to the Supreme Court along with two other appeals by a prospective buyer and on 31-08-1979, the Supreme Court directed that the jewellery be sold in the public auction by the Finance Secretary to act as the Officer of the Court for the same. On 20-09-1979, when the auction was about to be held in the Court room of the Supreme Court, the Union of India sought stay pending a decision to acquire these jewels as art treasures in national interest. The Antiquities and Art Treasures’ Rules were amended with a view to declare, identified pieces of jewellery as art treasures. This was challenged in W.P No. 1429/1979 and the matter was remitted for consideration by the Government. On 12-10-1984, a notification for compulsory acquisition of seven items of jewellery was made in respect of which the trustees filed their objections and later an application to the Supreme Court for setting aside that order. In the meanwhile, another Committee was set up by the Government with Sri Sharada Prasad as Chairman which recommended the acquisition of the entire collections of historic interest. There upon negotiations were conducted and the parties entered into a compromise dated 14-2-1989 for a package deal by which the dispute was to be referred to arbitration. The Supreme Court recorded the compromise on 25-4-1989 and referred the matter to the arbitration. In the meanwhile, an application was made by the Government for a declaration that the jewellery was partof regalia and belonged to the Union of India but this was dismissed as withdrawn on 22-4-1991. The two arbitrators differed on the question whether the right of the Government to acquire the property had lapsed in terms of the compromise agreement and the matter was referred to the Umpire. Before the Umpire also, the Government again took the objection that the jewellery belonged to the Government but it was rejected. On the question of fair price to be paid for the jewellery in terms of the agreement, the trustees claimed that the jewellery had been valued by Southeby at 162 million dollars which if taken asa reserve price, the fair price may be four times And could work out to 648 million dollars equivalent to Rs. 1, 192.32 crores. The claim also referred to valuation done by Christie's giving a valuation of 135 million dollars. The Union of India submitted that the foreign market for the jewellsry had to be excluded in fixing the price, that there were numerous restrictions on the sale of the jewellery and the only purchaser available being Union of India, the valuation made for the purpose of Wealth Tax should be adopted as the fair market price. It was pointed out that the same jewellery was assessed by Wealth Tax Officer on the basis of the valuation made under Section 16-A of the Wealth Tax Act and since that valuation had been accepted by both the parties, the fair price should not exceed the value adopted for Wealth Tax purposes. The valuer, Sri Chowlera filed an affidavit before the arbitrator and he was also cross examined on behalf of the trust. The Umpire, Sri A.N Sen gave an award dated 27-7-1991 holding mat the valuation made for wealth tax purposes cannot determine the fair and just value for the purpose of acquisition, that valuation made by Sotheby and Christie was with reference to an international auction and the valuation made by Vithaldas was based on fancy prices. Therefore, he himself determined the value of the 173 items of jewellery at Rs. 225, 37, 33, 959/-. The Union of India challenged this before the Supreme Court and by the decision reported in the case of Union of India v. Prince Muffakam Jan . 1994 4 SCALE 113 SC. the Supreme Court held that the award was binding on the Government, but taking into account an arithmatical error, the amount that was to be paid as just and fair price for 173 items of jewellery as on 31-12-1994 would be Rs. 180, 37, 33, 959/-. The Government was given the liberty to choose certain items alone if necessary and if all me items were acquired, a sum of Rs. 1, 50, 000/- was also to be paid as costs. It is stated that ultimately the jewellery has been taken over by the Government at that value. Government's claim to title was also rejected by a separate order in 1994 (4) Scale 112 observing that it was based on gross misrepresentation.

3. While the above proceedings were going on, Wealth Tax assessments had also been made. It is the case of the petitioner that all the facts relating to the proceedings mentioned above were disclosed to the Wealth tax Officer while filing the return for each assessment year. In 1979, one Mr. Mahenderji Mehta was appointed as a Valuation Officer for the valuation of the jewellery in respect of the assessment years 1957-58 to 1979-80. The valuation made by him started from Rs. 1.87 crores for valuation date 31-3-1957 to Rs. 29.73 crores for the valuation date 31-3-1979. Subsequently, for the assessment years 1980-81 and 1981-82 valuation dates (31-3-80 and 31-3-1981), the matter was referred to Mr. Chowlera under Section 16-A and he gave his report on 13-4-1987 assessing the value of Rs. 32-43 crores. According to the petitioner, returns were filed for the subsequent years on the basis of the valuation made by the Department for the earlier years. For the assessment years 1982-83 to 1985-86, a fresh valuation was made by Mr. Chowlera on 13-3-1986 taking the value at Rs. 33.30 crores for 1982-83 and Rs. 34.18 crores for 1983-84 and Rs. 35.18 crores for 1984-85 and 1985-86. Similarly, the valuation was made for the three subsequent assessment years 1986-87 - Rs. 35.24 crores, 1987-88 - 39.89 crores, 1988-89 - Rs. 41.72 crores. For all these assessment years 1984-85 to 1988-89 with which we are now concerned, assessments were made under Section 16-A (6) in conformity with the valuation reports.

4. By the impugned notices, the Wealth Tax Officer proposed to revise those valuations on the ground that net wealth chargeable to tax has escaped assessment by reason of under-assessment. The reasons for the belief that wealth has escaped assessment was recorded as follows:

“A referenca was made to the determination of the fair value of the jewellery at Rs. 171 crores in the proceedings before the Supreme Court and the admission of the Valuer, Mr. Chowlera before the Arbitrator that his valuation made was on the low side and that he had also committed certain errors with reference to the valuation. It was stated that such valuation suffered from several infirmities resulting in under assessment of the wealth considering the fact that the trustees had returned the value at Rs. 3.60 crores though according to them the value was near the amount of Rs. 1, 000/- crores, and therefore, it was clear that the trustees had not disclosed fully and truly all material facts pertaining to the value of the jewellery necessary for the assessment of the net wealth in the cases of the beneficiaries of the Jewellery Trust.

5. These petitions challenge the impugned notices on the ground that such a belief that there was under assessment could not be entertained by the Wealth tax Officer from the material on record, that the petitioners have disclosed all relevant information and material particulars and that the question of non disclosure of any material particulars becomes irrelevant where the assessment is made under Section 16-A and not on the basis of the return. The learned Counsel for the petitioners submitted that any deficiency in the enquiry before making the assessment, cannot be the basis for reopening the assessment and the value of the property cannot be worked out backwards on the basis of the subsequent valuation. He pointed ou t that even according to the valuer who had fully participated in the arbitration proceedings, the value of the jewellery was taken at a lesser figure even after the arbitration award, as in his report dated 1-8-1995 he has taken the value for 1989-90 - Rs. 56.06 crores. It was further submitted that the entire question of valuation was the subject of an appeal and concluded by the order of the Appellate Tribunal and cannot be the subject of escaped assessment. It was also pointed out that when the jewellery itself was tendered for examination/valuation, there wasno question of disclosure of any further facts as to its valuation. It was also submitted mat the notices are barred by limitation. It was submitted that in these circumstances the impugned notices were wholly without jurisdiction and should be quashed.

6. On the other hand, in the common counter affidavit filed on behalf of the Revenue, it is stated that the admission of the valuer in the arbitration proceedings indicate that he did not have real expertise as he had not seen an Alexandrite gem in his life. It is also stated that the petitioners knew that the jewellery was worth more man the value shown and yet chose to show very low value. It is further stated that it was only at the hearing of the appeal before the Appellate Tribunal that the Revenue realised from an article in India To day that the intrinsic worth of the jewellery was many times more than what was declared and it is stated that an investigation was made thereafter and the Revenue came to know that the jewellery was being acquired by the Government at Rs. 180 crores. The learned Counsel for the Revenue submitted that a perusal of the proceedings pending before the Supreme Court would show that upto 1991 there was no challenge to title and upto 1989 there was no bar on the sale of the jewellery. He submitted that the compromise entered in 1989 was significant and this compromise was not disclosed and the valuation reports obtained from Sotheby and Christie were not disclosed and hence it was a case of omission to disclose the material particulars. He further submitted that even though for the assessment year 1990-91 onwards those facts are mentioned, the vast difference between the claim for over Rs. 1, 000/- crores before the arbitrator and the returned value of less than Rs. 10 crores in the wealth tax proceedings ind icated that the assessee knew that the jewellery were valuablebuthad deliberately withheld the information. He also submitted that even though the assessment was made under Section 16-A (6), the Wealth Tax Officer was entitled to reopen the same when he had reason to believe that the wealth was under-assessed. He argued that when Section 17 provided for a reassessment of the escaped wealth, such a provision had to be applied to all assessments because excluding the assessments made under Section 16-A (6) from the scope of Section 17 will lead to dismmination.

7. According to the provisions of the Wealth Tax Act, when the assets are held by the trustee, a return has to be filed by the trustee but the assessments have to be made in the like manner and to the same extent as it will be leviable upon the beneficiaries. In a connected case which went upto the Supreme Court, it was held in C.W.T v. Trustees of Nizam's Family Trust . 108 ITR 555 SC. as follows:

“The consequences of the provisions in Section 21 (1) mat the trustee is assessable in the like manner and to the same extent as the beneficiary are three-fold. In the first place, there would have to be as many assessments on the trustee as mere are beneficiaries with determinate and known shares, though for the sake of convenience, there may be only one assessment order specifying separately the tax due in respect of the wealth of each beneficiary. Second, the assessment of the trustee would have to be made in the same status as that of the beneficiary whose interest is sought to be taxed in the hands of the trustee. And lastly, the amount of tax payable by the trustee would be the same as that payable by each beneficiary in respect of his beneficial interest, if he were assessed directly.

“The Wealth Tax Officer has to determine who are the beneficiaries in respect of the remainder on the relevant valuation date and whether their shares are indeterminate or unknown. It is not at all relevant whether the beneficiaries may change in subsequent years before the date of distribution, depending upon contingencies which may come to pass in future. So long as it is possible to say on the relevant valuation date mat the beneficiaries are known and their shares are determinate, the possibility that the beneficiaries may change by reason of5 subsequent events such as birth or death would not take the case out of the ambit of sub section (1) of Section 21. The position has to be seen on the relevant valuation date as if the preceding life interest had come to an end on that date and if, on that hypothesis, it is possible to determine who precisely would be the beneficiaries and on what determinate shares, sub section (1) of Section 21 must apply and it would be a matter of no consequence that the number of beneficiaries may vary in the future either by reason of some beneficiaries ceasing to exist or some new beneficiaries coming into being.

8. Thereafter, sub section (1-A) was introduced for the purposes of assessing the value of the assets which fall short of the aggregate value of the interest of the beneficiaries. That is why in the present case, apart from making separate assessments in respect of about 180 beneficiaries, assessments have also been made under sub section (1-A) of Section 21 in the hands of the trust.

9. A brief reference to legislative history gives us the perspective. Prior to 1-4-1989 a return had to be filed by the assessee under Section 14 and the Wealth Tax Officer could assess the net wealth on the basis of the return if he found it to be correct and complete. Otherwise, he could call for evidence in support of the return and after an enquiry, complete the assessment under Section 16(3). The charge is on the net wealth which is defined under Section 2(m) as the aggregate value of all the assets in excess of the aggregate value of all the debts owed by the assessee on the valuation date. Section 7 provided, at that time, that the value of any asset shall be estimated to be the price which in the opinion of the Assessing Officer it would fetch if sold in the open market on the valuation date. Thus, the estimate of the value of the asset was one step in the assessment proceedings. With respect to this step, the assessee was required to make an estimate in the return which was substituted by the estimate made by the Wealth Tax Officer which would men to be taken up on appeal for adjudication. Sub sections 6, 7 and 8 of Section 24 provided for a reference by the Appellate Tribunal for an Arbitration by a valuer at the option of the assessee which was to be final. There were also departmental instructions for assistance by valuer to the Wealth tax Officer when he made his estimates. There was a general feeling that the assessees were under valuing the assets. Therefore, by the Finance Act, 1968, Explanation 4 was added to Section 18 which provides for penalty for concealment. This explanation reads as follows:—

Explanation 4:—

“Where the value of any asset returned by any person is less than seventy per cent of the value of such asset as determined in an assessment under Section 16 or Section 17, such person ahall be deemed to have furnished inaccurate particulars of such assets within the meaning of clause (c) of this sub-section, unless he proves that the value of the asset as returned by him is the correct value.

10. The meaning of this Explanation has been clarified by a Circular and Press Note dated 27-5-1968 by the C.B.D.T itself to the effect that as long as some material is available to the assessee such as a valuation report given by a Registered Valuer, the substitution by a value more than 30 per cent by the Wealth tax Officer would not make it a matter of concealment in spite of this Explanation. Simultaneously, there was the other side of the picture namely, the Wealth tax Officers were making wild and high pitched estimates, one of the reasons being that they did not have the expertise for valuation of assets, and secondly, they would be motivated by an understandable bias in favour of the Revenue. This aspect was considered by the Direct Taxes Enquiry Committee. Based on the report of the Committee, Section 16-A was introduced to remove the matter of estimating the value of the assets from the purview of the Wealth Tax Officer to.a Valuation Officer. The memorandum explained this amendment which was introduced by the Taxation Laws (Amendment) Act, 1972 as follows:

“The valuation cells so established were poorly manned and their jurisdiction was far and wide and it was becoming increasingly difficult to cope with all the cases which required proper valuation and the completion of the assessments in respect of big and revenue yielding cases were being unduly delayed.

As pointed out above, the function of the cell was advisory only and the report was technically not binding even on the Wealth tax Officer and if there were errors or omissions even he could differ from the report. The assessee had no opportunity in placing before the Officer of the cell his view point or any document or evidence in support of the value declared by him. In order to remove these difficulties, the Taxation Laws (Amendment) Act, 1972, has introduced the procedure for valuation by the Valuation Officers appointed under the Act with powers to call the assessee, call for documents, records and accounts and also vests him with powers vested in the Civil Court for the purpose of discovery, inspection, of enforcing attendance, etc., under Section 37 and powers of entry and inspection of land and building under the newly inserted Section 38-A.

The main object of the new procedure is minimising the tax evasion on account of under valuation of properties. It simultaneously provides the assessee with an opportunity to prove his case regarding the value declared before the Valuation Officer as well as appeal against the order of the Valuation Officer before the Appellate Assistant Commissioner and later to the tribunal. The purpose of the new administrative structure and procedure for valuation is to strengthen the valuation machinery. With the introduction of valuation of properties by the statutorily appointed Valuation Officer at the initial stage of assessment, the old provisions regarding the reference to the valuers for arbitration at the tribunal stage has been omitted being redundant and superfluous. With the introduction of the new procedure and appointment of Valuation Officers who are experts in their respective fields, the job of valuation is entrusted to the experts instead of being left to the Wealth tax Officer who is a layman, The procedure outlined creates wheels within wheels.’ The work of the assessments thereby divided into twodistinct limbs. Thevaluation of the assets is to be done by the Valuation Officer in cases and circumstances outlined in the Section. The Wealth tax Officer has to complete the assessment adopting the value of such asset as determined by the Valuation Officer. The valuation report is to be defended by the Valuation Officer and not by the Wealth tax Officer in the appellate proceedings. (Verma page ¼ 94-495 (1978 Edn) (see also CBDT Circular No. 96 dated 25-11-72).

11. Form-08 given in the rules lays down the particulars required to be given by the assessee for assessing the jewellery. Those particulars are only, description, weight or special features. In view of the introduction of Section 16-A, subsection (3) was introduced in Section 7 to the effect that notwithstanding anything contained in sub section (1) in Section 7, where the valuation of any asset is referred by the Assessing Officer to the Valuation Officer under Section 16-A, the value of such asset will be estimated to be the price which in the opinion of the Valuation Officer it would fetch if sold in the open market on Ihe valuation date. The Direct Tax Laws (Amendment) Act, 1989, amended the Section 7 with effect from 1-4-1989. It provided in sub section (1) that the value of any asset shall be the value as determined in the manner laid down in the Schedule-Ill. Consequently, sub section (3) was omitted. However, Schedule Ill now provides that in respect of the jewellery the value shall be estimated to be the price which it would fetch if sold in the open market on the valuation date. According to the Rule 18 in that schedule, the return has to be supported by a report of a Registered Valuer where the value exceeds Rupees five lakhs and if the Assessing Officer was of the opinion that the value declared is less than the market value, he may refer the matter to the Valuation Officer under Section 16-A, and the value of such jewellery shall be the fair market value as estimated by the Valuation Officer. Rule 19 provides for adjustment of the value once estimated by the Valuation Officer for four subsequent assessment years without fresh valuation. Form 0-8 A requires only the following information:

Form 8 A: “(1) Serial No.

(2) Description of item

(3) Gross weight

(4) Net weight of precious metal

(5) Description And weight of previous (sic. precious) or semi precious stones

(6) Value of each previous (sic. precious) or semi precious stone and decided value of such stones.

(7) Total value of the Item of jewellery.

12. Therefore, in spite of these amendments, the position remains the same as before. As explained by the Supreme Court in Bharat Hari Singhania v. C.W.T . 207 ITR 1 SC Page 23.

“Ordinarily, it is for the Wealth tax Officer to value the assets of an assessee, whatever be their nature. Section 7 (1) says so. Sub section (3) of Section 7, however, says that notwithstanding anything contained in sub section (1), where the valuation of any asset is referred by the Wealth tax Officer to the Valuation Officer under Section 16-A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date “Sub section (1) of Section 16-A prescribes the situations in which the Wealth tax Officer may refer the valuation of any asset to the Valuation Officer. Sub section (2) to (4) prescribe the procedure to be followed by the Valuation Officer on such reference. In short, he has to give notice to the assessee, receive the evidence produced by him, make appropriate enquiry and then send his report under subsection (5) to the Wealth tax Officer. Sub section (6) says that on receipt of the order under sub section (3) sub section (5) from the Valuation Officer, the Wealth tax Officer shall, so far as the valuation of the asset in question is concerned, proceed to complete the assessment in conformity with the estimate of the Valuation Officer. In other word s, the order or the valuation made by the Valuation Officer, as the case may be, is binding on the Wealth tax Officer.

13. Section 17 as it stands today, amended with effect from 1-4-1989, being the law relevant to the date on which the action is proposed to be taken, is as follows:—

Section 17 - Wealth Escaping Assessment:

“If the Assessing Officer has reasons to believe that the net wealth chargeable to tax in respect of which any person is assessable under this Act has escaped assessment for any assessment year (whether by reason of under assessment or assessment at too low a rate or otherwise), he may subject to the other provisions of this Section and Section 17-A, serve on such person a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valuation date mentioned in the notice, alongwith such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this Section for the assessment year concerned (hereinafter in this Section referred to as the relevant assessment year) and the provisions of this Act shall, so far as may be, apply as if the return were a return required to be furnished under this Section 14;

Provided that where an assessment under sub section (3) of Section 16 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any net wealth chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return on the part of the assessee to make a return under Section 14 or Section 15 or in response to a notice issued under sub section (4) of Section 16 or this Section or to disclose fully and truly all material facts necessary for this assessment for that assessment years.

Provided further that the Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so.

14. This Section enables the Wealth tax Officer to make a reassessment if the wealth was under assessed and the proviso states that unless the under assessment was by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, such reassessment cannot be made after the expiry of four years from the end of the relevant assessment year. The action proposed to be taken by the issue of the impugned notices are therefore challenged for want of jurisdiction on three points:—

1. The matter of valuation of an asset being a matter of opinion, no reassessment can be made by reason of changing that opinion whatever be the provocation for the same.

2. The matter of valuation of an asset being within the jurisdiction of the Valuation Officer, the Assessing Officer has no jurisdiction to reassess the same.

3. A matter of valuation of an asset being an opinion, it is not a matter of a material fact and there being no failure on the part of the assessee to disclose any material fact, any action taken under Section 17 is barred by limitation under the proviso thereof.

15. The statement that the matter of valuation of an asset is a matter of estimate and consequently the opinion of the valuer admits of no dispute. As we have seen, Section 7 itself stated originally that the value of an asset shall be estimated to be the price which in the opinion of the Assessing Officer it would fetch if sold in the open market on the valuation date. Therefore, the value determined by the Wealth tax Officer, is in fact, an opinion. Similarly, the value estimated by any Registered Valuer or a Valuation Officer would again be an opinion. Not the least an estimate made by the assessee himself even without any expert advice would still be an opinion. Though it is a price which a willing buyer will pay to a willing seller, it has to be estimated in a hypothetical market particularly when there are restrictions on such transactions. Any determination of the value will certainly vary from case to case and any precise Mathematical calculation may not be possible. Valuation is an art, not an exact science. Mathematical certainty is not demanded, nor indeed is it possible said Viscount Simon in the case of Gold Coast Selectwn Trust Ltd v. Humphrey (Inspector of Taxes) (1949) 17 ITR 19 (HL). A notional value is contemplated and many imponderables are involved requiring application of different methods and approaches. This is perhaps the reason why even in the Form 0-8 and 0-8 A prescribed under the Rules and Schedule III for jewellery there is no column relating to the value. No doubt, the value is given by the assessee in the return and is often supported by a valuer's report. But it cannot be said that any other valuation report obtained by the assessee, is a material fact required to be intimated to the Wealth Tax Officer. It is quite possible that an assessee may obtain several valuation reports for different purposes but such valuation reports still remain only opinions of various experts. Though they may be relevant for any person to come to his own opinion about the valuation qf the asset, they do not constitute a primary fact which is required to be disclosed. Particularly in the case of jewellery, when the jewellery themselves are produced for inspection and valuation, any other valuation, either by the assessee or any other qualified valuer would be just another opinion but not a primary fact and the omission to disclose the fact that the assessee obtained any other opinion would not amount to failure to disclose fully and truly a primary fact. Consequently, the fact that the assessee was able to obtain two different valuation reports from Sotheby and Christie's is of no consequence when the jewellery was presented to the Valuation Officer of the Department for his own valuation. It is only with reference to the Explanation 4 to Section 18 mat the assessee's own valuation has to be supported by a valuer's report. In the present context, it is not in dispute mat for each assessment year the assessee took as the basis the valuation of the Department's Valuation Officer for the earlier year. Further, according to a Circular of the C.B.D.T No. 646 dated 15-3-1993 as well as Rule 19 of Schedule III the value of jewellery assessed in one year holds good for four successive assessment years. Therefore, in view of the clarification given by the C.B.D.T in the Press Note dated 27-5-1968, there was no concealment of any particulars by the assessee inasmuch as the valuation shown in the return was bona fide and was based upon the Department's own valuation for the earlier years. It follows that there was no omission to disclose correct particulars.

16. As observed earlier, it is only because the manner of valuation of assets led to unnecessary friction that Section 16-A was introduced. A reading of that Section shows that the entire procedure of valuation after enquiry which was earlier done by the Wealth tax Officer was transferred to the exclusive jurisdiction of the Valuation Officer. He is appointed by the Government on the basis of his qualifications. He has been given the power under Section 16-A(3) to accept the value shown by the assessee which earlier the Assessing Officer was doingunder Section 16(1). Similarly, he has been given a power under subsection (4) to make a preliminary enquiry and call for the objections of the assessee and under sub section (5) to hear such evidence as the assessee may produce or as the Valuation Officer may require and toestimate the value of the asset after taking into account all relevant material which he has garnered. This is analogous to sub sections (3) and (4) of Section 16. In other words, a part of the assessment which was the valuation of the asset, which was being done by the Assessing Officer, was transferred to the exclusive jurisdiction of the Valuation Officer because under sub section (6) the assessment has to be completed in conformity with the valuation of the Valuation Officer. It may be note/i mat if he has made any mistake then the Valuation Officer alone has the power to rectify the mistake as can be seen by Section 35 (1) (aaa). A consequence of this pattern of assessment is that litigation in respect of valuation of an asset is intentionally restrained on the part of the Department, for, an appeal lies against such valuation only at the instance of the assessee and the Appellate Authorities have to decide the matter only after hearing the Valuation Officer. The purpose of this legislation appears to be to maintain a ceiling on the valuation of the asset by the Department reserving only the right of the assessee to seek adjustments if he feels aggrieved by the valuation. This is similar to the yaluation of land acquired under the Land Acquisition Act where the value determined by the Land Acquisition Officer is the minimum below which the Government cannot go as it is binding on the Government though the claimant can have the matter referred to Government seeking a higher value. No doubt, prior to introduction of Section 16-A, when the Wealth tax Officer was himself making assessments by estimating the value of the asset he could perhaps have invoked Section 17 on the ground that the net wealth wi th reference to the value of an asset was under assessed by reason of his own failure to advert to any relevant material in the enquiry in the original assessment. But, even such an action would have been severely restricted because it would be a substitution Of an earlier opinion with reference to the value of an asset by another opinion though well informed. The Supreme Court has held in thecase of C.I.T v. Simon Carves Ltd. . 105 ITR 212 SC. that it is not open to the Assessing Officer to substitute his opinion for that of the Officer making the original assessment when the method of computation adopted at the time of the original assessment was permissible in law and that the fact that the adoption of a different method would have resulted in higheryield of tax would not justify the reopening of the assessment. If the Wealth tax Officer could not have done such a reassessment prior to introduction of Section 16-A, all the more reason why he cannot do it after Section 16-A (6) was enacted. The valuation made by the Valuation Officer is binding on him and that part of the assessment which was in conformity with the Valuation Officer's estimate, cannot be revised by the Wealth tax Officer. When we find that the jurisdiction of the Wealth tax Officer in respect of the valuation of an asset was specifically transferred to the Valuation Officer including the matter of rectification of mistake and no right to revise such an estimate is reserved under Section 17 it would follow that the jurisdiction of the Wealth tax Officer under Section 17 is curtailed to that extent. A harmonious reading of Section 16-A and Section 17 leads us to hold that the matter of valuation of asset is within the exclusive jurisdiction of the Valuation Officer subject only to appeal by the assessee, and therefore, cannot be the subject of reassessment under Section 17. The contention of the Revenue that this will be discriminatory as under assessments in assessments made under Section 16 will be open to revision while those made under Section 16-A will not, has only to be stated to be rejected. Obviously, it amounts to a reasonable classification between valuation by the Wealth tax Officer without expertise and valuation by Valuation Officer whose decision is clearly made final by Section 16-A (6). In the present case, the valuation was actually the subject of an appeal. The assessee had accepted the estimate made by the Valuation Officer and asked only for certain discount because of various depressing factors which the Commissioner of Wealth Tax had accepted and it was upheld by the Appellate Tribunal. The Tribunal also exempted seven items of jewellery declared as Art Treasures exempt under Section 5 (1) (xii) of the Act. Once the matter of valuation has merged with the appellate order, there is no further justification for the Wealth tax Officer to attempt a reassessment of the same.

17. The learned Counsel for the Revenue submitted that the Wealth tax Officer had reason to believe that the net wealth has been under assessed because the fact that the assessee was claiming very large amount as compensation and had also obtained other valuer's report in support of that claim, was not disclosed and secondly, the Valuation Officer had admitted during the arbitration proceedings that his own valuation was vitiated by certain infirmities. According to the learned Counsel, failure to keep the Valuation Officer informed about the exorbitant claim made in the arbitration pnkeedings amounted to failure to disclose truly and fully all material facts. We are unable to accept these contentions because a reading of the entire proceedings shows mat the Valuation Officer was a party to the entire proceedings in the arbitration. There was a coordinated effort by the Government of India in the arbitration proceedings to project the Valuation Officer as the most credible valuer. There was correspondence between the Ministry of Cultural Affairs and the Finance Ministry with reference to the deputation of the Valuation Officer for giving evidence before the arbitrators. On 29-12-1989, itself the Director General of National Museum wrote to the Member, C.B.D.T that the Valuation Officer had been summoned before the, Income Tax Appellate Tribunal with reference to an appeal relating to the valuation of the jewellery and informed him that hearing of the appeal should be deferred so that the trustees may not get away with comparatively lower valuation in the Wealth Tax assessment and extract maximum price from the Government. Surprisingly, after all the appeals were concluded on 8-2-1990 by the Appellate Tribunal, the Department's representative produced an issue of ‘India To-day’ dated 15-2-1990 to the members of the Tribunal which happened to have an article captioned The Nizam's Jewels Treasure Hunt - Waiting to encash a legacy and asked leave to rely on the same. But the Tribunal rightly rejected this plea made after the conclusion of the case before it. In the counter affidavit filed before us the Assistant Commissioner of Wealth tax states as follows:

“For the first time, the Revenue realised at the time of hearing of the case from a coverage made in the leading fortnightly ‘India To-day’ mat the intrinsic worth of the jewellery was many times more than what was declared and assessed.

18. This statement clearly suppressed the fact that there was already a letter dated 29-12-1989 on the subject. Apart from this, in every return filed by the trustees, the pendency of the litigation before the Supreme Court and the arbitrators have been mentioned. The learned Counsel submitted that for the assessment year 1989-90 the compromise dated 14-2-1989 was not disclosed. But the fact is that this compromise was recorded by the Supreme Court only on 25-4-1989 after the valuation date relevant to the assessment year 1989-90. Moreover, when the valuer gave evidence before ths arbitrator, he was cross examined on behalf of the trustees and he stated as follows:

“This valuation was done for the purpose of Wealth Tax and I have submitted my proposed valuation report also and invited objections or errors whatever it was from the assessee. They have never submitted any specific objection or document to the same jewellery about which all these questions are being asked, and I have been told that I have just to bring down the value all these errors are being made by me.

19. Since this answer has been given in the cross examination by the assessee, it appears to suggest that the Department did not want a higher value to be given so that the Government may be saved from paying more in case the jewellery was acquired. It must be remembered that the case with reference to the acquisition of the jewellery had been pending eversince 1979 and the Additional Secretary to the Ministry of Finance was himself a trustee. The Valuation Officer has also admitted that he was consistently associated with the Ministry of Finance in assessing the jewellery, and therefore, he was co opted as a member of the Valuation Committee constituted in 1990. In the circumstances, we are unable to accept the contention of the Revenue that any information about the claim of the petitioner for a large amount in arbitration proceedings was unknown to the Assessing Officer, even if it was known to the Department, particularly when the same Valuation Officer had given evidence before the arbitrator and had also valued the jewellery in the Wealth Tax assessment. Furthermore, by a letter dated 5-8-1991 the C.B.D.T Director wrote the following letter:

“Dear Shri

Sub: Arbitration proceedings in the case of Nizam Jewellery Trust and Nizam Supplemental Trust.

Please find enclosed herewith a copy of the award given by A.N Sen (Rtd), Umpire in the Nizam Jewellery arbitration proceedings. This award was given on July 27, 1991 at Calcutta. He has fixed the value of 173 items of jewellery comprised in the 2 Nizam's Trust at Rs. 225.37 crores. The award given by A.N Sen discusses at length the valuation of the departmental Valuer, Sri. Jayant Chowlera which was adopted by the Wealth tax Officer after certain modifications. Since the order of the Umpire has commented upon certain infirmities and under valuation of jewellery, the award may be scrutinised and suitable action as necessary may be taken urgently under intimation to the Board.

With regards

20. Encl: As above

Your sincerely,

(K. Vasudevan)

Shri R. Ganeshan

Chief Commissioner of

Income-tax, Hyderabad.

Copy to Sh. S. Govindarajan, Commissioner of Income-tax, Andhra Pradesh-I, Hyderabad for necessary action.

21. This suggests that the belief of the Wealth Tax Officer was not his own but one induced by the Government.

22. The learned Counsel for the Revenue stressed the fact that the very wide difference between the valuations made by the Valuation Officer and the claim made by the petitioners in the arbitration proceedings would indicate that mere was under assessmentof devaluation of the jewellery. We find that there were several reasons for this wide variation and it is not suggested that mere was anything mala fide in the matter. Firstly, there is a vital difference between the valuation for the purpose of an annual levy of tax and the valuation for the purpose of acquisition of the property. In the words of Dixon in the case of Commissioner of Succession Duties v. Executor Trustee and Agency Co. of South Australia

“I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second, the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While this difference cannot change the test of value, it is not without effect upon a Court's attitude in the application of the test. In a case of compensation, doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate.

23. We find that the same approach was taken by the learned Umpire in the arbitration proceedings where it was stated that:—

“the valuation made by Chowlera on behalf of the Union of India was on the basis of the value of these items of jewellery for wealth tax purposes. Mr. Chowlera himself has admitted that his valuation which was accepted by the parties for Wealth Tax purposes was only for wealth tax purposes and was therefore on the low side. In course of his evidence, he has also admitted that there are errors in the valuation made by him and as the valuation was for Wealth Tax purposes he had also not considered a particular item to be real Alexandrite but an imitation one and if it were real Alexandrite the value would be much more as real Alexandrite is very rare and valuable. It appears that the Union of India itself has considered the valuation made by Mr. Chowlera as rather low and has itself added to the said valuation 20% more on account of aesthetic value of items of jewellery and 20% more on account of escalation price. The addition of 20% for escalation in price appear to be arbitrary. There is a huge quantity of gold in many items of jewellery. The hike in the price of gold is indeed huge. The escalation in price should further be considered after taking into consideration the increased valuation on account of aesthetic value. The valuation made for wealth tax purposes cannot therefore determine the fair and just value of these items of jewellery.

24. This indicates that what was determined in the arbitration proceedings was the fair price that should be paid by the Government for acquisition of the jewellery as on 31-12-1994. The fact that the petitioner received a sum of Rs. 180 crores as on that date could never be a primary fact for disclosure for valuation of jewellery on the valuation dates 31-3-1984 to 31-3-1989 which were long prior to that event, What the Government was acquiring was the jewellery free from all encumberances. On the other hand, as on the earlier date of valuation the Valuation Officer had to estimate the value on a hypothetical market subject to various restrictions such as, sale within India, objections of the beneficiaries, dispute as to the title by the Government, threat of acquisition by the Government and lack of possession inasmuch as it was under attachment and in the custody of the Government etc. In a hypothetical market with all these depressing factors no willing buyer would have paid what the Government ultimately paid for acquiring the jewellery free from all encumberances. The valuation reports obtained by the petitioner were with reference to the foreign markets with the added prestige of a sale of jewellery belonging to a former ruler whereas the valuation for Wealth Tax purposes was mostly confined to intrinsic worth with reference to the weight of the gold and gems and the market value thereof. A significant fact is that the same valuer has valued the same jewellery even after 1990 at figures less than that paid by the Government and curiously for the year 1994-95 he has taken a figure of Rs. 236 crores which is even more than what it fetched. The more startling fact is that in spite of the valuer having admitted in the cross examination before the arbitrator in April 1991 that he had committed certain mistakes, he was continued to be employed as a valuer in respect of the same jewellery for subsequent valuation dates. This indicates that he was willing to give evidence before the arbitrators to suit the interests of the Government in order to continue his employment. His evidence, cannot therefore, be relied upon by the Revenue to contend that he had failed to make an appropriate enquiry under Section 16-A (5), and therefore, his report has to be disregarded for making any reassessment. As we have seen from the scheme of the Act, the Valuation Officer's report is binding on the Assessing Officer and if he could not avoid it at the time of original assessment itself on the ground that the enquiry contemplated under sub section was vitiated by the Valuation Officer not taking into account all relevant materials or not gathering all relevant material, certainly he could not make a reassessment on that ground.

25. We have already seen that the matter of valuation is a matter of opinion and not a primary fact. The Bombay High Court has held in the case of Tulsidas Kilachand v. D.R Chawla . 122 ITR 458 Bombay.:

“that a subsequent valuer's report giving a higher value is not relevant information enabling the Wealth tax Officer to reopen an assessment based on a valuer's report because it would still amount to a change of opinion, especially when the Wealth tax Officer could have easily ascertained the correctness of the statement made in the return while making the assessment.

26. The Supreme Court refused to grant theleave to appeal against that judgment (141 St. 47). It can, therefore, be taken as well settled that an estimate of a value of an asset is not a primary fact. We have also seen that the forms prescribed do not require the assessee to mention anything about the value except to support the value returned with the valuer's report. The assessee in the present case relied entirely on the Department's valuation for the value returned. We find that there was a full and complete disclosure of all the primary facts by production of the jewellery itself for inspection and evaluation, as well as by giving all relevant facts relating to the pending litigation before the Supreme Court. Furthermore, in spite of the petitioners giving all such information, the return filed was not accepted. The valuation was made by the Valuation Officer under Section 16 (5) independently and the assessment was made on that basis. It is, therefore, impossible for the Revenue to assert that there was any underassessment by the reason of the failure of the assessee to disclose truly and fully all material particulars. When the assessment itself was made independent of any material furnished by the assessee, the Revenue cannot contend that mere was any under assessment based on the belief that the valuation made in the assessments were low compared to the claim made by the assessee in the arbitration proceedings only by reason of the failure of the assessee to give any particulars. The proviso to Section 17 states that in such circumstances a reassessment can be initiated only within four years from the date of the assessment order. Since that period of limitation has admittedly expired in respect of all the five assessmentyears 1984-85 to 1989-90, the impugned notices are also barred by limitation. The Supreme Court has held in the case of Calcutta Discount Co. Ltd v. ITO . 41 ITR 191 SC. that:

“the question whether the Income Tax Officer had reason to believe that under assessment had occurred by reason of non disclosure of material facts was not a mere question of limitation only but was a question of jurisdiction which could be investigated under Article 226 of the Constitution of India. The Supreme Court has also observed in Parashuram Potter Works Co. LTD v. I.T.O . 106 ITR 10 SC.

“It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity. So far as the Income tax assessment orders are concerned, they cannot be reopened on the score of income escaping assessment under Section 147 of the Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

27. We have already found that the Act itself had been amended to limit the litigation in respect of valuation, and therefore, we are of the opinion the Revenue would do well to cease and desist from reopening the matter of valuation of jewellery. W.P No. 8612/1996 relates to 34 notices and W.P No. 16431/1996 relates to 41 notices issued to the trustees in the representative capacity to reopen assessments made on the beneficiaries mentioned therein. Since all the assessments were made only on the basis of valuation made under Section 16-A and for assessment year 1989-90 though no reference was made under Section 16-A, the earlier years valuation prevailed because of Department Circular as well as Rule 19 of Schedule III, such valuation was outside the scope of Section 17 and the Wealth Tax Officer has no jurisdiction to revalue the same under Section 17. The impugned notices are therefore quashed and the writ petitions allowed. No costs.