JUDGMENT M.C. Agarwal, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated August 16, 1976, issued by the Wealth-tax Officer under Section 17 of the Wealth-tax Act, 1957, for the assessment year 1973-74, requiring the assessee-petitioner to file its return of wealth for the said year and the subsequent notices dated January 31, 1978, March 10, 1978, March 11, 1978 and April 15, 1978, issued by the Valuation Officer in connection with the valuation of the assets of the petitioner.
2. Counter and rejoinder affidavits have been exchanged.
3. We have heard learned counsel for the petitioner, Sri V.B. Upadhyaya, and Sri Bharat Ji Agarwal, learned standing counsel for the respondents.
4. The petitioner is a public religious and charitable trust. Its case is that it is exempt from income-tax by virtue of Section 11 of the Income-tax Act, 1961, and also from wealth-tax by virtue of section 5 of the Wealth-tax Act. For the assessment years 1972-73 and 1973-74 proceedings were initiated to assess the income of the assessee under the Income-tax Act and, ultimately, the Income-tax Appellate Tribunal, vide its order dated September 27, 1977, held that the petitioner was entitled to exemption from income-tax. Since the petitioner was exempt from levy of wealth-tax, it did not file any wealth-tax return, but the Wealth-tax Officer, Kanpur, issued the impugned notice under Section 17. The petitioner filed its return under protest. By letter dated January 31, 1978, the Valuation Officer, respondent No. 2, asked the petitioner to supply the details of the property regarding the Kamla castle for purposes of valuation under the Act. It was alleged that there was no material on record that the wealth of the petitioner has escaped assessment and, therefore, the condition precedent for the exercise of the powers under Section 17 of the Wealth-tax Act was absent and, consequently, the proceedings for the valuation of the properties were also invalid. It is on this basis that the various notices issued by the Valuation Officer have been challenged in the writ petition.
5. In the counter-affidavit, it was alleged that the petitioner was not a public charitable trust and was not entitled to exemption under the Income-tax and Wealth-tax Acts and that the controversy between the parties about the eligibility of exemption to the petitioner has not been finally settled and application under Section 256(1) for reference to the High Court is pending.
6. At the hearing before us, it was pointed out that in the income-tax proceedings for the assessment years 1972-73 and 1973-74, the Income-tax Officer had taken the view that the assessee had violated the provisions of Section 13 of the Income-tax Act and was, therefore, not entitled to exemption under Section 11. Section 21A was enacted in the Wealth-tax Act with effect from April 1, 1973, containing provisions parallel to Section 13 of the Income-tax Act and providing the circumstances in which the wealth held under trust for any public purpose of a charitable or religious nature may become liable to wealth-tax. The impugned notice under Section 17 of the Act was issued by the Wealth-tax Officer after recording his reasons which were produced before us at the hearing. The reasons stated that "as per finding recorded in the income-tax assessment of 1973-74, that the income and also property of the trust during the previous year was used directly or indirectly for the benefits of persons specified in Section 13(3) of the Income-tax Act. On account of this fact I have reason to believe that the net wealth computed below has escaped assessment on account of failure on the part of the trust to file its return of wealth".
7. Section 17 of the Wealth-tax Act as it stood at the relevant time permitted the issue of a notice under that section calling for a return of wealth if the Assessing Officer for reasons recorded by him in writing, is of the opinion that the net wealth chargeable to tax in respect of which any person is assessable under this Act has escaped assessment. Although, in the writ petition, it was claimed that there was no material on the record that the wealth of the petitioner had escaped assessment, at the hearing no argument was addressed to us on that point and it was not contended that the finding in the income-tax proceedings for the assessment years 1972-73 and 1973-74 as it stood at the relevant time did not justify the formation of an opinion by the Wealth-tax Officer that because of those findings the wealth was not exempt and consequently, had escaped assessment. In the income-tax proceedings, it was held that the properties of the trust were being used for the benefit of persons mentioned in Section 13(3) of the Income-tax Act and on those findings action for assessment of assets of the trust to wealth-tax could be validly initiated. We, therefore, find that the impugned notice under Section 17 of the Wealth-tax Act was validly issued.
8. What was contended by learned counsel for the petitioner, however, was that subsequently the Income-tax Tribunal reversed the findings of the Income-tax Officer on the aforesaid points and held that the income of the petitioner was not liable to tax as it had not violated the provisions of Section 13 of the Income-tax Act and the findings of the Tribunal have been upheld by this court, vide its judgment, dated April 9, 1991, in Income-tax Reference No. 229 of 1981--CIT v. J.K. Charitable Trust [1992] 196 ITR 31. According to learned counsel for the petitioner, therefore, the basis on which the notice under Section 17 was issued has vanished and the notice has become void ab initio and should be quashed.
9. Reliance is placed on a judgment of the Andhra Pradesh High Court in Perla Krishna Rao v. ITO [1986] 159 ITR 299. In that case proceedings under Section 147(a) read with Section 148 of the Income-tax Act were initiated on the basis of a finding by the Collector and the Gold Control Administrator that certain gold recovered from some other persons belonged to the assessee, namely, Perla Krishna Rao. Subsequent to the issue of notice under Section 148 of the Income-tax Act, the decision of the Collector and the Gold Control Administrator was set aside in revision by the Government holding that it was not established that the gold belonged to the said assessee. For this reason, the High Court held that the impugned notice could not be sustained and it must be held to be based on no material. Learned counsel for the petitioner also referred to a news report in [1991] 187 ITR (St.) 65, to the effect that the Supreme Court dismissed the Department's special leave petition against the aforesaid judgment of the Andhra Pradesh High Court reported in [1986] 159 ITR 299. On the other hand, learned counsel for the Revenue relied on a judgment of the Gujarat High Court in CIT v. Maneklal Harilal Spg. And Mfg. Co. Ltd [1977] 106 ITR 24. In that case in the original assessment development rebate was allowed on the parts of machinery. Later, the legal position was understood to be that development rebate was not available on the parts of machinery and it was for this reason that a notice under Section 148 was issued to make a reassessment withdrawing the development rebate. Subsequently, the Supreme Court held that development rebate was admissible on the parts of machinery. The judgment of the Supreme Court was pronounced within a month of the issue of the notice by the Income-tax Officer. A question arose whether the notice issued by the Income-tax Officer under Section 148 stood invalidated because of the subsequent decision of the Supreme Court. It was held that a judgment of the Supreme Court cannot be placed on the same footing as a retrospective piece of legislation and it cannot, therefore, be said that the reason for the belief of the Income-tax Officer was not in existence at the time when he initiated the proceedings. It was therefore, held that the subsequent event, i.e., the change of the legal position by virtue of a judgment of the Supreme Court, did not invalidate the notice that was rightly issued at the relevant time. To the same effect in the view of the Calcutta High Court in CIT v. Assam Oil Co. Ltd. [1982] 133 ITR 204, it was held that a decision of the High Court that a particular kind of expenditure is not deductible would constitute "information" within the meaning of Section 147(b) and reassessment proceedings taken in consequence of such information would be valid. A subsequent reversal of the decision of the High Court by the Supreme Court would not render the reassessment proceedings void ab initio.
10. We are in agreement with the view taken by the Gujarat and the Calcutta High Courts in the aforesaid cases. As regards dismissal of the special leave petition by the Supreme Court against the judgment of the Andhra Pradesh High Court in Perla Krishna Rao v. ITO [1986] 159 ITR 299, the judgment of the Supreme Court dismissing the special leave petition has not been placed before us. What was cited was a news report and we do not know whether the Supreme Court made any observations approving the judgment of the Andhra Pradesh High Court. A mere dismissal of the special leave petition does not mean that the judgment of the High Court stands affirmed by the Supreme Court. The fact merely remains that no appeal was permitted and not that an appeal against the said judgment was dismissed by the Supreme Court affirming the view of the High Court.
11. For the above reasons, we are of the opinion that the proceedings were validly initiated by the issue of the impugned notice dated August 16, 1976, and the subsequent reversal of the findings by the Income-tax Tribunal did not affect the validity of the said notice.
12. As regards the notices issued by the Valuation Officer, the challenge to them was based on the assumption that the initiation of proceedings under Section 17 being invalid, there were no valid assessment proceedings pending and hence no valid reference to the Valuation Officer could be made. As a consequence of the aforesaid findings, this contention cannot prevail and has to be rejected.
13. For the above reasons, this writ petition has no force and is hereby dismissed with costs, that we assess at Rs. 5,000.