M.C.Agarwal, J. - (1.) THESE two petitions under article 226 of the Constitution of India have been preferred by Davendra Pal Singh, an assessee, under the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), and pertain to the assessment years 1990-91 and 1991-92, respectively. The petitioner challenges orders dated January 31, 1995, whereby penalty under Section 18(1)(c) of the Act has been levied for the two years, a common order dated October 10, 1994, passed by the Commissioner of Wealth-tax, Meerut, whereby the petitioner's revision petitions against the assessment orders moved under Section 25 of the Act have been partly allowed, and, the assessment orders dated March 29, 1994, for the two years, respectively. The petitioner further prays that a writ of mandamus be issued to the Commissioner of Wealth-tax, Meerut, to declare the land as agricultural land and directing the Assessing Officer, i.e., the Assistant Commissioner of Wealth-tax, Bulandshahr, not to proceed with the recovery of the demands created. Counter and rejoinder affidavits, etc., have been exchanged. I have heard Sri Ajit Kumar, Learned counsel for the petitioner, and Sri A. N. Mahajan, learned counsel for the respondents.
(2.) THE petitioner is a wealth-tax assessee and was the owner of the agricultural lands bearing khasra numbers 509, 510, 513, 514, 515, 538, 539 and 540 situate in village Bhoor district Bulandshahr and measuring 23 bighas, 16 biswas pucca, i.e., 71,968 square yards or 60,650 square meters. Up to the assessment year 1988-89, this land was treated as agricultural land and was treated to be exempt from wealth-tax having been excluded from the definition of "asset" by Section 2(e)(2)(i)(a) of the Act and the dispute in these writ petitions is whether on the relevant valuation dates, i.e., March 31, 1990, and March 31, 1991, this land ceased to be agricultural land and became an asset as held by the Assessing Officer and the Commissioner. On May 19, 1989, the petitioner entered into an agreement to sell this land to a partnership firm named Konarka Builders constituted by six persons including the petitioner's wife, Smt. Sarla Rani. A copy of this agreement is annexure 9 to Writ Petition No. 330 of 1995 which describes the petitioner as a party of the first part. The agreement describes the prospective purchaser as colonizers who were purchasing the land having potential for residential and commercial purposes and who were to sell the same after carving out plots, a corollary colony in accordance with law of the day and selling them for profits. The consideration agreed was Rs. 1,04,28,000 and a period of three years was agreed for the completion of the terms of the agreement. It was agreed that the party of the first part would provide all assistance to the party of the second part so that they may get approved the lay out plan for the establishment of the colony. The party of the first part was to continue to be the owner of the land till the sale deeds were executed but the party of the second part was entitled to get executed the sale deeds plotwise as approved or to be approved by the development authority or pocketwise or khata numberwise. The party of the second part was also entitled to enter upon the land for the purposes of making measurements, marking the roads, parks and plots according to the approved lay out plan, showing to their potential purchasers and developing roads, parks or plots, etc. The entire expenses for the approval of the lay out plan, of the development of the site and other ancillary expenses were to be borne by the party of the second part and the party of the second part was at liberty to get cut the entire grove at their own expenses and sell the wood to meet the expenses of the development work for this purpose. The property was described in a schedule as under : "Grove land is situated in village Bhoor Pargana Baran, district Bulandshahr. JUDGEMENT_127_ITR243_2000Html1.htm Twenty three bigha and sixteen biswas pukhta." It was because of this agreement and the subsequent events that the Assessing Officer while making the assessments held that on the relevant valuation dates, i.e., March 31, 1990 and March 51, 1991, the land had lost its character as agricultural land and was, therefore, not excluded from the definition of "asset" in Section 2(e) of the Act. The circumstances relied upon by the Assessing Officer for holding that the land in question was no longer agricultural land were (i) the Bulandshahr Khurja Development Authority (for short BKDA) was requested for approval of the colony in the month of June, 1989 ; (ii) on September 29, 1989, a sum of Rs. 3 lakhs was paid by the assessee to the BKDA ; (iii) the firm, Konarka Builders, had paid an instalment of Rs. 2,84,407 on December 30, 1989 to the BKDA ; (iv) the assessee sold Plot No. 119 measuring 176 square metres of this colony on March 19, 1990 ; and (v) in the income-tax return for the assessment year 1990-91, the builders Konarka Builders had shown a sum of Rs. 3,18,451 as sale proceeds of the plots in Hari Enclave the name that was given to the colony to be developed on the disputed land. In the assessment order for the assessment year 1991-92 (valuation date March 31, 1991), the Assessing Officer mentioned that up to the valuation date plots measuring 3,846,73 square yards had been sold. For the assessment year 1990-91, the Assessing Officer valued this land at Rs. 2,11,52,750. This value was arrived at by applying a rate of Rs. 350 per square metre to the land measuring 60,650 square metres and adjusting therefrom the value already received in respect of Plot No. 119. For the assessment year 1991-92, the value of the land was assessed at Rs. 1,98,68,894 by applying a rate of Rs. 350 per square metre to the unsold land measuring 56,768.27 square metres.
(3.) AGAINST the assessment orders, the petitioner preferred appeals to the Commissioner of Wealth-tax (Appeals) but for reasons best known to him the petitioner withdrew the appeals which were dismissed as such by the Commissioner of Wealth-tax (Appeals) vide order dated September 28, 1994, a copy of which is annexure 13 in Writ Petition No. 330 of 1995. Though this order does not state the reasons for the withdrawal of the appeals, in the petition it is stated that the petitioner withdrew these appeals as the petitioner preferred to file revision petitions before the Commissioner (see paragraph 18). By the impugned order dated October 10, 1994, the Commissioner dismissed the revision petitions in so far as the character of the land and its valuation was concerned. In the writ petition, it is contended that no development work had been undertaken on the land in question up to the relevant valuation dates, i.e., March 31, 1990 and March 31, 1991, and it was only thereafter that actual development work started. The following grounds have been set up in Writ Petition No. 330 of 1995 and similar grounds have been set up in the other writ petition : "I. Because respondent No. 1 has given a totally perverse finding and has gone on irrelevant and extraneous consideration. The Commissioner was of the opinion that since the documents on which the agreement to sell was executed was purchased on May 19, 1989, the land had lost its character of agricultural land. It was also mentioned that the petitioner was not the owner of the land. Both these findings are perverse in nature. The petitioner had already filed relevant documents to show that the land retained its character as agricultural land till the year 1991, when the permission to develop the land was accorded by the development authority and a separate agreement dated February 26, 1991, was entered into between the petitioner and the said development authority. It has also been shown by necessary documents annexed earlier to the writ petition that the petitioner continued to remain as the owner of the land and in any view of the matter this was hardly the relevant consideration for the domain whether the land was agricultural or non-agricultural. The law is also clear on this ground that mere agreement to sell does not get absolute right and title in the property in question. II. Because the Commissioner has also not taken into consideration the Circular No. 2(WT) of 1968, issued by the Central Board of Direct Taxes in which certain guidelines have been laid down for treating the land as agricultural or non-agricultural. The Commissioner has merely said that the third condition of the said circular that it has not been put to use as non-agricultural land has not been satisfied. The petitioner has already shown that the land retained its character as agricultural land for the relevant assessment years in question. Thus, it is clear that the Commissioner has not taken into consideration the relevant factors which go to determine the nature of the land as to whether it is agricultural or non-agricultural. He had merely been influenced by the fact that the agreement to sell was entered into between the petitioner and private builders. III. Because as already stated above, the Commissioner of Wealth-tax, Meerut, had not applied the necessary tests as laid down by various courts to determine whether the land in question is agricultural or non-agricultural in nature. The Commissioner has not taken into consideration the relevant factors on facts and on law which were presented before both the authorities, i.e., respondents Nos. 1 and 2. It was pointed out before the both authorities below that for the relevant assessment year and on the relevant valuation date, the land in question was agricultural in nature and no operations were carried out on the said land, so as to change the character of the land. Although it is true that an agreement to sell was entered into, but the land remained untouched and even for the assessment year 1991-92 as pointed out again the agricultural income to the tune of Rs. 55,000 was shown and it was accepted, as such, under the heading 'income from agricultural sources and the addition made on the income from undisclosed sources' was deleted by the Commissioner of Income-tax (Appeals). IV. Because the Commissioner also did not take into consideration the fact that the development work was started only when the second agreement was entered into between the petitioner and the relevant development authority on February 26, 1991. Even then, the actual development work did not start and the correspondence was being carried on between the two parties right up to September, 1991, regarding the deposit of supervision charges, etc. V. Because the Commissioner also did not take into consideration the land revenue receipt as well as the copy of khasra and khatauni which were filed before the various authorities below as well as before the Commissioner to show that the land was agricultural. VI. Because the Commissioner also did not take into consideration the Board's circular dated March 16, 1968, which was categorical to the effect that any land even if it comes within the town planning scheme may be treated as agricultural land provided land revenue is being paid, agricultural operations being carried out and it is being put to non-agricultural purpose on the relevant valuation date. All the three said conditions were satisfied in the petitioner's case, therefore, the land should have been accepted as agricultural. It is settled law, that the circular of the Board is binding on all income-tax authorities including the Commissioner under Section 119 of the Income-tax Act. The order passed by the Commissioner is perverse and based on irrelevant and extraneous considerations and as such is liable to be quashed by this court. VII. Because it may be relevant to mention here that after the passing of these orders a heavy demand has been created against the petitioner by respondent No. 2 to the present writ petition. VIII. Because a bare perusal of the order passed under Section 18(1)(c) of the Wealth-tax Act would show that the Assessing Officer had not at all applied his mind as to whether penalty would have been levied in this case or not. He has also not discussed anything as to whether any concealment was there on the part of the assessee. The entire order is arbitrary and based on conjectures and surmises. It would not be wrong to say that the Assessing Officer is simply following the order passed by the higher authorities. No application of mind independently in this issue has been done and no efforts have been made to say whether the ingredients of Section 18(1)(c) of the Wealth-tax Act are present or not." ;