1. The appeals are by the department. The cross-objections are by the assessee. The basis of all these appeals is the levy of penalty under Section 18(1)(c) of the Wealth-tax Act 1957 ('the Act'), by the WTO for the assessment years 1966-67 to 1971-72. Different amounts of penalties have been levied by the WTO. In the departmental appeals several grounds are raised. One of the grounds is that the appeals against the levy of penalties having been filed before the AAC but subsequently transferred to and taken up for consideration by the Commissioner (Appeals), the order of the Commissioner (Appeals) is ab initio void.
Objection is also raised to the Commissioner (Appeals)'s issuing a show-cause notice of hearing to the ITO even before receiving a report from him on the point of limitation. A consequential ground is that the ITO was not given an opportunity of hearing. Apparently, the reference to the ITO in these grounds is a mistake for the WTO since the appeals before us are under the Act. We, therefore, proceed substituting 'Wealth-tax Officer' for 'Income-tax Officer'.
2. The initial grounds raised by the department to our mind are without any substance. We have heard the parties on the point. It would appear that the instructions accompanying the demand notice may be on account of a routine, dealing with the same referred to the AAC. An assessee who follows the instructions of the department cannot be committing an error by doing so. It would be improper for the department to take advantage of this misdirection and object to the transfer of the appeals to the correct officer having jurisdiction, namely, the Commissioner (Appeals) for being heard by him. This ground of appeal raised by the department arises from a misconception of the whole matter. The records of the case, etc., we find were called for by the Commissioner (Appeals), who issued the notice of hearing also. The allegation of non-grant of opportunity is also, therefore, without substance. In fact, for some of the appeals relating to the same group and covering the same matter, the WTO was present on behalf of the department. These grounds raised by the department are decided against it.
3. The respondents in these appeals were the monthly tenants in of a building called 'Shikhar Kunj' situated at Carmiehael Road, Bombay. On 13-3-1950, Sahu Brothers (Saurashtra) (P.) Ltd. (S.B. Ltd.) controlled by the Jain family of which the respondents are members, acquired the abovementioned property. On 24-2-1966, Carmiehael Properties (P.) Ltd. (CPP Ltd.) was incorporated as a wholly subsidiary company of SB Ltd. to acquire the above-mentioned property. On 30-3-1967, CPP Ltd. purchased this property for a sum of Rs. 47 lakhs. At the time of the purchase, the twelve respondents on whom the penalties under section I8(1)(c) have been levied by the WTO and whose appeals are considered hereunder were the tenants of this property. On 10-3-1966, SB Ltd. and CPP Ltd. entered into an agreement relating to this property. This agreement referred to the tenancy of the respondents. By a letter, dated 7-1-1966, a deal was struck between SB Ltd. and CPP Ltd. and also the tenants. According to this, the tenants were to be allotted flats in a building to be constructed on the premises after pulling down the existing building. The assessees, tenants of the property, were to continue as tenants in the new building constructed. They had also an option to purchase the flats allotted to them as a tenant. The purchase price also was subject to an option. They could either pay the cost of construction or a particular multiplier of the standard rent. By their letter dated 4-4-1966, CPP Ltd. ratified the above agreement between SB Ltd. and its tenants, the present assessees. In November 1971, the constructed flats were occupied on an ownership basis by the assessees.
4. In the original assessment to the wealth-tax, the assessees had not referred to any of the above details or transactions. Scrutinising the above-mentioned documents, the WTO found that the average price of a flat sold to outsiders is at Rs. 98 per square ft. in the new building.
To the present assessees, these flats were to be sold at a price of Rs. 53 per sq. ft. i.e., Rs. 45 per sq. ft. lesser than to the outsiders.
Likewise, the garages constructed in the new building were sold to these assessees at Rs. 2,500 per garage whereas the outsiders were charged Rs. 8,500. According to the WTO in-built in these transactions was an asset of substantial value, which was not included in the original wealth-tax return or the wealth-tax assessment of these assessees. Since this asset was not taken into consideration at the time of the original assessment, the assessees having concealed the details thereof, reassessment proceedings were started. The WTO completed the assessment by including an extra asset valued at Rs. 1,30,000 in the new wealth of each of the assesseess for each assessment year. The assessees appealed against this inclusion. But before the AAC, the assessees did not contest the appeals. They withdrew the same. This was done by a letter addressed to the AAC on 30-7-1980.
5. The WTO noting that the assessees had omitted the above asset valued at Rs. 1,30,000 from the returns, started penalty proceedings for concealment and levied penalties under Section 18(1)(c) for all the assessment years from 1966-67 to 1971-72. In the case of S.P. Jain, the penalties levied were Rs. 980, Rs. 922, Rs. 1,096, Rs. 839, Rs. 967 and Rs. 1,251 for these years. Similar penalties were levied in the case of all these assessees for the abovementioned assessment years. The penalties levied, according to the WTO, represented the minimum penalty equal to the tax sought to be evaded.
6. In the appeal to the Commissioner (Appeals), it was argued before him that the assessees did not include the value of the above asset in the returns of net wealth in the bona fide belief that in law, it did not constitute an asset for the purposes of wealth-tax. The Commissioner held that the assessee could not be said to have acted deliberately in defiance of the law or in conscious disregard of his obligations. It was also pointed out before him that the assessees did not contest the additions but withdrew the appeals filed before the AAC for the reason that the tax involved was small. The Commissioner (Appeals) held that the assessees did not conceal their wealth or furnish inaccurate particulars thereof. The penalties were cancelled for all the years. It is, thus, that the matter is before the Tribunal in the case of all the assessees and for all these assessment years.
7. Taking us through the details of the agreement between SB Ltd. and CPP Ltd. and the assessees, the learned counsel for the department has pointed out that the letters dated 7-1-1966 and 4-4-1966 represent the deal struck between the parties. Under the agreement, each of the assessees was to have a flat in the newly constructed building. While the outside purchase price of the flat would be on the basis of Rs. 98 per sq. ft. the assessees were given the flats at Rs. 53 per sq. ft.
There was a concession also in the price of the garages. The difference arose, according to the learned counsel, because under the agreement, the assessees were already possessed of an asset valued by the WTO at Rs. 1,30,000 given as past consideration for the flats purchased. The difference between the price paid by the outsiders and the assessees, according to the learned counsel, represented the "value of the right which the assessees had in the old building 'Shikhar Kunj' and on its conversion into a newly built multi-storeyed building. The matter has to be considered by taking into account all the details. One has to go through the pith and substance of the transaction. The assessees knew that when they surrendered their tenancy, they would get as a consideration for the same, a flat in the new building. The value of this asset as computed by the WTO was always in the possession of the assessees. They were conscious of the same. It was not by the mere agreement that this asset was brought into existence. The asset was already there. It is also pointed out by conceding before the first appellate authority the above position that the assessees accepted the existence of the asset. They have been also assessed on the same. The assessments have become conclusive. Taking us through the assessment order, the learned counsel pointed out that a special concession having monetary value was given to them under the agreement with SB Ltd. and CPP Ltd. The right to occupy the new flat allotted in lieu of the old tenement was a transferable and marketable right having monetary value.
Even otherwise, the test of transferability is not important for treating something as an asset.
8. Stressing the point that the assessees were conscious of their having a valuable asset with them and also that they had not returned that in their net wealth, the learned counsel pointed but that this omission was clear from their letter dated 3-12-1980 addressed to the AAC. In this letter, the assessees have mentioned that the ground relating to the inclusion of tenancy right as an asset was withdrawn because they were accepting the tenancy right as an asset. Even the ground of appeal before the AAC had not objected to treat the tenancy right as an interest in the property. At the time when these appeals were withdrawn, the penalty proceedings had already been started. The assessees, therefore, cannot say that they withdrew the appeals on the understanding that no penalties would be levied. The Commissioner (Appeals) has exonerated the assessees on the question of a bona fide belief that there was no includible asset. Substantial evidence has been laid in the quantum appeal to substantiate the existence of an asset and this has been accepted by the assessees in their letter addressed to the AAC. The evidence available in the quantum appeal, according to the learned counsel, was sufficient and good evidence even for the purposes of penalty appeals. The learned counsel referred in this connection the decisions in R.S. Joshi, STO v. Ajit Mills [1977] 40 STC 497 (SC), Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), Burmah-Shell Oil Storage & Distributing Co. of India Ltd. v.ITO [1978] 112 ITR 592 (Cal.) and Cement Marketing Co. of India Ltd. v.Assistant Commissioner of Sales Tax [1980] 124 ITR 15 (SC). These decisions rather than helping the assessees support the department's case.
9. The learned counsel has pointed out that the expression 'asset' in Section 2(e) of the Act must be given a comprehensive meaning. Unless it is excluded from the net wealth, every asset has to be included in the net wealth. Tests have referred to the nature of the property, its transferability and having a value for itself as constituting elements going to make an asset. The absence of one or other of these tests in full or in a partial measure does not make an asset any the less so.
Reference is made in this connection to the decisions in the case of CWT v. Purshottam N. Amersay [1969] 71 ITR 180 (Bom.) (confirmed by the Supreme Court in Purshottam N. Amarsay v. CWT[1973] 88 ITR 417), Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471 (SC) and CWT v. Smt. Rani Kaniz Abid [1974] 93 ITR 332 (All.). Aid has also been taken of the decisions in CIT v. New India Assurance Co. Ltd. [1980] 122 ITR 633 (Bom.), CIT v. Tata Services Ltd. [1980] 122 ITR 594 (Born.) and CIT v. Sterling Investment Corpn. Ltd. [1980] 123 ITR 441 (Bom.). Referring to the provisions of Section 18(1)(c), it is pointed out that Section 18 deals with different faults attracting penalty. With regard to different defaults, the section utilises different terminology. On the facts, the assessees knew that they were in possession of a valuable asset. Even so, no value for this asset was returned. The same material which formed the basis for sustaining the addition in this case by the first appellate authority would constitute material to support the levy of penalty as well. No fresh material was required. In the present case, the assessees had clearly concealed items of net wealth knowing that they were in possession of them. They were entering into an agreement and transactions with parties with the full knowledge not only of their being owners of these assets but also conscious of their worth. When gift-tax proceedings were taken against CPP Ltd., on the ground that the reduced value at which the flats were given to these assessees represented a gift in their hands, the assessees relied on the wealth-tax assessments made to challenge them. According to the learned counsel, this was a clear admission on the part of the assessees that this asset possessed value and knowingly they did not return its value for the wealth-tax assessment. Because of the stand taken by the assessees and almost the acceptance of the wealth-tax addition in disclaiming the liability to gift-tax, gift-tax proceedings were correctly dropped by the revenue. Thus, according to the learned counsel, there was a clear case of concealment. The fact that all these transactions were accomplished through the medium of private companies in which they were interested would make the matter more sinister. The entire position has to be looked at as a whole. The cumulative evidence on the activities of the assessees, according to the learned counsel, points out to a clear default on their part which attracted penalty for concealment. The revenue has been generous in fact by restricting the penalty to the minimum.
10. The learned counsel for the assessees has pointed out that the levy of penalty in these cases were neither justified nor proper. Referring to the argument of the learned' counsel for the department that a small penalty was levied only to show the displeasure of the department against the contumacious conduct of the assessees, it is pointed out that not only was penalty levied for all the years but, prosecution proceedings have also been started before a Magistrate. Even if the assessees were to ignore the penalty as nominal, the initiation of prosecution proceedings required the assessees to get the facts put right and in their proper perspective. It is the learned counsel's stand that the very additions made in these cases were unjustified. The matter covered as many as 70 assessments. The amount of penalty in each case was small. But if for the sake of principle, the assessees were to challenge the levy, the department might force these parties to go right up to the Supreme Court. This would have involved the assessees an enormous financial loss and other inconvenience. This was more so, since they will have to defend each one of the assessments separately.
It was for this reason that the assessees withdrew the appeals before the AAC. This fact was made clear by the last paragraph of the assessees' letter addressed to the AAC, dated 3-12-1980. Even in this letter the chartered accountants made it clear that a general question whether the particular right even as an interest in the property was not covered by the Act as an asset for inclusion in the net wealth. The letter also made it clear that the main purpose of the assessees' withdrawing the appeal was only to avoid escalating litigation.
11. The learned counsel has pointed out that there was in fact no justification for making the addition of Rs. 1,30,000 to the net wealth by the assessees. Even if on account of his withdrawal of appeals, the assessments became final in the penalty proceedings, he could well put forward the proper legal claim, viz., that the additions were unjustified. Elaborating his point, reference is made to the provisions of the letter dated 7-1-1966 addressed by SB Ltd. to all the respondents. Paragraph No. (d) of this letter specified that the assessees were only monthly tenants. The rights given to the assessees were only to occupy the place as tenants. The reference to the monthly tenancy indicated that the assessees were permitted to stay only for the month. Any protection of the tenancy secured to them by the tenancy legislations could always be waived if the justice of the situation warranted it. In other words, as a conscientious citizen, if the assessees found a claim for vacation of the premises made by the landlord, it was proper. Whatever be the rights under law, they might have to vacate the premises. The assessees' rights, therefore, were very limited in scope. The letter, according to the learned counsel, further made it clear that only an option was given to the assessees in view of their limited legal protection under the tenancy Acts.
Referring to the specific terms of this letter, it is pointed out that the premises were to be vacated but alternative accommodation till the completion of the new building was to be arranged by the tenants only and at their own cost. This is provided by Sub-clause (i) of Clause (g) of paragraph (d) of the letter. Sub-clause (in) of Clause (g) though referring to the payment of a rent of rupee one after the sale of the property had no legal effect. This clause only made an offer to give alternative accommodation !for old tenants of the old building in the new building at the standard rent for these premises. The option given in Sub-clause (iii) of Clause (g) for purchasing the flats did not in fact relate to the tenancy at all. The further option as regards the price, namely, standard rent calculated at the rate of 7| per cent yield per annum capitalised or the cost price of the carpet area of the flat, whichever is lesser, would also not directly relate to the tenancy. According to the learned counsel, therefore, these advantages by way of option can in no circumstances be related to the assessees being tenants in the old building. At any rate, the assessees had only a right to be granted alternate accommodation in the new building at the standard rent. The option to purchase the flats was nowhere in the picture as far as the tenancy was concerned. If the assessees were not to exercise the option, their rights would have been different.
According to the learned counsel, therefore, there was no asset which either the tenancy with standard rent or the option to purchase secured to the assessees on these valuation dates.
12. Referring to Section 17(6) and Section 19 of the Bombay Rent Hotel and Lodging House Rates Control Act, 1947, it is pointed out that the assessee had only the right to be a tenant. The tenancy could not be transferred. More than that receipt of any monetary consideration for a transfer of tenancy was an offence. The WTO cannot administer a law for which he was responsible in such a way as to compel a citizen to commit an offence either under that Act or any other statute, in this case the Bombay Rent Hotel and Lodging House Rates Control Act. By assuming a value for the transfer of the tenancy which in fact cannot be transferred in law, the WTO was doing just this. In-between the demolition of the old building and the construction of the new building, there was no tenancy, at best a promise of a future tenancy.
It is also pointed out that till an option is exercised even granting that it has a value, it cannot be evaluated. In the present case, the option was exercised only in November 1971. After this date, the assessees in fact returned the value of the flats as part of the net wealth. The assessees had in their letter to the WTO stated that the tenancy was not taxable. The definition of the asset in the Act was to include the value of an asset. If there was no monetary value for the asset, it could not be included in the net wealth, even if it was deemed to be a property for some other purposes. According to the counsel, the WTO assessed the 'tenancy right' as an asset includible in the net wealth. The departmental counsel's stand, therefore, that it is not the tenancy right but the agreement which conferred a benefit to the assessees that is a valuable right, Is altogether a different stand not contemplated by the WTO.13. Summarising the position, it is pointed out that in the present case, the assessees had no asset which could be accepted as such for the wealth-tax purposes. The monthly tenancy in the old building referred to in the letter of SB Ltd. was at best a precarious asset. No decision of any Court has been cited to show that any value of a tenancy should be included in the net wealth. The learned counsel also referred to the fact that there is a clear distinction between an asset having no value on transfer and the prohibition on making a transfer of the asset. Factually, therefore, there was no asset representing these agreements and transfers entered into by the assessees with their erstwhile landlord which could be included in the net wealth. Even though, therefore, the assessees had withdrawn the appeals before the AAC, the assessment itself stood intrinsically improper and unjustified. Apart from the fact that even the assessments were not correct, it is pointed out that the assessees were under the bona fide belief that the particular included asset was not includible for the wealth-tax purposes. There was no contumacious conduct. Reference is made in this connection to the decision in Cement Marketing Co. of India Ltd.'s case (supra). The assessees had not factually concealed any item of net wealth attracting penalty. Even the Explanation to Section 18(1)(c) was not attracted in their cases. The penalties were correctly cancelled by the Commissioner (Appeals).
14. The objections in these appeals are to the levy of penalties. The assessments including the additions which form the basis of the penalty have become final. For the reasons detailed below, we uphold the orders of the Commissioner (Appeals) cancelling the penalties. The cross-objections in effect pray for the upholding the orders of the Commissioner (Appeals) except to the extent of challenging the ground relating to the opportunity not granted to the WTO. The cross-objections are allowed.
15. Rent control regulations govern the equities of the landlord and the tenant relationship in a welfare State. Primarily, it is a relation between the owner of the property and his tenant. Even so, the law has treated it as a social problem governing the citizen. The inevitable consequence is the conferment of certain rights on the tenants. The rights follow and are restricted by the statutory provisions. We have in these appeals really an enquiry as to the sweep of and the limitations on the tenants' rights. The stand of the department in short is that the tenancy is a right. It is also an item of property.
It is thus includible in the net wealth of the tenant as an assessee.
16. The assessees in the present case were tenants in a property. They were also wealth-tax assessees prior to the earliest assessment years in appeal before us. Admittedly, the positive or presumptive value of the tenancies had not been included in the net wealth of these tenant-assessees in the earlier years. From the facts detailed above from the years 1966-67 to 1970-71, there was a dent on the tenants' previous position. The landlord sold the property to another. Avowedly seeking to protect the tenancies they were offered alternate accommodation. This was to be given in a new property to be constructed by the purchaser after demolishing the old property. The new property came into existence in 1971. After that period, the value of the flats allotted to these assessees were included by them in their net wealth.
There is, thus, an interim period between 1966 and 1971, where there was no existing property in respect of which these assessees were tenants. But the WTO held that they had a right to be tenanted in the new property and this right constituted an asset to be included in their net wealth for these intervening assessment years. Over the period, thus, when the actual tenancy was there, no asset was included.
When the buildings were demolished, a presumptive right to tenancy was valued and included. After the construction of the new property, the flats owned by the assessees were included by them in the net wealth.
The question is whether any asset for the intervening period ought to have been included in the net wealth. And since the assessees did not so include the property in the net wealth, did they not conceal the net wealth for which the penalties have been levied by the WTO 17. In challenging the penalties levied, the assessees' learned representative has challenged the very assessment itself. He claimed that though an appeal was filed, the appeal was withdrawn taking into account the financial implications and inconveniences. In an appeal against the penalty, certainly any argument against the addition in the assessment cannot be raised if it were to affect the assessment itself.
For the purpose of justifying the penalty, however, we see no reason why the assessment itself could not be shown to be wrong. If the addition itself has been wrongly sustained, there could be no levy of penalty at all. We see no objection to this argument being made by the learned counsel for the assessees while considering the levy of penalty. Whatever be our view on the inclusion of the asset in the net wealth, it cannot affect the assessment already concluded. But the levy of penalty, it certainly can affect.
18. In our view, there is no justification even for including the asset in the net wealth. In the first place, the wealth-tax has referred to the tenancy as a right in the property and, thus, an asset includible in the net wealth. If this be so, we see no justification for his not including the value of this tenancy in the case of all the assessments of the assessees prior to 1966-67, The tenancy really existed at that time. It is a common knowledge that thousands of tenants inhabit thousands of buildings in Bombay and in other towns of this country.
Rent control laws provide protection to the extent detailed in the statute to all these tenants. The present assessees are subject to the same rent control laws. Not a single case has been brought before us where the department has sought to include the value of these tenancies either in Bombay or anywhere in India in the net wealth of a tenant.
It, therefore, passes our comprehension why in the case of these assessees only lessee's tenancy right in a property should be treated as an asset to be included in the net wealth. If the matter is so clear and certain, at least, there would have been other assessments in Bombay or other places where the value of the tenancy of the continuing tenant would certainly have been included in his net wealth. There is no such instance. Even for the estate duty purposes, we know not of any instance where the protected tenancy of a deceased has been treated as a property passing on his death and included in the estate.
19. The above is no mere accident. Though the law provides a protection to the tenant, the protection cannot be elevated to the level of a positive asset which can be included in the net wealth of the tenant.
The Bombay Rent Hotel and Lodging House Rates Control Act permits the assessee to continue as a tenant in certain circumstances as long as he likes. The statute also provides certain circumstances in which the tenant can be evicted. The statute further provides that the tenancy cannot be transferred. The tenant cannot sublet his premises. Above all, the tenancy cannot be transferred for a monetary consideration.
The statute provides for deterrent penalties including imprisonment in the case of a person who receives money for surrendering his tenancy.
Even though, therefore, the tenant has a limited right to stay on the premises for an unlimited period, there is no question of the tenancy being treated as an asset which can be transferred much less be transferred for a price.
20. Sections 15(1) and 19 of the Bombay Rent Hotel and Lodging House Rates Control Act, clarify the above. If a tenant accepts the consideration for assigning his tenancy rights in the premises let to him for his residence, he would be hit by Section 19 and be exposed to the punishment therein stated. This is so, even where his contract of tenancy allows him to transfer his tenancy rights. This shows the extreme limit to which the rights of a tenant can be pushed.
21. Even though tenancy in a building is sometimes spoken of an asset and could be transferred when empowered by contract as provided for by Section 15(1), it cannot be transferred for a consideration. Its value, therefore, is nil. On the contrary, taking a consideration for such transfer would attract the provisions of Section 19(2) exposing the transferor tenant to punishment. Even if, therefore, a tenant's right can be regarded as property in certain circumstances and for certain purposes, it cannot be an asset for the purposes of the Act or for that matter for the Estate Duty Act, 1953. For these enactments, even if the Courts have held that transferability or otherwise of an asset is not the criterion for taxability, certainly determination of a market value is essential. If the property has no market value and cannot be sold even in a hypothetical market, it cannot be included in the net wealth or the estate passing on the death of a deceased. Even if theoretically an inclusion is justified its value will be nil. On the contrary, an attempt to transfer this right for a monetary consideration would be against the public policy and attract the penalty under Section 19(2).
As rightly contended by the learned counsel for the assessee, the WTO cannot import .the idea of an 'asset' to a situation where such importation necessarily implies the citizen acting against the public policy and in fact inviting punishment for breach of statutory provisions. This itself should be sufficient to show that tenancy right as such cannot be included as an asset for the purposes of wealth-tax.
22. True, we do come across cases where tenancies are surrendered and the tenants receive some consideration. Apart from the legality or otherwise of this receipt, if any, the payment may be for other purposes such as the difficulty in getting rid of a person or the difficulty in getting rid of inconvenient situations. The position would be almost like that of a blackmailer. If the blackmailer receives money from another, certainly it would be incongruous to tax him on the ground of an asset which brings him that money.
23. The learned counsel for the department almost giving up the stand of the WTO, who evaluated the 'tenancy' as an asset claimed that implicit in the various agreements between SB Ltd. and CPP Ltd. and the assessees inter se is an asset which belongs to the assessees.
Continuing this imaginary situation further, the learned counsel referred to the difference in price of flats offered to the assessees and outsiders in the new property constructed after demolition of 'ShikarKunj'. Interesting as the argument is, it fails to specify the exact asset which is includible in the net wealth. If it is the department's case that having entered into an agreement to obtain a place in the new building that agreement is the source of a valuable asset, that has only to be stated for being rejected. In the first place, if the agreement is the source of monetary benefit or for fulfilment of a promise, it would be a contract that requires support from a consideration. The provisions of the Bombay Rent Hotel and Lodging House Rates Control Act clearly would dub any such consideration as illegal. Secondly, this is at best a promise to do something in the future. In the peculiar circumstances of the case, all that these agreements signify would be that if the tenant leaves the premises and goes away, he would be provided with a tenancy at the standard rent in the new building to be constructed. Standard rent is a concept peculiar to the premises occupied. If the accommodation in the new building is different from the one in the old one, the standard rent itself would be several times the old rent paid giving the tenant scarcely any advantage.
24. More than this, the promise of a flat in a building to be constructed by a purchaser of the present building after its demolition is a commitment which requires several conditions to be satisfied before it can be realised. If for any reason, the purchaser refuses to construct the building or is incapable of constructing such a building or supervening forces prevent him from constructing the building what exactly would be remedies open to the tenant In many contingencies, his remedy would be practically nil. The maximum perhaps he can expect is compensatory damages could certainly not be equal to the price of the flat in the new building or even commensurate with the standard rent.
25. Again, the damages could be perhaps recovered if the present landlord demolishes his building and starts to construct a new building. If the demolition and the construction of the new building is to be done by a third person to whom the landlord has sold the property, we are not sure even the recovery of the damages would be easy. We are only trying to point out that even if the agreement or letters between these three parties are elevated to a position of a right, it would have absolutely a negligible value. The learned counsel for the assessees described it as a precarious asset. We would like to add 'a precarious asset of questionable value'. For the wealth-tax purposes, we have to include the value of an asset. If an asset even if exists has only a value of the abovementioned type, its inclusion in the net wealth would not be justified.
26. Under the Bombay Rent Hotel and Lodging House Rates Control Act, what the tenant is entitled to is alternate accommodation. There are one or two specific details basic to the transactions in the present case. The assessees as tenants agreed to the sale and demolition of the building. They were promised a flat in the new building at the standard rent. The relevant portions of the letter dated 7-1-1966 are as under : (g)(i) Till the sale of the said property is completed by us to the company, you shall pay rent of Re. 1 per month and after the sale of the said property is completed in favour of the company and till you are put in possession of the said duplex flat in the new building by the company, you shall pay the rent of Re. 1 per month to the company and from the date you are put in possession of the duplex flat in the new building, you shall pay permissible standard rent in respect of the said duplex flat applicable under law to the old tenants of the old building who are given accommodation in the new building after construction in place of accommodation in the old building provided that the standard rent payable by you shall be duly determined before you are put in possession of the said flat. " (iv) If at any time after the amount of standard rent payable by you is ascertained as aforesaid you desire to purchase the duplex flat allotted to you in the new building on what is known as 'On ownership basis' the company shall sell the said flat to you and the other tenants at the capitalised value of the aforesaid standard rent of the flat calculated at the rate of 7 1/2 per cent yield per annum or at the cost price of the carpet area of the new flat whichever is lesser and upon your exercising the option, the company shall enter into with you necessary agreements as may be required for sale of the new flat in your favour.
The above giving to them a choice to purchase the Duplex flat has absolutely no relation to the continuance of the tenancy or security of the tenancy under the Bombay Rent Hotel and Lodging House Rates Control Act. Apart from the fact that the purchase is an option to the tenant-assessees, which they may or may not exercise, even the grant of the standard tenancy would take place only after the building is constructed. Sub-clause (Hi) of the letter refers to the payment of rent of Re. 1 per month. The purpose of this payment and its legal implications are unclear. Is it that this payment of Re. 1 per month secures to the assessee the benefit of a consideration for the agreement No interpretation of this clause can, in our view, lead to such a presumption. In our view, all that Sub-clause (HZ) of Clause (g) refers to have absolutely no legal effect especially on the ownership of a tenancy right or the anticipation to get a flat in the new building. Section 17 deals with the case of a tenant when the owner demolishes the building, the tenant's right to continue in the old building subsists. He may obstruct demolition of the old building with subsequent attempts to construct another. Section 17 provides certain safeguards against this. The only safeguard the tenant has is to have a tenement in the newly constructed building at legally acceptable rent.
If in spite of or against these provisions, a tenant were foolish enough to leave the tenanted premises, he would have not even any rights under the tenancy left to him. If in the alternative, the tenant does not avail of alternative a commodation granted to him during the period of demolition of the old building and the construction of the new building, even the value of the alternate accommodation which he would be entitled to, would be lost to him. In the present case, whatever be the significance of the payment of Re. 1 per month, certainly these assessees did not have any alternate accommodation.
They cannot, therefore, be said to have even the benefit of alternate accommodation they are entitled to under Section 17. If instead of being granted and occupying an alternate accommodation, the tenants were foolish enough to have no alternate accommodation during this period but were looking up to the completion of the new building, we are unable to understand what rights the tenants would have during this interim period.
27. It is true that as a matter of fact, in practice, some tenants do receive money for relinquishing the tenanted premises. It is also found sometimes that tenants hand over their premises to others for a consideration, whereof sometimes the landlord also partakes. These, however, are not normal features or legal incidents of the Bombay Rent Hotel and Lodging House Rates Control Act. Deviations from normal norms would appear lucrative to people but legal rights cannot on that score be founded on them. The option to purchase the property at a stipulated price based on the standard rent or carpet area is entirely extraneous and de hors the tenancy agreement or the tenancy laws. To refer, therefore, to this 'facility' rightly or wrongly given to the tenants as an exercisable right in property would be erroneous. It is only an extension of the same view to hold that differences in the price of property given to the assessees and given to the outsiders secure no assets to the assessees. The learned counsel for the department as well as the WTO have made much of the difference in prices amounting to Rs. 45 per square ft., which has been made the basis of the addition.
According to us, nothing rests on this difference in price. The property owners could as well have given the tenants a flat in the new building with absolutely no payment to be made by them. If the allotment of the flat is only as a tenancy, it would be just an obvious application of the rent control regulations. In other words, under the Bombay Rent Hotel and Lodging House Rates Control Act, the assessees could have a flat on rent in the new building in substitution for the old flat surrendered or lost. The sale of a flat to them in the new building is altogether a different matter. If in their eagerness to get the tenants out of the premises for the purpose of reconstruction, the landlord were to promise the sale of the flat in the new building without even receiving Rs. 53 per square foot, the position in law would not change. In fact, we find several cases in the city of Bombay, where flats are allotted free to old tenants in the new buildings to induce them to vacate the premises. For the landlord, such an allotment is highly profitable. Sometimes one or two old tenants occupying a room or two hold up the construction of & twenty or thirty storeyed building with huge flats. But on account of the vast contribution from the future owners, the landlord makes a large profit in the newly constructed building. This would outweigh the cost of one or the other flats given free to the old tenants. Neither the concessional purchase price nor the full relief in purchase price given to the old tenants in the present case, therefore, can be the basis of any addition.
28. More than the above, there is a fallacy in the WTO valuing this 'supposed' asset in the manner he has done. He deducted the price paid by these assessees from the market price on the date of allotment in 1971 to the outsiders. This difference he included in the net wealth for all the assessment years 1966-67 to 1971-72. For the wealth-tax purposes, the value of an asset as defined in Section 7 of the Act as on the valuation date is to be included. If the assessee has an asset of the type under discussion on 31-3-1966, certainly its value cannot be the same on 31-3-1970. The prospects of the new construction coming up, its possible price, the time when it will be completed, the effect of inflation on this price, etc., introduce different variables in the computation. If the tenant has only a right to fresh tenancy under the Tenancy Act and is armed with only a letter of a dubious nature from the old landlord, what would be the market price which an outsider would give to this right even if it is treated as a right We have dealt with earlier about the uncertainty, vagueness and the precarious nature of this right. In the face of these, in our view, no prudent purchaser would purchase this right for any worthwhile amount. On the top of it, to hold that he would give the difference in price between what an outsider paid for the flats completed and ready for occupation in 1971 and the price paid by the assessees on all these valuation dates would be the limit of blind optimism. Even if an asset as pointed out by the WTO exists, its value would be very much low, if not negligible. Nor can its value be the same for all these years. Apart from the identification of an asset omitted, its valuation made by the WTO is also, therefore, unjustified.
29. Summarising the position : even for the assessment purposes, the tenant's right to stay in a property under the protection of the Bombay Rent Hotel and Lodging House Rates Control Act is not by itself an asset includible in the net wealth. Even if it is property it would be property purely personal to the tenant and cannot have a market value under Section 7. Factually, not only in Bombay, but in no part of the country does the revenue treat the tenant's right as an asset either for wealth-tax purposes or for the estate duty purposes. Where actually a tenancy right exists and has even then both from the point of legal theory as well as departmental practice been omitted from wealth-tax and estate duty assessments, the position of such a right after the tenancy has disappeared on account of the demolition of the tenanted building would be still worse. Having not treated the tenancy itself when it existed as an asset, to treat the 'lost' tenancy substituted perhaps by some inchoate and uncertain rights by a letter or agreement as a valuable asset would be the limit of absurdity. Even intangible property of any type cannot be perceived in the case of such a lost tenancy. The only protection or assurance available under the Bombay Rent Hotel and Lodging House Rates Control Act is the substitution of a tenancy at standard rent in the new building. If the new building does not come into existence, the tenant's right gets extinguished. It can at best (perhaps after long litigation) be compensated by damages. The nature of this right would be purely contingent not includible in the net wealth. Secondly, its value will be negligible. Sale of a flat in the new building to the old tenant would be a matter beyond the control of the Bombay Rent Hotel and Lodging House Rates Control Act. The price paid by the former tenant for this whether equal to the market price or less or nil may be relevant for provision of some other law. It certainly cannot be the basis of inclusion of some vague asset in wealth-tax or estate duty proceedings. We have, therefore, no hesitation in holding that the inclusion of the assets in the wealth-tax assessments in the present case itself is unjustified and erroneous in law. If the asses-sees had pursued their appeals to the Tribunal, we are not sure that the additions would not have been deleted. It is a natural corollary that the penalties based on such additions should not stand. For this reason alone, all the penalties should be cancelled.
30. Even otherwise, the only reason for the enforcement of the penalties seems to be the fact that the assessments have become final.
The mere conclusiveness of an assessment, correctly or incorrectly made, cannot be the basis of levy of penalty. Penalty for concealment requires the establishment of contumacious conduct on the part of the assessee. In the background of the facts described in detail above, if the assessees bona fidely believed that this asset is not includible in the net wealth, we cannot say that the belief was unjustified and pretentious. The learned counsel for the assessees pointed out that there is no decision of the Court also justifying such inclusion. The confusion is more when all around one finds that in not a single case has the value of a tenancy been included by the department in the net wealth of any person. If the assessees, therefore, did not return the value of these assets in the net wealth, they cannot be accused of contumacious conduct. They cannot be subjected to the levy of penalty.
The penalties in the present case have been levied under the main provisions of Section 18(1)(c) itself. Even if the Explanation to the section is regarded as included in the provisions of the main section, as was sought to be argued for the revenue, the penalties cannot be upheld in the present case. The orders of the Commissioner (Appeals) do not, therefore, call for any interference.