Kashi Prasad Kataruka v. Wealth Tax Officer — 1987 DIGILAW 344 (PAT)

Judgment R.C.P.Sinha, J. 1. This application under Articles 226 and 227 of the Constitution of India by the sole petitioner, who is the owner of a house located adjacent south to Gandhi Maidan bearing holding No. 363, is for quashing of a notice dated July 29, 1983 (annexure 4), to the writ application) issued by the Valuation Officer (respondent No. 2) to the petitioner as modified by letter No. 454 dated August 1, 1983 (annexure 5). By annexure 4, respondent No. 2 directed the petitioner to produce certain documents in order to enable him to determine the fair market value of the aforesaid house as on March 31, 1974 and onwards till March 31, 1982, which, by annexure-5 was modified as March 31, 1979, and onwards till March 31, 1983, under Sec.16A(1) of the Wealth-tax Act (for short "the Act"). 2. The aforesaid letters were issued under the direction of the Wealth-tax Officer (respondent No, 1) for determination of the fair market value of the aforesaid house in respect of the period mentioned in annexure-5 for the assessment of wealth-tax to be paid by the petitioner. 3. The petitioner has also impugned the notice dated February 10, 1984, issued by respondent No. 2 to him whereby he was asked to produce books of account and other documents mentioned therein on March 23, 1984, at 10.30 hrs. (annexure 11 to the writ application). Failing compliance with the direction given therein, a fine up to Rs. 500 was to be imposed upon him under Sec.37(2) of the Act. 4. The main ground on which the aforesaid annexures have been challenged is that the reference made by respondent No. 1 to respondent No. 2 under Sec.16A of the Act, is wholly illegal and void ab initio because the fair market value of the aforesaid house, being a self-occupied house, was assessed in the assessment year 1973-74 to be Rs. 2,02,200 on the basis of the fair market value for the assessment year 1971-72 which got freezed under Section 7(4) of the Act together with the addition made during the assessment year 1973-74. 2,02,200 on the basis of the fair market value for the assessment year 1971-72 which got freezed under Section 7(4) of the Act together with the addition made during the assessment year 1973-74. According to the petitioner, the house being a self-occupied residential one, the value thereof is to be taken to be either the fair market value on the relevant valuation date or in terms of Section 7(4) of the Act, mainly its frozen value as on April 1, 1971, together with subsequent addition at the option of the assessee. If the assessee chooses to adopt the latter value, the same has to be assessed accordingly and no discretion is left with the Wealth-tax Officer in the matter for either enhancing the value or taking any other value for assessment. According to the petitioner, before making a reference by the Wealth-tax Officer, three pre-conditions must exist, namely : (a) The subject-matter of the valuation must be an asset. (b) The reference must be for the purpose of making an assessment. (c) The Wealth-tax Officer must have formed the requisite opinion before making the reference and the opinion of the Wealth-tax Officer should be objective and not merely subjective. 5. In other words, according to the petitioner, the Wealth-tax Officer must state reasons for referring the matter of valuation to the Valuation Officer which, according to the petitioner, is lacking in this case. 6. It has further been contended by learned counsel for the petitioner that the reference to the Valuation Officer must be for the purpose of making an assessment and in the present case, the asset being a self-occupied residential house of the petitioner, the assessment has to be made according to Section 7(4) of the Act which was already fixed at Rs. 2,02,200 for the assessment year 1973-74 which became frozen and the question of revaluation does not arise in the case. 7. In a counter-affidavit sworn by the Wealth-tax Officer, Special Investigation Circle, Patna, it has, inter alia, been averred that the Valuation Officer to whom the reference was made is under duty bound to determine the value and it is only thereafter that the question raised by the petitioner can be decided by the Wealth-tax Officer. 7. In a counter-affidavit sworn by the Wealth-tax Officer, Special Investigation Circle, Patna, it has, inter alia, been averred that the Valuation Officer to whom the reference was made is under duty bound to determine the value and it is only thereafter that the question raised by the petitioner can be decided by the Wealth-tax Officer. It has further been asserted that in order to delay the matter, the petitioner is insisting upon the Valuation Officers deciding the validity or otherwise of the reference made by respondent No. 1. It has further been asserted that the Wealth-tax Officer is not bound to give a hearing to the assessee before he forms the requisite opinion for referring to the Valuation Officer for ascertaining the value. In paragraph 13 of the counter-affidavit, it has been mentioned that the additions have also been made to the house and the entire game of the petitioner is that the additions made to the house should not be brought to the notice of respondent No. 1 before making the assessment. 8. It is common ground that a return has to be riled by an assessee every year and that the Wealth-tax Officer is required to make assessment every year. It is also an admitted fact that the proceedings for making assessments for the years 1979-80 and onwards are pending before the Wealth-tax Officer and by annexure 5, respondent No. 2 was asked to value the house in question as on March 31, 1979, to March 31, 1983. 9. Learned counsel for the petitioner has submitted that he filed several petitions before respondent No. 2 to decide the validity of the reference made by respondent No. 1 to him but he did not decide it and asked the petitioner to produce the books of account and other papers by annexure 11 failing which a fine up to Rs. 500 was to be imposed on the petitioner under Sec.37(2) of the Act, as according to him, the reference is entirely illegal and void ab inifio. Mr. Jain, learned counsel for the petitioner, has further submitted that the petitioner has challenged the right of respondent No. 1 to refer the matter and not his right to make assessment. 10. Admittedly, the proceeding for making the assessment for the years 1979-80 and onwards are pending before the Wealth-tax Officer after the returns had been filed by the petitioner. 11. 10. Admittedly, the proceeding for making the assessment for the years 1979-80 and onwards are pending before the Wealth-tax Officer after the returns had been filed by the petitioner. 11. According to law, the Wealth-tax Officer has to satisfy himself as to whether the returns filed by the assessee are correct and in order to determine the correctness, the Wealth-tax Officer has got a right to make a reference to the Valuation Officer before making the assessment according to Sec.16A(1) of the Act Sec.16A(1) of the Act reads as follows : "(1) For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the Wealth-tax Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Wealth-tax Officer is of opinion that the value so returned is less than its fair market value ; (b) in any other case, if the Wealth-tax Officer is of opinion,-- (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary to do so." 12. It has already been mentioned in paragraph 13 of the counter-affidavit sworn by the Wealth-tax Officer that additions have also been made to the house. It has also been admitted by Mr. Jain that in the case of additions, the Wealth-tax Officer has got a right to make a reference to the Valuation Officer in order to make an assessment with regard to the asset. In the present case, further additions to the house alleged to have been made by the petitioner prompted the Wealth-tax Officer to make a reference to the Valuation Officer to value the house. Though Mr. In the present case, further additions to the house alleged to have been made by the petitioner prompted the Wealth-tax Officer to make a reference to the Valuation Officer to value the house. Though Mr. Jain, learned counsel appearing on behalf of the petitioner, has admitted that in the case of additions, reference can be made by the Wealth-tax Officer to the Valuation Officer for making the assessment, he has submitted that as the date or year of addition has not been given, the stand of the respondents that the additions were made or have been made in the relevant period should not be taken into consideration. The ground for forming an opinion for making a reference has been stated in the counter-affidavit sworn by the Wealth-tax Officer himself and hence I do not find any substance in the submissions made on behalf of the petitioner. In the case of Uday Kaushish V/s. CWT [1982] 137 ITR 906, it has been held that the Wealth-tax Officer is not bound to give a hearing to the assessee before he forms the requisite opinion and refers the valuation of any asset to the Valuation Officer under Section 16A(1) of the Act. 13. No provision of law has been shown to me which enjoins the Wealth-tax Officer to pass a reasoned order or to give any ground for forming an opinion for making a reference to the Valuation Officer. Under Sec.16A of the Act, the Wealth-tax Officer is conferred with the jurisdiction to make a reference to the Valuation Officer for the purpose of making an assessment and the proceeding for making the assessment commences with the filing of the return or when a person fails to file a return. In this case, the returns have been filed and assessment proceedings are pending and hence I do not find any illegality in the reference made by the Wealth-tax Officer. In the case of Bireshwar Mookerji V/s. IAC [1982] 135 ITR 29, a Division Bench of the Allahabad High Court has held that the Wealth-tax Officer, while passing an order under Sec.16A, does so on formation of the requisite opinion only to secure an estimate regarding valuation from a statutory expert. The reference to the Valuation Officer has no adjudicatory element involved in it and of its own, it can have no adverse effect on the assessee concerned. The reference to the Valuation Officer has no adjudicatory element involved in it and of its own, it can have no adverse effect on the assessee concerned. The procedure to be followed by the Valuation Officer is as elaborate as can be expected of any judicial proceeding. On material and evidence produced by the assessee, the Valuation Officer is absolutely free, in spite of the opinion of the Wealth-tax Officer, to return a finding that the valuation disclosed in the return filed by the assessee is correct. It has further been held therein that a reference to the Valuation Officer made by the Wealth-tax Officer "for the purpose of making an assessment" is merely a step during the course of the assessment proceedings. He decides nothing while passing an order under Sec.16A(1)(a) of the Act. 14. After passing of an order by the Valuation Officer, it is open to the assessee to persuade the Wealth-tax Officer that the valuation given by the former is in respect of the properties or assets which are not to be assessed and hence not taxable. In the present case, after the submission of the report of the Valuation Officer, it is also open to the petitioner to satisfy with reference to the books of account and other evidence that, in fact, no addition was made during the relevant period and that whatever additions made were before the relevant period under consideration and that in view of Section 7(4) of the Act, the /aluation of the house in question would remain as it was for the year 1973-74. Besides, after the assessment order is passed, the assessee has got a right to challenge the order by filing an appeal or revision under the provisions of the Act. 15. After the reference is made by the Wealth-tax Officer, the Valuation Officer has to give notice to the assessee directing him to produce relevant documents before him and in this respect he performs a statutory duty cast upon him. The contention of learned counsel for the petitioner is that he had filed several petitions before the Valuation Officer and still he proceeded with the matter and ultimately took steps and issued summons (annexure 11) under Sec.37(2) of the Act. The contention of learned counsel for the petitioner is that he had filed several petitions before the Valuation Officer and still he proceeded with the matter and ultimately took steps and issued summons (annexure 11) under Sec.37(2) of the Act. I do not find any substance in this submission as he is not the competent authority to decide the validity or otherwise of the reference made by the Wealth-tax Officer who is a superior Officer. On a reference being made, he has to perform his statutory duties as provided by law. There is no provision in the Act which empowers the Valuation Officer to decide the validity or otherwise of the reference made to him by the Wealth-tax Officer. 16. On consideration of the facts and circumstances and also the law involved in the case, I am of the opinion that there is no substance in this application and it is not a fit case for quashing the reference made by respondent No. 1 and respondent No. 2 of the notice and summons as contained in annexures 4 and 11 issued by respondent No. 2 to the petitioner. 17. In the result, the application is dismissed but without costs.