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1998 DIGILAW 304 (GUJ)

Commissioner of Wealth-Tax v. Hrudayesh B. Patel

1998-05-05

KUNDAN SINGH, R.K.ABICHANDANI

body1998
JUDGMENT : R. K. ABICHANDANI, J. 1. The Tribunal has referred for the opinion of this court the following questions under section 27(1) of the Wealth-tax Act, 1957 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in modifying the direction given by the Commissioner of Wealth-tax to the Wealth-tax Officer to reframe the assessment by directing the Wealth-tax Officer to apply rule 1BB when the Tribunal has held that the order was legal and was not liable to be set aside ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the Wealth-tax Officer should value the property by applying the provisions of rule 1BB of the Wealth-tax Rules, which came into force on April 1, 1979 ?" 2. The reference relates to the assessment years 1976-77 to 1978-79. Original assessments were completed by the Wealth-tax Officer on December 3, 1979, under section 16(3) of the Wealth-tax Act. The Commissioner of Wealth-tax found that the assessee owned a flat in Block No. 6-C of the Sea Face Housing Society, Bombay. The Wealth-tax Officer determined the value of the said property for all the years at Rs. 1,32,500. The Commissioner of Wealth-tax found that during the survey operation the adjoining plots bearing C-12 and B-12 were sold for Rs. 2 lakhs each in December, 1974, and January 1975. The Commissioner of Wealth-tax, therefore, found that the order of the assessment as made by the Wealth-tax Officer for each of the years was erroneous and prejudicial to the interests of the Revenue. He, therefore, set aside the order for each of these years after hearing the assessee and directed the Wealth-tax Officer to refer the case to the valuation cell and reframe the assessment on the basis of the report of the valuation cell after giving an opportunity of hearing to the assessee. In an appeal filed by the assessee, while upholding the jurisdiction of the Commissioner of Wealth-tax to revise the assessment under section 25(2) of the Act, the Tribunal accepted the assessee's contention that the property being self-occupied, valuation thereof should be made in accordance with rule 1BB of the Wealth-tax Rules. In an appeal filed by the assessee, while upholding the jurisdiction of the Commissioner of Wealth-tax to revise the assessment under section 25(2) of the Act, the Tribunal accepted the assessee's contention that the property being self-occupied, valuation thereof should be made in accordance with rule 1BB of the Wealth-tax Rules. The Tribunal, therefore, directed the Wealth-tax Officer to apply rule 1BB and then decide whether a reference to the Valuation Officer was called for. The Tribunal held that rule 1BB being procedural and mandatory, applied to all pending proceedings before all the authorities. It was held that, since the matter had already been remitted to the Wealth-tax Officer, the Wealth-tax Officer should apply rule 1BB for all the years in question. 3. The contention of the Revenue that rule 1BB cannot be invoked does not now survive in view of the decision of the Supreme Court in CWT v. Sharvan Kumar Swarup and Sons [1994] 210 ITR 886., in which while construing the provisions of rule 1BB of the said rules, the Supreme Court held that the said rule partakes of the character of a rule of evidence. It deems the market value to be the one arrived at on the application of a particular method of valuation which is also one of the recognised and accepted methods. The rule is procedural and not substantive and is applicable to all proceedings pending on April 1, 1979, when the rule came into force. The Supreme Court affirmed the ratio of the decision of this court in CWT v. Kasturbhai Mayabhai [1987] 164 ITR 107, in which it was held that the benefit of rule 1BB must relate back to the date on which section 7(1) was made subject to the Rules. Similar view was taken by this court in CWT v. Niranjan Narottam [1988] 173 ITR 693. 4. In this view of the matter, we hold that the Tribunal did not commit any error in holding that the provisions of rule 1BB of the Wealth-tax Rules should be applied to the assessee's case in respect of these years and the Wealth-tax Officer should reframe the assessment on that basis. Both the questions are, therefore, answered in the affirmative, against the Revenue and in favour of the assessee. The reference stands disposed of accordingly with no order as to costs.