1998 (9) TMI 44 - HC - Wealth-tax

Summary

Issues Involved:
1. Validity of the reference made by the Wealth-tax Officer to the District Valuation Officer under section 16A of the Wealth-tax Act.
2. Applicability of Schedule III to the Wealth-tax Act for valuation of property for assessment years 1981-82 to 1983-84.
3. Method of valuation adopted by the District Valuation Officer.
4. Compliance with principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the Reference under Section 16A:
The petitioners contested the reference made by the Wealth-tax Officer to the District Valuation Officer for the valuation of the property. The court upheld the validity of this reference, stating it was within the jurisdiction of the Wealth-tax Officer. The Commissioner of Wealth-tax had revised the assessment orders for the years 1981-82 to 1983-84 under section 25, finding the original valuations too low based on a partner's retirement and release deed. Consequently, the Wealth-tax Officer's reference to the District Valuation Officer was deemed appropriate.

2. Applicability of Schedule III to the Wealth-tax Act:
The petitioners argued that the revaluation of assets should follow Schedule III of the Wealth-tax Act, introduced by the Direct Tax Laws (Amendment) Act, 1989, effective from April 1, 1989. They contended that these rules were procedural and should apply to pending assessments. The respondents countered that Schedule III was substantive and only applicable to future assessments. The court sided with the petitioners, referencing judgments from the Supreme Court and Rajasthan High Court, which held that procedural rules for valuation apply to pending cases. Thus, Schedule III was applicable for the valuation of the property in question.

3. Method of Valuation Adopted by the District Valuation Officer:
The District Valuation Officer used the land and building method to value the property, which the petitioners claimed was erroneous and not in line with Schedule III. Schedule III prescribes a rent capitalisation method for valuing immovable property. The court found that the Valuation Officer erred by not following the prescribed statutory method under Schedule III. The valuation should have been based on the net maintainable rent multiplied by a factor of 12.5, as specified in the rules.

4. Compliance with Principles of Natural Justice:
The petitioners alleged that the impugned orders violated principles of natural justice due to inadequate opportunity to present their case. The court reviewed the process and noted that the petitioners were given sufficient opportunities to file objections and present their case but failed to do so. Therefore, the court rejected the contention that the orders violated natural justice principles.

Conclusion:
The court concluded that the impugned orders were opposed to the specific provisions of the Wealth-tax Act, specifically rule 3 under Part B of Schedule III. The valuation adopted by the District Valuation Officer was not in accordance with the statutory method prescribed. Consequently, the writ petitions were allowed, the impugned orders were quashed, and the District Valuation Officer was directed to pass a new valuation order in accordance with the law.