1995 (3) TMI 61 - HC - Wealth-tax

Issues involved:
1. Method of working out the break-up value of unquoted shares.
2. Allowance granted under section 5(1)(iv) of the Wealth-tax Act, 1957.
3. Valuation of the assessee's shares in lands at Adyar.
4. Relief under section 5(1) of the Wealth-tax Act for the assessment year 1972-73.
5. Reassessment based on audit objections under section 17(1)(b) of the Wealth-tax Act.

Issue-wise Detailed Analysis:

1. Method of working out the break-up value of unquoted shares:
The audit objected to the gross income-tax allowed as a deduction, suggesting that only the extra tax over and above the advance tax paid should be allowed. The Tribunal noted conflicting views between Tribunals in Madras and Bombay on this issue, interpreting the rule differently. The Tribunal held that the interpretation of a rule does not constitute information, as per the Supreme Court's later decision, thus invalidating the basis for reassessment.

2. Allowance granted under section 5(1)(iv) of the Wealth-tax Act, 1957:
The audit claimed that relief was wrongly granted on the Coimbatore property as it was not wholly residential. The Tribunal pointed out that the words "and exclusively used by him for residential purposes" had been omitted from section 5(1)(iv) by the Finance (No. 2) Act of 1971, effective from April 1, 1972. Thus, the audit note overlooked this amendment, making the audit objection incorrect and not constituting valid information for reassessment.

3. Valuation of the assessee's shares in lands at Adyar:
The audit objected to the valuation, suggesting a higher valuation based on a compensation offer by the Housing Board for a neighboring property. The Tribunal found that the original assessment was correct, supported by detailed inquiries and valuations from an approved valuer and urban land tax authorities. The Tribunal held that merely introducing a supposed "comparative sale" does not justify disturbing the original valuation under section 17(1)(b).

4. Relief under section 5(1) of the Wealth-tax Act for the assessment year 1972-73:
The audit noted that relief should be given to the firm and not to each partner separately. The Tribunal deemed this audit view incorrect and stated that even if it were correct, it involved interpretation of the law, which cannot constitute information for reassessment.

5. Reassessment based on audit objections under section 17(1)(b) of the Wealth-tax Act:
The Tribunal concluded that the audit objections did not provide a valid basis for reassessment. The Supreme Court's decision in Indian and Eastern Newspaper Society v. CIT established that an audit party's opinion on a point of law does not constitute information enabling reassessment. The Tribunal also referenced the Supreme Court's decision in A. L. A. Firm v. CIT, which outlined four situations where reassessment could be validly initiated, none of which applied in this case. The Tribunal appreciated the legal position and found that the audit objections were not sufficient to justify reopening the assessment.

Conclusion:
The Tribunal held that the audit objections did not provide valid information for reassessment under section 17(1)(b) of the Wealth-tax Act. The original assessments were upheld, and the question referred to the court was answered in favor of the assessee. There was no order as to costs.

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