1989 (10) TMI 14 - HC - Wealth-tax

Summary

Issues:
1. Application under section 27(3) of the Wealth-tax Act, 1957 for referring questions of law arising from the order of the Income-tax Appellate Tribunal for assessment years 1978-79 and 1979-80.
2. Interpretation of rule 2B(2) of the Wealth-tax Rules regarding valuation of closing stock and application of gross profit rate.
3. Determination of the onus of proof in establishing market value of closing stock.
4. Dispute over whether the Tribunal was justified in upholding the finding of the Appellate Assistant Commissioner regarding the application of rule 2B(2) and the onus of proof.
5. Request for reconsideration of previous decision and arguments for remanding the matter to the Wealth-tax Officer for further inquiry.

Analysis:
The judgment involves two reference applications by the Revenue under section 27(3) of the Wealth-tax Act, 1957, seeking to refer questions of law arising from the order of the Income-tax Appellate Tribunal for assessment years 1978-79 and 1979-80. The disputes primarily revolve around the interpretation and application of rule 2B(2) of the Wealth-tax Rules concerning the valuation of closing stock based on the gross profit rate declared by the firm. The Appellate Assistant Commissioner had deleted the additions made by the Wealth-tax Officer under rule 2B(2) for both assessment years, a decision upheld by the Tribunal. The Revenue contended that the Tribunal erred in not applying rule 2B(2) solely based on the gross profit rate disclosed by the firm, leading to the reference applications before the High Court.

Regarding the determination of the onus of proof in establishing the market value of closing stock, the High Court referred to a previous decision in CWT v. Moti Chand Daga, where it was established that the burden lies on the Revenue to demonstrate that the market value exceeds the balance-sheet value by more than 20%. The Court reiterated that the onus of proof rests with the Department, and the application of rule 2B(2) hinges on the Revenue showing that the market value surpasses the balance-sheet value by the required percentage.

The Revenue argued for a reconsideration of the previous decision and requested a remand to the Wealth-tax Officer for further inquiry in the present cases. However, the High Court found that such contentions were not raised before the Tribunal and were not covered by the questions proposed in the reference applications. The Court emphasized that since these arguments were not presented earlier, they could not be deemed to arise from the Tribunal's order. Consequently, the High Court dismissed the reference applications, concluding that no grounds existed for referring the questions raised by the Revenue and declined to remand the matter for additional inquiry.