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Issues involved: Interpretation of u/s 16A of the Wealth-tax Act, 1957 regarding mandatory or discretionary reference to Valuation Officer based on the difference in wealth returned by the assessee and assessed by the Wealth-tax Officer.
Summary: The High Court of PUNJAB AND HARYANA considered a case where the Wealth-tax Officer assessed the value of assets higher than the values returned by the assessee. The question was whether the Wealth-tax Officer was required to refer the valuation to a Valuation Officer u/s 16A of the Wealth-tax Act, 1957, when the difference exceeded the limit prescribed by rule 3B of the Wealth-tax Rules. The court analyzed the relevant statutory provisions, including u/s 16A and rule 3B, which set conditions for reference to Valuation Officers. The court referred to the Supreme Court's decision in K. P. Varghese v. ITO [1981] 131 ITR 597, emphasizing the importance of contemporaneous interpretation in statutory construction. The court held that if the estimated value exceeded the returned value by the limit specified in rule 3B, the Wealth-tax Officer was obligated to refer the valuation to the Valuation Officer. The court rejected the argument that the use of "may" in the provision indicated discretion, stating that such an interpretation would lead to arbitrariness and potential unconstitutionality. Additionally, the court disagreed with the view that a reference was mandatory only if requested by the assessee, asserting that the Wealth-tax Officer must make a reference once the conditions of u/s 16A(1) and rule 3B are met, regardless of the assessee's response. In conclusion, the court answered the question in the negative, favoring the assessee and directing the case to be reconsidered by the Tribunal in accordance with the law.
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