2018 (3) TMI 814 - HC - Wealth-tax

Wealth tax assessment - ITAT directing the AO to disregard the recent valuation report and adopt old valuation report - current valuation of the assets was available with the assessee at the time of filing of Wealth Tax return - Valuation of jewellery - Held that - A conjoint reading of the Rules require valuation of all assets; furthermore, the valuation operates not on a year to year basis but for a four year cycle. The only exception made out is that where jewellery includes gold or silver or any other alloy, the valuation of gold has to be undertaken annually. Furthermore, if the jewellery or any part of such asset is sold or acquired before valuation date (i.e. within the four year period) such value has to be reduced or increased as the case may be and has to be reflected in the subsequent assessment year. It is evident from the facts of the present case that the search was an event which per se could not have compelled the assessee to go in for fresh valuation, unless there was a compulsion in law to do so. In these circumstances, the assessees acted within their rights in relying upon the prevailing valuation, which ended on 31.03.2012. - Decided in favour of the assessee

Summary

Issues:
1. Whether the ITAT was right in directing the Assessing Officer to adopt an old valuation report over a recent one?
2. Interpretation of circular dated 15.03.1993 regarding valuation reports for wealth tax assessment.
3. Application of Rules 18 & 19 of the Wealth Tax Rules for valuation of assets.
4. Determining the impact of a search event on the requirement for fresh valuation of assets.

Analysis:

1. The case involved assessees subjected to a search under Section 132 of the Income Tax Act, resulting in wealth tax liability due to valuation of assets, including jewellery. The challenge to the Commissioner of Wealth Tax was unsuccessful, leading to an appeal to the Tribunal, which granted relief based on a circular issued on 15.03.1993.

2. The Revenue argued that the circular only allowed using a valuation report for one assessment year for subsequent years but did not restrict the Wealth Tax Officer's power to rely on a later valuation report. The assessees relied on Rules 18 & 19, stating that once a valuation report is adopted, it remains in effect for four years unless specific circumstances require fresh valuation.

3. Rules 18 & 19 of the Wealth Tax Rules outline the valuation mechanism for assets, especially jewellery. Valuation is based on the fair market value, and the rules specify the requirements for supporting the net wealth return with a valuation report. The rules also address adjustments in the value of jewellery for subsequent assessment years.

4. The judgment emphasized that valuation of assets operates on a four-year cycle, with exceptions for annual valuation of gold in jewellery. The case highlighted that a search event alone does not mandate fresh valuation unless required by law. The assessees were within their rights to rely on the existing valuation until the legally stipulated time for a fresh valuation.

In conclusion, the High Court ruled in favor of the assessees, dismissing the appeals and disposing of all pending applications. The judgment clarified the application of valuation rules, the impact of circulars on assessment, and the significance of search events on the requirement for fresh valuation of assets.