1979 (11) TMI 37 - HC - Wealth-tax

Summary

Issues:
1. Jurisdiction of the notices issued under section 17(1)(a) of the Wealth Tax Act.
2. Valuation of unquoted equity shares of a company for wealth tax assessment purposes.
3. Disclosure of material facts during the original assessment.

Analysis:

Issue 1: Jurisdiction of the notices issued under section 17(1)(a) of the Wealth Tax Act:
The petitioners, as kartas of HUFs, were assessed to wealth tax, and the dispute arose when the WTO served a notice under section 17(1) of the Wealth Tax Act after the expiry of four years from the assessment year. The court held that since the notice was issued beyond the prescribed time limit, it could only be served under clause (a) of section 17(1). The court found that the notices issued under section 17(1)(a) were without jurisdiction, as the assessee had already disclosed all material facts during the original assessment. Therefore, the court quashed the notices in all three matters.

Issue 2: Valuation of unquoted equity shares of a company for wealth tax assessment purposes:
The valuation of unquoted equity shares of a company, as per rule ID of the Wealth Tax Rules, involves deducting the liabilities from the assets shown in the balance-sheet and arriving at the break-up value of each share. The market value is then determined as 85% of the break-up value. In this case, the petitioner had valued the shares in accordance with this rule and submitted the balance-sheet of the company. The court noted that all relevant information for evaluating the shares was available to the WTO during the original assessment, including the market value of certain shares being higher than the face value. As such, the court found that the valuation made by the assessee was in compliance with the rules, and the reassessment by the WTO was unwarranted.

Issue 3: Disclosure of material facts during the original assessment:
The court emphasized that the assessee had fully and truthfully disclosed all material facts at the time of the original assessment. It was noted that the balance-sheet of the company, which contained information about the market value of certain shares, had been submitted to the WTO. The court held that since all necessary information was already available during the original assessment and there was no new information provided subsequently, the proceedings initiated under section 17(1)(a) were deemed to be without jurisdiction.

In conclusion, the court allowed the writ petitions, quashed the notices issued under section 17(1)(a) in all three matters, and ruled that there would be no order as to costs.