2019 (11) TMI 44 - AT - Wealth-tax

Jewellery estimation - Revised valuation in respect of all the items of jewellery whether or not covered by the FIRs - reduced value of the jewellery for the purpose of determining the net wealth of the assessee and passed the assessment orders - valuation figures as supported by valuation report of Registered Valuer and WTO - HELD THAT - In respect of the value of such items of jewellery as are not covered by the FIR, it occurs to our mind that there is inherent inconsistency in the approach of the Ld. CIT(A), because while referring to schedule III of the Act in the light of Section 7 read with Rule 18 thereof, CIT(A) made an observation that the jewellery shall be valued on the estimation of the price which it would fetch if sold in the open market on the valuation date. If it would be so, we do not find any logic in the CIT(A) directing AO to take the higher value as per the valuation report by ignoring the items the revised the value of which is less than the returned value. Further in the case of CWT vs. Raghunath Singh Thakur 2008 (4) TMI 152 - HIMACHAL PRADESH HIGH COURT held that where assessee s valuation figures are supported by valuation report of Registered Valuer and WTO has not made a reference to valuation cell, then the assessee s figures are required to be accepted. Insofar as the items of jewellery covered by the FIR, the assessee is bound by the valuation secured by the Hon ble High Court and the assessee cannot seek to reopen the same. Insofar as the items of jewellery not covered by FIR, however, the Revenue is expected to take a consistent stand in respect of all the items thereof and in view of the settled position of law, the assessing officer is directed to consider the revised valuation secured by police or by the assessee, as the case may be, and submitted by the assessee. Appeal of the assessee is, accordingly, allowed in part.

Summary

Issues Involved:
1. Valuation of jewellery covered by FIRs.
2. Valuation of jewellery not covered by FIRs.
3. Compliance with Wealth Tax Act provisions regarding valuation.

Issue-wise Detailed Analysis:

1. Valuation of Jewellery Covered by FIRs:
The assessee discovered fraud involving jewellery purchased over the past 10-12 years, leading to two FIRs against the jeweller for items worth ?15.89 crores. The assessee requested the Assessing Officer to consider the reduced value based on a government-approved valuer's report. However, the Assessing Officer and the Commissioner of Income Tax (Appeals) [CIT(A)] did not accept the revised valuation. The CIT(A) held that the value could not be considered as market value due to pending criminal proceedings. The Tribunal upheld this view, noting that the Delhi High Court's order ensured the refund of the full value of ?15.89 crores upon return of the jewellery, making it inappropriate to revise the valuation.

2. Valuation of Jewellery Not Covered by FIRs:
For jewellery not covered by FIRs, the CIT(A) accepted the revised valuation where it was higher than the returned value but ignored it where it was lower. The Tribunal found inconsistency in this approach, emphasizing that under Section 7 read with Rule 18 of Schedule III of the Wealth Tax Act, jewellery should be valued at the price it would fetch in the open market on the valuation date. The Tribunal directed the Assessing Officer to consider the revised valuation for all items, whether higher or lower than the returned value, supported by valuation reports from registered valuers.

3. Compliance with Wealth Tax Act Provisions Regarding Valuation:
The Tribunal highlighted the importance of adhering to the Wealth Tax Act's provisions. Section 3 mandates annual tax on net wealth, and Section 7 specifies valuation methods, with Rule 18 focusing on market value. The Tribunal noted that the Assessing Officer should have referred the valuation dispute to a valuation officer as per Section 16A of the Act. The Tribunal also referenced CBDT Circular No. 96, which requires disagreement with asset valuation to be referred to a valuation officer.

Conclusion:
The Tribunal allowed the appeal in part, affirming the CIT(A)'s decision regarding jewellery covered by FIRs but directing a consistent approach for jewellery not covered by FIRs, considering revised valuations for all items. The appeals for both assessment years were partially allowed, emphasizing adherence to valuation rules under the Wealth Tax Act.