1993 (8) TMI 111 - AT - Income Tax

Reassessment Non Disclosure Of Primary Facts Reference To Valuation Officer Powers Of Deputy Commissioner (Appeals)

Issues Involved:
1. Reopening of assessment proceedings under section 17(1)(a) of the Wealth-tax Act, 1957.
2. Valuation of the assessee's interest in the partnership firm M/s. Durga Trading Corporation.

Issue-Wise Detailed Analysis:

1. Reopening of Assessment Proceedings under Section 17(1)(a) of the Wealth-tax Act, 1957:
The first issue pertains to the reopening of assessment proceedings for the assessment years 1973-74 and 1974-75 under section 17(1)(a) of the Wealth-tax Act, 1957. The original assessments were completed on 30-3-1979. Subsequently, the assessment proceedings were reopened by issuing a notice dated 22-2-1982, which was duly served upon the assessee on 3-3-1982. The reopening was challenged by the assessee on the grounds that the notice did not specify whether it was under section 17(1)(a) or 17(1)(b). The Assessing Officer (WTO) found that the value of the assessee's interest in M/s. Durga Trading Corporation was much higher than disclosed, leading to the belief that the assessee failed to disclose all material facts fully and truly, thus justifying the reopening under section 17(1)(a).

The Deputy Commissioner (Appeals) upheld the WTO's decision, stating that the disclosure by the assessee was not true, as it was based on an outdated valuation report from 1963. The Tribunal also supported this view, noting that the assessee's reliance on a 1963 valuation report was not relevant for the assessment years in question. The Tribunal cited various judicial precedents, including the Supreme Court's decisions in Sheo Nath Singh v. AAC and ITO v. Lakhmani Mewal Das, to emphasize that the WTO must have "reason to believe" based on material facts, which was satisfied in this case. The Tribunal concluded that the reopening of the assessment was justified and dismissed the assessee's appeal on this point.

2. Valuation of the Assessee's Interest in the Partnership Firm M/s. Durga Trading Corporation:
The second issue concerns the valuation of the assessee's 12.5% interest in M/s. Durga Trading Corporation. The WTO valued the interest by applying rule 2 of the Wealth-tax Rules, 1957, which involved taking 12 times the net rental income plus other assets of the firm, reduced by liabilities and partner's capital. The assessee contested this valuation, arguing that municipal taxes were not deducted and that a multiplier of 12.5% was too high given the nature of the properties.

The Deputy Commissioner (Appeals) directed the WTO to refer the valuation to the Departmental Valuation Cell, considering the complexities involved. The assessee argued that the Deputy Commissioner (Appeals) did not have the power to make such a referral, citing the Madhya Pradesh High Court's decision in M. V. Kibe v. CWT. However, the Tribunal upheld the Deputy Commissioner (Appeals)'s directions, referencing the Supreme Court's decision in Juggilal Kamlapat Bankers v. WTO, which validated such referrals for valuation purposes.

The Tribunal also noted that the appellate authority's powers are coterminous with those of the Assessing Officer, allowing it to direct the latter to undertake actions he failed to perform. The Tribunal cited several judicial precedents, including Shrenik Kasturbhai v. CWT and CWT v. Vimlaben Vadilal Mehta, to support this view. Consequently, the Tribunal upheld the Deputy Commissioner (Appeals)'s directions for a fresh valuation by the Departmental Valuation Cell and dismissed the assessee's appeal on this point.

Conclusion:
In conclusion, the Tribunal dismissed the appeals filed by the assessee, upholding the reopening of the assessment proceedings under section 17(1)(a) of the Wealth-tax Act, 1957, and the directions for a fresh valuation of the assessee's interest in the partnership firm M/s. Durga Trading Corporation by the Departmental Valuation Cell.

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