1995 (10) TMI 72 - AT - Wealth-tax

Assessing Officer, Assessment Year, High Court, Inaccurate Particulars, Quoted Equity Shares, Supreme Court, Valuation Officer, Wealth Tax Return, Writ Petition

Summary

Issues Involved:
1. Valuation of unquoted equity shares.
2. Applicability of Rule 1D of the Wealth-tax Rules.
3. Imposition of penalty under section 18(1)(c) of the Wealth-tax Act, 1957.
4. Interpretation and application of Explanation 4 to section 18(1)(c).

Issue-wise Detailed Analysis:

1. Valuation of Unquoted Equity Shares:
The assessee, an individual, filed a return of wealth for the assessment year 1981-82, disclosing net wealth of Rs. 5,69,953, which included unquoted equity shares of Continental Constructions (P.) Ltd. (CCL). The valuation of these shares was referred to the Valuation Officer (VO) under section 16A of the Wealth-tax Act, 1957. The VO estimated the value of each equity share at Rs. 239.58 on a simple average yield basis, following the judgment of the Delhi High Court in Sharbati Devi Jhalani v. CWT. The Assessing Officer (AO) adopted this value but mentioned that it was subject to revision based on future directions from higher courts.

2. Applicability of Rule 1D of the Wealth-tax Rules:
The assessee disclosed the value of the shares at face value (Rs. 100 per share) subject to valuation. The AO and VO did not follow Rule 1D but instead used the yield basis for valuation, as per the Delhi High Court's judgment. The assessee argued that the valuation should be as per Rule 1D, which was ultimately upheld by the Supreme Court in Bharat Hari Singhania v. CWT.

3. Imposition of Penalty under Section 18(1)(c) of the Wealth-tax Act, 1957:
The AO imposed a penalty of Rs. 14,840 under section 18(1)(c) for allegedly furnishing inaccurate particulars of wealth by undervaluing the shares. The AO contended that the assessee did not file any valuation report or revised return and self-assessment tax. The penalty was confirmed by the Commissioner of Wealth-tax (Appeals) [CWT (Appeals)], who held that the assessee was aware that the value returned was not correct and did not revise the return despite opportunities.

4. Interpretation and Application of Explanation 4 to Section 18(1)(c):
Explanation 4 to section 18(1)(c) deems a person to have furnished inaccurate particulars if the returned value of an asset is less than 70% of the value determined in the assessment, unless proven otherwise. The assessee argued that the value of shares was shown at face value subject to valuation as per WT Rules, indicating no intent to conceal or misrepresent. The Tribunal noted that the legal position on the valuation of shares was unsettled at the time of filing the return, and the assessee's declaration was qualified, not definitive. The Tribunal found that neither the assessee nor the AO provided a certain and definite value, making the invocation of Explanation 4 unjustified.

Conclusion:
The Tribunal held that the AO was not justified in levying the penalty under section 18(1)(c) as the valuation of shares was not definitive and both the assessee and AO had qualified their values. The penalty was deleted, and the appeal was allowed.