2003 (8) TMI 184 - AT - Wealth-tax

Summary

Issues Involved:
1. Validity of the notice issued by the Commissioner of Wealth-tax (CWT) under section 25(2) of the Wealth-tax Act, 1957.
2. Whether the Wealth-tax Officer (WTO) was justified in estimating the value of the property without considering the Valuation Officer's report.
3. Whether the order passed by the WTO was erroneous and prejudicial to the interest of the Revenue.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued by the CWT:
The validity of the notice issued by the CWT was challenged by the assessee on the grounds that the notice was initially sent by the WTO working in the CWT's headquarters, which was claimed to be improper. The CWT issued another notice dated 24-2-1994 after considering the reply to the initial notice. The assessee argued that the CWT had not initiated the proceedings on his own initiative but upon the suggestion of subordinate authorities. The Tribunal found that the CWT had issued a detailed notice and provided the assessee with an opportunity to be heard, thus fulfilling the requirements of natural justice. The Tribunal cited the Supreme Court's decision in CIT v. Electro House and the Gujarat High Court's decision in Smt. Anantkuverba v. CWT, which clarified that the issuance of notice does not affect the jurisdiction of the Commissioner. Therefore, the Tribunal rejected the grounds challenging the validity of the notice.

2. Justification of the WTO's Estimation of Property Value:
The WTO had estimated the value of the property at Rs. 16,50,000 based on the valuation of the previous year, ignoring the Valuation Officer's report which valued the property at Rs. 34,25,000. The assessee contended that the property was encroached upon by trespassers, which was not considered by the Valuation Officer. The Tribunal noted that the WTO had made a reference to the Valuation Officer under section 16A of the Wealth-tax Act, and the Valuation Officer had followed the procedure laid down in the Act, including considering the objections raised by the assessee. The Tribunal held that the WTO was bound to complete the assessment in conformity with the Valuation Officer's estimate as per section 16A(6) of the Wealth-tax Act. The WTO's failure to consider the Valuation Officer's report was legally erroneous and patently faulty.

3. Erroneous and Prejudicial Order:
The Tribunal upheld the CWT's finding that the WTO's order was erroneous and prejudicial to the interest of the Revenue because it did not conform to the Valuation Officer's report. The Tribunal emphasized that the WTO had no discretion to ignore the Valuation Officer's order, which was binding upon him. The Tribunal cited the Supreme Court's decision in Malabar Industrial Co. Ltd. v. CIT, which stated that an order is erroneous and prejudicial to the interests of the Revenue if it results in the Revenue losing tax lawfully payable by a person. The Tribunal also referred to the Allahabad High Court's decision in Swarup Vegetable Products Industries Ltd. (No.1) v. CIT, which held that the Commissioner has the power to set aside an assessment order if the Assessing Officer had accepted the assessee's contention erroneously without proper enquiry.

Conclusion:
The Tribunal found no error in the CWT's order, which was detailed and provided full opportunity of hearing to the assessee. The Tribunal upheld the CWT's order passed under section 25(2) of the Wealth-tax Act and rejected the grounds taken by the assessee to challenge the same. Consequently, the assessee's appeal was dismissed.