1988 (11) TMI 140 - AT - Wealth-tax

Issues Involved:
1. Valuation of property for assessment years 1980-81, 1981-82, and 1982-83.
2. Inclusion of amounts due from S/Shri S.N. Chenoy and D.B. Mistry in the wealth of the assessee for assessment years 1981-82 and 1982-83.

Issue-wise Detailed Analysis:

1. Valuation of Property:
The primary issue is the valuation of the property located at 1-1-141 to 144, Sarojinidevi Road, Secunderabad, for the assessment years 1980-81, 1981-82, and 1982-83. The Wealth Tax Officer (WTO) had valued the property at Rs. 1,31,400, based on rent capitalization method, whereas the assessee had returned a value of Rs. 95,000. The Commissioner of Income Tax (CIT) found the valuation to be under-assessed, noting that the property was sold for Rs. 6 lakhs and later for Rs. 12 lakhs in agreements dated 25th Feb 1980 and 10th June 1981, respectively. The CIT directed the WTO to refer the valuation to the Valuation Cell under Section 16A of the Wealth Tax Act, 1957.

The Tribunal analyzed whether the rent capitalization method was appropriate given the property was fully tenanted and governed by the A.P. Rent and Eviction Control Act, 1960. The Tribunal referred to several precedents, including:
- CWT vs. E.C. Ramachandran (1966) 60 ITR 103 (Mys): Held that for properties occupied by tenants and governed by Rent Control Acts, the appropriate method of valuation is to capitalize the annual rent.
- CED vs. Radhadevi Jalan (1968) 67 ITR 761 (Cal): Supported the rent capitalization method for properties under Rent Control Acts.
- Deviprasad Poddar vs. CIT (1977) 109 ITR 760 (Cal): Emphasized that properties occupied by tenants should be valued by capitalizing the annual rent.

The Tribunal agreed that the rent capitalization method was appropriate given the statutory restrictions on rent increases and tenant eviction. The Tribunal also held that the CIT's direction to refer the valuation to the Valuation Cell was invalid, citing:
- K.M. Ramdas Prabhu vs. WTO (1987) 166 ITR 706 (Kar): Held that once assessments are completed, the WTO cannot refer the valuation to the Valuation Officer.
- M.V. Kibe vs. CWT (1987) 168 ITR 82 (MP): Stated that appellate or revisionary authorities cannot direct the WTO to refer valuation to the Valuation Officer.

Thus, the Tribunal concluded that the WTO's valuation using the rent capitalization method was correct and there was no error within the meaning of Section 25(2) of the WT Act.

2. Inclusion of Amounts Due from S/Shri S.N. Chenoy and D.B. Mistry:
The second issue involved the inclusion of amounts due from S/Shri S.N. Chenoy (Rs. 18,090) and D.B. Mistry (Rs. 41,916) in the wealth of the assessee for assessment years 1981-82 and 1982-83. The CIT noted that these amounts were included in the wealth for the assessment year 1980-81 but not for the subsequent years. The assessee argued that the amounts were not declared due to misappropriation by the manager handling the business affairs.

The Tribunal found that the WTO had not provided reasons for excluding these amounts in the assessments for 1981-82 and 1982-83, despite including them in 1980-81. The CIT's direction to re-examine this issue was upheld, as it was justified to ensure consistency and clarity in the assessments.

Conclusion:
The Tribunal partly allowed the appeals. It upheld the WTO's valuation of the property using the rent capitalization method and canceled the CIT's direction to refer the valuation to the Valuation Cell. However, it sustained the CIT's direction to re-examine the inclusion of amounts due from S/Shri S.N. Chenoy and D.B. Mistry in the wealth for 1981-82 and 1982-83, directing the WTO to provide a fresh finding on this matter.

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