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Issues Involved:
1. Validity of re-assessments under section 17(1)(a) of the Wealth-tax Act. 2. Validity of re-assessments under section 17(1)(b) of the Wealth-tax Act. 3. Mode of valuation of unquoted equity shares. Issue-wise Detailed Analysis: 1. Validity of Re-assessments under Section 17(1)(a) of the Wealth-tax Act The primary issue was whether the assessees had disclosed all the primary facts necessary for the computation of the value of unquoted equity shares held in S.R.M.T. Ltd. The Wealth-tax Officer argued that the assessees failed to disclose the balance-sheets, which were essential for computing the value of the shares, thus justifying re-assessment under section 17(1)(a). However, the Tribunal found that for the assessment years 1982-83 and 1983-84, the balance-sheets were indeed available to the Wealth-tax Officer, as evidenced by the different values adopted for these years. This indicated that all relevant materials were disclosed, making re-assessment under section 17(1)(a) invalid for these years. For the assessment years 1980-81 and 1981-82, although it was not clear if the balance-sheets were enclosed, the Tribunal inferred that they were available based on audit objections and the fact that the same officer assessed both the shareholders and the company. Therefore, the Tribunal concluded that there was no failure to disclose primary facts, rendering the re-assessments under section 17(1)(a) invalid for these years as well. 2. Validity of Re-assessments under Section 17(1)(b) of the Wealth-tax Act The Tribunal examined whether the decision of the Andhra Pradesh High Court in M. Lakshmaiah's case, which was rendered on 10th March 1988, could constitute "information" justifying re-assessment under section 17(1)(b). The re-assessment proceedings were initiated on 10th March 1987, a year before this decision. Therefore, the Tribunal held that the Wealth-tax Officer did not have the jurisdiction to initiate re-assessment based on this decision as it was not available at the time of issuing the notices. Additionally, on merits, the Tribunal noted that the Andhra Pradesh High Court's later decision in Dr. D. Renuka's case, which aligned with Supreme Court precedents, supported the yield basis method for valuing shares of a going concern. This indicated no escapement of wealth, further invalidating re-assessment under section 17(1)(b). 3. Mode of Valuation of Unquoted Equity Shares The Tribunal addressed the assessees' argument that the shares should be valued on a yield basis rather than the break-up value method under rule 1D. The Tribunal noted that although the assessees had initially adopted the break-up value method, they were entitled to argue for a different method in re-assessment proceedings. The Tribunal cited the Andhra Pradesh High Court's decision in State Bank of Hyderabad v. CIT, which clarified that in re-assessment proceedings, assessees could put forward claims for deductions or non-taxability of receipts not raised in the original assessment. Since the assessees had not previously claimed the yield basis method, they were not precluded from doing so in the re-assessment proceedings. However, as the Tribunal had already held that the re-assessments were invalid under both sections 17(1)(a) and 17(1)(b), it did not issue any directions regarding the mode of valuation. Conclusion: The Tribunal allowed the assessees' appeals and dismissed the departmental appeals, declaring the re-assessments under sections 17(1)(a) and 17(1)(b) invalid. The assessees were also permitted to argue for the yield basis method of valuation in re-assessment proceedings, although no specific directions were issued due to the invalidity of the re-assessments.
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