2005 (3) TMI 31 - HC - Wealth-tax

Whether Tribunal was justified in holding that the assessee was liable to penalty u/s 18(1)(c) r.w. Explanation 4 to section 18(1)(c) of the Wealth-tax Act, 1957, despite the Press Note dated May 27, 1968, issued by the Ministry of Finance and Circular No. 8-WT dated November 15, 1968, issued by the CBDT? - It is well settled by a catena of decisions of the apex court that the circular issued by CBDT u.s. 13 of the Act, as it stood during the relevant period, is binding upon the authorities. Thus, ithe penalty could not have been imposed as the value of the asset declared by the applicant was as per the report of the approved valuer. Moreover, the valuation of the property as disclosed by the applicant was based on the report of the approved valuer duly approved by the Department. There is bound to be a difference in the valuation report given by different Valuation Officers whether they are approved valuers or Departmental Valuers. Moreover, the value can differ on account of different methods of valuation being adopted. In the present case, the difference arose because of different methods of valuation adopted by the approved valuer and by the Departmental valuer. Thus, no case of concealment even otherwise is established. Question is answered in the negative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
1. Interpretation of penalty under section 18(1)(c) of the Wealth-tax Act, 1957.
2. Application of circulars issued by Ministry of Finance and Central Board of Direct Taxes.
3. Valuation methods and discrepancies in valuation reports.

Issue 1: Interpretation of penalty under section 18(1)(c) of the Wealth-tax Act, 1957:
The judgment pertains to a reference made by the Income-tax Appellate Tribunal regarding the imposition of a penalty under section 18(1)(c) of the Wealth-tax Act, 1957. The Tribunal had imposed penalties for the assessment years 1979-80 and 1980-81, which were partially upheld on appeal. The main contention was whether the assessee was liable for penalty despite following the valuation report of an approved valuer. The Tribunal directed the levy of the minimum penalty under the Act.

Issue 2: Application of circulars issued by Ministry of Finance and Central Board of Direct Taxes:
The respondent-assessee had declared the value of the property based on the approved valuer's report, which was submitted along with the return. The circular dated June 7, 1968, issued by the Central Board of Direct Taxes was cited, emphasizing that penalties for understatement of asset value are not applicable when supported by an approved valuer's report. The circular highlighted the Deputy Prime Minister's speech in the Lok Sabha, stating that penalties should not be levied in such cases. The circular was considered binding on the authorities, and the judgment favored the assessee based on the circular's provisions.

Issue 3: Valuation methods and discrepancies in valuation reports:
The valuation of the property in question was a crucial aspect of the case. Discrepancies arose due to different valuation methods adopted by the approved valuer and the Departmental Valuer. The Tribunal's decision to only consider the rental method for valuation led to differences in the assessed values for the relevant years. The judgment highlighted that variations in valuation reports are common due to different methods employed. The argument was made that no concealment was established as the declared value was based on the approved valuer's report, which was duly approved by the Department.

In conclusion, the High Court of Allahabad ruled in favor of the assessee, stating that the penalty under section 18(1)(c) of the Wealth-tax Act, 1957, was not justified in this case. The judgment emphasized the importance of following circulars issued by the Central Board of Direct Taxes and the reliance on approved valuer reports in determining asset values. The decision also addressed discrepancies in valuation reports due to varying valuation methods.