Default by AO should always be examined in detail and appropriate action taken against them. - Income Tax - 364/CBDT

INSTRUCTION NO. 364/CBDT Dated: December 21, 1971 The Board have noticed with concern that in many cases the Wealth Tax Officers have incorrectly valued the interest of the assessees in partnership firms. Such omissions have also been adversely commented upon by the Revenue Audit. 2. Attention is invited to the provisions of Rule 2 of the Wealth Tax Rules, 1957, which lay down the procedure for valuation of interest in partnership or association of persons. This Rule provides that the net wealth of the firm or association on the valuation date should first be determined. For the purposes of determination of the net wealth, the net value of the assets may have to be determined in accordance with the manner provided in Rules 2A to Rule 2G. 3. Rule 2E enumerates the liabilities which are not to be taken into account for the purposes of calculating the value of the interest of the partner of a firm. It inter-alia, provides that reserves of all kinds should not be considered as liabilities for this purpose. It, therefore, follows that reserves like the balance in the Development Rebate Reserve shown in the balance sheet of the firm should not be allowed as liability in computing the value of interest of the partners in the firm. Again, according to the provisions of Rules 2-B(2), where the market value of an asset exceeds its written down value or its book value, or the value adopted for purposes of assessment under the I.T.Act, as the case may be, by more than 2-A be taken to be market value. These provisions should be strictly followed. 4. The Board desire that it should be ensured that such defaults by assessing officers should always be examined in detail and appropriate action taken against them.