9911796707
TMI Blog2000 (6) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... se of difference in valuation of property situated in residential flat of Roopam Building, 18 Worli Estate Scheme No. 52, Abdul Gaffar Road, Worli, Bombay, owned by the assessee and used as guest house. It may be noted that during assessment proceedings the Assessing Officer noted that assessee had shown the value of the above referred guest house at Bombay at Rs. 1,55,130 on valuation date at 31-3-1993 and valuation report submitted along with return go to reveal that built up area was 5756.77 sq. ft. being used by the assessee as guest house. The Assessing Officer was of the opinion that valuation of the same be adopted at fair market price as identical properties inBombayare having higher valuation. He accordingly made a reference to the Valuation Officer who valued the building at Rs. 2,60,73,000. The Assessing Officer called upon the assessee to explain as to why the valuation of the property be not taken as per valuation done by the Departmental Valuation Officer (DVO). The assessee submitted vide letter dated 5-12-1995 that valuation of any immovable property as required under section 7(1) of the Wealth-tax Act is to be assessed as per Rules 3 to 8 of Schedule III of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not arise in respect of property of assessee as none of the situation mentioned in Rule 8(a) applied to the facts of the assessee's case and Assessing Officer had wrongly appreciated the factual position. The property being used as guest house by the assessee was to be valued as per Rules 3 to 7 of Schedule III of the Act. The agreement dated19-5-1995by which assessee had agreed to sell the property for Rs. 10.26 crores was not fully implemented and flat was not sold. On these basis, it was submitted that valuation given by the assessee as per provisions of Rules 3 to 7 of Wealth-tax Rules should be accepted. Reliance was placed on the decision of ITAT Calcutta Bench in the case of Arabinda Mitra v. Asstt. CWT [1996] 59 ITD 609 in which on identical facts the Bench had concluded that provisions of Rule 8 of Schedule III will not be applicable where there was no difficulty to arrive at the valuation of any asset as per provisions of Rules 3 to 7 of the Wealth-tax Rules. 2.2 The learned CWT (Appeals) considered all the facts and noted that each of the arguments of learned counsel for the assessee had been considered by the Assessing Officer and facts as noted by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee keeping in view the provisions of Rules 3 to 7 of Schedule III and that was the correct mode of valuation of immovable property. The learned counsel also submitted that Rule 8 of Schedule III excludes the application of Rule 3 but in certain circumstances, as enumerated therein, and one, of the circumstances is that Assessing Officer has to record a finding that it was not practicable to apply the provisions of the said Rule (Rule 3) then only the Assessing Officer, after seeking necessary previous approval of DC, will get the value of the property determined in the manner laid down in Rule 20. The learned counsel submitted that in the case in hand the Assessing Officer on baseless observation has tried to proceed under Rule 8(a) of Schedule III while it was not at all applicable. According to learned counsel the observations made in the assessment order are without any substance and do not justify the action of the Assessing Officer to ignore the mandatory provisions of Rule 3 of Schedule III and to invoke the provisions of Rule 8(a) and get the value of the property determined under the provisions of Rule 20 of Schedule III. Our attention was drawn to the facts th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 48 lakhs, after hearing the assessee in response to enhancement notice was not held justified by the Tribunal, on the ground that view of the CWT(Appeals) that it was not practicable to apply Rule 3 of Schedule III was not justified as the definition of word "practicable" cannot be stratched and applied to a situation whereby applying a different valuation or realistic value, the value of the property can be adopted at a higher figure than the one which is worked out as per Rule 3. On the basis of this case law the learned counsel contended that same view is to be taken in the case in hand as there was no justification for Assessing Officer to conclude that Rule 3 was not practicably applicable, and there was no justification to resort to get the valuation of the property under Rule 20 of Schedule III by DVO and order of the Assessing Officer as well as CWT(Appeals) should be set aside and valuation shown by the assessee be accepted. 2.5 As against it the learned D.R. has vehemently supported the orders of the authorities below and referred to the observation of the Assessing Officer made in the assessment order to bring home the point that Assessing Officer had specifically m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is correct or action of the Assessing Officer to ignore the provisions of Rules 3 to 7 and got the value under Rule 8(a) read with Section 20 of Schedule III is justified or not. 2.8 At the very beginning it is to be pointed out that section 7(1) gives out the mode of valuation of any asset. Originally section 7(1) reads as under: "Value of asset - how to be determined: 7(1) Subject to any rule made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date." Rule 1 BB was provided to work out the value of a house which was wholly or mainly used for residential purposes. From1-4-1989the provisions of section 7(1) of the Act were amended by the Direct Tax Laws (Amendment) Act, 1989 and after that section 7(1) reads as under: "7(1) Subject to the provisions of sub-section (2), the value of any asset, other than cash, for the purposes of this Act shall be its value as on the valuation date determined in the manner laid down in Schedule III." Schedule III was inserted from1-4-1989and Part B of Sched ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeded under Rule 8(a) and we have to examine as to whether the approach of the learned Assessing Officer was justified in concluding that it was not practicable to apply the provisions of Rule 3 to get the value of the property determined. In this connection the observations of the Assessing Officer are significant as he had given out the following reasons for ignoring the provisions of Rule 3(a) in concluding that the provisions of Rule 3 are not practicable to be applied. "(1) Valuation as per Rule 3 is not practicable in view of the wide variation between the market value and valuation done by the appellant on the basis of rateable value determined by the municipal authorities, i.e., Rs. 6,573 which is insignificant compared to rent prevailing inBombay. (2) Rule 8 of Schedule III was applicable and the issue of valuation had to be referred to the DVO. (3) The appellant had been paying rent of Rs. 500 per month prior to purchase of the aforesaid flat on22-11-1972and had incurred expenditure on improvement of the said flat which is difficult to ascertain and application of Rule 3 would have been impracticable in such a situation. (4) The nature of the flat is under sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rule, as pointed out earlier, are not absolute but are subject to the provisions of Rules 4 to 8 and we have already concluded that Rule 8(a) gives a scope to Assessing Officer to ignore Rule 3, if under the facts and circumstances of the case he opined that it was not practicable to proceed under Rule 3 to work out the value of immovable property. In the case in hand, facts and circumstances as noted by Assessing Officer go to indicate that there were sufficient material before the Assessing Officer to conclude that valuation under Rule 3 of Schedule III property will not be giving out the correct value. It is to be kept in mind that while completing assessment Assessing Officer is supposed to work out the value of the asset and rules framed under Schedule III are the method prescribed by the Legislature so that uniformity in the method of valuation is adopted. No doubt Rule 3, as argued by the learned counsel for the assessee, is mandatory, but subject to other rules as its very language indicate and Rule 8(a) of Schedule III gives out the circumstances and in the case in hand the facts and circumstances were going to show that approach of the Assessing Officer was justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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