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TMI Blog1984 (8) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... n the firm of Siddhartha Enterprises, in which he has a 10 per cent share. It appears that the property of the firm, which consists of the land and building where Siddhartha Hotel is run, came to be valued under section 16A of the Act in respect of the wealth-tax assessment of another partner. Since this valuation report fixed the value of the building at Rs. 59.75 lakhs as against the book value of Rs. 43 lakhs, it appears that the attention of the Commissioner was drawn to this assessment completed under section 16(1) in the assessee's case. The Commissioner, in his notice, pointed out that rule 2 of the Wealth-tax Rules, 1957 (' the Rules '), which requires the WTO to value the interest in a firm by making adjustment in the value of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this is a gross over-valuation and that, even otherwise, it cannot form a basis for any action for revision of assessment. Further, he argued that the Calcutta High Court in Ganga Properties v. ITO [1979] 118 ITR 447, while dealing with a similar power under section 263 of the Income-tax Act, 1961 (' the 1961 Act '), had found that the valuation report without jurisdiction could not form the basis of revision of assessment, and that the Commissioner's action should be confined to the materials on record, as it stood at the time of examination by him and not on the basis of subsequent information. He pointed out that there are other provisions in law to deal with such contingencies. He also referred to a number of decisions where, on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the acceptance of a voluntary return without enquiry, on the facts and in the circumstances of that case, made the assessment one which was erroneous and prejudicial to the revenue. The Gujarat High Court, in Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312, justified the action of the Commissioner in setting aside an assessment, where deductions were allowed without enquiry. In this case, the Commissioner did not give a finding that the deductions were improper, but had merely set aside. This was also held to be not a conclusion which vitiated his order. The Rajasthan High Court in Kanhaiyalal v. CIT [1982] 136 ITR 243 also held a similar view, where a return had been accepted under section 143(1) of the 1961 Act without ascertaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the valuation date. The hotel building is a large one located in an important locality. The valuation of land component was a subject-matter of dispute in earlier years in the assessee's own case when he held the property as his own individual property. In other words, the assessee's record itself shows that there is, prima facie, a case for revaluation of the assets enjoined by rule 2B of the Rules, read with rule 2, which requires adjustment to be made under specified conditions. It is clear that the Commissioner had these in mind, as is evident both from his notice and his order. He also referred to the valuation report regarding the very property held by the firm, though in connection with a reference made in a co-partner's case. No d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we would not have been able to interfere with the order of the Commissioner as he had given clear reasons both in his notice and the order to suggest that the acceptance of the return under section 16(1) was not justified on the facts and in the circumstances of the case. At any rate, we find it difficult to accept that the Commissioner should completely ignore any material which may come on record. In fact, the Calcutta High Court itself pointed out at Ganga Properties' case as under : " In other words, any material which comes into existence later on cannot form part of the record of the ITO for the purposes of invoking the Commissioner's power under section 263(1) of the Act. And it is only after the proceeding is lawfully initiated by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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