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TMI Blog1988 (4) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... from the total wealth. The AAC gave some more relief to the assessee. By means of the present assessment, the WTO has chosen to withdraw the amount that was earlier allowed by his predecessor, which had already been considered by the AAC in appeal as the very issue of debts was the matter in appeal before him. Against the order of the AAC, the department had not preferred any appeals. Therefore, by means of reassessment proceedings they cannot withdraw the deduction already granted. 3. We have given very careful consideration to the arguments of the parties. The perusal of the record shows that the WTO had considered each of the debts and had allowed deduction of some of them from the total wealth as per the balance sheet. The AAC's orders also reveal that some of these very debts for which only part taken was allowed by the WTO he had enhanced the deduction to be allowed. There is no dispute to the fact that the department did not prefer any appeals against the orders of the AAC. The present order of the WTO is purely examination of the same item again by bringing in the provisions of section 36 of the IT Act for the plea that the said debts had not been written off in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances all that can be said is that the previous method of computing the net wealth of the assessee was wholly irregular. The best that can be said was that a global method of valuation had been adopted in which the capital investment standing in the name of the assessee had been taken to be her net wealth after which certain adjustments had been allowed in accordance with rules 2B to 2-I of the WT Rules. If this was not the method, then there was no logical method of assessment in the first instance and the earlier assessment was bad on this short ground. 3. Before the WTO there was no plea of the assessee that the earlier assessments had been made under section 7(1) of the WT Act. The plea of the assessee was that the reopening could not be justified on the basis of the audit report as per decision of the Hon'ble Supreme Court in India Eastern Newspaper Society v. CIT [1979] 119 ITR 996. Apart from the fact that recently the said decision has been sought to be reconsidered by a large Bench so their Lordships of the Supreme Court itself the proposition laid down in this case was only that the audit authorities could not lay down any law for the guidance of the Income-tax/We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a market value of Rs. 40,000. Similarly, a debt in the name of Harisingh Punamchand of Kanpur having a book value of Rs. 76,000 was shown at Rs. 38,000. The other debts were small items. The Wealth-tax Officer had considered the position of these debts and had determined their market value wherever he was satisfied that such market value should be lower than the book value. In respect of one debt in the name of M/s. Indian Commercial Corporation, Calcutta, the Wealth-tax Officer had adopted the market value at a figure higher than what was shown in the books. In respect of this also, the assessee had claimed that its market value was negligible. After considering the nature of those debts, the Wealth-tax Officer worked out the difference of the book and market value of these debts and deducted this difference from the wealth of the assessee. 3. In respect of the immovable property, the Wealth-tax Officer did not adopted the book value and in its place he adopted the market value at a higher figure of Rs. 1,78,000. The net wealth was determined at Rs. 14,19,704. 4. Against this order, there was an appeal in which the assessee had contended that the market value of these debts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the wealth had been determined under section 7(1) of the Wealth-tax Act. He also considered that sections 7(1) and 7(2) were alternative provisions and either of them could be applied. The Commissioner of Income-tax (Appeals) accepted the plea of the assessee that the provisions of section 7(1) having been applied in the original assessment, the provisions of section 7(2) could not be so applied. The Commissioner of Income-tax (Appeals) accepted the plea of the assessee and held that the addition made I the value of the debts was not justified. The addition was, therefore, deleted. It is against this order that an appeal was filed before the Tribunal and the ground taken was as under : "On the facts and in the circumstances of the case, the learned CIT (A) has erred in allowing a deduction of Rs. 1,05,100 and further holding that section 7(2) of the Wealth-tax Act, 1957 does not apply on re-assessment proceedings." 7. There was a difference of opinion between the two Members and while the learned Accountant Member held that in the original assessment the provisions of section 7(1) had been applied by the Wealth-tax Officer, who had considered each item of debt and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 7 refers to such cases where it is not necessary to determine the value of each asset and it is possible to determine the net value of the asset of the business as a whole having regard to the balance-sheet of such business. The adjustments to this can be only under the rules. However, the whole purpose is to determine the value of the business as a whole. But words 'having regard to the balance-sheet of the such business' do not mean that whatever is written in the balance-sheet has to be adopted. However, that has to be the main basis for determining the valuation. It is open to the Wealth-tax Officer to adopt a valuation different from what is shown in the balance-sheet if there are good reasons for the same. Where, however, the books are maintained the onus is on the assessee to establish that the value shown in the books is not the correct value and if the value is increased it is for the Wealth-tax Officer to establish it. 10. With this background when we see to the original assessment, we find that the assessee was carrying on a money-lending business. The assets belonging to the assessee were mostly in the form of various debts. The only other major asset was an immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of hearing of this appeal, the Appellate Assistant Commissioner had taken into consideration the fact that in the accounting period relevant to the assessment year 1975-76 many of the debts had been written off and some of them had been scaled down. This fact had been shown on the basis of the arbitration where the arbitrator had considered the financial conditions of the debtors in recommending the writ off or scaling down. This had been so accepted by the Wealth-tax Officer in the assessment year 1975-76. As these facts were available before the Appellate Assistant Commissioner, he took into consideration and directed that the market value of these debts should be taken at a figure which was slightly higher than the value as per the accounts of 1975-76. It was much after this that the reassessment proceedings had been started in 1980. It is true that the arbitration proceedings had been completed on 11-4-1975 but it did indicate the position of these debts on the basis of which the Appellate Assistant Commissioner had accepted the plea of the assessee for taking them at the figure lower than shown in the balance-sheet. I have also to note that by reopening the assessment the We ..... X X X X Extracts X X X X X X X X Extracts X X X X
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