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TMI Blog1987 (9) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee shooed GP rate of 29.3 per cent and 29 per cent for the year under appeal respectively. Considering the GP rate, the WTO was of the view that the market value of the closing stock of the firm in which the assesses partner, exceeded the value as adopted by the firm by more than 20 per cent. He, therefore, invoked rule 2B (2) of the Rules, 1957. The WTO rejected the contention of the assessee that the GP rate could not constitute a good guideline to determine the market value of the stock as on the valuation date. The assessee raised several objections vide reply dated 6-11-1979 why the GP Rate could not be taken as adequate material to come to the conclusion that market value of the stock exceeded the value as adopted by the firm by more than 20 per cent. The WTO was not at all convinced by the assessee's reply dated 6-11-1979. He, therefore, took the market value of the stock for purposes of the assessments as against the cost price shown by the assessee. The dispute was carried in appeal to the AAC by the assessee. He, having followed an earlier order dated 26-7-1980, concurred with the assessee that rule 2B (2) could not be invoked simply because the GP rate was 29.3 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23(3A) (a) of the act, 1957 and in reducing the value of the immovable property as made by the Valuation Officer by Rs. 48,700. No material has been shown by the revenue to substantiate the objection that no notice was served on the Valuation Officer. Shri Swaroop, the learned Sr. departmental Representative conceded that notice had been sent by the AAC to the Valuation Officer. It is not the contention of the revenue that the notice was sent on wrong address. No affidavit has been filed by the Valuation Officer to prove that the notice being sent on correct address, was not served on the Valuation Officer. On these facts, it has to be held that the AAC got the notice duly served on the Valuation officer and the latter chose not to appear before the former. The assessee as well as the revenue agreed that the discrepancy relates the multiplier and deduction of repairs and collection charges. There is no to her dispute regarding the valuation of the immovable property. First, we take up the question of multiplier. The WTO applied the multiplier of 16.6. The AAC adopted the multiplier 10. We have heard the representatives of both the parties and the Valuation Officer. No good reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill reduced the issue after giving an opportunity of being heard to both the parties. 8. Next, we take up the cross-objection of the assessee. The first common objection is that the AAC erred in not accepting the value of Kanota Bagh plot, Takhte Shahi Road, Jaipur. The assessee returned the value of his half share in the said plot at Rs. 35,000 for each year. Relying on the report of the Valuation Officer, the WTO estimated the value of the assessee's hold share in the said plot at Rs. 57,500 and Rs. 65,000 for the years under appeal respectively. The AAC concurred with the WTO. For the assessee, the learned consul Sh. Ranka urges that emergency was clamped by the Govt. and that continued during these years. He argues that on account of emergency, the prices of the land had drastically gone down. The valuation of the assessee's shares in the said plot was in dispute in the asstt. years 1973-74 to 1974-75 also. In the cross-objections of the assessee, this Bench of the Tribunal fixed up the value of the assessee's share in the said plot at Rs. 49,500. The question for consideration is as to what extent the value of the plot was increased in the years under appeal as compared to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heet of the firm is more that 20 per cent. The learned Judicial Member has held that in the case of the assessee the differences not more than 20 per cent. For coming to this conclusion he had relied upon an earlier decision of Jaipur Bench in the case of Smt. Ladkunwar Dhadda, the relevant extract of which is reproduced below : "It might so happen that more valuable gems have already been sold out and what remind was the inferior variety which can fetch much less profit, the assessee might have had a very goods year but on the last day value could get depressed." It is also observed that unless the facts are analysed properly and positive material brought on record to show that market value was very much higher than the cost price on the last day of the accounting period, it would not be possible to uphold the WTO's action and the burden rested heavily on the WTO to prove that the market value was more than 20 per cent. In the combined order the observation made is that WTO has not brought on record material to reach the conclusion that market value of the closing stock was more than 20 per cent of the value disclosed in the books of the firm. 3. I have my own reservations o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been spelt out. The submission made before the AAC were as under : "That the gross profit during the said years was more than 20 per cent. It does not mean fair market value of the closing stock was more by 20% of the book value. We may mention that the jewellery trade has its own special feature. Goods may remain in stock for years together and may not be syllable at all. same goods may be sold at 10 per cent profit and others may be sold at 25 per cent profit also. One had to take an overall view and for putting value as fair market value,. one had to see that the goods in stock are sold out on that day in lump sum to the willing buyer on that day. None would be agreeable to the book value of the valuation date. Whatever stock is available with the assessee on today the assessee is prepared to sell it at rate above 18 per cent of its cost books value. If you have any evidence in your possession that the fair market value of the closing stock on the valuation date was more than 20 per cent of the cost/boos value you are requested to let us know the same so that evidence in rebuttal may be adduced. We know the same so that evidence in rebuttal may be adduced. We may mention here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue one has to see that the goods in stock are sold out on that day in lump sum to the willing buyers and none will be willing to buy the entire lot on that day and, therefore, it will affect the market value. I do not see any justification in this contention as well. It is not necessary to sell the entire stock on the a single day. Purchasing and selling is a continuing process in the trade. The value on the valuation date has to be determined taking into consideration the market trends on that date or near about. In fact a prudent businessmen would try to sell goods in piecemeal or in one lump depending upon the favourable market trends. If the market trends on particular date are not favourable, there is not need to sell the entire lot in one lump. I have already taken similar view in my order in WTA Nos. 664 665/JP/80 for the assessment years 1973-74 and 1974-75 in the case of the assessee himself. Calcutta Bench 'A' of the Appellate Tribunal coming at Jaipur also took similar view in the case of WTO v. Sri Chand Golecha [WT Appeal Nos. 667 and 679 (Jp.) of 1980] relating to the assessment years 1972-73 to 1975-76. 6. I have pointed out above that even before us the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Members of the Bench differ in opinion on the following point : "Whether, on the facts and in the circumstances of the case, does the gross profit rate taken in the case of the firm, constitute adequate material to come to the conclusion that market value of the closing stock of the firm exceeds the cost price as adopted by the firm by more than 20 per cent and whether merely on that basis, can Rule 2B (2) of the Wealth-tax Rules, 1957 be invoked ?" The same is referred for hearing by a Third Member in view of section 24(11) of the Wealth-tax Act, 1957, read with section 255, sub-sections (4), (5) of the Income-tax Act, 1961. ORDER UNDER SECTION 24(11) OF THE WEALTH-TAX ACT, 1957 READ WITH SECTION 255(4) OF THE INCOME-TAX ACT, 1961 THIRD MEMBER ORDER Per Shri Ch. G. Krishnamurthy, President - This is a common difference of opinion refereed to me by the President under the provisions of section 24(11) of the WT Act, 1957 read with section 255(4) of the IT Act, 1961. The point of difference of opinion is as under : "Whether, on the facts and in the circumstances of the case, does the gross profit rate taken in the case of the firm, constitute adequate material to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be taken as the conclusive profit that the market value of the closing stock would exceed the book value by 20 per cent. This would again prove how fallacious, unsafe the conclusion of the WTO could be if reliance is to be placed all by itself on the rate of gross profit disclosed by the trading account. 3. The matter will now go before the regular Bench so that the appeal can be disposed of in accordance it the opinion of the majority. Per Shri Y. R. Meena, Judicial Member - These appeals are by the revenue. The only main issue for our consideration in these appeals in whether on the facts and in the circumstances of the case the Commissioner (Appeals) erred in holding that the WTO was not justified in invoking the provisions of rule 2B(2). There was a difference between the Members of the Bench. The matter was referred to the President under section 24(11) of the WT Act read with section 255(4) of the IT Act, 1961. The Hon'ble President as Third Member has agreed with the view taken by the Judicial Member. The majority view expressed is that rule 2B(2) cannot be invoked on the facts and in the circumstances of the case. Following the majority view, we confirm the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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