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TMI Blog1984 (8) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the contention that r. 2B(2) could not be applied merely on the basis of the rate of g.p. shown by the assessee in the income-tax assessment. In some cases reliance was placed on the Allahabad High Court ruling in the case of Seth Satish Kumar Modi vs. WTO (1980) 15 CTR (All) 340 : (1983) 139 373 (All) for the proposition that even in wealth-tax the valuation has to be taken at cost price in accordance with settled commercial principles. In other cases reliance was placed on various orders of the Tribunal wherein on similar facts it was held that the application of r. 2B(2) merely on the basis of a higher gross profit rate than 20% was unjustified. 4. It may be pointed out that in some cases the WTO had re-opened the assessments under s. 17(1)(b) of the WT Act, while in other cases the addition was made during the original assessment itself. 5. The department is aggrieved and in appeal. We have heard the ld. departmental representative and the counsel for the assessee at length. The ld. departmental representative did not dispute that the point at issue has been resolved by various orders of the Tribunal of Jaipur Bench. The details of those orders are to be found in para 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principles of accountancy. The ld. counsel for the assessee placed strong reliance on the Rajasthan High Court ruling in (1980) 123 ITR 298 (Raj) in the case of CWT vs. Man Industrial Corporation for the proposition that the onus of proving that the value mentioned in the balance-sheet does not correctly represent the real value of the assets and to what extent the value mentioned in the balance sheet should be reduced or increased for arriving at the real value of such assets would be on the party that challenges the valuation shown in the balance-sheet. In the instant case, it is the revenue that challenges the valuation and the onus would, therefore, be on the revenue. The counsel for the assessee also relied on an order of the Jaipur Bench of the Tribunal in WTA Nos. 675 676/Jp/1981 in the case of WTO vs. Shri Ghyan Chand Kothari Jaipur, dt. 31st Dec., 1983 wherein the bench quoted the order of the Third Member in the case of Gopichand Rawat, and also the fact that a miscellaneous application for rectification has been moved by the department and still followed the order of the majority in that case. 8. We have considered the rival contentions. So far as the first questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng this rule, it is clear that since here the revenue is claiming that the valuation of the closing stock was in excess of the book value, the onus would squarely be on the revenue to prove the fact by acceptable evidence. 10. The question arises whether the mere fact that the g.p. exceeds 20% in most of the cases would be sufficient reason to hold that the value of closing stock as per the balance-sheet exceeds the book value by more than 20%. The matter has been argued at considerable length and we have taken into consideration the arguments pro contra. In an earlier order of the Calcutta Bench of the Tribunal had held that merely on the basis of the g.p. rate r. 2B(2) cannot be applied. That view was taken by more than one bench but it appears that some benches took a contrary view also and for that the matter went finally to the Third Member. The reliance on Supreme Court ruling in J. K. Cotton Manufacturers Ltd., by the revenue, is in our opinion quite misplaced. All that one of the Judges in that case held was that if the WTO had made some enquiries by examining the assessee with the aid of principles of ss. 106 and 114 of the Evidence Act, their Lordships, would perhaps ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e g.p. is earned over a full period of 365 days or so, the WT Act takes into account only the valuation date, i.e., last day of accounting year. Unless the WTO brings on record any material to show that on the last day of the year or near about the last day of the accounting period the market value of the closing stock was in excess of the book value by more than 20%, r. 2B(2) cannot be applied merely on the basis of g.p. which may have been earned in respect of the exports in particular, in the 1st half of the year or 1st three quarters of the year and in some cases there may have been no cases of transaction of sales in the last quarter at all. These are mostly cases of exporters of emeralds and exports do not take place on all the days of the year though in respect of sales inside the country the sales may take place every day. The market rates of goods in which the assessee is dealing may have been higher in the 1st quarter of the year and lower in the 2nd quarter. It may gain have been higher in the 3rd quarter and may have fallen in the 4th quarter. These facts could have been enquired into by the WTO but he did not do so. By looking at the books of the assessee and by examin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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