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TMI Blog1991 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... he Lake Shore Palace Hotel commenced its business and stared payment of the rent to the assessee. The WTO noted that the property under consideration consisted of 15 bedrooms with dressing rooms, toilets, stores and verandah in front, one central drawing hall, one dining room, one bar room, pantry, service room, fountain and open chowk, etc. and hence the rent at the rate of Rs. 1,500 per month was every negligible particularly when the assessee himself was the Managing Director of the company with whom the assessee had executed the lease agreement. He, therefore, took the view that provisions of r. 1BB of the WT Rule were applicable in this case. He estimated the rent of the property at Rs. 8,500 per month i.e., Rs. 1,02,000 per annum and multiplying it by the fraction of 100/8 assessed its value at Rs. 12,75,000. 3. When the assessee went in appeal before the CWT(A), it was argued before him that the WTO was led away by the present status of the building as a Five Star Hotel instead of considering the condition and the status of the building at the time when it was leased out and more particularly ignoring the fact that the building was of stone construction and more than 80 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 (Mad) in order to support this proposition. He further submitted that in the income-tax assessment proceedings, the ITO had accepted the rent as disclosed by the assessee and that there was no basis for estimate of rent made by the WTO. Moreover, as per the report of the registered valuer, the condition of the property had been deteriorating year after year. According to Shri Ranka, since the property had been to thoroughly renovated, it would not now be possible to find its shape and value as it was in 1978. He also emphasised that since the registered valuer had been appointed by the CBDT his report had to be given due weight. 5. The learned counsel further argued that the first appellate authorised could not direct the WTO to refer case under s. 16A to the Valuation Officer and this could not be done even by the CWT under s. 25 of the WT Act. For these propositions, Shri Ranka relied on the decision in the case of CWT vs. A.A. Patel (1989) 80 CTR (MP) 187 : (1990) 181 ITR 543 (MP), besides the case law which has been cited in the "grounds of appeal" itself. The learned counsel urged that in the case of let out property, the valuation had to be done according to r.1BB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CWT(A) was very fair in mentioning that the report of registered valuer had also to be considered. He had also given guidelines that the potential of the property, taking its historic value into account, had also to be considered. He submitted that in the past, there was no rent from this building and the potential came only when the building was rented out. 7. Regarding the application of r. 1BB, the learned Departmental Representative argued that it was the case of a commercial building and not residential building, as the rent was stipulated w.e.f. the date when the limited company started using it for its business. He submitted that in any case, the entire matter was now open before the WTO who had to frame the assessment order according to provisions of law. 8. Shri Ranka in his reply explained that the reliance of the learned Departmental Representative on the decision of the Hon ble Rajasthan High Court in the case of Prem Agencies, was misconceived because in that case the Tribunal had given a decision on a point which was not covered by the decision of the AAC whereas in the instant case, the CWT(A) had decided the issue by restoring it to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, (where under the provisions of s. 7 r/w the rules made under this Act or as the case may be the rues in Schedule III the market value of any asset is to be taken into account in such assessment) the (Assessing Officer) may refer the valuation of any asset to a Valuation Officer (a) In a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the (Assessing Officer) is of opinion that the value so returned is less that its fair market value; (b) in any other case, if the (Assessing Officer) is opinion (i) that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do............. (6) On receipt of the report under sub-s. (3) or sub-s. (5) from the Valuation Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of s. 16A to be interpreted in such a way that they vest a discretion in the WTO to make a reference to the Valuation Officer even when the case is covered by cl. (a) or cl. (b)(i) of sub-s. (1) of s. 16A, it would amount to giving arbitrary powers to the WTO in spite of the specific provisions in the WT Act and the Circular of the CBDT and that cannot be a correct interpretation. In our view, join fats, it would be a case of failure to exercise the jurisdiction mandated by the clear wordings of the statute. We may mention that our view is supported by the decision of the Hon'ble Punjab Haryana High Court in the case of Raj Paul Oswal vs. CWT (1988) 67 CTR (P H) 60 : (1988) 171 ITR 489 (P H) and the Hon'ble Delhi High Court in the case of Sharbati Devi Jhalani vs. CWT (1986) 54 CTR (Del) 85 : (1986) 159 ITR 549 (Del). In the facts and circumstances, we are of the opinion that when the WTO came to the conclusion that the value of the property disclosed by the assessee at Rs. 2,25,000 was less than its fair market value and in his opinion its value was working out to Rs. 12,75,000 (which was more than 331/3 per cent of the value disclosed by the assessee and was more than Rs. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that defect. Another case of the Hon'ble Madhya Pradesh High Court in (1989) 80 CTR (MP) 187 : (1990) 181 ITR 543 (MP), namely that of CWT vs. A.A. Patel only follows the decision in the case of Kibe and hence that is also distinguishable. The case of Brig. B. Lall vs. WTO, Smt. Uma Debi Jhawar vs. WTO (1982) 32 CTR (Cal) (Cal) 16 : 136 ITR 662 (Cal) and Satyendra Chunder Chose vs. WTO (1979) 12 CTR (Cal) 155 : (1980) 126 ITR 102 (Cal) deal with the cases where the WTO had mad reference after the completion of assessment proceedings and hence their Lordships held in all these cases that such references to the Valuation Officer were not valid. It is obvious that such is not the situation in the case before us. In the case of Onkarji Kasturchand (HUF) vs. WTO (1982) 135 ITR 188 (MP), a reference had been made to the Valuation Officer by the WTO when no proceedings were pending before him and on the basis of the report of the Valuation Officer, assessments were reopened, it was held by their Lordships that since no assessment proceedings were pending before the WTO, a reference under s. 16A was not valid. In the case before us, it is obvious that the matter was pending before the CW ..... X X X X Extracts X X X X X X X X Extracts X X X X
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