9911796707
TMI Blog1985 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... with wealth-tax return. This statement, he mentioned, is also at p. 11 of the paper-book. This statement clearly shows the details of corpus like shareholdings, debtors, cash and bank balance, capital contribution in firm, income accrued but not received, loans and advances and also the liability. The net total after deduction of liabilities of the corpus was Rs. 5,96,525. Mr. Mehta drew our attention to the copy of the assessment order that has been filed alongwith appeal. In p. 2, WTO has asked for explanation, etc., which were provided for. In Para-3, the WTO had brought to the notice of the assessee regarding the calculation of the two interests, life insurance as well as the remainderman's interest. The WTO then had gone to the question of depreciation. It was observed by the WTO that in all cases the assets are in the form of shares, advances, etc. He also observed that these assets are not depreciable assets and, therefore, he did not allow any depreciation. The assessee's submission have been reproduced as under:— "The assessee in his written reply has replied (reproducing the reply of the actuary) that 'as the corpus is payable in the future or termination of the prior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the Hon'ble Gujarat High Court in the case of Addl. CIT vs. Mukur Corpn. (1978) 111 ITR 312 (Guj) stating that the Wealth-tax Officer did not make proper enquiry and, therefore, he is now directing the WTO to make the enquiry. He observes in his order "I am inclined to hold that proper enquiry was not made by the WTO and so the assessment as framed was erroneous insofar as it is prejudicial to the interests of the Revenue". He, therefore, set aside the assessment and directed the WTO to make a fresh assessment after making necessary enquiries and giving reasonable opportunity to the assessee as indicated. 3.3. According to the ld. counsel Mr. Mehta, the CWT is empowered to revise an order of the WTO out of the proceedings under this Act which were available before the WTO at the time of making of an assessment. Mr. Mehta submitted that the revisional proceeding have been initiated by the CIT by regular the internal audit report. Mr. Mehta submitted that the internal audit had raised an objection in respect of the valuation of the shares for an earlier assessment year for the purpose of determining the capital gains. In the year under review, the WTO did not make any refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was subsequent to proceedings under this Act as was before the WTO. He also submitted that a similar issue had been so held by the Hon'ble Gujarat High Court in (1974) 33 STC 147 (Guj). He also referred to pp. 40 to 44 of the paper book wherein he had filed Gujarat High Court decision on an identical situation. There also their Lordships of the Gujarat High Court held that there was no material on record to the WTO which was either overlooked or not applied properly by the WTO which would give jurisdiction to the CIT to invoke the provisions of s. 23. 3.7. Mr. Mehta, therefore, submitted that the entire order of the CWT is beyond his jurisdiction and, therefo0re, needs to be quashed. 4. On behalf of the Department. Mr. V. M. Mehta, the ld. Representative, submitted that where the WTO adopted the book value instead of taking the market value, then that order of the WTO is very much erroneous as well as prejudicial to the interests of the Revenue. He referred to the decision of the Gujarat High Court in the case of Mukur Corpn. (1978) 111 ITR 312 (Guj). Mr. Mehta submitted that since the WTO did not make proper enquiry in respect of the value of the shares, the CWT was fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to read the assessment or the basis of an internal audit observation. The answer is clearly 'No'. The reason being that the internal audit objection is not part of the record of assessment proceeding. Sec. 25 (2) reads as under: "25. (2) Without prejudice to the provisions contained in sub-s. (1), the CIT may call for and examine the record of any proceeding under this Act, and if he considers that any order passed there in by a Wealth tax Officer is erroneous in so far as it is prejudicial to the interests of revenue, he may after giving the assessee an opportunity of being heard, and after making or causing to be made such inquiry as be deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment". The record has to be construed to mean the record of the proceedings of the WTO on the basis of which he had made the assessment. Since the audit was done subsequent to the assessment, it is extraneous to the assessment proceedings and. therefore, the WTO had no occasion to consider the same. Therefore, on the extraneous information which was not part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to the interest of the Revenue". This, therefore, clearly supports our view that CWT just cannot invoke jurisdiction under s. 25 on the extraneous audit objection. Therefore, on this legal question, the contention of the assessee must be upheld, and the same is, therefore, decided against the Department the CWT's order under s. 25 (2) being without jurisdiction. 5.4. We shall now deal on the facts of this case as to whether WTO has made any error in applying the provision of law or has overlooked the provisions of law. 5.5. From the reply to the internal audit objection, the following fact emerges which goes to establish whether or not the WTO had applied his mine to the case and had passed the assessment order in accordance with the law: (a) that the WTO was aware of the fact that s. 7 (1) of the WT Act gives the primary mode regarding valuation of assets; (b) Sec. 7 (2) is not enabling one; (c) the option of applying s. 7 (1) or s. 7 (2) is with the WTO; (d) he could not have applied s. 7 (2) as the difference in market value and book value of assets is below 20 per cent; and (e) further more he cannot value certain assets of balance sheet to the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet of such business as on the valuation date and making such adjustment therein as may be prescribed. It is true that sub-s. (2) commences with a non obstiante clause, but even so, the provision itself is an enabling and conferring discretion on the WTO to determine the net value of the assets of the business as a whole having regard to its balance sheet as on the valuation date, instead of proceeding under sub-s. (1). In other words, it is optional for the WTO to resort to either of the methods even in the case where the net value of the business carried on by the assessee is to be determined. Thirdly, even when the proceeds under sub-s. (2) he has to determine the value of the business as on the valuation date, the phrase "having regard to the balance sheet of such business" as judicially interpreted means that the WTO has to take into consideration or account the balance sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of asset appearing therein. Fourthly, the said sub-section also says that the WTO has to "make much adjustments therein as may be prescribed" and in this behalf rr. 2A and 2B al ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
