COMMISSIONER OF WEALTH TAX Vs. VIDYA MALHOTRA

JUDGEMENT

(1.) PURSUANT to directions given by this Court under S. 27(3) of the WEALTH TAX ACT, 1957 (in short, the Act), following questions have been referred for opinion of this Court:

(2.) FACTUAL position is to be noted in brief. The dispute relates to asst. yrs. 1968 -69 and 1969 -70. For the asst. yrs. 1966 -67 and 1967 -68, the assessee declared value of the property at 9, Aurangzeb Road, New Delhi at Rs. 12 lakhs but for the asst. yrs. 1968 -69 and 1969 -70 the valuation is shown at Rs. 7,76,800. On 18th Feb., 1971, the property was sold for Rs. 22,60,000. It is to be noted that on 17th Aug., 1965, the property was purchased for Rs. 17 lakhs. In 1965 assessee declared the value of the property at Rs. 17 lakhs and that she had spent Rs. 1,42,750. The WTO accepted the valuation made by the District Valuation Officer at Rs. 19,21,000 and valued the property at this figure in both the years. Penalty proceedings under S. 18(1)(c) were initiated for furnishing inaccurate particulars. The matter was referred to the IAC who issued notice to the assessee. On consideration of the explanation submitted by the assessee, IAC came to the conclusion that the assessee was guilty of furnishing inaccurate particulars of wealth. He noted that the Tribunal had finally held, in the appeals relating to assessment of net wealth that the value of the property in these two assessment years was Rs. 11 lakhs. The matter was carried in appeal before the Tribunal. On consideration of factual aspects pressed into service by the party, Tribunal came to hold that the figure returned by the assessee was done bona fide and there was no deliberate understatement or furnishing of inaccurate particulars. It was further held that the assessee was not guilty of any gross or wilful neglect and, therefore, penalty imposed for each year was cancelled. Application for reference made under S. 27(1) was not accepted. This Court has directed reference and the questions as set out above were referred for our opinion.

(3.) WHILE dealing with the factual aspects and the conclusions arrived at by the Tribunal, we think it necessary to extract the relevant portion of Tribunal's order which reads as follows : "We have considered the submission of the parties and gone through the record. It appears that the IAC was mainly influenced in levying the penalty by the fact that this property was purchased by the assessee on 17th Aug., 1965, for a sum of Rs. 17 lakhs. It is true that it was so but the assessee had explained the circumstances in which she had to pay this fabulous price. The assessee had sold 24, Ferozeshah Road on 20th Feb., 1965. She was in search of a residence nearabout this locality and till a residence was found, she had to shift to Claridges Hotel with her husband and son. She stayed there for six months and after a search, was able to find the property at 9, Aurangzeb Road. The necessity for the immediate purchase of the property was also due to the fact that by investing the sale proceeds of 24 Ferozeshah Road, she could save the capital gains tax of the value of Rs. 11,37,000. In order to save this capital gain, it was necessary for the assessee to purchase the new property within one year of the sale of 24, Ferozeshah Road. In, the meanwhile, she was staying in Claridges Hotel and incurring high expenditure. In these circumstances the Tribunal; in the assessee's appeal against assessment held that the price of Rs. 17 lakhs paid by the assessee was a fancy price. The Tribunal then determined the fair market value of this property on the basis of the following evidence. The value of this property was returned by Dr. Krupp at Rs. 5.25 lacs and accepted by the WTO for the asst. yrs. 1957 -58 to 1963 -64. In the asst. year 1965 -66. Dr. Krupp returned a value of Rs. 11 lacs which was also accepted by the WTO as the correct market value. In the asst. year 1965 -66, Dr. Krupp no doubt returned the value of this property at Rs. 17 lakhs, but he was bound to do so, as he had sold the property for that amount and was leaving the country and did not want to be embroiled in any dispute with the WT authorities. The Tribunal observed that otherwise it could not be expected that its value would go up by six lacs in one year. The Tribunal then referred to the value of the District Valuation Officer in his report dt. 16th Aug., 1974 at Rs. 13,26,000. The Tribunal took into account the following three instances of sales of properties in this locality :