COMMISSIONER OF WEALTH TAX Vs. REMAMANI BHARIRAVAN

JUDGEMENT

(1.) The question raised in the connected wealth-tax appeals filed by the revenue is whether the Tribunal was justified in cancelling the suo motu revisional orders issued by the CWT under Section 25(2) of the Wealth Tax Act, 1957 directing modification of respondent-assessees wealth-tax assessments for the assessment years 1996-97 to 2000-01. The facts leading to these appeals are the following.

(2.) The assessee was owner of 1/6th share of 1.50 acres of land in Coimbatore which was originally agricultural land. However, later on account of urbanisation, the land came within the city area assessable to wealth-tax. The assessee filed WT returns declaring fair market value as on the valuation date for all the assessment years by adopting cost indexation method. Under this method, the assessee estimated fair market value as on 1-4-1981 which was jacked up for all the years based on the cost indexation prescribed by CBDT for the purpose of assessment of capital gains. The value as on the valuation date, that is, 31-3-1996, returned for the assessment year 1996-97 was Rs. 47,06,750. In the returns filed for the later years, the value declared for 1996-97 was progressively increased @ 10 per cent from year to year. The value returned as on the valuation date, that is 31-3-2000, for the wealth-tax assessment year 2000-01 was Rs. 65,15,750. The assessing officer without any dispute accepted the method of valuation and value returned for l/6th share of assessees property and completed all the wealth-tax assessments under Section 16(3) read with Section 17 of the said Act. However, the CWT noticed that assessee under an agreement for sale dated 19-5-2000 sold one-sixth of her share for Rs. 98,75,000. Based on information obtained from an application filed by the assessee for a certificate under Section 230A of the Income Tax Act, the CWT directed revision of assessments in exercise of powers under Section 25(2) of the Wealth Tax Act on the ground that original assessments completed were erroneous and prejudicial to the interest of the revenue. In short, the CWT was of the view that the value adopted was not representing market value as on the valuation date for all these years because sale within six weeks from the end of the valuation date for the assessment year 2000- 01 is much higher than the value adopted for assessment. The assessee challenged the orders issued by the CWT under Section 25(2) before the Tribunal and the Tribunal allowed the appeals by vacating the orders of the CWT holding that original assessments were not erroneous and prejudicial to the interest of the revenue justifying interference by the CWT under Section 25(2) of the Act. It is against these orders, the appeals are filed by the revenue. We have heard senior Counsel Sri P.K.R. Menon appearing for the appellant and Sri T.M. Sreedharan appearing for the respondent.

(3.) The only question to be considered is whether the sale consideration received by the assessee pursuant to agreement for sale executed six weeks after the relevant valuation date for the assessment year 2000-01, which is higher than the value returned by the assessee and accepted by the assessing officer, constitutes a ground justifying the CWT to set aside the wealth-tax assessments and direct revision of assessments completed for the assessment years 1996-97 to 2000-01. While senior Counsel appearing for the revenue has relied on the decisions of the Supreme Court in Malabar Industrial Co. Ltd. v. CIT, 2000 243 ITR 83 (SC), the assessees counsel has relied on later decision of the Supreme Court in CIT v. Max India Ltd., 2007 295 ITR 282 (SC) in respect of their respective contentions. On going through both the decisions, we are of the view that later decision of the Supreme Court relied on by the assessee applies to the facts of this case because the method adopted by the assessee in the valuation of one-sixth share of property at Coimbatore and accepted by the assessing officer is the method available under the Income Tax Act for the purpose of computation of capital gains. Under this method, the assessee has estimated the market value as on 1-4-1981 and increased the same by index figure prescribed by CBDT from time to time for enhanced valuation for later years. The assessing officer completed the assessments by adopting not only base year value adopted by the assessee but also the indexation applied for valuation.