COMMISSIONER OF WEALTH TAX Vs. MINALBEN RAMESHBHAI JHAVERI

JUDGEMENT

(1.) At the instance of the Revenue, the Income-tax Appellate Tribunal, Ahmedabad Bench B has made the above-mentioned three References. Wealth-Tax Reference No. 112/95 relates to Wealth Tax Appeals no. 520, 522 and 523/Ahd./84 relating to assessment years 1970-71, 1972-73 and 1973-74. W.T.R. No. 117/95 relates to Sales Tax Appeal No. 521/Ahd./84 relating to assessment year 1971-72, while W.T.R. No. 121/94, relates to the Sales Tax Appeals No. 385, 386 and 387/Ahd/90 pertaining to the assessment years 1979-80, 1980-81 and 1981-82.

(2.) In W.T.R. No. 112/95, the following question of law has been referred by the Income-tax Appellate Tribunal for the opinion of this Court. Whether the appellate Tribunal has been right in law and on facts in holding that the rectification order by the Sales-tax Officer was not justified. In W.T.R. No. 117/95, the following questions have been referred by the Tribunal for the opinion of this Court.Whether the Tribunal has been right in law and on facts in holding that the rectification order by the WTO was not justified. Whether the Tribunal has been right in law and on facts in following the decision of the Gujarat High Court in the case of Kikabhai Bhagubhai, 72 ITR 586 when the said decision was not directly applicable to the facts of the case. Whether the Tribunal has not erred in law and on facts in not considering that the valuation of the quoted shares held in stock in trade was required to be made as per the provisions of sec.7[1] read with Rule 2[b][ii] at market value and hence there was a clear error apparent on record which was capable of rectification. In W.T.R. No. 121/94, the following questions are referred by the Tribunal for opinion of this Court. Whether, the Tribunal is right in law and on facts in directing the WTO to adopt the value of shares as per the book value. Whether, the Tribunal is right in law and on facts in holding that the rectification made by the WTO u/s 35 of the Wealth-tax Act was invalid.

(3.) As the matters are in relation to the same assessee, but the assessment years are different, and the questions virtually are identical, we propose to dispose of these three References by this common judgment. Undisputed facts are that the Wealth-tax assessment for the assessment years 1970-71, 1972-73 and 1973-74 were made by the Sales Tax Officer, but later on realizing that he had made a mistake in not noticing Rule 2B of the Rules, which came into force from 1963, he accordingly proposed to exercise his jurisdiction under Section 35 of the Wealth-Tax Act and consequently issued notice to the assessee. The assessee appeared before the Wealth-tax Officer and raised many objections including the objection that the Wealth-tax Officer was not bound to adopt the valuation procedure laid down under Sec. 7[2][a] as he had discretion to go for valuation procedure provided under Section 7[1] of the Wealth-tax Act. The argument did not find favour with the Wealth-tax Officer and he accordingly rectified the order and in accordance with the mandatory language employed in Rule 2B[2] of the Rules observed that if there was a difference of more than 20 per cent in the book value and the market value of the shares, then, the market value prevalent during assessment year would be taken to be true value of the assets/wealth. Being aggrieved by the said order of the Wealth-tax Officer, the assessee took up the matter before the Commissioner, Wealth-tax. The Commissioner, Wealth-tax observed that the Wealth-tax Officer was entitled to exercise his jurisdiction conferred upon him under Section 35 of the Wealth-tax Act in view of the mandatory language employed in Rule 2B[2] of the Rules. He accordingly dismissed he appeal. The assessee, still dissatisfied, took up the matter before the Tribunal. It was contended before the Tribunal that as a Division Bench of this Court in the matter of Kikabhai Bhagabhai Vs. CIT, [ 1969 72 ITR 586] has observed that it would be open to the Wealth-tax Officer to proceed under Section 7[2][a] or under Section 7[1] of the Act and if he has proceeded after exercising his option, then, there would be no scope for exercise of powers under Section 35 of the Wealth-tax Act. It was contended before the Tribunal that the Division Bench of this Court was considering the scope of Section 7[1] and of Section 7[2][a] of the Wealth-tax Act and as Rule 2B[2] was never presented before the Court for consideration, the judgment was of no help.