COMMISSIONER OF WEALTH TAX Vs. GAUR HARI SINGHANIA

JUDGEMENT

(1.) The Tribunal, Allahabad, has referred the following two questions of law for opinion of this Court under Section 27(1) of the WT Act, hereinafter referred to as the Act : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to file an appeal under the WT Act, 1957, even though he had agreed to be assessed on the value of the unquoted equity shares worked out in accordance with Rule 1D of the WT Rules. 1957 ?

(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that arrears of dividends on cumulative preference shares and depreciation as allowed in the income-tax assessment was allowable as deduction in working out the break-up value of the shares ?" 2. Briefly stated, the facts giving rise to the present reference are as follows : The original assessment in this case was made on 30th Dec., 1971. The ITO had valued the unquoted shares in accordance with the WT Rules, 1957, hereinafter referred to as the Rules, at Rs. 2,01,545. He had also allowed deduction for a loan of Rs. 20,500 taken by the assessee from the Life Insurance Corporation (LIC). It appears that the above assessment order came up in appeal before the Tribunal. The Tribunal set aside the assessment with the direction that the value of the unquoted shares should have been taken after referring the same to the valuer. It was, in these circumstances, that the matter again came up for the consideration of the WTO. While the above assessment order was awaiting the consideration of the WTO, he also initiated action under Section 17(1)(a) of the Act for withdrawing the deduction allowed for the loan taken form the LIC. He finally made the assessment on 31st March, 1978, determining the value of unquoted shares as per Rule 1D at Rs. 1,84,540. In this order, he also did not allow deduction for loan from LIC. In this connection, he merely mentioned that the deduction was not allowed for the reasons mentioned in other cases of the group. It may be observed here that before passing this order, he obtained the consent of Shri S.S. Pandey, the representative of the assessee with regard to the above deductions. The assessee appealed to the AAC. It was submitted before him that all the material facts had been fully and truly disclosed in the original assessment and, therefore, the reopening of the assessment under Section 17(1)(a) of the Act was invalid and illegal in law. It was also argued before the AAC that even the valuation of shares should not have been made by recourse to the provisions of Rule 1D of the Rules. The AAC held that in view of the concession allowed by Shri S.S. Pandey, it could not be said that the assessee was an aggrieved party and, therefore, he could not file an appeal against the assessment order, He also observed that it was now a settled law that unquoted equity shares could be valued by recourse to Rule 1D of the Rules. With regard to disallowance of deduction for LIC loan, he referred to the decision of Allahabad High Court in the case of Jiwan Lal Virmani v. CWT (1967) 66 ITR 338 (All). Against the order of the AAC, the respondent-assessee preferred an appeal before the Tribunal. The Tribunal vide order dt. 22nd Aug., 1981, had allowed the appeal. It held that the provisions of Section 17(1)(a) of the Act were not applicable as there could not be any estoppel against the statute. It further directed that the deduction should be allowed for the arrears of the dividends on preference shares and depreciation as allowed in the income-tax assessment by the Department while working out the value of shares under Rule 1D of the Rules.

(3.) We have heard Sri A.N. Mahajan, learned counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee,