COMMISSIONER OF WEALTH TAX Vs. BADER S K

JUDGEMENT

(1.) THESE wealth-tax reference petitions filed under s. 27(3) of the WT Act, 1957, raise common questions and, therefore, they are being disposed of by this common order. D.B. WT. Ref., Petition No. 214 of 1985 relates to the asst. yr. 1974-75 and the other three reference petitions relate to the asst. yr. 1975-76. In WT. Ref., Petitions Nos. 213 and 214 of 1985, the assessee is Smt. S. K. Bader, in WT. Ref., Petition No. 217 of 1985, the assessee is Shri Gulabchand Bader, and in WT. Ref., Petition No. 221 of 1985, the assessee is Shri H. C. Bader. Smt. S. K. Bader and Gulabchand Bader are partners of M/s K. D. Jhaveri, Jaipur, which carry on the business of purchase and sale of precious and semi-precious stones both in India and abroad. Shri H. C. Bader, the assessee, in W.T. Reference Petition NO. 221 of 1985, is a partner of the firm, M/s Cosmopolitan Trading Corporation, Jaipur, which also carries on the business of export of precious and semi-precious stones.

(2.) IN so far as the assessees in W.T. Reference Petitions Nos. 213, 214 and 217 of 1985 are concerned it has been stated that in respect of the asst. yr. 1974-75, M/s K. D. Jhaveri declared a closing stock of Rs. 10,95,667 in the jewellery account and Rs. 5,880 in the precious and semi- precious stones account and the assessees submitted their wealth-tax returns on the basis of the aforesaid value of the closing stock. The WTO in the assessment order dt. 3rd Jan., 1979, did not accept the aforesaid value of the closing stock and fixed the market value of the closing stock in the jewellery account at Rs. 19,57,189 as per the export invoice value (EIV) and as a result of the aforesaid revision in the market value of the stock, the value increased by more than 20 per cent and as per r. 2B(2) of the WT. Rules., 1957, the net wealth was computed on that basis. During the asst. yr. 1975-76, the value of the closing stock of M/s K. D. Jhaveri was declared at Rs. 2,21,202 and the returns were filed on that basis. The WTO did not accept that figure and fixed the market value of the stock at Rs. 14,88,247, the export invoice value, and after applying the provisions of r. 2B, computed the net wealth of the assessees. The assessees filed appeals against the assessment orders passed by the WTO and the said appeals were allowed by the AAC. The AAC held that the export invoice could not be made the basis for the market value of the stock and that the WTO was not justified in invoking the provisions of r. 2B(2) to determine the net wealth of the firm, M/s K. D. Jhaveri, Jaipur, and then making the additions on pro rata basis. The Revenue filed appeals against the aforesaid orders of the AAC before the Tribunal and the said appeals were disposed of by the Tribunal by order dt. 31st Dec., 1983. The Tribunal agreed with the AAC that the export invoice value could not be the basis for determining the market value of the stock, because the goods did not fetch the export invoice value in the foreign markets. According to the Tribunal, it will be reasonable if the fair market value of the closing stock was arrived at by making a deduction of. 35 per cent from the export invoice value. The Tribunal found that if deduction of 35 per cent was made from the export invoice value and the fair market value is determined on that basis, then for the asst. yrs. 1974-75 and 1975-76, the said fair market value was less than 20 per cent as contemplated in r. 2B(2) of the WT. Rules., 1957, and no addition on account of enhanced market value of the closing stock could be made under r. 2B(2). Being aggrieved by the aforesaid order of the Tribunal, the Revenue moved the petitions under s. 27(1) of the WT Act, whereby it was prayed that the following four questions may be referred to this Court :