COMMISSIONER OF WEALTH TAX Vs. MOTI CHAND DAGA

JUDGEMENT

(1.) BOTH these references relate to the same assessee. The relevant assessment years in these references are 1972-73, 1973-74 and 1974-75. The facts on which a common question of law arises being the same, this common order shall dispose of both these references

(2.) FOR the assessment years 1973-74 and 1974-75, a similar formula was adopted by the Wealth-tax Officer for computation of the market value on the basis of gross profit disclosed by the firm at 26.52% and 24.78%, respectively. After allowing deduction of 4% therefrom, the Wealth-tax Officer estimated the market value of the closing stock of the firm for the assessment year 1973-74 at Rs. 13,45,192 against the value declared by the firm at Rs. 10,44,952; and for the assessment year 1974-75, the Wealth-tax Officer estimated the market value of the closing stock of the firm at Rs. 7,60,375 against Rs. 5,95,980 declared by the firm. Thereafter, the Wealth-tax Officer worked out the difference between the book value and the market value of the closing stock at Rs. 3,00,240 for the assessment year 1973-74 and Rs. 1,64,395 for the assessment year 1974-75. The assessees share therein was calculated by the Wealth-tax Officer at Rs. 1,20,096 for the assessment year 1973-74 and at Rs. 65,758 for the assessment year 1974-75. These amounts were then included in the net wealth of the assessee for these assessment years. Facts in the other reference relating only to the assessment year 1974-75 are similar.

(3.) IN CWT v. Tungabhadra INdustries Ltd., [1970]75ITR196(SC) it has been indicated that the onus of proof is on the person who claims that the balance-sheet value is not the true value where the mode of valuation adopted is in accordance with section 7(2)(a). That was a case in which the assessee claimed that the balance-sheet value was not the true value and, therefore, it was held that the onus of proof was on the assessee who wanted to assail the correctness of the balance-sheet value by setting up some other value as the true value. Similar is the decision of the Supreme Court in CWT v. Hindustan Motors Ltd., [1976]104ITR430(SC) , wherein it was held that the burden was on the assessee to show that the balance-sheet value was not the true value since it was the assessee who assailed the balance-sheet value. It is, therefore, obvious that where the mode of determination of the value adopted is that provided in section 7(2)(a), the basis is the balance-sheet value and the burden lies on the person assailing the balance-sheet value to show that it is not the true value. IN a case like the present where the balance-sheet value is asserted to be the true value by the assessee, but is assailed by the Revenue, the burden lies on the Revenue to show that the balance-sheet value is not the true value and that the market value is higher; and when it is shown by the Revenue that the market value exceeds the balance-sheet value by more than 20 per cent., then only the aid of rule 2B (2) can be invoked. IN other words, in a case like the present where the mode of valuation adopted is that provided in section 7(2) (a) of the Act an, d it is the Wealth-tax Officer and not the assessee who assails the correctness of the balance-sheet value, the burden lies on the Wealth-tax Officer to prove on the basis of relevant material that the real market value exceeds by more than 20 per cent. the balance-sheet value so as to justify invoking the aid of rule 2B (2). Unless this burden is discharged by the Revenue, the condition precedent for invoking the aid of rule 2B (2) is not satisfied. IN our opinion, this is the correct position with regard to the question of burden of proof on which divergent stands have been taken by the two sides before us.