COMMISSIONER OF WEALTH TAX Vs. BHANWARI DEVI

JUDGEMENT

(1.) THE following questions of law have been referred by the Tribunal, Jaipur Bench, Jaipur at the instance of the Revenue in the following reference petitions: (1) D.B. WT Ref. No. 4 of 1988: (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2B(2) of the WT Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s Rawat Jewellers, Jaipur exceeded the value as shown in the firm's accounts by more than 20 per cent ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of AAC that the firm M/s Rawat Jewellers, Jaipur is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxi) of WT Act, 1957? (2) D.B. WT Ref. No. 5 of 1988: (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2B(2) of the WT Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s Rawats Bombay exceeded the value as shown in the firm's accounts by more than 20 per cent ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of AAC that the firm M/s Rawat Bombay is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxi) of WT Act, 1957 ? (3) D.B. WT Ref. No. 7 of 1988: (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2B(2) of the WT Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s Rawat Jewellers, Jaipur exceeded the value as shown in the firm's accounts by more than 20 per cent ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of AAC that the firm M/s Rawat Jewellers, Jaipur is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxi) of WT Act, 1957 ? (4) D.B. WT Ref. No. 66 of 1988: Whether on the facts and in the circumstances of the case the Tribunal was justified in directing the WTO to arrive at the value of the immovable property by applying Rule 1BB and further in directing if the value arrived at by applying Rule 1BB does not exceed the value as per the books by 20 per cent then he shall not apply Rule 2B(2) in respect of immovable property ?(5) D.B. WT Ref. No. 6 of 1988: (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2B(2) of the WT Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s Rawats Bombay and M/s Rawat Jewellers, Jaipur exceeded the value as shown in the firms' accounts by more than 20 per cent ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of AAC that the firm M/s Rawats Bombay and M/s Rawat Jewellers, Jaipur are industrial undertakings within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxii) of WT Act, 1957 ? (6) D.B. WT Ref. No. 49 of 1988: (1) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the firm M/s Maliram Puranmal is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxii) of WT Act, 1957? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that for the purpose of applying Rule 2B(2) of the WT Rules, the onus was on the Revenue to prove that the market value of the closing stock of M/s Maliram Puranmal exceeded the value as shown in the firm's accounts by more than 20 per cent ? (7) D.B. WT Ref. No. 65 of 1988: Whether on the facts and in the circumstances of the case the Tribunal was justified in directing the WTO to arrive at the value of the immovable property by applying Rule 1BB and further in directing if the value arrived at by applying Rule 1BB does not exceed the value as per the books by 20 per cent then he shall not apply Rule 2B(2) in respect of immovable property ?(8) D.B. WT Ref. No. 7 of 1989: (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the onus of proof that the market value of the closing stock exceeded by more than 20 per cent the value disclosed in the balance sheet of the firm was on the Revenue, and the same not having been proved, Rule 2B(2) of the WT Rules was not attracted ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's interest in the firm is exempt under Section 5(1)(xxxii) r/w Explanation to Section 5(1)(xxxi) of the WT Act, 1957 ? (9) D.B. WT Ref. No. 34 of 1989: (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the onus of proving that the market value of the closing stock exceeded by more than 20 per cent the value disclosed in the balance sheet of the firm was on the Revenue and the same not having been proved, Rule 2B(2) of the WT Rules was not attracted ?(10) D.B. WT Ref. No. 82 of 1986: (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the findings of the AAC that Rule 2B(2) of the WT Rules was not applicable in the assessee's case and consequently in deleting the addition of Rs. 4,13,270 ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in not holding that onus was on the assessee to prove that the market value of the closing stock of M/s Hazarimal Milapchand Surana, Jaipur did not exceed by more than 20 per cent than the value disclosed by him and whether the assessee could be said to have discharged that onus ? (3) Whether on the facts and in the circumstances of the case, the Tribunal was right in upholding the findings of AAC that the firm M/s Hazarimal Milapchand Surana, of Jaipur is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxi) of WT Act, 1957 ? (11) D.B. WT Ref. No. 16 of 1990: Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that GP cannot be the only basis for invoking the provisions of Rule 2B(2) of WT Rules ?(12) D.B. WT Ref. No. 32 of 1990: (1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that Rule 2B(2) of the WT Rules cannot be invoked in the case of the assessee for valuing the closing stock only on the basis of GP rate declared by the assessee in the year ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding the firm (M/s Jewels Emporium, Jaipur), in which the assessee is a partner, is an industrial undertaking and also holding that the assessee's interest in the firm is exempt under Section 5(1)(xxxii) of the WT Act, 1957 ? (13) D.B. WT Ref. No. 38 of 1990: Whether on the facts and in the circumstances of the case the Tribunal is justified in holding that the firm M/s Bhuramal Rajmal Surana (Mfrs.) is an industrial undertaking within the meaning of Section 5(1)(xxxi) and consequently the value of the assessee's interest in that firm is exempt under Section 5(1)(xxxi) of the WT Act, 1957 ?(14) D.B. WT Ref. No. 3 of 1992: (1) Whether on the facts and in the circumstances of case, the Tribunal was justified in holding that onus of proof that the market value of the closing stock exceeded by more than 20 per cent the value disclosed in the balance sheet of the firm was on the Revenue and the same not having been proved, Rule 2B(2) of the WT Rules was not attracted ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's interest in the firm is exempt under Section 5(1)(xxxii) r/w Explanation to Section 5(1)(xxxi) of the WT Act, 1957 ? (15) D.B. WT Ref. No. 5 of 1992: (1) Whether on the facts and in the circumstances of case, the Tribunal was justified in holding that the onus of proving that the market value of the closing stock exceeded by more than 20 per cent of the value disclosed in the balance sheet of the firm was on the Revenue and the same not having been proved, Rule 2B(2) of the WT Rules was not attracted ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's interest in the firm is exempt under Section 5(1)(xxxi) of the WT Act, 1957 ? (16) D.B. WT Ref. No. 6 of 1992: (1) Whether on the facts and in the circumstances of case, the Tribunal was justified in holding that onus of proof that the market value of the closing stock exceeded by more than 20 per cent the value disclosed in the balance sheet of the firm was on the Revenue, and the same not having been proved, Rule 2B(2) of the WT Rules was not attracted ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's interest in the firm is exempt under Section 5(1)(xxxii) r/w Explanation to Section 5(1)(xxxi) of the WT Act, 1957 ? (17) D.B. WT Ref. No. 28 of 1995: Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the decision of the CWT(A) wherein it was held that the share capital investment of the assessee is exempt under Section 5(1)(xxxii) of the WT Act, 1957 despite the fact that the firm M/s Nissar Brothers is not an industrial undertaking ?(18) D.B. WT Ref. No. 8 of 2003: Whether in the facts and circumstances of the case, the learned Tribunal was right in holding that the firm M/s Kotawala is an industrial undertaking within the meaning of Explanation to Section 5(1)(xxxi) of the WT Act, 1957 and consequently in holding that the value of the assessee's interest in that firm is exempt under Section 5(1)(xxxi) of the WT Act, 1957 ?(19) D.B. WT Ref. No. 14 of 1990:Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that GP cannot be the only basis for invoking the provisions of Rule 2B(2) of WT Rules ?

(2.) THE following reference applications have been preferred by the Revenue seeking to issue directions to the Tribunal to refer the following questions of law to the Court for its opinion: (1) D.B. WT Ref Appln. No. 20 of 1988: Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the provisions of Rule 2B(2) of WT Rules were not applicable for determination of the value of the assessee's interest in the firm M/s K.D. Jhaveri, Jaipur and consequently in deleting the addition from the assessee's net wealth ?(2) D.B. WT Ref. Appln. No. 26 of 1988: Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the provisions of Rule 2B(2) of WT Rules were not applicable for determination of the value of the assessee's interest in the firm M/s K.D. Jhaveri, Jaipur and consequently in deleting the addition from the assessees net wealth ?(3) D.B. WT Ref. Appln. No. 27 of 1988: Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the provisions of Rule 2B(2) of WT Rules were not applicable for determination of the value of the assessee's interest in the firm M/s K.D. Jhaveri, Jaipur and consequently in deleting the addition from the assessee's net wealth ?(4)D.B. WT Ref. Appln. No. 118 of 1988: (1) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that Rule 2B(2) of WT Rules was not applicable in the assessee's case and consequently in deleting the addition made by the WTO ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the firm M/s Cosmopolitan Trading Corporation, Jaipur is an industrial undertaking within the meaning of Section 5(1)(xxxi) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxii) of the WT Act, 1957 ? (5)D.B. WT Ref. Appln. No. 156 of 1988: (1) Whether on the facts and in the circumstances of the case does the GP rate taken in the case of the firm constitute adequate material to the conclusion that market value of the closing stock of the firm exceeds the cost price as adopted by the firm by more than 20 per cent and whether on that basis the Rule 2B(2) of the WT Rules, 1957 could be invoked ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of Rule 2B(2) were not applicable in the assessee's case and consequently in deleting the addition made by the WTO ? (3) Whether on the facts and in the circumstances of the case, the Tribunal was right in not holding that the assessee is not entitled to exemption under Section 5(1)(xxxii) of the WT Act, 1957 in respect of investment in the firm M/s Cosmopolitan Trading Corporation, Jaipur ? (6) D.B. WT Ref. Appln. No. 140 of 1988: (1) Whether on the facts and in the circumstances of the case the WTO has not discharged the burden of proof to establish that the value of stock as disclosed in the balance sheet of the firm in which the assessee is a partner exceeded by more than 20 per cent ? (2) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the provisions of Rule 2B(2) of WT Rules, 1957 were not applicable to the assessee's case and consequently in deleting the addition made by the WTO ? (7)D.B. WT Ref. Appln. No. 144 of 1988: (1) Whether on the facts and in the circumstances of the case, does the GP rate taken in the case of the firm constitute adequate material to come to the conclusion that market value of the closing stock of the firm exceeds the cost price as adopted by the firm by more than 20 per cent and whether on that basis the Rule 2B(2) of the WT Rules, 1957 could be invoked ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the provisions of Rule 2B(2) were not applicable to the assessee's case and consequently in deleting the addition made by the WTO ? (3) Whether on the facts and in the circumstances of the case, the Tribunal was right in not holding that the assessee is not entitled to exemption under Section 5(1)(xxxii) of the WT Act, 1957 in respect of investment in the firm M/s K.D. Javeri, Jaipur ? (8) D.B. WT Ref. Appln. No. 125 of 1988: (1) Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that Rule 2B(2) of WT Rules was not applicable in the assessee's case and consequently in deleting the addition made by the WTO ? (2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the firm M/s P.V. Jewellers is an industrial undertaking within the meaning of Section 5(1)(xxxii) and consequently in holding that the value of assessee's interest in that firm is exempt under Section 5(1)(xxxii) of the WT Act, 1957 ? (9) D.B. WT Ref. Appln. No. 7 of 1995:Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the order of the CWT(A) in directing the WTO to allow assessee's claim in respect of deduction under Section 5(1)(xxxi) of the WT Act, 1957 ?

(3.) FOR convenience, we are taking the facts of WT Ref. No. 4 of 1988 for disposal of all the aforesaid cases. The assessee is carrying on the business in gold jewellery and precious and semi -precious stones. The WTO on examination of the returns filed by the assessee found that the firm has declared GP above 20 per cent in the accounts relating to the precious and semi -precious stones. The WTO was of the view that Rule 2B(2) of the WT Rules, 1957 was applicable and the value of the closing stock would exceed the book value by a margin of more than 20 per cent. The assessee contended before the WTO that the rate of GP did not establish the value of the closing stock, therefore, the Rule 2B(2) has no application. It was also the plea of the assessee that the business in precious stones was of a particular type and a part of the stock may not be at all saleable. The WTO did not accept the plea of the assessee and was of the view that GP rate was to be the average of the transactions as good indicator of the market value of the closing stock. He was further of the view that there was no evidence on record to support the contention of assessee that a part of this stock may not be saleable. The WTO observed that the overall market value has to be adopted and it could not be taken as nil. The WTO, therefore, applied Rule 2B(2) of the Rules of 1957 for valuing the closing stock of the firm. An appeal was preferred before the AAC (hereinafter referred to as 'the Appellate Court'). The Appellate Court following certain orders of the Tribunal held that Rule 2B(2) has no application. The orders of the WTO and the Appellate Court were challenged before the Income -tax Appellate Tribunal (Special Bench, Jaipur) (hereinafter referred to as 'the Tribunal'). The Tribunal disposed of the four appeals by a common order holding as under: We do not agree that the matter should be set aside and the WTO should be directed to do what he had not done at the time of the assessment. The WTO having failed to bring the case of the assessee under the exception provided under Rule 2B(2) the main rule of 2B(1)(c) would be applicable. Here it is not a case where the WTO had asked for the relevant details in a specific manner and the assessee had failed to furnish them. Had that been the position an interference could have been drawn from such circumstances.