Wealth tax---

----Revision---Commissioner---Rise in market value of assets---Scope of rule 2-B---No material to show that there had been a rise in market value of assets exceeding 20 per cent. of book value---Commissioner had no jurisdiction to revise order of assessment---Indian Wealth Tax Rules, 1957, R.2-B.

Held, that under rule 2B(2) of the Wealth Tax Rules, 1957, which was applicable at the relevant time notwithstanding anything contained in sub-rule (1), where the market value of an asset exceeded its written down value or its book value or the value adopted for purposes of assessment under the Income-tax Act, 1961, as the. case might be, by more than 20 per cent. The value of that asset shall, for the purpose of rule 2A, be taken to be its market value. There was absolutely no material on record to show as to whether there was any difference of more than 20 per cent, as contemplated by sub-rule (2) of rule 2B of the Wealth Tax Rules, 1957. The order of the Commissioner of Wealth tax setting aside the order of assessment was not valid.

B.J. Shelat, instructed by M.R. Bhatt of Messrs. R.P. Bhatt and Co. for Commissioner.

DA. Mehta and R.K: Patel for Assessee.

JUDGMENT

R.K. ABICHANDANI J.---The income Tax Appellate Tribunal, Ahmedabad Bench "C", has referred for the opinion of this Court under section 27 of the Wealth Tax Act, 1957, the following question:

"(1)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal had-been right in law in quashing and setting aside the order of the Commissioner of Wealth tax made under section 25(2) of the Wealth Tax Act, 1957, on December 4, 1979?

(2)Whether, when the Wealth Tax Officer had failed to take cognizance of the fact that there was steep rise in the market value of the plant and machinery used in manufacturing of art silk yarn and fabrics, i.e., business carried on by the firm in which the assessee was a partner, and when he had not taken into consideration rule 2-B(2) read with rule 2-A of the Wealth Tax Rules, the Appellate Tribunal was justified in law in setting aside the order of the Commissioner of Wealth tax made-under section 25(2) of the Act?"

The relevant assessment years are 1971-72 to 1976-77. The assessee is a partner in the firm of Messrs. Dhamanwala Textile Mills. While returning the value of interest in the firm, the assessee had shown the credit balance in hisaccount in the balance-sheet of the firm and to the same he proportionately added the appreciation of property of the firm. The balance-sheet of the firm had machinery on the assets side. The assessee did not take into consideration the appreciation in value of the machinery of the firm. The assessments were made by the Wealth Tax Officer under section 16(3) on December 12, 1977.

The Commissioner of Wealth Tax, Baroda, initiated proceedings under section 25(2) of the Act in the case of the assessee, Shri Parshottamdas M. Dhamanwala (Hindu undivided family), on the ground that the assessments were, erroneous in so far as they were prejudicial to the interests of the Revenue. The Commissioner of Wealth Tax, by the order dated December 4, 1979, set aside -the orders of the Wealth Tax Officer with a direction to make the assessments afresh after obtaining from the Valuation Officer, the correct valuation in respect of plant and machinery of the partnership firm in which the assessee was a partner as on the relevant valuation dates and to re-compute the interest of the assessee for the assessment years in question. The main ground on which the Commissioner of Wealth Tax set aside the orders of the Wealth Tax Officer was that there had been in recent years a steep increase in the market value of the plant and machinery used in the manufacture of art silk yarn fabrics, which was the business carried on by the firm in which the assessee was a partner. In the view of the Commissioner, the Wealth tax Officer ought to have insisted upon a revaluation of the plant and machinery in question as on the relevant valuation dates in the context of such rise in the price. The Tribunal, on appeal being made, found that on the facts and circumstances of the case, the Wealth Tax Officer was justified in not referring the matter to the Valuation Officer and in not obtaining from .him the valuation of the plant and machinery of the partnership firm in question. The appeals were, therefore, allowed.

It would appear that the order of the Commissioner of Wealth tax proceeds on an assumption that there was a steep rise in the price of the plant and machinery used in the manufacture-of art silk yarn fabrics, though there was no basis for such an inference. No such rise in the market value of the plant and machinery used in the manufacture of art silk-yarn fabrics could have been presumed in the absence of any material to support such assumption. In this context, we may refer to the provisions of rule 2-B(2) of the Wealth Tax Rules, 1957, which were applicable at the relevant time, in which it was provided that .notwithstanding anything contained in sub-rule (1), where the market value of an asset exceeded its written down value or its book' value or the value adopted for purposes of assessment under the Income-tax Act, 1961, as the case may be, by more than 20 per cent., the value of that asset shall, for the, purpose of rule 2A, be taken to be its market value. There was absolutely no material on record to show as to whether there was any difference of more than 20 per cent. as contemplated by sub-rule (2) of rule 2-B of the Wealth Tax Rules, 1957. In our view, therefore, the Tribunal was justified in allowing the appeals of the assessee. Question No.l referred to us is, therefore, answered in the affirmative, in favour of the assessee and against the Revenue.

In view of our answer to question No.l, question No.2 is not required to be answered and is, therefore, left unanswered.

The reference stands disposed of accordingly with no order as to costs.

M.B.A./964/T.F. Reference answered.