COMMISSIONER OF WEALTH TAX VS MRS. RAHAMATUNNISSA BEGUM, 1998 PTD-ANDHRA-PRADESH-HIGH-COURT-INDIA 1527 (1995)

Wealth tax---

---Reference---Valuation of assets ---CIT substantially reducing value estimated by Department valuer and Tribunal confirming the order-- Valuation Officer not given opportunity to be heard---No reasons given for reduction in value---Question whether valuation had been properly made was a question of law---Indian Wealth Tax Act, 1957, Ss.23(3-A) 8t 27(3).

The assessee was a beneficiary of a trust known as "HEH Nizam's Jewellery Trust". For the assessment year 1981-82, the trustees filed a return of wealth on behalf of the assessee, declaring the value of her proportionate share m the corpus at Rs.11,37,073 and offering the same for assessment under the Wealth Tax Act. The Wealth Tax Officer thought that the value furnished by the trustees needed an upward revision. Based on the valuation of a Department Valuer, the Wealth Tax Officer fixed the wealth representing the assessee's interest in the trust at Rs.12,35,006. The assessee then filed an appeal before the Commissioner (Appeals). As regards the valuation, the Commissioner purporting to follow his own orders in certain connected cases directed the entire corpus of the jewellery to be valued at Rs.16.20 crores, instead of the valuation of Rs.32.43 crores adopted by the Wealth Tax Officer. This was confirmed by the Tribunal. On an application to direct reference:

Held, that admittedly in this case, the Commissioner (Appeals) had not followed the procedure prescribed under section 23(3-A) of the Wealth Tax Act, 1957, which enjoins the Appellate Authority to give an opportunity of hearing to the Valuation Officer. That apart, it cannot be stated as an universal proposition of law that a question of valuation is always a question of fact. An arbitrary valuation by taking into account irrelevant factors or by eschewing from consideration relevant factors, or a valuation based on wild guesswork rather than proper data could be found fault with as a legal error and not merely as a factual error. The Tribunal rejected the Revenue's contention purporting to follow "several of the orders in the cases of the beneficiaries of the Nizam's Trust". However, the details of the decision rendered in such cases had not been spelt out. Hence, the question whether or not the valuation made by the Departmental Valuer was rejected on relevant grounds and whether the estimation made by the Appellate Commissioner was based on accepted principles was a question of law to be referred.

Maharaj Kumar Kamal Singh v. CWT (1972) 84 ITR 240 (Pat.) ref.

S.R. Ashok for Petitioner.

Mahboob Mustafa Firdos for Respondent.

JUDGMENT

P.VENKATARAMA REDDY, J. ---This is an application filed by the Commissioner of Wealth Tax under section 27(3) of the Wealth Tax Act, 1957, to refer the following question of law for decision of this Court

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in confirming the order of the Commissioner of Income-tax (Appeals) especially when the Commissioner of Income-tax (Appeals) did not follow the procedure prescribed under section 23(3-A) of the Wealth Tax Act, 1957, which casts an obligation on the Commissioner of Wealth Tax (Appeals) to give am opportunity of being heard to the Valuation Officer who gave report under section 16-A of the Act?

(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in not giving an opportunity of being heard to the Valuation Officer who submitted a report under section 16-A as required under section 24(5) of the Wealth Tax Act?

(3) Whether, on the facts and in the circumstances of the case, the finding arrived at by the Appellate Tribunal is not vitiated in law owing to failure in complying with the statutory provisions of the Act?

(4)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in confirming the direction of the Commissioner of Income-tax (Appeals) given to the Wealth Tax Officer to recompute the assessee's beneficial interest with reference to the principal value of the corpus at Rs.16.20 crores as against Rs.32.43 crores valued by the Valuation Officer under section 16-A of the Wealth Tax Act?" '

The respondent herein is a beneficiary of a trusst known as "HEH Nizam's Jewellery Trust". For the assessment year 1981-82, the trustees filed a return of wealth on behalf of the assessee, the respondent herein, declaring the value of her proportionate share m the corpus at Rs.11,37,073 and offering the same for assessment under the Wealth Tax Act. The Wealth Tax Officer thought that the value furnished by the trustees needed an upward revision. Based on the valuation of a Departmental Valuer the Wealth Tax Officer fixed the wealth representing the assessee's interest in the trust at Rs.12,35,006. The respondent then filed an appeal before the Commissioner (Appeals). Inter alia, the respondent raised an objection against the refusal of exemption under section 5(1) of the Act. This contention was negatived by the appellate authority. However, as regards the valuation, the Commissioner purporting to follow his own orders in certain connected cases directed the entire corpus of the jewellery to be valued at Rs.16.20 crores, instead of the valuation of Rs.32.43 crores adopted by the Wealth Tax Officer. Aggrieved by this part of the order of the Commissioner, the Department filed an appeal to the Tribunal. The Tribunal rejected the Revenue's contention purporting to follow "several of the orders of the beneficiaries of the Nizam's Trust". However, the details of the decision rendered in such cases have not been spelt out. Not even a reference was given to the particular case in which such valuation was upheld. We are unable to know the basis on which the Commissioner reduced the valuation made by the Departmental Valuer.

Learned counsel for the respondent has contended that the question of valuation is a question of fact and he relied on an observation of S.P. Sinha J. in the Full Bench decision of the Patna High Court in Maharai Kumar Kamal Singh v. CWT (1972) 84 ITR 240. Learned counsel for the respondent is not in a position to clarify the basis on which a substantial reduction was made rejecting the Departmental Valuer's estimation. Moreover, admittedly in this case, the Commissioner (Appeals) had not followed the procedure prescribed under section 23(3-A) of the Wealth Tax Act which enjoins on the appellate authority to give an opportunity of hearing to the Valuation Officer. That apart, it cannot be stated as a universal proposition of law that the question of valuation is always a question of fact. An arbitrary valuation by taking into account irrelevant factors or by eschewing from consideration relevant factors or a valuation based on wild guess work rather than proper data could be found fault with as a legal error and not merely as a factual error. Whether or not the valuation made by Departmental Valuer was rejected on relevant grounds and whether the estimation made by the Appellate Commissioner is based on accepted principles is a question of law to be considered. In this view of the matter, we consider it just and appropriate to direct questions Nos.1 and 4 to be referred for the opinion of the High Court.

The wealth tax case is accordingly allowed. No costs.

M.B.A./1695/FCOrder accordingly.