K. T. KURUVILLA VS DISTRICT VALUATION OFFICER
2001 P T D 848
[241 I T R 691]
[Madras High Court (India)]
Before R. Jayasimha Babu, J
K.T. KURUVILLA
versus
DISTRICT VALUATION OFFICER and another
Writ Petition No.2275 and W.M.P. No.3468 of 1991, decided on 10/09/1998.
(a) Wealth tax---
‑‑‑‑Valuation property‑‑‑Reference to Valuation Officer‑‑‑‑Valuation requested for a number of assessment years‑‑‑Completion of assessment for one of assessment years before valuation report was received‑‑‑Valuation was not invalidated‑‑‑Indian Wealth Tax Act, 1957, S. 16A.
Section 16A of the Wealth Tax Act, 1957, provides for reference by the Assessing Officer to the Valuation Officer. That section does not provide that the Valuation Officer shall not proceed with the valuation if the assessment is completed before the valuation is completed. Section 16A(6) of the Act no doubt provides that the assessment shall be completed in accordance with the valuation made by the Valuation Officer. That provision, however, cannot be read as imposing an embargo on the completion of the assessment, till such time as the valuer submits his report. Delay on the part of the valuer cannot have the effect of deterring the Assessing Officer from proceeding to complete the assessment, and allow the proceedings to be barred by limitation. It is open to the; Assessing Officer to invoke section 35 of the Act after the valuation report is received to correct the value stated in the assessment order in conformity with the valuation made by the Valuation Officer. The reference on the "record" in section 3 5 of the Act would include the report of the Valuation Officer when it is received by the Assessing Officer and is made to form part of the record of assessment. That report being the result of a reference made in the course of the assessment proceedings, the report submitted by the valuer would legitimately be a part of the record.
The Wealth Tax Officer having felt the need for a valuation report wrote to the Valuation Officer under section 16A of the Wealth Tax Act on November 26, 1989. As the report had not been received even by March 26, 1990, he completed the assessment for the assessment year 1985‑86 and he estimated the value of the property under consideration, at Rs.40 lakhs. Reference made to the valuer was not only for the assessment year 1985‑86, but also for subsequent assessment years including the assessment year 1988‑89. The valuer submitted his report on January 18, 1991. As on the date of submission of his report he found that the building was still incomplete and a portion of the building had been let out and some portion was lying vacant, he valued the portion which had been rented out by adopting the rent capitalisation method and valued the remaining portion by adopting the land and building method. On a writ petition challenging the valuation:
Held, dismissing the writ petition, (i) that the fact that the valuation report was submitted subsequent to the making of the assessment order for one of the assessment year 1985‑86, did not in any way invalidate valuation. (b) Wealth tax---
‑‑‑‑Valuation of property‑‑Construction of building not completed‑‑‑Part of constructed portion let out and part of it lying vacant‑‑‑Valuation of portion which had been let out under rent capitalisation method and remaining portion by adopting land and building method‑‑‑Valuation was valid‑‑‑Indian Wealth Tax Act, 1957, Sched. III, Rr.3 & 20.
In the valuation report it had been stated by the Valuation Officer that the draft report had been furnished to the assessee. Though the latter was given an opportunity to state his objections he did not do so. It was only after such an opportunity had been given that the Valuation Officer proceeded to finalise the report. The assessee, having failed to make use of the opportunity so provided, could not question the mode of valuation now. Moreover, the building being one which was still under construction, the constructed part being partly vacant and partly in occupation of the tenants, the provisions of rule 3 of the Third Schedule could not be strictly applied by the Valuation Officer. Schedule III is not inflexible. The need on occasions for adopting a method different from that set out in the other portion of that Schedule has been recognised in rule 20. The valuation, had to be an amalgam of two methods, one by way of rent capitalisation and the other by an estimation of prices that could be fetched in the open market if sold on the valuation date.
C.W.T v. Sharvan Kumar Swarup & Sons (.1994) 210 ITR 886 (SC) ref.
G. Ashokpathy for K. Mani for the Assessee.
S.V. Subramaniam for Mrs. Chitra Venkataraman for the Income? tax Department.
JUDGMENT
The assessee is aggrieved by the valuation report in respect of the property owned by him and the property being a shopping complex, which was partly‑ under construction as on the date of valuation and situated at 444/8, Main Road, Chalakkudi, in the State of Kerala. Prior to the assessment, the Wealth Tax Officer, having felt the need for valuation report, wrote to the Valuation Officer, under section 16A of the Wealth Tax Act, 1957, on November 26, 1989. As the report had not been received even by March 26, 1990, he completed the assessment for the assessment year 1985‑86 and he estimated the value of this property at Rs.40 lakhs. Reference made to the valuer was not only for the assessment year 1985‑86 but also for subsequent assessment years including the assessment year 1988‑89. The valuer submitted his report on January 18, 1991. As on the date of submission of his report he found that the building was still incomplete and a portion of the building has been let out and some portion was lying vacant he valued the portion which has been rented out be adopting the rent capitalisation method and valued the remaining portion by adopting the land and building method. He arrived at Rs.33 lakhs as property. This amount is lower than the amount as estimated by the Wealth Tax Office in the wealth tax assessment for the year 1985-86.
Learned counsel for the assessee contended that this report is not in accordance with law and, therefore, cannot be acted upon. His submission was that the reference to the valuer was after the assessment order. That submission is factually incorrect. The valuation report was called for long prior to the making of the assessment order. As the assessment had to be finalised, he proceeded ;o do so even though the report had not been received. It was open to the assessee to challenge the assessment. It is not clear as to whether the order of assessment was appealed against. So far as the valuation report is concerned, the valuer did not lose jurisdiction on account of the fact that the assessment had been completed for one of the assessment years, even while his report was called for with reference to several assessment years. The reference had been made even before the assessment had been completed in respect of one of the assessment years. Section 16A of the Wealth Tax Act provides for reference by the Assessing Officer. That section does not provide that the Valuation Officer shall not proceed with the valuation if the assessment is completed before the valuation is completed. Section 16A(6) of the Act no doubt provides that the assessment shall be completed in accordance with the valuation made by the Valuation Officer. That provision, however, cannot be read as imposing an embargo on the completion of the assessment, till such time the valuer submits his report. Delay on the part of the valuer, cannot have the effect of deterring the Assessing Officer from proceeding to complete the assessment, and allow the proceeding to be barred by limitation. It is open to the Assessing Officer to invoke section 35 of the Act after the valuation report is received to correct the value stated in the assessment order in conformity with the valuation made by the Assessing Officer. The reference to the record in section 35 of the Act would include the report of the Valuation Officer when it is received by the Assessing Officer and is made to form part of the record of assessment. That report being the result of a reference made in the course of the assessment proceedings, the report submitted by the valuer would legitimately be a part of the record. The fact that the valuation report was submitted subsequent to the making of the assessment order for one of the assessment years 1985‑86, therefore, does not in any way invalidate the valuation.
?
?The other ground raised by counsel for the assessee is that the procedure prescribed in Schedule III to the Wealth Tax Act, has not been followed by the valuer. In the valuation report it has been stated by the Valuation Officer that the draft report has been furnished to the assessee. Though he was given an opportunity to state his objections he did not do so. It is only after such an opportunity has been given, the Valuation Officer proceeded to finalise the report. The assessee having failed to make use of the opportunity provided, cannot question the mode of valuation now. Moreover,. the building being one which was still under construction, with the constructed part being partly vacant and partly in occupation of the tenants, the provisions of rule 3 could not be strictly applied by the Valuation Officer. Schedule III is not inflexible. The need on occasions for adopting a method different from that set out in the other portion of that Schedule has been recognised in rule 20.
The Valuation Officer in this case has in fact adopted the rent capitalisation method so far as the portions let out are concerned, and he has adopted the market value of the portions which remain vacant and for the portion under construction. Under rule 20, in cases where it is not practicable to apply the other provisions of the Schedule, the valuation has to be on the basis of the price that the property would fetch if sold in the open market on the valuation date. The land and building method was adopted to ascertain the value for which the properties could have been sold in the open market, so far as the portions which were not let out are concerned. The portions which were let out were valued by adopting the rent capitalisation method and in fact that is the method required 'to be adopted where the building is tenanted. The valuation had to be an amalgum of two methods, one by way of rent capitalisation and the other by an estimation of prices that could be fetched in the open market if sold on the valuation date.
Thus, the method of valuation relevant to the respective portions had been adopted. The method so adopted by the Valuation Officer cannot be regarded as arbitrary and violative of the rules of valuation contained in Schedule III.
Learned counsel for the assessee invited attention to the decision of the Supreme Court in the case of CWT v. Sharvan Kumar Swarup & Sons (1994) 210 ITR 886, wherein the Court held that the rules providing for methods of valuation are not substantive, but procedural and they are applicable to all pending proceedings. The valuation in this case has been made in accordance with the rules.
There is no merit in this writ petition. The petition is dismissed with costs of Rs. 1,500.
Consequently W.M.P. is also dismissed.
M.B.A./414/FC?????????????????????????????????????????????????????????????????????????????????? Petition‑dismissed.