1986 (12) TMI 52 - AT - Wealth-tax

Issues Involved:
1. Cancellation of rectification orders under Section 35 by the Commissioner of Wealth-tax (Appeals) [CWT(A)].
2. Inclusion of Rs. 4.5 lacs in the net wealth of the assessee for the assessment years 1978-79 and 1979-80.
3. Applicability of Rule 1BB of the Wealth-tax Rules for valuation of immovable properties.

Issue-wise Detailed Analysis:

1. Cancellation of Rectification Orders under Section 35 by the CWT(A):

The primary issue was whether the CWT(A) was correct in canceling the rectification orders passed by the Wealth-tax Officer (WTO) under Section 35 for the assessment years 1978-79 and 1979-80. The WTO had identified an apparent mistake in the original assessment where Rs. 4.5 lacs, which had been seized during a search on 16th July 1981 and was considered unexplained income, was not included in the net wealth for the year under consideration. The WTO issued a notice under Section 35 to rectify this mistake, but the assessee contended that this was not an apparent mistake from the record and hence Section 35 did not apply.

The WTO argued that the non-inclusion was due to a misinterpretation of the seized papers and that the sum was available with the assessee until the assessment year 1982-83, thus justifying its inclusion in the wealth for the year under consideration.

The CWT(A) canceled the rectification orders, citing that the CIT under Section 132(12) had determined that the Rs. 4.5 lacs should not be included in the wealth-tax for the assessment year 1978-79 onwards, presuming it was spent by the assessee.

2. Inclusion of Rs. 4.5 Lacs in the Net Wealth of the Assessee:

The Revenue contended that the CWT(A) erred in deleting the Rs. 4.5 lacs from the net wealth, arguing that the CIT's order under Section 132(12) was not final or conclusive for wealth-tax purposes. The WTO had inferred from the seized documents and subsequent returns that the Rs. 4.5 lacs was still available with the assessee as of 31st March 1978.

The Tribunal found merit in the Revenue's arguments, noting that the CIT's order under Section 132(12) was based on a provisional assessment and not a final determination of wealth. The Tribunal cited various judgments, including those from the Supreme Court and High Courts, to support the view that orders under Section 132(5) are provisional and do not preclude further inquiry during regular assessments.

The Tribunal concluded that the non-inclusion of Rs. 4.5 lacs in the original assessment was indeed an apparent mistake, justifying the rectification under Section 35. Consequently, the Tribunal reversed the CWT(A)'s order and restored the WTO's rectification order for both assessment years 1978-79 and 1979-80.

3. Applicability of Rule 1BB of the Wealth-tax Rules for Valuation of Immovable Properties:

The other issue was whether the immovable properties of the assessee should be valued as per Rule 1BB of the Wealth-tax Rules. The CWT(A) had directed that the properties be valued according to Rule 1BB, and the Revenue appealed against this direction.

The Tribunal upheld the CWT(A)'s direction, noting that the Tribunal had previously dealt with this issue in the assessee's case for the assessment years 1972-73 to 1978-79, and had ruled that the properties should be valued as per Rule 1BB. Therefore, the Tribunal rejected the Revenue's ground of appeal on this issue.

Conclusion:

The Tribunal allowed the Revenue's appeal for the assessment year 1978-79 and partly allowed the appeal for the assessment year 1979-80. The rectification orders under Section 35 by the WTO were restored, and the inclusion of Rs. 4.5 lacs in the net wealth of the assessee was upheld. However, the direction to value immovable properties as per Rule 1BB was sustained.

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