1995 (9) TMI 106 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of shares for wealth tax purposes.
2. Applicability of Rule 1D of the Wealth Tax Rules.
3. Imposition of penalties under Section 18(1)(c) of the Wealth Tax Act.
4. Bona fide explanation and concealment of wealth.

Detailed Analysis:

1. Valuation of Shares for Wealth Tax Purposes:
The assessee disclosed the value of shares for three assessment years: 1983-84, 1986-87, and 1987-88. The values returned by the assessee were significantly lower than the values assessed by the Assessing Officer (AO). The assessee valued the shares based on the report of M/s S.L. Khandelwal & Co., Chartered Accountants, relying on Supreme Court decisions in CGT vs. Smt. Kusumben D. Mahadevia and Mahadeo Jalan vs. CWT. The AO, however, followed Rule 1D of the Wealth Tax Rules, as mandated by the Allahabad High Court, resulting in much higher assessed values.

2. Applicability of Rule 1D of the Wealth Tax Rules:
The AO relied on Rule 1D for valuing unquoted equity shares, as upheld by the Allahabad High Court in several cases, including CWT vs. Padampat Singhania and Bharat Hari Singhania vs. CWT. The AO argued that Rule 1D was mandatory and had to be followed. The Tribunal agreed, noting that the Hon'ble Supreme Court had affirmed the mandatory nature of Rule 1D in Bharat Hari Singhania & Ors. vs. CWT.

3. Imposition of Penalties under Section 18(1)(c) of the Wealth Tax Act:
The AO initiated penalty proceedings under Section 18(1)(c) for furnishing inaccurate particulars of wealth. The assessee contended that the valuation was bona fide and based on expert advice. The Commissioner of Wealth Tax (Appeals) [CWT(A)] canceled the penalties, stating that the difference in valuation was a legal issue rather than concealment of wealth. However, the Tribunal held that Explanation 4 to Section 18(1)(c) was applicable, which deems an assessee to have furnished inaccurate particulars if the returned value is less than 70% of the assessed value. The Tribunal emphasized that the assessee's act of ignoring Rule 1D and the jurisdictional High Court's decisions could not be considered bona fide.

4. Bona Fide Explanation and Concealment of Wealth:
The Tribunal analyzed the provisions of Explanations 2 and 4 to Section 18(1)(c). Explanation 2 provides that if an explanation is bona fide and all facts are disclosed, no penalty should be imposed. However, Explanation 4 specifically deals with inaccurate particulars and does not consider bona fide explanations. The Tribunal concluded that the assessee's conduct was not bona fide, as he ignored the Wealth Tax Rules and jurisdictional High Court's decisions. The Tribunal held that the assessee failed to prove that the returned value was the correct value, thus making him liable for penalties under Section 18(1)(c).

Conclusion:
The Tribunal allowed the Revenue's appeals, reinstating the penalties imposed by the AO. The Tribunal found that the assessee's valuation method was not bona fide and that the provisions of Explanation 4 to Section 18(1)(c) were correctly applied. The CWT(A)'s order canceling the penalties was overturned.