1997 (4) TMI 120 - AT - Wealth-tax

Summary

Issues Involved:
1. Valuation of property as per Rule 1BB for assessment year 1983-84.
2. Jurisdiction of the first Appellate Authority in assessment year 1987-88.

Issue-Wise Detailed Analysis:

I. Valuation of Property as per Rule 1BB (Assessment Year 1983-84):

Background:
The department appealed against the direction to value the property as per Rule 1BB, arguing that the rule was inapplicable to the property in question and that the property was acquired by the Appropriate Authority in 1987-88 for Rs. 40,00,000.

Arguments by Assessee:
- The assessee, a specified HUF, declared the property value at Rs. 2,50,000.
- Contended that the property value should be worked out as per Rule 1BB of the Wealth-tax Rules.
- Cited judicial precedents including CWT v. Niranjan Kumar Hirjee, Jaswant Rai v. CWT, and CWT v. Man Bahadur Singh to support their claim.
- Argued that the acquisition by the Appropriate Authority was irrelevant as the proceedings were quashed and dropped.

Arguments by Assessing Officer:
- Observed that the property was sold in 1987 for Rs. 20,00,000.
- Estimated the fair market value as Rs. 15,00,000 for 1983, considering the property's appreciation.
- Argued that Rule 1BB was merely a guide and not applicable when there was evidence of fair market value.

Tribunal's Decision:
- Upheld the Dy. Commissioner (Appeals)'s direction to value the property as per Rule 1BB.
- Emphasized that the property was used for residential purposes, thus mandating the application of Rule 1BB.
- Cited Supreme Court rulings, including Bharat Hari Singhania v. CWT and Sharvan Kumar Swarup & Sons, to affirm the procedural and mandatory character of the rules.
- Concluded that the rules being part of procedural law applied to all pending cases.

Outcome:
- The Tribunal did not interfere with the Dy. Commissioner (Appeals)'s order and upheld the valuation as per Rule 1BB.

Second Ground:
- The department's objection regarding the property's residential use for only three months was rendered infructuous and rejected due to the first ground's decision.

II. Jurisdiction of the First Appellate Authority (Assessment Year 1987-88):

Background:
The department challenged the jurisdiction of the first Appellate Authority in entertaining and deciding the appeal.

Facts:
- Original assessment was completed under section 16(1) with the property valued at Rs. 2,25,000.
- The CWT observed that the property was agreed to be sold for Rs. 40,00,000 and directed the Assessing Officer to adopt a value of Rs. 20,00,000 for the assessee's share.
- The Assessing Officer reassessed the net wealth including the property value at Rs. 20,00,000.

Arguments by Department:
- Contended that the Dy. Commissioner (Appeals) was not competent to entertain and decide the appeal as the Assessing Officer merely followed the directions of the CWT.

Arguments by Assessee:
- Argued that the department should have raised the jurisdictional objection at the first appellate stage.
- Claimed the Dy. Commissioner (Appeals) adjudicated on the order passed by the Assessing Officer under section 16(1), not the CWT's order under section 25(2).
- Cited various judicial precedents to support the right to appeal against the order under section 16(1).

Tribunal's Decision:
- Clarified that the provisions of the Wealth-tax Act differ materially from those of the Income-tax Act.
- Rejected the contention that the department could not raise the jurisdictional objection at the Tribunal stage.
- Emphasized that the Dy. Commissioner (Appeals) did not have the jurisdiction to entertain the appeal against the order passed under section 16(1) in compliance with the CWT's directions under section 25(2).
- Highlighted that accepting the assessee's argument would lead to functional dichotomy and absurdity in tax administration.

Outcome:
- The Tribunal accepted the department's ground, holding that the Dy. Commissioner (Appeals) had no jurisdiction to entertain and decide the appeal.
- Restored the Assessing Officer's order dated 17-4-1990.

Conclusion:
The Tribunal upheld the valuation of the property as per Rule 1BB for the assessment year 1983-84, rejecting the department's objections. For the assessment year 1987-88, the Tribunal ruled that the Dy. Commissioner (Appeals) lacked jurisdiction to entertain the appeal against the Assessing Officer's order passed under section 16(1)/25(2), thereby restoring the original assessment order.