TMI Blog1995 (9) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... ntants, New Delhi, who had valued the shares of M/s Talwar Khullar Pvt. Ltd. on yield basis by relying upon the decision of the Hon'ble Supreme Court in the case of CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 and also in the case of CWT v. Mahadeo Jalan [1972] 86 ITR 621. But the Assessing Officer, on the other hand, relying on the decision of the Hon'ble Allahabad High Court in the cases of CWT v. Padampat Singhania [1979] 117 ITR 443 and Bharat Hari Singhania v. CWT [1979] 119 ITR 258 took the view that the provisions of section 7 of the Wealth-tax Act are subject to any rules made in this behalf. Accordingly, so long as the rules were not framed, it was open to the Wealth-tax Officer to apply any method to determine the value of the concerned assets but after the rules were framed they would have to be followed. Further, as rule 1D had laid down the method of determining the value of unquoted equity shares, this rule shall have to be followed. The Assessing Officer further mentioned that in the case of Smt. Saroj Talwar the wife of the assessee the "B" Bench of Delhi Tribunal had held vide its orders dated 30-1-1987 that rule 1D was mandatory in view of the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es framed in accordance with the Wealth-tax Act were superfluous and irrelevant. According to her, such a view would be unreasonable and cannot be taken. She further pointed out that the Hon'ble Supreme Court had recently held in the case of Bharat Hari Singhania v. CWT [1994] 207 ITR 1 that rule 1D was mandatory and the valuation of shares had to be done according to that rule. She further pointed out that it was not only as per the Supreme Court decision but also as per the three decisions of the Hon'ble Allahabad High Court, which is the jurisdictional High Court for the assessee, namely, in the cases of CWT v. Shripat Singhania [1978] 112 ITR 363 (All.), Padampat Singhania and Bharat Hari Singhania, which has now been affirmed by the Hon'ble Supreme Court as in Bharat Hari Singhania's case that the assessee was required to value his shares in accordance with provisions of rule ID of the Wealth-tax Rules. She argued that in case the assessee had ignored the Income-tax Rules as well as the three judgments of the jurisdictional High Court, he had done it at his own peril and he was bound to suffer the consequences. She further pointed out that in all the three assessment years it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 18(1)(c) of the Wealth-tax Act and pointed out that as per that Explanation the penalty could be imposed only when the assessee failed to offer any explanation or if the explanation offered by him was false or if he was not able to substantiate and failed to prove that such explanation was bona fide and that all the facts relating to the same had not been disclosed. The learned counsel went on to argue that the provisions of Explanation 4 to section 18(1)(c) had to be read together with those of Explanation 2 and in case the assessee could prove that assessee's basis of valuing his assets was bona fide and nothing has been concealed, no penalty could be imposed even by invoking provisions of Explanation 4 to section 18(1)(c) of the Wealth-tax Act. 10. The learned counsel urged that in the instant case it was important to take note of the following dates : ---------------------------------------------------------------------------------------------------------------------------------------------------Assessment Date of filing Date of Date of imposition Date of year return assessment of order penalty CIT(A) ------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation 2and Explanation 4 of section 18(1)(c) of the Wealth-tax Act, we consider it only reasonable to reproduce those provisions : Section 18 and the relevant Explanations read as under in the relevant assessment years : " 18. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner (Appeals), Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person--- (a) ** ** ** (b) ** ** ** (c) has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts; he or it may, by order in writing, direct that such person shall pay by way of penalty----- (i) ** ** ** (ii) ** ** ** (iii) in the cases referred to in clause (c), in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed five times, the amount of tax sought to be evaded by reason of the concealment of particulars of any assets or the furnishing of inaccurate particulars in respect of any assets or debts. Explanation 1: ** ** ** Explanation 2 : Where in respect of any facts material to the computation of the net wealth of any person under this Act,-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance, they do not deal with concealment of particulars of assets but they deal with " shall be deemed to have furnished inaccurate particulars of such asset ". Secondly, Explanation 4 can be invoked in only specific circumstances, namely, where the value of any asset returned by an assessee is less than 70 per cent of the value of such asset as determined in assessment under section 16 or 17. Thirdly, there is no provision regarding any bona fide explanation or regarding having disclosed all facts relating to the assets and material to the computation of assessee's net wealth. The only circumstances in which the assessee can be exonerated is if he proves that the value of the asset as returned by him is the correct value. 14. This specific difference between the two Explanations mentioned above and the basic principle of interpretation of statutes to the effect that nothing in a statute can be construed to be superfluous, would lead us to reject the arguments of the learned counsel to the effect that the provisions of Explanation 4 can be applied only after reading it along with the provisions of Explanation 2 and that if an assessee has offered a bona fide explanation as envis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal, since that question was neither raised before the Tribunal nor decided by it. In these circumstances, it cannot be said to be a bona fide interpretation on the part of the assessee that on the basis of this judgment of the Supreme Court he could ignore the specific provisions of rule 1D of the Wealth-tax Rules. Again a reading of the judgment in the case of Mahadeo Jalan also indicates that their Lordships had not considered the applicability or otherwise of the Wealth-tax Rules. These facts when examined in the light of the fact that the Hon'ble Allahabad High Court, which was the jurisdictional High Court for the assessee, had held in three separate judgments one after the other that the valuation of shares had to be done in accordance with the rule 1D of the Wealthtax Rules and all those three judgments were available and had been reported when the assessee filed his returns for all the three years under consideration, it cannot be said to be a bona fide act on the part of the assessee to ignore the High Court judgments and the Wealth-tax Rules and to file returns of wealth-tax on the basis of advice of a Chartered Accountant, the correctness of which fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decisions of the Hon'ble Supreme Court in two cases, is not bona fide. In our view, no conduct can be said to be bona fide if it is in deliberate defiance of law and rules and decisions of jurisdictional High Court. We, therefore, hold that the assessee was squarely covered by the provisions of section 18(1)(c) read with Explanation 4 to that section and hence was liable to penalty which was imposed on him for these three years. We further hold that the learned CWT (Appeals) erred in deleting the penalties. The order passed by the learned CWT (Appeals) are, therefore, cancelled. 18. We do not find the ratio of decision of Tribunal in the case of Mannalal Nirmal Kumar Soorana relied upon by Shri Sampath, relevant because in that case the assessee had valued his house property according to provisions of the Wealth-tax Act but which claim was not allowed. 19. At this stage we would like to mention that the claim of the learned counsel for the assessee to the effect that the penalties imposed on Smt. Saroj Talwar for the assessment years 1979-80 and 1980-81 had been cancelled by the Tribunal is not relevant for our purpose. We agree with the learned Departmental Represe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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