TMI Blog1995 (9) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd., on yield basis by relying upon the decision of the Hon'ble Supreme Court in the case of CGT vs. Smt. Kusumben D. Mahadevia (1980) 14 CTR (SC) 366 : (1980) 122 ITR 38 (SC) and also in the case of Mahadeo Jalan vs. CWT 1972 CTR (SC) 395 : (1972) 86 ITR 621 (SC). But the AO, on the other hand, relying on the decision of the Hon'ble Allahabad High Court in the cases of CWT vs. Padampat Singhania (1979) 9 CTR (All) 56 : (1979) 117 ITR 443 (All) and Bharat Hari Singhania vs. CWT (1979) 9 CTR (All) 164 : (1979) 119 ITR 258 (All) took the view that the provisions of s. 7 of the WT Act are subject to any rules made in this behalf. Accordingly, so long as the rules were not framed, it was open to the WTO 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 r. 1D had laid down the method of determining the value of unquoted equity shares, this rule shall have to be followed. The AO 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 dt. 30th Jan., 1987 that the r. 1D was mandatory in view of the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d recently held in the case of Bharat Hari Singhania Ors. vs. CWT (1994) 118 CTR (SC) 125 : (1994) 207 ITR 1 (SC) that r. 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 case of CWT vs. Shripat Singhania 1977 CTR (All) 119 : (1978) 112 ITR 363 (All), Padampat Singhania and Bharat Hari Singhania, which has now been affirmed by the Hon'ble Supreme Court as reported in (1994) 118 CTR (SC) 125 : (1994) 207 ITR 1 (SC), that the assessee was required to value his shares in accordance with provisions of r. 1D of the WT Rules. She argued that in case the assessee had ignored the IT 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 was obvious that there was a huge difference between the value of these shares as returned by the assessee and as assessed and, according to her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Expln. 4 to s. 18(1)(c) had to be read together with those of Expln. 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 Expln. 4 to s. 18(1)(c) of the WT Act. 10. The learned counsel urged that in the instant case it was important to take note of the following dates: Asst. yr Date of filing return Date of assessment Date of imposition of penalty Date of order CIT(A) 1. 2. 3. 4. 5. 1983-84 29.6.1983 18.3.1988 13.3.1989 29.11.1989 1986-87 14.8.1986 27.5.1988 13.3.1989 29.11.1989 1987-88 31.7.1987 27.5.1988 13.3.1989 29.11.1989 11. He argued that the decision of the Hon'ble Supreme Court in the case of Bharat Hari Singhania is dt.16th Feb., 1994and hence it can be said that the position in this regard crystalli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason of the concealment of particulars of any assets or the furnishing of inaccurate particulars in respect of any assets or debts. Expln. 1:.......... Expln. 2: Where in respect of any facts material to the computation of the net wealth of any person under this Act, (A) such person fails to offer an explanation or offers an explanation which is found by the WTO or the AAC or the CWT(A) to be false, or (B) such person offers an explanation which he is not able to substantiate, then, the amount added or disallowed in computing the net wealth of such person as a result thereof shall, for the purposes of cl. (c) of this sub-section, be deemed to represent the value of the assets in respect of which particulars have been concealed: Provided that nothing contained in this Explanation shall apply to a case referred to in cl. (B) in respect of any amount paid or disallowed as a result of the rejection of any explanation offered by such person, if such explanation as bona fide and all the facts relating to the same and material to the computation of his net wealth have been disclosed by him. Expln. 3:.................... Expln. 4: Where the value of any asset returned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied only after reading it along with the provisions of Expln. 2 and that if an assessee has offered a bona fide explanation as envisaged in Expln. 2, no penalty under s. 18(1)(c) can be imposed on him by invoking the provisions of Expln. to s. 18(1)(c). In our opinion, therefore, Expln. 4 has to be read along with the provisions of s. 18(1)(c) and in case it is found that the returned value of an asset is less than 70% of the assessed value of that asset, the assessee is deemed to have furnished inaccurate particulars of such asset within the meaning of s. 18(1)(c) and thereafter the assessee is required to prove that the value of the asset as returned by him is the correct value and in case he fails to prove this, he shall be liable to penalty under s. 18(1)(c) irrespective of the fact that the returned value was on a bona fide basis, because no words like "bona fide" have been incorporated in Expln. 4 as they have been incorporated in proviso to Expln. 2 and that would indicate that the legislature did not intend to exonerate a person who falls within the mischief of Expln. 4 even if his act was bona fide, although the legislature considered it reasonable to exonerate him if hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e us but for the statement of the assessee, as mentioned above, in assessment order. 15. So far as the various dates mentioned by the learned counsel for the assessee are concerned, which have been reproduced in this order, in our view they are also not helpful to the assessee because all these three returns have been filed long after the three decisions of the Hon'ble Allahabad High Court had been reported and hence it cannot be said that only when the decision of the Hon'ble Supreme Court in the case of Bharat Hari Singhania was pronounced on 16th Feb., 1994, it could be said that the position regarding valuation of shares had crystallised. It is well established legal maxim having its support in the Constitution of India that the view expressed by a High Court has to be followed within its jurisdiction and merely because an appeal or a SLP has been filed, the decision of the High Court cannot be ignored or defied. 16. Taking all these facts and circumstances into account, we hold that in the first instance if an assessee falls within the provisions of Expln. 4 to s. 18(1)(c) of the WT Act, he cannot be saved from penalty even if he explains that he had disclosed all the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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