TMI Blog1995 (10) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... 6A(5) estimated the value of each equity share of CCL as on 30-12-1980 relevant to the assessment year 1981-82 at Rs. 239.58 on simple average yield basis. The VO while estimating the value of the shares of the CCL followed the judgment of the Hon'ble Delhi High Court in the case of Sharbati Devi Jhalani v. CWT [1986] 159 ITR 549. The AO mentioned in the assessment order that the shareholders of the CCL filed writ petitions for the assessment years 1979-80 and 1980-81 before the Hon'ble Delhi High Court challenging the validity of Rule 1D of the Wealth-tax Rules and its applicability to the facts and circumstances of the assessee's own case and that the judgments of the Hon'ble Delhi High Court on the Writ Petitions filed by the shareholders were not available. The AO adopted the value of 4680 equity shares of CCL at Rs. 239.58 per share aggregating to Rs. 11,21,234 by observing as under :--- " keeping in view all the facts and circumstances of the case and the binding nature of the order dated 21-3-1986 of the Valuation Officer in view of section 16A(6) of the Act, I adopt the fair market value of the equity shares of M/s. Continental Construction (Private) Ltd. at Rs. 239.58 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of shares shown at the face value of Rs. 100 per share is subject to valuation. Nevertheless, neither any valuation report was ever filed nor any revised return and self-assessment tax deposited. On the other hand as evident from the order of the Valuation Officer, the assessee himself argued against the valuation being taken on the basis of Rule ID and contended that the correct method for valuing such shares would be the method asapproved by the Supreme Court in 86 ITR 621 and 122 ITR 38 which is by applying the 'Yield' method. It need not be pointed out that the Valuation Officer has valued the shares in question on yield basis. Thus, the decision relied upon by the assessee that the difference of opinion on valuation of assets will not justify levy of penalty is totally irrelevant in this case and does not come to the rescue of the assessee in the present circumstances when the assessee himself has agreed to the yield basis of valuation and the same has been taken in the valuation of shares. It may further be mentioned that the Valuation Officer in his order under section 16A(5) has pointed out that the assessee himself has worked out the value of Equity Shares at Rs. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate order, the CWT (Appeals) stated that opportunity was given to the assessee by the VO to show the correct valuation of shares and that the assessee gave the valuation at Rs. 213 per share and that even at this stage the assessee did not revise the value of the shares shown in the return at Rs. 100 per share. The CIT(A) stated in the appellate order that the assessee also worked out alternative valuation as per Rule 1D and that the assessee worked out the net assets of CCL at Rs. 3,67,71,896. In Paragraph 28 of the appellate order, the CWT (Appeals) stated that even though the assessee got so many opportunities to revise his return and file a correct value of the shares, but the assessee did not avail the opportunity of filing the correct value of the shares. Ultimately, he held that the assessee was in the know of the fact that the value of the shares returned by him was not the correct value and that Explanation 4 to clause (iii) of section 18(1)(c) was applicable in the case of the assessee. In that view of the matter, he confirmed the penalty levied by the WTO. Dissatisfied with the order of the CWT (Appeals), the assessee filed the present appeal before the Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the unquoted equity shares must be done according to Rule 1D. The Delhi High Court in the case of Sharbati Devi Jhalani held that if the valuation date of the wealth-tax assessee is different from the closing date of the accounting period of the company in which the equity shares are held by that assessee, then the shares have to be valued on yield basis. In the assessee's case, the AO referred the matter of valuation of equity shares to the VO. The VO valued the said shares on yield basis as he was bound by the judgment of the Delhi High Court in the case of Sharbati Devi Jhalani. The paradox can be seen here explicitly. The assessee prayed that the valuation of shares of the CCL must be subject to WT Rules, but the VO valued them on yield basis. The issue of valuation of unquoted equity shares of a company was ultimately decided by the Hon'ble Supreme Court in the case of Bharat Hari Singhania v. CWT [1994] 73 Taxman 3. The Supreme Court laid down the same principle what the assessee has stated in his return of wealth, that the shares should be valued as per WT Rules. The complicated thinking of various High Courts and the Supreme Court, the assessee cannot be expected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation as per Rule 1D had been upheld by the Supreme Court in the case of Bharat Hari Singhania . Therefore, since the claim of the assessee was the correct claim, no penalty was leviable under section 18(1)(c). Another aspect referred to by the assessee's counsel was that the particulars of the number of shares had already been declared by the assessee and as such the question of concealment does not arise. This plea of the assessee is not acceptable as the assessee has not declared the correct value of the shares which is what is to be seen once the Explanation 4 to section 18(1)(c) is attracted. In the present case, the value declared by the assessee is Rs. 4,70,500 whereas the assessed value is Rs. 1 1,21, 234. Even after the Tribunal's order, the value of shares comes to much more than the declared value and would be hit by Explanation 4 as it is less than 70%. The assessee cannot get away by merely filing any sum as the value of an asset until and unless he can prove that it is the correct value to avoid the consequence of penalty under section 18(1)(c). Neither has the assessee declared the value on yield basis nor as per Rule 1D merely mentioning that the value may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of unquoted equity shares of companies other than investment companies and managing agency companies. The basis is the break up value. The Allahabad High Court in its judgment dated14-12-1976in the case of Sripat Singhania held that Rule 1D is mandatory. This was followed later in the judgment dated18-9-1978in the case of Bharal Hari Singhania . However, the Bombay High Court in its judgment dated 21-2-1979 in the case of Smt. Kusumben D. Mahadevia v. CWT [1980] 124 ITR 799 held that Rule 1D was directory and not mandatory. Even while applying Rule 1D, certain controversies were there. Some High Courts, e.g., Gujarat High Court in its judgment dated 25-9--1980 in the case of CWT v. Ashok K. Parikh [1981] 129 ITR 46 held that the amount of advance tax paid by the company in the relevant year and shown on the assets side of the Balance Sheet was not to be deducted from the tax payable in determining whether the provision for taxation was in excess or the tax payable with reference to the book profits in accordance with the law applicable thereto. The Allahabad High Court in its judgment dated 7-9-1978 in the case of CWT v. Rajendra Kumar Jhunjhunwala [1979] 118 ITR 523 held that in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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