Bombay High Court
Smt. Bella Cajeton Travasso vs Third Wealth-Tax Officer And Others on 10 July, 1986
Equivalent citations: [1987]166ITR49(BOM)
JUDGMENT Pendse, J.
1. the petitioner is an individual and is assessed to wealth-tax by the 1st respondent. She owns one-half share in plots No. 374, Mahim, and in the four structures, namely, houses Nos. 14A, 6, 14AA and 6DD, on plot No. 393 at Mahim. She also owns one-fourth share in the building standing on plot No. 330 at Mahim Division. She filed her wealth-tax returns for the assessment years 1975-76 to 1980-81 showing the valuation of her share in immovable properties. The Valuation of the properties in respect of final plot No. 330 was done by the Rent capitalization Method following the procedure laid down by Circular No. 3 of the Wealth-tax Act, 1957. The circular was given statutory recognition subsequently by introduction of rule 1BB in the Wealth-tax Rules, 1957.
2. The Wealth-tax Officer issued a notice under Section 16(2) of the Wealth-tax Act to the petitioner for the assessment years 1975-76 to 1978-79 and an assessment order under section 16(5) of the Act for the assessment year 1975-76 was passed valuing the immovable properties at Rs. 3,30,000. Against that order, the petitioner preferred an appeal to the Appellate Assistant Commissioner of Wealth-tax, and in the appeal, the valuation of the property was reduced and the net wealth was determined at Rs. 1,03,000. In the meanwhile, the Wealth-tax Officer completed the assessment for the year 1976-77 and 1977-78 accepting the return of wealth as filed by the petitioner.
3. On January 5, 1982, the Assistant Valuation Officer, Unit VI, Income-tax Department, served a notice on the petition under section 16A of the Act stating that the Wealth-tax Officer by letter dated December 27, 1981, had directed the Valuation Officer to determine the fair market value of the properties of the petitioner for the assessment years 1975-76 to 1980-81. The petitioner was called upon to send detailed location of the property along with the list of tenants, rent received, outgoings, etc. The petitioner complained to the Valuation Office that it was not permissible for the Wealth-tax Officer to make a reference for valuation in respect of the assessment years where the final assessment order was already passed. The petitioner also complained that the property was valued in accordance with rule 1BB of the Wealth-tax Rules and the Valuation Officer should bear that aspect in mind. The Valuation Officer in reply by letter dated May 27, 1982, informed the petitioner that the Valuation Officer was carrying out statutory duties as contemplated under section 16A of the Act, in accordance with the reference made by the Wealth-tax Officer and the assessee was duty bound to furnish the details of the property. The Valuation Officer further stated that as regards the applicability of rule 1BB of the Wealth-tax Rules, the assessee may take up the matter with the Wealth-tax Officer directly and he may consider the same at the appropriate time. Feeling aggrieved by this attitude of the Valuation Officer, the petitioner has filed the present petition under article 226 of the Constitution of India in this court on June 18, 1982.
4. Shri Pandit, learned counsel appearing on behalf of the petitioner, submitted that the assessments for the years 1975-76 to 1977-78 were already finalised by the assessment orders passed by the Wealth-tax Officer and, therefore, the Wealth-tax Officer had no jurisdiction to refer the valuation of the properties for those assessment years to the Valuation Officer. The submission of the learned counsel is correct and deserves acceptance. Section 16A(1) of the Act prescribes that for the purpose of making an assessment under the Act, the Wealth-tax Officer may refer the valuation of any asset to the Valuation Officer. A plain reading of the section makes it clear that reference to the Valuation Officer is permissible for the purpose of making an assessment and such reference cannot be made in respect of the assessments which are already finalised. The reliance by Shri Pandit in this connection on the decision of the Calcutta High Court in the decision Smt. Uma Debi Jhawar v. WTO [1982] 136 ITR 662 is appropriate. As it is not in dispute that the assessment for the years 1975-76 to 1977-78 was finalised before making reference to the Valuation Officer, reference for these assessment years was clearly illegal and without jurisdiction. Shri Jetly, learned counsel on behalf of the respondents, very fairly conceded this position.
5. Shri Pandit then submitted that the reference made by the Wealth-tax Officer in respect of the remaining assessment years where the assessments are not finalised is also invalid, because the Wealth-tax Officer has no material before him to form an opinion that the value of the assets as returned by the petitioner is less than the fair market value. The learned counsel urged that the power of the Wealth-tax Officer to make a reference to the Valuation Officer flows from the provision of section 16A(1)(a) and (b) of the Wealth-tax Act and unless and until the Wealth-tax Officer forms such an opinion and the formation of such opinion is demonstrated before the court, the reference cannot be sustained. It is not possible to accept the submission of the learned counsel. A plain reading of the provisions of section 16A makes it clear that before the assessment is finalised if the Wealth-tax Officer is of the opinion, having regard to the nature of the assets and other relevant circumstances, that it is necessary to refer the valuation of any assets to the Valuation Officer, then it is permissible for him to do so. What the section prescribes is a subjective satisfaction of the Wealth-tax Officer and the formation of the opinion by the Officer would depend upon several circumstance including his knowledge of the valuation of the property. In my judgment, it cannot be laid down that in each and every case where a reference is made to the Valuation Officer, the Wealth-tax Officer must demonstrate before the court that he had formed an opinion on the basis of material in his possession and such material was sufficient for the formation of the opinion. In my judgment, the reference made by the Wealth-tax Officer to the Valuation Officer for the assessment years 1978-79 onwards cannot be faulted.
6. Shri Pandit then submitted with reference to the letter dated May 27, 1982, received from the Assistant Valuation Officer, a copy of which is annexed as exhibit "N" to the petition, that the Valuation Officer has refused to take into consideration the applicability of rule 1BB of the Wealth-tax Rules and has taken the view that the applicability will be considered by the Wealth-tax Officer at the appropriate time. Shri Pandit complains that this attitude of the Assistant Valuation Officer is wholly illegal and, in my judgment, there is considerable substance in the grievance of the learned counsel. Rule 1BB prescribes how a house property which is wholly or mainly used for residential purposes shall be valued. It is impossible to imagine how the Valuation Officer can refuse to consider the applicability of this rule while entertaining the reference made by the Wealth-tax Officer. The action of the Valuation Officer in suggesting that the would not bother about the applicability of the rule nor would he take into consideration the principle laid down therein and the assessee may complain about the same before the Wealth-tax Officer is wholly incorrect. Indeed, section 16A of the Wealth-tax Act prescribed that the Wealth-tax Office would be bound to accept the report made by the Valuation Officer. The Valuation Officer thus is duty bound under the Act and the Rules to value the property in accordance with the procedure prescribed and it is futile to claim that the valuation Officer should ignore the applicability of rule 1BB of the Wealth-tax Rules. The Valuation Officer shall take into consideration the applicability of rule 1BB and carry out the work of valuation in accordance with the provisions of the Act and the Rules and shall not advise the assessee to raise a complaint before the Wealth-tax Officer.
7. Accordingly, the petition partly succeeds and respondent No. 2, the Assistant Valuation Officer, Unit VI, Bombay, is directed to proceed with the reference made by the Wealth-tax Officer and value the house properties of the petitioner only for the assessment years 1978-79, 1979-80 and 1980-81. The Valuation Officer shall carry out the valuation in accordance with the provisions of the Act and the Rules and in the light of the observations made in this judgment. The reference made by the Wealth-tax Officer for the assessment years 1975-76 to 1977-78 is struck down. In the circumstance of the case, there will be no order as to costs.