Income Tax Appellate Tribunal - Chennai
B.Shanthilal Choudry, Kumbakonam vs Department Of Income Tax on 15 May, 2008
IN THE INCOMETAX APPELLATE TRIBUNAL: C-BENCHL;CHENNAI
(Before Shri U.B.S.Bedi, Judicial Member and
Shri Abraham P. George. Accountant Member)
1. WTA No.13 / Mds/10
Asst. year 2002-03
2. WTA Nos.14 & 15/Mds/10
Asst. years 2001-02 & 2002-03
3. WTA Nos.16 & 17/Mds/10
Asst. years 2002-03 & 2003-04
vs 1) Smt. Saroj Kanwar
(PAN AEFPS9753P)
2) Joharilal Choudry, HUF
(PAN AAAHJ5905M)
The Dy.Commissioner of
Wealth-tax, Cir. I,
Kumbakonam 3) Shri B.Shanthilal
Choudry,
(PAN AEFPS9755M)
5/164, Vilendara Samuthram,
Sirkali.
(Appellant) (Respondents)
Appellant by: Shri B.Srinivas
Respondents by: None
ORDER
PER BENCH:
In these appeals of the Revenue it has assailed the order of the CWT(Appeals), whereby he had deleted the additions to net wealth, made WTA NOS 13 - 17/Mds/2010. 2 by AO by valuing the precious stones held by the assessees, based on certain instances of sales of diamonds effected by the assessees during the relevant previous year.
2. Short facts apropos are that each of the assessees involved in these appeals were having holding of precious stones and they had filed respective returns of wealth-tax, showing the value of such holding as part of their net wealth. AO during the course of assessment noted that the assessees concerned had effected sale of certain diamonds, at higher rates during the relevant previous year and such sales were reflected in the respective Income-tax returns. He, therefore, valued the holding of precious stones based on the rate at which the diamonds were sold by the assessees during the relevant previous year. This resulted in enhancement of the value of the precious stones and consequently the net wealth.
3. In their respective appeals before the CWT(A) argument of the assessees was that the AO ought not have adopted the rate at which the assessees had sold the diamonds, for valuing the holding of precious stones for wealth-tax purposes, since the sales effected were only a small WTA NOS 13 - 17/Mds/2010. 3 part of such holdings. Assessees also contended that the items sold were of higher value when compared to the items that they were holding. It was also contended that precious stoners could not be valued on a standard basis since its valuation was dependent on factors like colour, clarity, cut, size etc. CWT(A) accepted these contentions and deleted the enhancement of values.
4. Now before us, Ld. DR strongly assailing the order of the CWT(A) submitted that the AO had based his valuation only on the rates at which assessees themselves had sold diamonds during the relevant previous year and therefore, CWT(A) fell in error in holding that such valuation was not correct. Ld. DR also submitted that the appeals were falling under the exceptional clause mentioned in para 8(c) of CBDT Instruction No.5 of 2008 dated 15-05-2008, and hence monetary limits prescribed for filing of appeals would not apply. Copies of Revenue audit objections were filed in support. Nobody appeared on behalf of the assessees, despite service of notices.
5. We have perused the orders and heard the ld. DR. We find that the appeals would fall within exceptional item mentioned at para 8(c) of CBDT WTA NOS 13 - 17/Mds/2010. 4 Instructions of 2008 dated 15-05-2008, since the Wealh-tax assessments were reopened based on Revenue audit objections. Hence these appeals are maintainable. Coming to the merits, in the first place it is noted that as per sec. 7(1) of the Wealth-tax Act, value of every asset, other than cash, for the purposes of this Act, has to be determined in the manner laid down in Schedule-III thereof, except for the value of a house, belonging to an assessee, exclusively used by him for residential purpose. If we look at Schedule-III, Rule 18 under Part G gives the method of valuation of jewellery. This Rule is reproduced hereunder:
"Valuation of jewellery.
18. The value of the jewellery shall be estimated to be the price which it would fetch if sold in the open market on the valuation date (hereafter in this rule referred to as fair market value).
(2) The return of net wealth furnished by the assessee shall be supported by, -
(i) a statement in the prescribed form, where the value of the jewellery on the valuiation date does not exceed rupees five lakhs;
(ii) a report of a registered valuer in the prescribed form, where the value of the jewellery on the valuation date exceeds rupees five lakhs.
(3) Notwithstanding anything mentioned in sub-rule (2), the AO may, if he is of the opinion, that the value of the jewellery declared in the return,--WTA NOS 13 - 17/Mds/2010. 5
(a) is less than its fair market value by such percentage or such amount as is prescribed under sub-clause (i) of clause (b) of sub-section (1) of sec. 16A;
(b) is less than its fair market value as referred to in clause (a) of sub-sec. (1) of section 16A, he may refer the valuation of such jewellery to a Valuation Officer;
under sub-sec.(1) of the said section and the value of such jewellery shall be the fair market value as estimated by the Valuation Officer."
6. Thus, for the purpose of valuation of jewellery, the price which is to be considered is the price which the jewellery would fetch, if sold in the open market on valuation date. The Rule also says that the assessee has to support his return of net wealth with a report of the registered valuer in the prescribed form for the value of jewellery exceeding rupees five lakhs. There is nothing in the assessment order regarding any valuation report submitted by the assessees. Further, the AO, if he is of the opinion that the value declared in the return was less than the fair market value, he has to follow sub-rule (3) of Rule 18. As against this, here the AO has simply went by certain sale instances done by the assessees, of part of their diamond holdings, during the relevant previous years. We thus find that the AO has not followed the Rule specified under Schedule-III mentioned supra. Ld. CWT(A) also fell in error, by simply deleting the valuation done by the AO, without noting this aspect. We are therefore of the opinion that the matter WTA NOS 13 - 17/Mds/2010. 6 needs a revisit by the AO for following the rules of valuation as per the Wealth-tax Act. Thus, in the interest of justice, we set aside the orders of the authorities below and remit the matter back to the AO for redoing the Wealth-tax assessments in accordance with the rules of valuation prescribed under the Wealth-tax Act.
7. In the result, appeals of the Revenue are allowed for statistical purposes.
Order was pronounced in the Open Court soon after hearing on 15-11- 2010.
Sd/- Sd/-
(U.B.S.BEDI) (ABRAHAM P. GEORGE)
Judicial Member Accountant Member
Chennai: 15th November, 2010
Nbr"
Cc: Assessees Assessing Officer/ CIT(A)/ CIT/ D.R/ Guard File.