Income Tax Appellate Tribunal - Chandigarh
Jangi Lal Oswal vs Assistant Commissioner Of Wealth Tax ... on 13 January, 2004
Equivalent citations: (2005)98TTJ(CHD)486
ORDER
D.R. Singh, J.M.
1. These two appeals filed by two different assessees against the respective orders of the CWT(A)(C), Ludhiana, in appeal No. 78/WT/1995-96, CWT(A)(C), dt. 26th Feb., 1996, and appeal No. 69/WT/1993-94, CWT(A)(C), dt. 26th Feb., 1996, for the asst. yr. 1992-93 were heard together and are being disposed of by this single order as the facts and the issue involved in both these appeals are identical except variation in the amounts involved therein, for the sake of convenience.
2. The identical grounds of appeal taken by the assessees in their respective appeals are stated as under:
2. That the learned CWT(A) has misinterpreted the provisions of Rule 9A of Schedule III to WT Act, 1957, while upholding the action of the AO with respect to rejection of value of equity shares of Vardhman Spg. Mills Ltd. taken by the assessee in the return of wealth.
3. That the learned CWT(A) has erred in law and on the facts while upholding the addition of Rs. 77,17,230 made by the AO on account of valuation of equity shares as per Rule 9.
3. The relevant and material facts for the disposal of the issue involved in these grounds of appeals are that both the assessees owned certain shares of M/s Vardhman Spg. Mills Ltd. and M/s Malwa Cotton Spg. Mills Ltd. In the returns of wealth filed, the assessees had shown value of these shares as per Rule 9A of Schedule III to the WT Act. However, the assessees did not file the certificates from an authorized accountant as required under second proviso to Rule 9A. The AO observed that the assessees had an option to declare the value of quoted equity shares as per Rule 9A. But they are required to furnish the certificates from the authorized accountant along with the returns. In these cases, the assessees failed to furnish the certificates of the accountant. Therefore, the AO adopted the value of shares as quoted in the market on the valuation date as per provisions of Rule 9 of Schedule III.
4. Aggrieved with the order of the WTO, the assessees filed appeals before the first appellate authority and contended that the provisions of Rule 9A were only directory and not mandatory. Therefore, the assessees could file such certificates before the completion of wealth-tax assessments. Reliance was also placed on the judgments of Hon'ble Supreme Court in the cases CST v. Auraiya Chamber of Commerce and Collector, Land Acquisition v. Mst. Katiji and Ors. . The assessees also relied on the judgment of the Hon'ble Calcutta High Court in the case of CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust and judgment of Hon'ble Bombay High Court in the case of CIT v. Shivanand Electronics . However, these submissions did not find favour with the learned CWT(A) who observed that it was mandatory to furnish certificates of the authorised accountant along with the returns in case the assessees desired to exercise the option to value the quoted equity shares of companies as per provisions of Rule 9A. Since the assessees failed to obtain and attach the requisite certificates with the returns of wealth, they did not fulfil the conditions laid down in the Act. The CWT(A) also relied on the judgment of Hon'ble jurisdictional High Court of Punjab and Haryana in the case of CIT v. Jaideep Industries (1989) 180 ITR 81 (P&H). He, therefore, upheld the action of the AO in taking the value of these shares as quoted in the market.
5. The assessees preferred an appeal before the Tribunal against those orders of the first appellate authority and reiterated the submissions which were made before the tax authorities below.
6. We have considered the rival submissions of both the parties, perused the records and carefully gone through the orders of the tax authorities below.
Now, before disposing of the instant appeals of the assessees, we would like to first give a little background of these cases regarding the circumstances under which we are required to decide these appeals of the assessees.
7. The Tribunal after considering the submissions of both the parties, perusing the material on record and the orders of the tax authorities below had dismissed the appeals of the assessees by making the following observations in the order :
"9. It may be mentioned that the judgment of Punjab and Haryana High Court in the case of CIT v. Jaideep Industries (1989) 180 ITR 81 (P&H) was delivered with reference to the provisions of Section 80J(6A) of the IT Act. Section 80J(6A) also required furnishing of audit report along with the return of income duly verified by an accountant. Rule 9A also required furnishing of certificate by an accountant along with the return of wealth. Therefore, the judgment of Punjab and Haryana High Court in the case of Jaideep Industries (supra), would equally apply to the facts of the present case. As regards reliance of the learned Counsel on the two judgments of the Hon'ble Supreme Court reported in CST v. Auraiya Chamber of Commerce , Collector, Land Acquisition v. Mst. Katiji and Ors. , we find that the same are on distinguishable facts. In fact, in the case of CST v. Auraiya Chamber of Commerce (supra), the STO had completed an assessment in respect of certain forward transactions and the assessee had paid sales-tax thereon. Subsequently, the apex Court held the levy of sales tax on forward transactions ultra vires. In the light of these facts, the Hon'ble Supreme Court held that the tax was collected without the authority of law and the State had no right to the money paid by the assessee and, therefore, the assessee was entitled to refund. The apex Court has further held that in interpreting the procedural provisions of an Act, fairness and justice should be the approach whenever the language permits. The facts of the present case are clearly distinguishable inasmuch as neither the provisions of Rule 9A have been declared ultra vires nor there is any authority vested in the AO to condone such delay. Similarly, the other judgment of Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji (supra), is on the issue of delay under Section 5 of the Limitation Act which is specifically conferred on the authorities. But, Rule 9A does not confer any power on the AO. As regards reliance of the learned Counsel on two judgments of Calcutta High Court in the cases of CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust , and Murli Export House v. CIT , the facts are distinguishable. Section 139(9) of the IT Act empowers the AO to issue defect memo in case the return is found to be deficient in not enclosing the audit report with the return or the assessee could even file the revised return rectifying such defects on his own. If the assessee rectifies such detect, the same would be considered as compliance with the provisions of the IT Act and the return shall become valid. But the provisions of WT Act do not provide for issuing defect memo to the assessee rectifying such mistake and in this case, the assessee has not filed any revised return. Therefore, the ratio of these two judgments of the Hon'ble Calcutta High Court would not apply to the facts of the present case, moreso, when the judgment of the Hon'ble jurisdictional High Court of Punjab and Haryana in the case of Jaideep Industries, cited supra, is against the assessee.
10. No doubt, the Gujarat High Court in the case of CIT v. Gujarat Oil & Allied Industries, cited supra, relied on by the learned Counsel, has taken a contrary view. Since we fall in the jurisdiction of Punjab and Haryana High Court, we are bound to follow the judgment of jurisdictional High Court. Moreover, the Hon'ble Punjab and Haryana High Court in their subsequent judgment in the case of CIT v. Shahzadanand Charity Trust had an occasion to consider their earlier judgment in the case of Jaideep Industries (supra). While reiterating the ratio of their earlier judgement in the case of Jaideep Industries (supra), the Punjab and Haryana High Court held the ratio of their earlier judgment in the case of Jaideep Industries (supra), would have been equally applicable had the CBDT not issued the Circular, dt. 9th Feb., 1978, as per which the filing of the audit report under Section 12A(b) along with the return of income was not mandatory. However, the Punjab and Haryana High Court has not overruled their earlier judgment in the case of Jaideep Industries (supra), rather reiterated their earlier judgment. It may be mentioned that the provisions of Section 12A(b) are in pari materia with the Rule 9A of Schedule III to the WT Act. In this case, the CBDT has not issued any circular to the effect, that certificate of the accountant filed after the return of wealth was filed would amount to compliance with the provisions of Rule 9A, Schedule III. Therefore, the judgment of Punjab and Haryana High Court in the case of Jaideep Industries (supra) would equally apply to the facts of the present cases.
11. Having regard to these facts and circumstances of the case and the legal position discussed above and respectfully following the judgment of Hon'ble Punjab and Haryana High Court in the case of Jaideep Industries (supra), we hold that the assessees failed to fulfil the mandatory requirement of furnishing the certificates of the accountant along with the returns and, therefore, the CWT(A) was justified in sustaining the orders of the AO in regard to the valuation of quoted equity shares as per Rule 9 of Schedule III. We confirm his orders and dismiss the respective grounds of appeals."
8. Later on, the Tribunal on the miscellaneous applications filed by the assessees wherein the assessee submitted that the judgment of Hon'ble Punjab and Haryana High Court in the case of CIT v. Jaideep Industries (supra) has since been overruled by the Full Bench of Hon'ble Punjab and Haryana High Court in the case of CIT v. Punjab Financial Corporation (FB), hence, the order passed by the Tribunal earlier dt. 30th Jan., 2002, may be recalled and the appeals of the assessees be decided in the light of the Full Bench decision of the Hon'ble Punjab and Haryana High Court (supra). The Tribunal recalled its order dt. 30th Jan., 2002, vide its other order dt. 30th Jan., 2003. Now, in the light of this background of the cases, we are required to decide these appeals afresh.
9. Now, the only submission made by the learned Authorised Representative for the assessee before us is that since the Tribunal while dismissing the appeals of the assessee vide order dt. 30th Jan., 2003, placed reliance mainly on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT v. Jaideep Industries (supra), and dismissed the appeals of the assessees, whereas their Lordships of Punjab and Haryana High Court in Full Bench subsequent decision (FB) (supra), have reversed their own decision in the case of Jaideep Industries (supra), so, following the Full Bench decision of Hon'ble Punjab and Haryana High Court in the case of Punjab Financial Corporation (supra) and the decision of the Hon'ble Gujarat High Court in the case of CIT v. Gujarat Oil & Allied Industries , the Tribunal should decide these appeals in favour of the assessees.
10. Learned Departmental Representative for the Revenue was fair enough to concede to these submissions of the learned Authorised Representative for the assessee.
11. We have considered the rival submissions of both the parties, perused the records and carefully gone through the orders of the tax authorities below as well as the earlier order (supra) passed by the Tribunal.
12. The Tribunal while dismissing the appeals of the assessees vide order dt. 10th Jan., 2003 (supra), placed reliance mainly on the decision of the Hon'ble Punjab and Haryana High Court in the case of Jaideep Industries (supra) and observed that this judgment of Hon'ble Punjab and Haryana High Court would equally apply to the facts of the instant case of the assessee because in that case (supra), their Lordships were dealing with the provisions of Section 80J(6A) of the IT Act, which required furnishing of audit report along with the return of income duly verified by an accountant, as well as Rule 9A as involved in the instant case of the assessees also required furnishing of certificate by an accountant along with certificate of wealth.
13. In that very order (supra), the Tribunal further observed that though the decision of Hon'ble Gujarat High Court in the case of Gujarat Oil & Allied, Industries (supra), relied upon by the learned Authorised Representative for the assessee, is contrary to the view taken by the Hon'ble Punjab and Haryana High Court because in that case (supra), their Lordships of Hon'ble Gujarat High Court held that filing of audit report under Section 80J before completion of the assessment amounts to sufficient compliance with the provisions of the Act. In this very order (supra), the Tribunal further observed that as the Tribunal was bound to follow the judgment of jurisdictional High Court, so it followed the decision of the Hon'ble Punjab and Haryana High Court in the case of Jaideep Industries (supra) and dismissed the appears of the assessees.
14. We are of the opinion that had this decision (supra) of Hon'ble Punjab and Haryana High Court not been there, the Tribunal would have followed the decision (supra) of the Hon'ble Gujarat High Court and decided the appeals in favour of the assessees because the Tribunal had observed in that order (supra) that the facts of the case of Jaideep Industries (supra) equally apply to the facts of the case of the assessees.
15. In this view of the matter and in the light of the submissions made by the learned Authorised Representative for the assessee before us to which we also agree, we are of the opinion that since the decision of Hon'ble Punjab and Haryana High Court in the case of Jaideep Industries (supra) has been reversed by the Hon'ble Punjab and Haryana High Court in the case of Punjab Financial Corporation (supra), and so, relying on the decision of the jurisdictional High Court in the case of Punjab Financial Corporation (supra) and the decision of the Hon'ble Gujarat High Court in the case Gujarat Oil & Allied Industries (supra), we decide the issue in favour of the assessees and against the Revenue by holding that the assessees filing of certificates from the authorized accountant before the completion of the wealth-tax assessments was a due compliance of the provisions of the Act, as required under second proviso to Rule 9A for the purposes of valuation of the shares as per Rule 9A of Schedule III to the WT Act. Accordingly, the respective orders of the first appellate authority pertaining to both the instant appeals are reversed and the grounds of appeals taken by both the assessees in their respective appeals are allowed.
16. In the result, both the instant appeals filed by the assessees are allowed.