DELHI BENCH D WEALTH-TAX v. SMT. BRIJ RANI OFFICER April 24, 1985 JUDGMENT PerKrishnamurthy'In all these appeals pointinvolved is same though assessees are different. assessees are partnersin firm called Kanjimal & Sons, Scindia House, New Delhi. For purpose of wealth-taxassessments for assessment years 1977-78 and 1978-79 in case of Smt. Brij Rani and for assessment year 1979-80 in caseof Shri Vijay Kumar, WTO revalued closing stock of firm of Kanjimal & Sons on ground that market value ofthe closing stock exceeded book value by 20 per cent and thereby madeadditions of Rs. 1,35,915 and Rs. 1,64,204 in case of Smt. Brij Rani for two assessment years mentioned above andof Rs. 1,79,179 in case of Shri Vijay Kumar. reason that prevailed withthe WTO to revalue closing stock of firm of Kanjimal& Sons was that in balance sheet of firm even though value ofthe closing stock was shown at particular figure (Rs. 14,57,000 and Rs.17,28,000 respectively, for these two assessment years), gross profit ratewas 38 per cent. When gross profit rate was 38 per cent WTO opined thatthe market value of closing stock shown in books must be in excess bymore than 20 per cent of book value. Applying provisions of rule 2B(2)of Wealth-tax Rules, 1957 ('the Rules') he enhanced value of theclosing stock to represent market value on basis of 38 per cent grossprofit and brought difference to wealth-tax in which assessee's shareamounted to figures mentioned above. In other words, what WTO did wasto rework out value of closing stock on basis of 38 per cent grossprofit, meaning thereby that market value of closing stock should behigher than book value at least by 38 per cent which again meant that itwas taken for granted that closing stock was valued at 38 per cent lessthan market value. On appeal, AAC found that this method of arriving atthe market value for purpose of application of rule 2B was totallyunwarranted. There was no evidence to show that market value of closingstock was more than book value and that was equal to 38 per cent. He heldthat evidence to prove market value of closing stock was to be ledby revenue and since revenue had failed to adduce any evidence, heobserved that addition made on that basis was unwarranted. He also reliedupon decision of Tribunal, Delhi Bench 'B', Third Member case in WTOv. Gopi Chand Rawat[1983] . Following this view he held in other yearin assessee's own case and in case of other assessee that rule 2B(2) was wrongly applied and deleted additions. Therevenue is aggrieved by these deletions and is in appeal before us. 2.The learned departmental representative relying upon decision of SupremeCourt in case of Juggilal Kamlapat Bankers v. WTO [1984] 145 ITR 485submitted that if market value of closing stock was found to be 20 percent more than book value, then WTO is bound to apply rule 2B andrevalue closing stock and as such revaluation of closing stockcould not be questioned in this case. According to him, AAC was wrong indeleting additions. For assessee reliance was placed upon decisionof Tribunal in Gopi Chand Rawat's case (supra) and another decision of theTribunal in WTO v. Kirtichand Tauk [1985] (Jp.). 3.In our opinion, view taken by AAC cannot be said to be incorrect. It isno doubt true that Supreme Court laid down rule in case of Juggilal KamlapatBankers (supra) that if market value of asset is found to bemore by 20 per cent than book value, then market value of that asset should be adopted for wealth-tax purposes.There is no quarrel with that proposition and that is enunciation of lawand that has to be followed and applied. But point for consideration iswhether market value of closing stock was not properly shown in thebooks of account and book value shown was less by 20 per cent than themarket value? revenue relied upon rate ofgross profit. In our opinion, that is not fair guide. revenue must proveby evidence that market value of closing stock was more than bookvalue. This can be supported very easily with reference to sales made onthe last few days or first few days after accounting year ended. Sinceno evidence was led by revenue to show that market value of closingstock was less, revenue cannot assume that it is less by 20 per cent andapply rule 2B. Rule 2B(2) can be applied only when there is evidence to showthat market value was less than book value by 20 per cent. Mere rate ofgross profit does not mean that market value would be more than bookvalue. Sole dependence on rate of gross profit for purpose ofdetermining market value for purpose of application of rule 2B(2) isnot safe. We are, therefore, of opinion that AAC was right in deletingthe additions made. We also follow with respect of views expressed by theearlier Benches of Tribunal referred to above. 4.In result, appeals are dismissed. *** Wealth-tax Officer v. Smt. Brij Rani