M. HARICHANDRA PRASAD v. WEALTH-TAX OFFICER
[Citation -1986-LL-1017-3]

Citation 1986-LL-1017-3
Appellant Name M. HARICHANDRA PRASAD
Respondent Name WEALTH-TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 17/10/1986
Assessment Year 1979-80 TO 1981-82
Judgment View Judgment
Keyword Tags best judgment assessment • assistant controller • revisionary order • valuation officer • valuation report • revisional power • wealth-tax act • valuation cell • printing press • estate duty • sales tax
Bot Summary: These are three appeals by the assessee against the order under section 25(2) of the Wealth-tax Act, 1957 by the Commissioner for the assessment years 1979-80 to 1981-82. These were the valuations in the hands of late Thimma Raju for the assessment years 1975-76 to 1978-79. In the course of the estate duty assessment proceedings, the Assistant Controller had referred the matter of valuation of these three properties to the Valuation Officer again. The Commissioner rejected these submissions and held that the valuations made in the estate duty assessments are relevant and on the basis of the valuation report there has been undervaluation and so the order passed by the WTO was erroneous. The valuation made for estate duty purposes would not be available at the time of assessments and had no connection with the wealth- tax assessments. The following passage occurred which had been quoted with approval: ...There is no doubt that the revising authority may only call for the record of the order or the proceeding, and the record alone may be scrutinised for ascertaining the legality or propriety of an order or regularity of the proceeding. There is nothing in the Act that for passing an order in exercise of his revisional jurisdiction, if the revising authority is satisfied that the subordinate officer has committed an illegality or impropriety in the order or irregularity in the proceeding, he cannot make or direct any further enquiry.... So, the Supreme Court has laid down that in order to assume jurisdiction, i.e., at the stage of calling for records, the records alone may be scrutinised for ascertaining whether the order is prejudicial to revenue.


These are three appeals by assessee against order under section 25(2) of Wealth-tax Act, 1957 ('the Act') by Commissioner for assessment years 1979-80 to 1981-82. According to Commissioner, orders passed by WTO for these three years are erroneous and prejudicial to revenue insofar as three properties were undervalued. 2. assessee is individual. His father, late Rimma Raju had with him, among other properties, three properties which were (1) residential house at Tanuku, (2) one property at Gollapeta, and (3) another property which is used in business of Royal Printing Press. On death of Thimma Raju on 14-8- 1978, these properties were inherited by assessee. He had shown these properties in wealth-tax returns for assessment years 1979-80 onwards. valuation dates were 30th September of relevant accounting years. 3. These properties were assessed to wealth-tax for assessment years up to and including 1978-79 in hands of late Thimma Raju. These properties were subject to valuation by Valuation Officer at Vijayawada. In respect of t h e property called 'Royal Printing Press,' he had admitted value of Rs. 54,000 by his report dated 20-12-1979. residential house at Tanuku was valued by Valuation Officer on same report at Rs. 1,19,500. house at Gollapeta was valued at Rs. 10,000. These were valuations in hands of late Thimma Raju for assessment years 1975-76 to 1978-79. 4. WTO took up assessment of assessee for year 1979-80. He found that three properties inherited by assessee from Thimma Raju had already been valued by valuation cell. He adopted those values and completed assessments for three years under consideration. 5. estate duty assessment of estate left by late Thimma Raju was taken up later. That assessment was completed in 1985. In course of estate duty assessment proceedings, Assistant Controller had referred matter of valuation of these three properties to Valuation Officer again. Valuation Officer fixed value of Rs. 3,59,000 for residential house at Tanuku, Rs. 43,000 for house at Gollapeta and Rs. 1,55,000 for Royal Printing Press Building. 6. Commissioner came to finding that wealth-tax assessments for these three years made on 30-10-1982 were erroneous and prejudicial to revenue insofar as they were undervalued. He, therefore, initiated proceedings under section 25(2). assessee objected. It was submitted that WTO had completed assessments on basis of valuation report of department and, therefore, it cannot be said that order was erroneous. It was further submitted that estate duty valuation has no bearing on wealth-tax assessments. It was submitted that estate duty assessments have not been accepted and appeals are pending. We may at this stage state that appeals are still pending and have not been disposed of even today. Commissioner rejected these submissions and held that valuations made in estate duty assessments are relevant and on basis of valuation report there has been undervaluation and so order passed by WTO was erroneous. He set aside assessments and directed WTO to redo same keeping in mind valuation for estate duty purposes. 7. assessee is on appeals before us. Two points were made by Shri CVK Prasad for assessee. first point was that assessments were completed in 1982 whereas estate duty proceedings were taken up and completed only in 1965. valuation made for estate duty purposes would not be available at time of assessments and had no connection with wealth- tax assessments. Therefore, they are not part of assessment records and Commissioner cannot take that into consideration in giving finding that order is erroneous. second submission made was that WTO had taken value fixed by valuation cell and, therefore, that value must be accepted as correct value. 8. Shri Santhanam for department, however, submitted that both these contentions are not sound. He pointed out that first contention of Shri Prasad rested on decision of Calcutta High Court in case of Ganga Properties v. ITO [1979] 118 ITR 447. single Judge of Calcutta High Court has laid down that Commissioner should see records only as it stood at time of order was passed by ITO and any subsequent development has no relevance for section 263 of Income-tax Act, 1961. He submitted that this single Judge decision runs counter to decision of Supreme Court in case of Swastik Oil Mills Ltd. v. H.B. Munshi, Dy. CST AIR 1968 SC 843. Although this is case under sales tax law, he submitted that revisionary provisions in both sales tax and income-tax are in pari materia and, therefore, decision of Supreme Court has relevance. In that case, identical objection has been taken against revisionary order on ground that materials were not there in records. Court observed: " ...The first point urged by learned counsel was that, in exercise of revisional powers, Deputy Commissioner of Sales Tax, whether acting under Sales Tax Act of 1946, or of 1953, or of 1959, could only proceed to take action on basis of material already present on record and was not entitled to act on conjecture or to institute any enquiry so as to include additional material, in order to judge correctness of order sought to be revised. In support of this proposition, learned counsel referred us to decision of Andhra Pradesh High Court in State of Andhra Pradesh v. T.G. Lakshmaiah Setty & Sons [1961] 12 STC 663 (AP). In that case, Deputy Commissioner, in exercising revisional jurisdiction, was found by High Court to have based his assessment on guess-work, and Court held that 'this conjecture could not be justification for seeking to revise order of assessing authority. If Deputy Commissioner could, on material before him, find data for revising assessment, it was open to him to do so. It must be made clear that he has no jurisdiction to travel beyond record that is available to assessing authority and basis should be found on record already in existence.' We are unable to accept this principle laid down by that High Court as correct.... " On basis of above paragraph, Shri Santhanam submitted that Calcutta High Court's decision cannot be considered as laying down correct proposition in law. 9. We are unable to accept Shri Santhanam's submission. In revisionary, proceedings, whether it is income-tax or sales tax, there are two stages. first stage is assumption of jurisdiction. second stage is exercise of that jurisdiction. In order to assume jurisdiction, revising authority on going through records must come to finding that order passed is prejudicial to revenue. It is at this stage that decision of Calcutta High Court comes in. For purpose of assuming jurisdiction, Commissioner should not look into anything other than records. This position is accepted by Supreme Court also in same case cited by Shri Santhanam. In that case, they had referred to earlier decision in case of State of Kerala v. K.M. Charia Abdulla & Co. AIR 1965 SC 1585. following passage occurred which had been quoted with approval: " ...There is no doubt that revising authority may only call for record of order or proceeding, and record alone may be scrutinised for ascertaining legality or propriety of order or regularity of proceeding. But there is nothing in Act that for passing order in exercise of his revisional jurisdiction, if revising authority is satisfied that subordinate officer has committed illegality or impropriety in order or irregularity in proceeding, he cannot make or direct any further enquiry.... " So, Supreme Court has laid down that in order to assume jurisdiction, i.e., at stage of calling for records, records alone may be scrutinised for ascertaining whether order is prejudicial to revenue. Now, it is actually true that in passage relied on by Shri Santhanam which we have quoted in paragraph 8 above Supreme Court has said revising authority need not confine himself to records. But, this observation is with reference to proceedings after assumption of jurisdiction. That has made clear in another passage quoted from K.M. Charia Abdullah Co.'s case by Supreme Court in Swastik Oil Mills Ltd.'s case. That passage reads as follows: " 'It is, therefore, not right baldly to propound that, in passing order in exercise of his revisional jurisdiction, Deputy Commissioner must, in all cases, be restricted to record maintained by officer subordinate to him, and can never make enquiry outside that record'. While thus explaining scope of revisional power, Court also indicated limitations within which such power can be exercised, holding: 'It would not invest revising authority with power to launch upon enquiries at large so as either to trench upon powers which are expressly reserved by Act or by Rules to other authorities or to ignore limitations inherent in exercise of those powers. For instance, power to reassess escaped turnover is primarily vested by rule 17 in assessing officer and is to be exercised subject to certain limitations, and revising authority will not be competent to make enquiry for reassessing taxpayer. Similarly, power to make best judgment assessment is vested by section 9(2)(b) in assessing authority and has to be exercised in manner provided. It would not be open to revising authority to assume that power'. " Thus, passage cited by Shri Santhanam refers proceedings after initial jurisdiction was validly exercised. Thereafter, there is no fetter on Commissioner to look into any other matter. 10. We in this case are concerned with assumption of jurisdiction. For that purpose, we must see whether Commissioner has materials to show that order of WTO is erroneous and prejudicial to revenue. records show that WTO had adopted value given by valuation cell itself. Therefore, WTO was guided by experts in valuation. It is difficult to hold that such valuation is erroneous without any other materials in records. It is true that report refers to valuation pertaining to earlier assessment years. However, there is binding circular which requires WTO not to disturb valuation of immovable properties for two or three years. 11. If these are kept in mind it will be seen that assumption of jurisdiction by Commissioner was not valid. We will, therefore, set aside order under section 25(2) and allow appeals. *** M. HARICHANDRA PRASAD v. WEALTH-TAX OFFICER
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