Decided on July 05,1994



G. Krishnamurthy, President - (1.) IN this appeal filed by the assessee Dr. Gopal Krishan Jaiswal, the sole question that arose for our consideration is the valuation to be placed upon the gifted properties. This assessment relates to the gift-tax assessment year 1990-91.
(2.) The assessee made a gift of a flat bearing No. 42 situate on the 4th floor of Tower "L' Maker Towers and a garage No. 6 at Cuffee Parade, G.D. Somani Marg, Bombay in Maker Tower 'L' Co-op. Housing Society Ltd. to three different donees, who happened to be his sister, her son and her husband. This gift was made on 27-3-1990 under a regular registered deed of gift. Thereafter the assessee filed on 8-5-1991 a return of gift declaring the net value of the taxable gift at Rs. 2,12,000. The Gift Tax Officer on taking up the assessment came to the view that the property gifted was valued at a very low price and that its fair market value must be far higher than disclosed. Acting under Section 15(6) of the Gift-tax Act, the Gift-tax Officer referred the valuation of this property to the Valuation Officer. The Valuation Officer valued the fair market value of this property on the date of gift at Rs. 60.93 lakhs. The assessee was then given an opportunity to show cause why the value adopted by the Valuation Officer be not regarded as the fair market value of the property for the purpose of assessment. The assessee objected to the adoption of this value. The first objection was that this property purchased in 1976 for Rs. 1,85,000 was rented to those persons long prior to the date of gift and the rent received was assessed to income-tax accepting it as fair rent and such being the case, the rent capitalisation method provided for in Schedule II to the Gift-tax Act of 1958 read with Rule 3 of Schedule III of the Wealth-tax Act, 1957 should be adopted. So done the value returned by the assessee would be the correct value in accordance with law and that should not be jettisoned. Secondly, certain technical defects were pointed out in the valuation report. The Gift-tax Officer refused to accept the rent capitalisation method on the ground that the property shown to have been rented out to the donees was at a very nominal rent as compared to the market rent for such an accommodation in such an area and it was on account of the close relationship of the donees with the assessee that a very lower rent was charged and that should not be taken as the normal rent. Though the assessee filed a valuation report by a registered valuer, that was found to be defective and therefore reference was made under Sub-section (6) of Section 15 of the Gift-tax Act to the Valuation Officer. He therefore held that the property was rightly valued by the Valuation Officer under Rule 20 of Schedule III of the Wealth-tax Act, 1957 as applied to the gift-tax proceedings. Turning down the objections of the assessee, the Gift-tax Officer fixed the valuation of the property at Rs. 60.93 lakhs and on that basis levied the gift-tax. Aggrieved by this valuation the assessee appealed to the Commissioner (A) and repeated the same contentions. The Commissioner (A) with a view to satisfy himself about the veracity of the contentions, namely, whether the annual rent shown by the assessee was genuine or collusive, made a reference to the Investigating Wing Bombay to ascertain the facts and report. The Investigating Wing made enquiries and submitted a report to the Commissioner (A) pointing out that flat No. 32, which was of the same area as that of the gifted property was let out on a monthly lease of Rs. 14,000, that the local Estate Agent, which was adjacent to the gifted property, pointed out that the flats in Maker Tower Society were fetching a monthly rent of Rs. 40,000 to Rs. 50,000 and that the Manager of Maker Tower 'L' Society, namely, Mr. Raju stated that as per the bye-laws of the Society a member of the society has to pay non-occupancy charges @ Rs. 2 per month per sq. ft. if he let out his flat, which in the case of flat No. 42 would work out to Rs. 3,600 per month. On the basis of this report the Commissioner (A) concluded that the assessee was not charging the market rent and that the rent charged was concessional tainted by relationship and was collusive. He also came to the conclusion that, the property was let out without informing the Maker Towers Society as per rules, He therefore dismissed the rent charged as reasonable and also rejected the contention that the flat should be valued on the rent capitalisation method as per Rule 3 of Schedule III of the Wealth-tax Act, 1957. The assessee was given an opportunity to explain the case. The assessee submitted that the property was let out since the assessment year 1983-84 and the income was being taxed in the income-tax assessment as fair rent and that the present suggestion terms and went against the assessment records of the department, that the receipt alleged to have been issued by Shri Kapoor charging a rent of Rs. 14,000 per month for flat No. 32 was never enclosed even though it was said to have been enclosed. The Manager of the Maker Towers Society was never allowed to be examined by the assessee to explain his statements. Lastly the valuation cell had valued the market rate without any basis, particularly the past record of the letting out of this property but took into account the alleged market rates available on the date of gift ignoring the earlier position.
(3.) THE Commissioner (A) dismissed these submissions as of no consequence pointing out that if the assessee was not given the receipt issued by Shri Kapoor, it. was his duty to come to the Income-tax Office and collect it and to see when they were verifiable facts and without referring to the other points, held that under Rules 3 to 7 of the Schedule III of the Wealth-tax Act the correct value of the gifted property could not be worked out. Applying the provisions of Rule 8 of the same Schedule III of the Wealth-tax Act, he invoked the provisions of Rule 20 of Schedule III of the Wealth-tax Act, 1957 to find out the market value of the property on estimate basis and then justified the adoption of the fair market value of the property at Rs. 60.93 lakhs. Grievously aggrieved by the valuation placed upon this property, the assessee has come up in further appeal before us.;

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