P. D. DESAI, J. -
(1.) : The petitioner is the legal representative of one B. T. Kharawala who died on March 28, 1974. B. T. Kharawala owned a piece or parcel of land bearing S. No. 340-341 (Part) situate in village Ghodasar, Taluka City, District Ahmedabad. Sometime in the year 1960, B. T. Kharawala constructed factory sheds on the said piece or parcel of land. In or about 1961, the factory sheds were separately let to Jeeka Industries, a partnership firm, and M/s Bhagwandas Tejaji Kharawala Pvt. Ltd. The rent per mensem was Rs. 600 in the case of Jeeka Industries and Rs. 300 in the case of Bhagwandas Tejaji Kharawala Pvt. Ltd.
(2.) THE cost of the land and superstructures was Rs. 1,70,000 as per the entries made in the books of account maintained by B. T. Kharawala. In the course of proceedings for his assessment to wealth-tax up to the asst. yr. 1967-68, the net wealth was computed on the basis of the valuation of the said asset as per the balance-sheet. In the course of proceedings for his assessment to income-tax, the taxable income was determined by including therein the aforesaid rental income received from the said property.
In the year 1967, B. T. Kharawala obtained the valuation report of an approved valuer in respect of the said property. The valuer, in the course of his report dated October 10, 1968, estimated the market value of the property at Rs. 1,21,000 as in November, 1967. The valuation was arrived at on the basis of the rental yield. In the course of proceedings for assessment to wealth-tax for the asst. yrs. 1968-69, 1969-70 and 1970-71, the market value as determined by the valuer was accepted as the value of the said asset and the net wealth was computed on the said basis. In the year 1971, B. T. Kharawala once again got the said property valued by an approved valuer and in the valuation report dated November 15, 1971, the market value was estimated to be Rs. 1,25,000 as on October 30, 1970. The said valuation was also arrived at on the basis of the rental yield. In the course of proceedings for assessment to wealth-tax for the asst. yrs. 1911-72 and 1972-73, the market value as determined by the approved valuer was accepted and the net wealth was computed on the said basis.
On June 9, 1972, B. T. Kharawala sold the said property for a total consideration of Rs. 1,50,000 to the two sitting tenants, namely, Jeeka Industries and M/s Bhagwandas Tejaji Kharawala Pvt. Ltd. The property was conveyed to the two vendees under two separate sale deeds. For the property sold to Jeeka Industries, the consideration was Rs. 70,000 and for that sold to M/s Bhagwanji Tejaji Kharawala Pvt. Ltd., the consideration was Rs. 80,000.
(3.) IN the course of proceedings for assessment to income-tax for the asst. yr. 1973-74, B. T. Kharawala claimed that the net result of the computation under the head "Capital gains" arising on the sale of the said property was a loss in the sum of Rs. 40,000. The claim was advanced on the footing that the cost of acquisition of the said property and that of improvements made thereon was Rs. 1,90,040, whereas the consideration received upon the transfer of the property was Rs. 1,50,000. The difference between the two amounts was claimed as a loss under the head " Capital gains". Before the assessment could be completed, B. T. Kharawala died and, therefore, the assessment proceedings were continued against the petitioner as the legal representative of the deceased. IN the course of a communication dated March 11, 1976, addressed by the petitioner to the ITO in charge of the assessment proceedings, the petitioner explained the basis on which the claim for loss in the sum of Rs. 40,040 under the head "Capital gain" was put forward on behalf of the assessee. The ITO, by his assessment order dated March 15, 1976, accepted the claim advanced on behalf of the assessee and completed the assessment on the footing that the net result of the computation under the head "Capital gains" was a loss in the sum of Rs. 40,040.
It appears that meanwhile, for the purpose of making assessment under the WT Act, 1957, the WTO had referred the question of valuation of the property in question to the Valuation Officer under s. 16A of the said Act. The Valuation Officer issued a notice dated August 25, 1976, to the petitioner as the legal representative of B. T. Kharawala to show cause why the value of the property as on November 2, 1967 (valuation date for the asst. yr. 1968-69) should not be taken to be Rs. 5,08,000 in place and stead of Rs. 1,21,000 as per the report of the approved valuer submitted to the WTO in the course of the proceedings for assessment to wealth-tax for the asst. yr. 1968- 69. The petitioner, in the course of his reply dated September 6, 1976, set out his objections to the proposed valuation. The Valuation Officer, however, estimated the fair market value of the said property at Rs. 4,49,000 as on November 2, 1967, in his report dated October 6, 1976. The valuation was arrived at on the basis of the land and building method as against the rental yield method on the basis of which the valuation was earlier determined by the approved valuer. Be it stated at this stage that the proceedings for assessment to wealth-tax for the assessment years 1969-70, 1970-71, 1971-72 and 1972-73 were still pending when the Valuation Officer made his report dated October 6, 1976. Even then the net wealth for those assessment years was computed by the assessment orders made, on January 28, 1977, on the basis that the fair market value of the property on the relevant dates was as per the concerned valuation report of the approved valuer, that is, Rs. 1,21,000 or Rs. 1,25,000, as the case may be.;