S. Venkataraman, J. - (1.) AT the instance of the Revenue, the Tribunal has referred the following two questions of law arising from its order under section 27(1) of the Wealth-tax Act, 1957 ("the Act", for short), for the opinion of this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in cancelling the order passed by the Commissioner of Wealth-tax under section 25(2) of the Wealth-tax and set aside the orders of the Wealth-tax Officer on the ground that the order is erroneous and prejudicial to the interests of the Revenue ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the Commissioner of Wealth-tax cannot set aside the assessment and issue directions to value the property by capitalisation of rent when the properties were leased to tenants for rent ?"
(2.) THE facts leading to the above reference are as hereunder : THE assessee is a Hindu undivided family which owned land measuring 1 acre 6 guntas. THE assessee had put up industrial sheds on this plot and leased them to tenants. THE total net rent receivable by the assessee in respect of the sheds let out to the tenants was Rs. 3,24,454 per year. For the purpose of wealth-tax assessment for the year 1984-85, the assessee valued the land at Rs. 1,45,000 on the basis of a report of an approved valuer and the value of the constructions was taken at the written down value. THE total valuation of the assets declared was Rs. 10,51,993. THE Wealth-tax Officer accepted this valuation and completed the assessment under section 16(3) of the Act. THE Commissioner of Wealth-tax was of the view that the said assessment was erroneous and prejudicial to the interests of the Revenue. He pointed out in his order that the gross rental collections in respect of the sheds let our was as much as Rs. 4,00,529 that even if 1/6th of this amount was deducted towards repairs after deduction of municipal taxes, the net rent would come to Rs. 3,24,454; that, even if the multiplier '10' is adopted, the value of the assets would work out to Rs. 32,42,540. He was of the opinion that the rent capitalisation method was the proper method for determining the market value. He, therefore, revised the order of the Wealth-tax Officer under section 25(2) of the Act and set aside the assessment and directed the Wealth-tax Officer to recompute the total wealth by adopting the capitalisation method. THE assessee challenged the order of the Commissioner before the Tribunal. THE Tribunal held that the Wealth-tax Officer had the discretion to adopt one of the various methods available for valuing a property, that if he had adopted one particular method of valuation in preference to others, the assessment so made would not erroneous. THE Tribunal relied on the decision of the Supreme Court in CIT v. Simon Carves Ltd. in support of the above conclusion. In this view of the matter, the Tribunal set aside the revisional order passed by the Commissioner. THE Revenue, aggrieved by the order of the Tribunal, has sought for reference of the above questions of law for the opinion of this court. The learned Government Advocate strenuously contended that, with regard to the valuation of buildings which are fetching rent or capable of fetching rent if let out, the well-recognised method is the rent capitalisation method; that this court, while laying down this principle in CWT v. V. C. Ramachandran [1966] 60 ITR 103 and in Rajasekhara v. Chairman, CITB, AIR 1957 Mys 20, has further held that, in such a case, valuing the land the building separately and adding the value of the one to the other does not furnish a reliable estimate of the property; that even the Supreme Court in State of Kerala v. P. P. Hassan Koya, AIR 1968 SC 1201, has laid down the same principle and that as the Wealth-tax Officer has accepted the valuation made by adopting the land and building method, completely ignoring the rent fetched by the property, his order is erroneous and is prejudicial to the Revenue. According to him, the Tribunal was not correct in holding that the Wealth-tax Officer had the discretion to adopt any of the several methods available for valuing the property and that adoption of one method by him would not render his order erroneous. He also contended that the Department has issued a circular regarding the method to be adopted in valuing land with building; that the circular is binding on the Wealth-tax Officer and that as he has not followed the circular, for that reason also his order is erroneous. Learned counsel for the assessee contended that the rent capitalisation method for purpose of valuation can be adopted only in cases of pucca building in development urban area to which rent restriction laws apply; that in the present case, the property consists of only industrial sheds and not regular buildings and that they were also not subject to the Rent Control Act having been built recently and as such the rent capitalisation method could not have been applied. He further contended that, under section 7 of the Act, the Wealth-tax Officer has a discretion to apply any one of the methods of valuation and that as he has adopted the land and building method and fixed the value under section 16(3) of the Act, his order cannot be said to be erroneous. He pressed into service the decision in CIT v. Simon Carves Ltd. , which is also referred to by the Tribunal, in support of the contention that, when the officer in exercise of his discretion, adopts one of the methods available to value a property, that order cannot be said to be erroneous merely because if he had adopted another method, the value would have been more with regard to the Departmental circular, he submitted that, firstly, the circular is not mandatory in terms, that it only lays down certain guidelines and that as such merely because the Assessing Officer has not followed it, his order cannot be said to be erroneous and that, secondly, as the Commissioner had not set aside the order of the Assessing Officer on the ground that he had not followed the Departmental circular, it is not open to the Department to now make out a new ground to sustain the order of the Commissioner.
(3.) BEFORE considering the question as to whether the Assessing Officer had committed any error in adopting the land and building method to determine the market value of the property, we may deal with the contention of the Government Advocate that, because the Assessing Officer has failed to follow the method laid down in the Departmental circular, the order is vitiated. The circular relied upon by the Government is extracted in CWT v. V. C. Ramachandran [1966] 60 ITR 103 (Mys), at page 110. That circular reads as hereunder : "The value of lands and buildings should be estimated with due regard to the nature, size and locality of the property, the amenities available and the price prevailing for similar assets in the same or in the neighbourhood of that locality. Where the valuer is not easily ascertainable in this manner, the Wealth-tax Officer may adopt the capital value of the property determined by the appropriate authority in the latest assessment for purposes of property taxation, under the laws and regulations relating to municipalities and municipal corporations. However, where the municipal valuation is prima facie too low having in view the rents actually received, or where an assessment of capital value is not made by a municipality, or the property is located in an area where there is no municipality, the Wealth-tax Officer may estimate the reasonable annual value of the property and determine its capital value as a multiple, say 20 times, of such annual value." It is only for the first time during arguments that the revenue has made a reference to the circular. The Commissioner has not held that he had order of the Wealth-tax Officer to be erroneous on the ground that he had not followed the Departmental circular. The Tribunal, in the appeal before it, could have only considered the question whether the Commissioner's order could be sustained on the ground on which it was made. It is could not be sustained on the ground on which it was made, the Tribunal, in the assessee's appeal, could not have sustained the Commissioner's order on some other ground. In this connection, we may refer to the decision in CIT v. L. F. D'silva . The court was dealing with the provisions of section 263 of the Income-tax Act which are similar to section 25 of the Wealth-tax Act and the power of the Appellate Tribunal under section 253(1)(c) of the Income-tax Act corresponding to section 26 of the Wealth-tax Act. This court has agreed with the following principles laid down in CIT v. Jagadhri Electric Supply and Industrial Co. [1983] 140 ITR 490, 502 (P andamp; H) (at page 555) : "The jurisdiction vested in the Commissioner under section 263(1) one of the Act is of a special nature or, in other words, the Commissioner has the exclusive jurisdiction under the Act to revise the order of the Income tax Officer, if he considers that any order passed by him was erroneous in so far as it was prejudicial to the interests of the Revenue. Before doing so, he is also required to give an opportunity of being heard to the assessee. If after hearing the assessee in pursuance of the notice issued by him under section 263(1) of the Act, he is not satisfied, he may pass the necessary orders. Of course, the order thus passed will contain the grounds for holding the order of the Income-tax Officer to be erroneous, as contemplated under section 263(1) of the Act. Feeling aggrieved thereby, the assessee may file an appeal against the same, as provided under section 253(1)(c) of the Act. In the memorandum of appeal, the assessee is supposed to attack the order of the Commissioner and to challenge the grounds for decision given by him in his order. At the time of the hearing, if the assessee can satisfy the Tribunal that the grounds for decision given in the order by the Commissioner are wrong on facts or are not tenable in law, the Tribunal has no option, but to accept the appeal and to set aside the order of the Commissioner. The Tribunal cannot uphold the order of the Commissioner on any other ground which in its opinion, was available to the Commissioner as well. If the Tribunal is allowed to find out the ground available to the Commissioner to pass an order under section 263(1) of the Act, then, it will amount to a sharing of the exclusive jurisdiction vested in the Commissioner, which is not warranted under the Act. It is all the more so, because the Revenue has not been given any right of appeal under Act against an order of the Commissioner under section 263(1) of the Act. In case he proceeds thereunder after hearing the assessee in pursuance of the notice given by him, then the appeal filed by the assessee under section 253(1)(c) of the Act cannot be treated on the same footing as an appeal against the order of the Appellate Assistant Commissioner passed in assessment proceedings, where both the parties have been given the right of appeal. In this view of the matter, the argument raised on behalf of the Revenue that, in appeal, the Tribunal may uphold the order appealed against on grounds other than those taken by the Commissioner in his order, is not tenable. Under section 263 of the Act, it is only the Commissioner who has been authorised to proceed in the matter and, therefore, it is his satisfaction according to which he may pass necessary orders thereunder in accordance with law. If the grounds which were available to him at the time of the passing of the order do not find a mention in his order appealed against, then it will be deemed that he rejected those grounds for the purpose of any action under section 263(1) of the Act......." ;