B.P. Jeevan Reddy, C.J. - (1.) COMMON questions are raised in these two writ petitions. They can be disposed of by a common order. For the sake of convenience, we shall refer to the facts in the writ petition filed by Shri Govind Hari Singhania. The attack is upon the validity of two notices issued by the Assistant Commissioner of Wealth-tax (1st respondent) on February 18, 1991, and March 2, 1991. It is further prayed that a direction be issued to respondent No. 1 not to proceed with the determination of the wealth of the petitioner on the basis of and in accordance with the said letters/notices. The matter arises under the wealth-tax assessment proceedings relating to the assessment year 1987-88 for which the relevant valuation date is said to be March 31, 1987.
(2.) THE petitioner was a partner in a partnership firm, Juggilal Kamlapat Bankers, till March 18, 1987. THE said firm was dissolved with effect from March 19, 1987, under a deed of dissolution dated March 26, 1987. THE assets of the partnership were distributed among the various partners. THE petitioner got a 1/9th share and, in lieu thereof, certain properties including certain house properties were allotted to him. On August 17, 1987, the petitioner filed a return for the assessment year 1987-88 disclosing a net wealth of Rs. 1,17,66,109. His assets included shares in joint stock companies, compulsory deposits, agricultural assets and immovable properties, including certain house properties which, the petitioner says, are being used for his own residential purposes. Difference of opinion arose between the Wealth-tax Officer and the assessee with respect to the method to be adopted for valuing the houses under the personal occupation of the assessee. (Certain others disputes also arose with which we are not concerned in these writ petitions). We shall state the facts relating to the said dispute. By his letter dated February 18, 1991, the Assistant Commissioner informed the petitioner as follows ; "Sub :--Wealth-tax assessment year 1987-88. In the return filed by you for the aforesaid assessment year, you have shown the value of immovable properties at Rs. 92,078 being l/9th share allotted to you on the dissolution of the firm, on the basis of the registered valuer's reports. You are aware that, in the wealth-tax assessments for the earlier years, while valuing the partners' interest in the said firm, the Department has sought to value the said immovable properties on the basis of their market value. Please show cause as to why the method and procedure of valuation sought to be followed by the Department for the earlier years should not be followed in completing your assessment well. Please submit your reply by February 25, 1991." To this, the petitioner replied stating that the valuation of the partners' interest in the said firm for the previous years has been challenged by the petitioner, among others, in several High Courts by way of writ petitions which are pending disposal in those courts. In any event, said the petitioner, since, on the valuation date relevant to the assessment year 1987-88, the said firm was not existing and because the properties have become the separate properties of the petitioner-assessee, they must be valued in accordance with Schedule III to the Wealth-tax Act. The petitioner submitted that though introduced by the 1989 Amendment Act with effect from April 1, 1989, the said Schedule is applicable even to pending proceedings relating to earlier assessment years and has to be followed. Alternatively, he submitted that the house properties have to be valued according to rule 1BB of the Wealth-tax Rules, whether they are rented out to tenants or occupied by the owner himself and that the valuation disclosed by the petitioner in his return is the valuation arrived at by the registered valuers in accordance with the said rule. This letter of the petitioner is dated February 25, 1991. This was replied to by the Assistant Commissioner on March 2, 1991. The said letter reads as follows : "Ref.--Wealth-tax assessment year 1987-88. Refer your letter dated February 25, 1991. Your submissions as contained in your letter dated February 25, 1991, are not acceptable. The provisions of Schedule III are applicable from April 1, 1989, i.e., assessment year 1989-90, and not for the earlier assessment years pending on the said date. You are, therefore, requested to attend this office on March 18, 1991, otherwise your case will be decided ex parte." It is then that the petitioner came forward with the present writ petition.
(3.) THE main contention urged by Sri Sudhir Chandra, learned counsel appearing for the petitioner, is that the amendments effected in the Wealth-tax Act by the Direct Tax Laws (Amendment) Act, 1989, particularly those relating to the method of valuation of immovable properties, are applicable even to pending proceedings pertaining to previous assessment years. He submits that, prior to the said amendment Act, immovable properties had to be valued in accordance with rules framed by the Central Board of Direct Taxes under Section 46 of the Act. Rule 1BB of the said rules prescribed the method to be followed in valuing house properties, both let to tenants and those occupied by the owner himself. THE said rules have been omitted by the said amendment Act, which has introduced a more elaborate and qualitatively different rule in Schedule III to the Act itself. Section 7 is also recast. Since Section 7 and the said rules constitute machinery provisions and are procedural in nature, they apply to pending proceedings as well. But the Assistant Commissioner has taken the view that the said rules in Schedule III apply only on and from April 1, 1989, and not to assessments relating to previous years. This is wrong. If Rule 1BB is applied and if the immovable properties owned by the petitioner are valued in accordance with section 7, the petitioner would suffer grave prejudice and would become liable for a huge tax amount. Learned counsel relied upon the decisions of the Allahabad, Gujarat and Calcutta High Courts in CWT v. Laxmipat Singhania [1978] 111 ITR 272, CWT v. Shri Kasturbhai Mayabhai [1987] 164 ITR 107 and Smt. Manjushree Biswas v. CWT [1988] 171 ITR 348, respectively, in support of the proposition that Section 7 and the said rules in Schedule III, being machinery provisions and procedural in nature, will have retrospective effect. It is on this basis that learned counsel requests that the impugned letters/notices issued by respondent No. 1 be quashed and he be directed to make assessment in accordance with Schedule III to the Act. Section 7 of the Act, before its amendment in 1989, in so far as it is relevant, read as follows : "7. (1) Subject to any rules made in this behalf, the value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Assessing Officer, it would fetch if sold in the open market on the valuation date." ;