Satish Chandra, C.J. - (1.) THE assessee is an individual. For the assessment years 1969-70 and 1970-71, the original assessment was completed on 26th October, 1970. THE officer reopened them on the ground that certain wealth had escaped assessment. THE assessee filed returns under protest. THE WTO passed a fresh assessment order on 9th March, 1973. In this he, inter alia, enhanced the value of shares of M.P. Sugar Mills owned by the assessee. He adopted the method prescribed by Rule 1D of the W.T. Rules in valuing these shares. THE WTO also included some assets which had been left out in the original assessment.
(2.) THE assessee went up in appeal. THE appeal was allowed in part. THE assessee then took the matter to the Tribunal. The Tribunal repelled the submission of the assessee, that after the assessment has been reopened the officer was confined to the items for assessing which the proceedings had been initiated. It was held that he was competent to assess even other items of assets, which had escaped assessment earlier. In respect of the valuation of the shares, the Tribunal held that the WTO had no fresh information in his possession, on the basis of which it could be said that wealth had escaped assessment on account of under-calculation of the shares. On the merits the Tribunal agreed with the assessee's submission that the depreciation reserve was liable to be added to the liabilities while computing the valuation of the shares under Sub-clause (c) of Clause(2) of the second Explanation to Rule ID, W.T, Rules. On this view, the Tribunal directed the WTO to correct the amount of the liability.
(3.) AT the instance of the CWT, the Tribunal has referred the following two questions for our opinion: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Wealth-tax Officer was not competent to revalue the shares of M.P. Sugar Mills in the reassessment proceedings ? 2. If the answer to question No. 1 is in the negative, whether the Tribunal was correct in holding that the initial depreciation reserve could not be treated as a reserve while computing the value of the shares under Rule 1D of the Wealth-tax Rules ?" We shall take up the second question first. Rule 1D lays down the method of computing the market value of unquoted equity shares of any company. The second Explanation provides the kinds of amounts shown as assets in the balance-sheet which are to be disregarded. The second clause of this Explanation categorises the kinds of liabilities in the balance-sheet which are not to be treated as liabilities for the purpose of this computation. Clause (c) mentions : "(c) reserves, by whatever name called, other than those set apart towards depreciation." ;