- (1.) THIS is a reference under Section 27(1) at the instance of the assessee and has been made by the Income-tax Appellate Tribunal, Allahabad, The Tribunal has referred the following questions stated to be of law and to arise out of its order dated October 11, 1990, passed in W. T. A. No. 27 (All) of 1990, for the assessment year 1983-84. "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in restoring the order of the Assessing Officer estimating the value of the property at Rs. 3 lakhs ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in applying the provisions of law contained in Sub-Rule (5) of Rule 1BB of the Wealth-tax Rules, 1957 ?"
(2.) WE have heard Sri Shambhu Chopra, learned counsel for the Commissioner. No one has appeared on behalf of the assessee. The facts of the case are that the assessee was the owner of a house property bearing Municipal No. 735 and situate in Mohalla Katra in the town of Allahabad. The assessee declared its value by determining the same by applying a multiplier of 20 to its annual letting value, which was shown at Rs. 1,496. The Assessing Officer, however, noticed that the said property was sold for Rs. 3 lakhs on February 28, 1984, while the valuation date for the year under consideration was March 31, 1983. The assessee's contention was that the value of the property should be determined by applying Rule 1BB of the Wealth-tax Rules, 1957. The Assessing Officer took the view that if the value is determined under Rule 1BB, the value of the property would come to Rs. 13,000 only and it will be absurd to accept this amount when the property was sold for Rs. 3 lakhs. The assessee appealed to the Commissioner of Wealth-tax (Appeals), who took the view that Rule 1BB was applicable in this case and, therefore, he directed that the, value declared by the assessee, which appears to have been arrived at under Rule 1BB, be adopted. The Assessing Officer then appealed to the Tribunal which reversed the appellate order and held that because of Sub-Rule (5) of Rule 1BB the value could be determined in the manner adopted by the Assessing Officer. It is against this view of the Tribunal that the assessee has got this reference made. Learned standing counsel for the Commissioner, Sri Shambhu Chopra stated that under Section 7 of the Wealth-tax Act, 1957, an asset has to be valued at the price which in the opinion of the Assessing Officer it could fetch if sold in the open market on the valuation date and that the subsequent sale made by the assessee for Rs. 3 lakhs was a relevant market value for adopting that value on the valuation date and that it would be anomalous to adopt the value arrived at by applying Rule 1BB which was disproportionately low.
(3.) WE have given our full consideration to the argument of learned counsel for the Commissioner as well as the view expressed by the Appellate Tribunal. Section 7 of the WEalth-tax Act provides for the method of the valuation for assessment and it begins with the words "subject to any Rules made in this behalf." It means that the value has to be determined according to the Rules. Various Rules have been made under Section 7 of the Act, which are contained in the WEalth-tax Rules, 1957, for the purpose of determination of the market value of various types of properties. Rule 1B describes the manner of valuation of life interest. Rule 1BB describes the method for valuation of immovable properties, Rule 1C made provision for determining the market value of unquoted preference shares. Rule 1D made provision for valuation of unquoted equity shares. Rule 2 provides for the valuation of interest in a partnership firm or association and there are certain other Rules also dealing with the valuation of other properties. Sub-Rule (1) of Rule 1BB provides "for the purposes of Sub-section (1) of Section 7, the market value of a house which is wholly or mainly used for residential purposes shall be the aggregate of the following amounts." Thus, the Rule uses the word "shall". Similarly in all other Rules mentioned above and contained in the Wealth-tax Rules, 1957, the word "shall" has been used meaning thereby that the Rule is mandatory and must be applied in all cases unless otherwise permitted. In CWT v. Ganga Pershad Kedia [1990] 185 1TR 30 a Division Bench of the Delhi High Court had held that if Rule 1BB is applicable then it is immaterial as to what is the value arrived at by the valuation cell, meaning thereby that if Rule IBS applied no other method of valuation can be adopted. Dealing with the provisions of Rule 1D which provides for the valuation of unquoted equity shares, the Supreme Court in Bharal Hari Singhania v. CWT [1994] 207 ITR 1, observed that the use of the word "shall" in Rule 1D prima facie indicates its mandatory character. The view of the Supreme Court would apply equally to Rule 1BB and other Rules which use the word "shall".;