AJIT K.SENGUPTA, J. - (1.) IN this application under S. 27(3) of the WT Act, 1957 ('the Act'), the following questions have been raised for the asst yr. 1982-83: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the value of unquoted shares, could be determined either by applying r. 1D of The WT Rules, 1957 or by the yield method and not in accordance with the mandatory provisions of r. 1D, ibid. alone? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the wealth-tax assessment order dt. 10 March, 1987 passed by the AO for the asst. yr. 1982- 83 was neither erroneous nor prejudicial to the interest of the Revenue? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order under S. 25(2) of the WT Act, 1957 dt. 15/23th March, 1989 passed by the CWT (Central-I), Calcutta?" It is necessary to state the facts of appreciate the contentions raised.
(2.) THE WTO in the assessment order dt. 10th March, 1987 has observed as follows: "The assessee has shown the value of unquoted share in respect of one Indian company at Rs. 38, 389. In respect of other five companies the value has been shown at Rs. Nil. The assessee has furnished fair market value of unquoted share in respect of five companies on the basis of profit- earning method. The value of unquoted shares is to be determined under S. 7(1) of the WT Act, 1957 r/w r. 1D which is mandatory. I, therefore, adopted the value of unquoted shares at Rs. 91,685 as in last year for want on any break-up value under r. 1D." Net Wealth is computed as below: Movable property: (1) Shares in Indian companies: Against the said order of assessment an appal was preferred by the assessee before AAC, The order of the AAC dt. 11 Jan., 1988 is as follows: "Ground No. 3 relates to the valuation of unquoted equity shares at Rs. 91,685 against the appellant's valuation at Rs. 38,389. The appellant applied the yield method and the ITO applied the break-up value method as per r. 1D of the WT Rules, 1957. The appellant relied on the case laws of Mahadeo Jallan and Smt. Kusumben D. Mahadevia. I have already held in my orders in appellant's other group cases that the above cases are not applicable in present case, Mahadeo Jallan case relates to asst. yr. 1964-65 and the r. 1D come into existence w.e.f. 6th Oct., 1967. Present case is for asst. yr. 1982-83. Kusumben D. Mahadevia case relates to investment company. Rule 1D is not applicable in investment company. Present case is not related to investment company. Thus, the Kusumben D. mahadevia case also becomes irrelevant. Thus, I uphold WTO's order in applying r. 1D. His order is confirmed on this point. However, he will reconsider the latest balance sheet while recomputing the break-up value properly after giving appellant a due opportunity of being heard." Thereafter, no further appeal was preferred by the assessee. (a) Unquoted shares as discussed Rs. 91,685 . (b) Quoted shares as per statement filed Rs. 5,112 Rs. 96,797
(3.) ON 3rd March, 1989, the CWT issued notice under S. 25(2) of the Act for the asst yr. 1982-83. In the said notice he observed as follows: "....On scrutiny of your wealth-tax assessment records, it has been seen that in the assessment order for the asst. yr. 1982-83 in your case, the value of 10 shares of Amin Chand Payarelal (P) Ltd. held by you was assessed at Rs. nil. It is seen that the valuation of shares of Amin Chand Payarelal (P) Ltd. was not correctly made for the purpose of said assessment made by the WTO under S. 16(3) of the WT Act, 1957 passed on 10th March, 1987. The proper method of valuation of shares of Amin Chand Payarelal (P) Ltd. should be the average of the value of assets of the wholly-owned subsidiary companies as per assets backing methods and the value of the assets of the holding as per yield method. This method of valuation finds support from para 519.7 of Taxman's Direct Taxes Law and Practice By Dr. Vinod Kr. Singhania 1988-89, pp. 968 and 969. According to this method the value of each share of Amin Chand Payarelal (P) Ltd. works out to Rs. 9,919 as per calculation given below: (Rs. 9,00,59,525 + Nil) divided by 4540 = Rs. 4,50,29,762 divided by 4540 = Rs. 9,918,45 say Rs. 9,918." The method by which the said amount of Rs. 9,99,59,525 has been worked out was also mentioned in the said show-cause notice. Thereafter the CWT in the said notice stated as follows: "The nil value as shown in para 3 above represents the value of the shares of Amin Chand Payarelal (P) Ltd. as per yield method. Since the value of 10 shares of Amin Chand Payarelal (P) Ltd has not been assessed properly in the wealth-tax assessment order for the asst. yr. 1982-83 has been erroneous insofar as it is prejudicial to the interest of the Revenue. After hearing the assessee on 15th/23rd March, 1989, the CWT passed an order under S. 25(3) of the Act. In the said order the CWT indicated reasons why he initiated proceeding under S. 25(2)." He mentioned in the said order, inter alia, as follows: "On going through the wealth-tax assessment record of the assessee it has been seen that the wealth-tax assessment order for the asst. yr. 1982-83 in the case of the assessee was passed on 10th March, 1987 under S. 16(3) of the WT Act, 1957, It has further been noticed that the assessee had 10 shares of Amin Chand Payarelal (P) Ltd. which had wholly-owned subsidiary company styled as Park Hotal (P) Ltd. which was again the holding company in respect of its wholly-owned subsidiary company styled as Flury's confectionery (P) Ltd.. Flury's confectionery (P) Ltd. in turn was the holding company in respect of its wholly-owned subsidiary company styled as Aruna Estate (P) Ltd. In the wealth-tax assessment for the asst. yr. 1982-83 the value of 10 shares of Amin Chand Payarelal (P) Ltd. held by the assessee was taken at "Nil" as computed by the assessee in the statement attached to the Return of wealth for the asst. yr. 1982-83. It has been seen that the vlue of 10 shares of Amin Chand Payarelal (P) Ltd. Should not be "Nil". On the contrary, the value of its shares ought to have been determined with reference to the value of assets of the parent company and the subsidiary companies which were wholly-owned indirectly by Amin Chand Payarelal (P) Ltd. The wealth-tax assessment in respect of the valuation of the shares of Amin Chand Payarelal (P) Ltd. has been considered erroneous insofar as it is prejudicial to the interests of the Revenue. Accordingly, the proceedings under S. 25(2) of the WT Act, 1957 have been started in this case." He held and directed as follows: "The balance sheets of the subsidiary companies, namely, Park Hotel (P) Ltd., Flury's Swiss Confectionery (P) Ltd. and Aruna Estates (P) Ltd. as on 30th June, 1981 which is the balance sheet on a date nearest to the valuation date relevant for the asst. yr. 1982-83 in the case of the assessee, clearly show that these subsidiary companies had substantial amount of net assets and the terms of para 6 of the said circular can be applied to determine the value of the unquoted equity shares of Amin Chand Payarelal (P) Ltd. for the wealth-tax assessment for the asst. yr. 1982-83. The WTO obviously did not make the valuation of the shares of Amin Chand Payarelal (P) Ltd. in accordance with the terms of the said circular of the CBDT while making the wealth-tax assessment for the asst. yr. 1982-83. It is obvious that in the assessment order dt. 10th March, 1987 the value of shares of Amin Chand Payarelala (P) Ltd. has been incorrectly taken at nil by the WTO, As discussed earlier, the powers under S. 25(2) of the WT Act have been lawfully invoked in the present case. The present proceedings under S. 25(2) of the WT Act are being concluded by passing the present order. By this order, I direct the AO to determine the correct value of 10 shares of Amin Chand Payarelal (P) Ltd. in accordance with the directions given by the CBDT in Circular No. 332A(F. No. 326/2/80-WT, dt. 31st March, 1982) which is binding on the AO. The AO will also modify the wealth-tax assessment order dt. 10th March, 1987 for the asst. yr. 1982-83 by adopting the value of 10 shares of Amin Chand Payarelal (P) Ltd. so determined and raise and recover the revised wealth-tax demand in consequence of modification of the wealth-tax assessment order in question Against the said order passed under S. 25(2) the appeal was preferred before the Tribunal. The Tribunal after considering the submission of the parties observed as follows: "The CWT has exercised his jurisdiction under S. 25(2) on the ground that the assessee did not disclose correctly the value of 10 shares held in Amin Chand Payarelal (P) Ltd. The assessee was holding shares in 6 companies which were not quoted. The assessee valued these shares at Rs. 38,389 and a detailed statement was filed before the Astt. CWT. The value of shares in 5 companies was taken at nil and the shares in one of the companies was valued at Rs. 38,389. The same was taken by the Astt. CWT at Rs. 91,685. The assessee was aggrieved and the dispute was before the appellate authority. It is not very clear either from the order of the Astt. CWT or from the appellate authority which has been filed before the Tribunal whether the appeal was in respect of one of the values of shares or the value of all the unquoted shares. As the matter is not clear the benefit of doubt can be given to the assessee and, if so, the value of shares was the subject- matter of dispute before the appellate authority and, therefore, the CWT was not justified in taking action under S. 25(2) of the WT Act. The view is suported by the decision of the Calcutta High Court in General beopar Co. (P) Ltd. vs. CIT (1987) 167 ITR 86 (Cal) and Hindustan Aluminium Corpn. Ltd. vs. CIT (1989) 178 ITR 75 (Cal). The second issue is that even otherwise it appears that the order passed by the Astt. CWT was neither erroneous nor prejudicial to the interests of the Revenue. The Departmental Representative has taken that the Astt. CWT did not accept the value of shares in one of the companies which was the subject matter of appeal. If this argument of the Revenue is accepted. it becomes clear that the Astt. CWT has applied his mind to the statement filed by the assessee and he was satisfied for the value declared by the assessee in respect of share held in five companies and consequently he only disturbed the value of shares of one of the companies and, therefore, it could not be said that the order passed by the Astt. CWT was erroneous and prejudicial to the interests of the Revenue. The third point is that the value of unquoted shares can be determined either by applying r. 1D or by the yield method. Even the circular on which reliance has been placed by the CWT does not say that the average value should be taken by applying break-up and yield method. This view is further strengthened by the decision of the Special Bench of the Tribunal in the case of WTO vs. Anik Pal chowdhury (1988) 25 ITD 287 (Cal). Therefore, if the assessee has valued the shares on yield method, it could not be said that the method applied by the assessee was incorrect. Even on this ground the action cannot be justified. Considering the totality of the circumstances, it is held that the order passed by the Astt. CWT was neither erroneous nor prejudicial to the interests of the Revenue and consequently the order passed by the CIT is set aside." ;