Naolekar, J. - (1.) FOLLOWING questions of law have been referred to the High Court under Section 27(1) of the Wealth Tax Act, 1957 (for short, 'the Act of 1957') :- "1. Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding that the valuation report was non-est and should not have been taken note of in the present assessment? 2. Whether on the facts and in the circumstances of the case the Tribunal was justified in law in holding that a partner was entitled to claim deduction under Section 5(1)(iv) of the Wealth-tax Act in respect of his interest in a firm which owned immovable properties?"
(2.) FACTS, in brief, relevant for the purpose of answering the questions are that Shri Tulsi Dass (hereinafter shall be referred to as 'the assessee') is a partner in M/s. Gopal Talkies, Alwar, a partnership firm. The assess submitted return of his properties before the Wealth Tax Officer and shown the credit balance in M/s. Gopal Talkies, Alwar amounting to Rs. 1,03,210/- (Rs. one lac three thousand two hundred and ten only). The partnership firm M/s. Gopal Talkies in its books of accounts had shown the value of Gopal Talkies at Rs. 7,25,000/- (Rs. seven lac twenty- five thousand) inclusive of the cost of the building. During the assessment proceedings of the assessee Tulsi Dass, the Wealth Tax Officer came to the prima facie conclusion that the valuation of Gopal Talkies at Rs. 7,25,000/- reflects under-valuation of the property. The assessing officer made a reference to the valuation officer by letter dated 6.1.1978 to make fresh valuation of Gopal Talkies. After re-valuation, the valuation officer has assessed the value of Gopal Talkies at Rs. 14,73,000/- and accordingly the assessee Tulsi Dass was assessed for wealth tax taking the valuation given by the valuation officer of Gopal Talkies. Aggrieved by the said order, the assessee preferred an appeal before the Assistant Appellate Commissioner of Income Tax. The submission made by the assessee that the valuation report was made by the valuation officer without giving notice to him, has found favour with appellate authority and accordingly the valuation report was struck down. The appellate authority has also given to the assessee the benefit of Section 5 (1)(iv) of the Act of 1957 to the extent of Rs. 1,00,000/- and accordingly assessed the assessee for the wealth tax purposes. Aggrieved by the said order, the Revenue preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal has rejected the appeal filed by the Revenue. Thereafter on an application moved by the Revenue, the aforementioned questions have been referred to the High Court. The submission of the learned counsel for the Revenue Shri R.B. Mathur is that before the valuation was made by the valuation officer of Gopal Talkies, the notice was given to M/s. Gopal Talkies, the firm and, therefore, the valuation could not have been struck down on the basis that the assessee was not given notice. It is an admitted fact that no notice whatsoever was ever issued by the valuation officer to the assessee as required by the provisions contained in Section 16-A (2) of the Act of 1957. Section 16-A (2) of the Act of 1957 requires that the valuation officer before estimating the value of any asset in pursuance of the reference made under Sub-section (1) of Section 16-A, may serve a notice on the assessee requiring him to produce or cause to produce on a date specified in the notice, such accounts, records or other documents as the valuation officer may require. Prima facie the purpose of service of notice on the assessee is for production of the documents as mentioned in the notice to help the valuation officer to value the property but at the same time the purpose of service of notice on the assessee would be giving him an opportunity to put forth material before the valuation officer which would support the valuation put by him of the property. This is clear from Sub-section (3) of Section 16-A of the Act of 1957 under which the valuation officer can given his opinion in writing that the value of the asset has been correctly declared in the return made by the assessee under Section 14 or Section 15 of the Act of 1957. If the assessee is not given a notice, he would not be in a position to satisfy the valuation officer that the valuation put forth by him in return is the correct valuation of the property. Giving notice to the person who would be affected by the re-valuation of his property appears to us is in consonance with the principles of natural justice. It is not a case where the assessee is a firm and notice has been served on the managing partner of the firm which could be held to be a notice to all the partners of the firm or the firm itself. The present case is against the assessee as an individual who happened to be the partner of the firm which owns the Gopal Talkies and thus would be entitled to notice under Section 16-A (2) of the Act of 1957. The order of the Tribunal striking out the valuation put forth by the valuation officer on the ground of non service of notice on the assessee does not require any interference and the question is answered accordingly.
(3.) AS regards another question which has been referred to us whether the assessee is entitled for exemption under Section 5(1)(iv) of the Act of 1957. Relevant provision reads as under :- Wealth tax shall not be payable by an assessee in respect of following assets (and such assets shall not be included in the net wealth of the assessee)- "Clause (iv) One house or part of house belonging to the assessee: Provided that, where the value of such house or part exceeds one hundred thousand rupees, the amount that shall not be included in the net wealth of the assessee under this clause shall be one hundred thousand rupees;" Prior to amendment, Clause (iv) reads - one house or part of the house belonging to the assessee and exclusively used by the for residential purposes. By amendment dated 1.4.1972 the legislature has deleted the words "exclusively used for residential purposes." ;