Commissioner of Wealth-tax vs Prasad Productions (P.) Ltd.

R. Jayasimha Babu, J.—These references are at the instance of the Revenue. The question referred is,

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that referring the matter to the Valuation Officer

u/s 16A of the Wealth-tax Act, 1957, is a discretion given by the statute to the Assessing Officer only and hence the Commissioner of Income Tax

(Appeals) cannot direct the Assessing Officer to redetermine the value of the property after referring the matter to the valuation cell ?

The assessment years are 1988-89 and 1989-90.

The assessee is a private limited company which owns several flats, three in Chennai, and one at Bombay. The Assessing Officer did not accept

the valuation given by the assessee, but made an estimate of the value. The asses-see challenged the estimate made by the Wealth-tax Officer of

the value of these properties. It was urged by the assessee that the Wealth-tax Officer should have referred the matter to the valuation cell, and

should not have made an estimate on his own. The Commissioner, in his order at paragraph 2.2, has noted thus :

Learned counsel further submitted before me that in any case, the Assessing Officer should have referred the matter to the valuation cell in

accordance with the mandatory provisions of Section 16A of the Wealth-tax Act.

Dealing with that submission, in paragraph 2.3, the Commissioner has held that,

In my opinion, learned counsel''s contention that the valuation of each property should have been referred to the valuation cell in accordance with

the provisions of Section 16A read with rule 3B of the Wealth-tax Rules is correct. The Assessing Officer is accordingly directed to recompute the

value of these properties after obtaining reports from the valuation cell.

He, thereafter, remitted the matter to the Assessing Officer.

Strangely enough, the assessee filed an appeal to the Tribunal, in which, it took a stand which was wholly contrary to the plea that it had urged

before the Commissioner and which plea has been accepted by the Commissioner. It is very surprising as to how the Tribunal allowed the assessee

to take the plea it did that the Commissioner should not have directed the Wealth-tax Officer to refer the matter to the valuation cell. The Tribunal,

not only entertained that plea, but, proceeded to accept the same by placing reliance on two decisions of the Madhya Pradesh High Court in M.

Vs. KIBE v. COMMISSIONER OF WEALTH-TAX., and M.V. Kibe Vs. Commissioner of Wealth-tax, .

In the case of M. Vs. KIBE v. COMMISSIONER OF WEALTH-TAX., , the court observed (page 85) :

For the purpose of making a reference to the Valuation Officer u/s 16A of the Act, the Wealth-tax Officer has to form the requisite opinion as

required by Section 16A. That he should form such an opinion cannot be dictated to him by the appellate authority.

The law so laid down in that case was followed in a subsequent ruling of the same court in the case reported in M.V. Kibe Vs. Commissioner of

Wealth-tax, .

The scope of the appellate power under the provisions of the Income Tax Act was considered in the decisions rendered by the Supreme Court

in the cases of Commissioner of Income Tax, U.P.,Lucknow Vs. Kanpur Coal Syndicate, ; Jute of Corporation of India Ltd. Vs. Commissioner of

Income Tax and another, and Commissioner of Income Tax, M.P., Bhopal Vs. M/s. Nirbheram Deluram, . That the power of the appellate

authority is as wide as that of the Assessing Officer was emphatically stated and reiterated in the decisions.

In the case of Commissioner of Income Tax, U.P.,Lucknow Vs. Kanpur Coal Syndicate, , which was a decision rendered u/s 31(3)(b) of the

Indian Income Tax Act, 1922, which is similar to Section 251(1)(a) of the Income Tax Act, 1961, it was observed that (page 229) :

The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is conterminous with that

of the Income Tax Officer. He can do what the Income Tax Officer can do and also direct him to do what he has failed to do.

In the case of Jute of Corporation of India Ltd. Vs. Commissioner of Income Tax and another, , the court held that the Income Tax Act (page

693) ""does not place any restriction or limitation on the exercise of appellate power. Even otherwise, the appellate authority, while hearing the

appeal against the order of a subordinate authority, has all the powers which the original authority may have in deciding the question before it

subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate

authority is vested with all the plenary powers which the subordinate authority may have in the matter."" The law laid down in those two decisions

was reiterated by the apex court in the case of Commissioner of Income Tax, M.P., Bhopal Vs. M/s. Nirbheram Deluram, .

What was said by the apex court in relation to the appellate power under the Income Tax Act is equally applicable to the scope of the

appellate power under the Wealth-tax Act, as in that Act also, no restriction or limitation has been placed on the appellate power. Section 23,

Sub-section (5), of the Wealth-tax Act, inter alia, provides that the Commissioner (Appeals) ""may pass such order as he thinks fit which may

include an order enhancing the assessment or penalty"". The proviso thereunder requires the Commissioner to give reasonable opportunity to the

assessee to show cause against any proposed enhancement of the assessment or penalty. There is no other restriction placed upon the powers of

the Commissioner (Appeals).

The Commissioner (Appeals), when he entertains the appeal under the provisions of the Wealth-tax Act, is, therefore, as competent as the

Wealth-tax Officer is in relation to all matters concerning the assessment which are within the scope of the Wealth-tax Officer while making the

assessment.

There was no error of jurisdiction in the Commissioner (Appeals) giving the direction that he did after accepting the argument which the

assessee itself had advanced before the Commissioner. When an appeal is allowed in whole or in part, the assessment is either required to be

redone wholly or in part. When the discretion which the original authority is vested with in relation to that assessment is a matter with regard to

which it is open to the appellate authority to give suitable directions, we see no error in the order which the Commissioner had made. The Tribunal

was wholly in error not only in entertaining the plea that was raised by the assessee which had persuaded the Commissioner to direct the Assessing

Officer to refer the matter to the valuation cell, but in further proceeding to hold that the Commissioner did not have the power to do so.

Having regard to what has been stated by the Supreme Court regarding the scope of the appellate power, the observations and law laid down

by the Madhya Pradesh High Court cannot be regarded as having laid down the law correctly.

The question referred is required to be, and is answered in favour of the Revenue, and against the assessee.