Commissioner of Wealth Tax vs Shmatilal Popatlal (Huf)

R.K. Abichandani, J.—The following question has been referred for our opinion by the Tribunal, Ahmedabad Bench ""A"", under s. 27 of the

WT Act, 1957 :

Whether, on the facts and in the circumstances of the case, the Tribunal has been right in law in setting aside the order of the CWT made under s.

25(2) of the WT Act, 1957 ?

The relevant assessment years are 1974-75 to 1977-78. The assessee owned bungalow with an open area of land in the Shahibaug locality of

the city of Ahmedabad. The said asset was valued at Rs. 1,43,375 for the asst. yr. 1974-75, as per the report of a registered valuer, who had

estimated the value at Rs. 35 per square yard and since the land was encumbered with a building, the effective value thereof was taken at 60 per

cent of the said value of the land. The WTO accepted the valuation return and completed the assessment for the asst. yr. 1974-75. On the same

basis, he completed the assessment for the asst. yrs. 1975-76, 1976-77 and 1977-78.

The CWT, Gujarat II, Ahmedabad invoking his revisional powers under s. 25(2) of the said Act, held that the assessment orders passed by the

WTO under s. 16(1) of the Act were erroneous and prejudicial to the interest of the Revenue. He held that the land on which the bungalow was

constructed had an area of 4471 sq. yards and the constructed area was only 371 sq. yards. It was therefore, noticed that there was surplus land

available for development. The CWT, therefore, held that the registered valuer was not justified in treating the entire plot of land at reduced value

on the plea that the land was encumbered with a building thereon. He was of the view that prima facie the estimate of market price of the property

made by the registered valuer was less than its fair market value and that the WTO should, therefore, have referred the valuation of the said assets

to the Valuation Officer under s. 16A(1)(a) of the said Act. The CWT further held that the value of the bungalow constructed on the building was

estimated at Rs. 49,484 only and there being a surplus open plot of land which could be developed, such surplus land cannot be considered for the

purpose of exemption under s. 5(1)(iv) of the said Act. The CWT referred to the Board''s circular in the context of the land appurtenant to the

house, which laid down the guidelines for valuation of the land which was not appurtenant to the house. As per this circular, where the vacant land

surrounding a house does not exceed the minimum land required to be left open according to Municipal bye-laws in force in the area, no portion of

the vacant land can be regarded as not being a part of the house itself or appurtenant to the house and where the open land exceeds the limit

specified in the Municipal bye-laws, but if a separate tenantable unit cannot be constructed thereon even such land was to be considered as a part

of the house appurtenant thereto. However, in cases where a separate tenantable unit could be constructed on such excess land, such land can be

considered as not appurtenant to the house and the matter regarding it''s valuation may be referred to the valuation cell. The CWT observed that in

view of the clear instruction of the Board such surplus land was to be considered as not appurtenant to the house and the matter regarding its

valuation was required to be referred to the valuation cell. Having not done so, the order of the WTO was considered to be erroneous and

prejudicial to the interest of the Revenue. The assessment orders were, therefore, set aside with a direction that the WTO should refer the question

of valuation of the said asset to the valuation cell.

The Tribunal, entertaining the appeal against the orders of the CWT, observed that the fact that the record has indicated certain guidelines for the

valuation of the land appurtenant to the house does not by itself indicate that valuation adopted by the assessee supported by registered valuer''s

report was erroneous. It was observed that neither the circular nor general principles of valuation referred to by the CWT make the method

adopted by the registered valuer prima facie defective. It was further observed that the position would have been different if the CWT had

information with him to indicate the actual operation of the principle of land appurtenant to a house in the areas where the land was situated and on

that basis he had treated the value adopted by the WTO as erroneous. The Tribunal, therefore, not finding justification for supporting the CWT''s

orders set them aside. The Tribunal observed that in view of this finding of the Tribunal it did not find it necessary to go into the question as to

whether the CWT in exercise of his powers under s. 25(2) of the said Act can substitute the opinion of the WTO under s. 16A(1) of the said Act,

especially when the said provision gives discretion to the WTO in respect of making of a reference to Valuation Officer. The Tribunal, however,

observed that it was not quite sure whether the guidelines given for valuation of the land in the Board''s Circular could be accepted as correct.

Section 25(2) of the Act empowers the CWT to call for and examine the record of any proceeding under the Act and on such examination if he

considers that any order passed therein by the AO is erroneous in so far as it is prejudicial to the interest of Revenue, he may, after giving the

assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as

the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment. It

will be noticed that the revisional powers of the CWT under the said provision are of a wide amplitude and they enable the CWT to make any

order as the circumstances of the case justify including modification of the assessment or cancellation of the assessment order and to direct a fresh

assessment. The CWT referred to certain guidelines given by the Board which had a direct bearing on the exercise of powers by the AO in

considering the valuation of an asset. The area of land was 4.471 sq. yards with the built up area of only 371 sq. yards thereon. Therefore, the

question whether the house would include the entire area of 4471 sq. yards surrounding that house and owned by the assessee or whether it should

be construed as to include only the appurtenant land surrounding the house which was required under the law to be left open or could be

considered to be as a part of the house or a dwelling unit, was required to be gone into by the WTO. Even apart from the circular of the Board this

was a vital question which was required to be examined while considering the value of the asset. The question whether a large portion of land can

be separately developed without affecting the owner''s right to retain the house would have bearing on the question of the value of the asset.

Therefore, when the CWT noted that the relevant aspects were not gone into by the WTO and he set aside the order of the WTO directing him to

refer the question of valuation to the Valuation Officer, it can never be said that the CWT had committed any error in exercise of his powers which

could have warranted interference by the Tribunal. The CWT, in our opinion, was perfectly justified in giving a direction to the WTO to refer the

question of valuation to the Valuation Cell and to consider the question of assessment afresh in respect of the said asset. In fact, the observations of

the Tribunal that ""The position would have been different if the CWT had information with him to indicate the actual operation of these principles in

areas where this land is situated and on that basis treated the value adopted by the WTO as erroneous"" are clearly indicative of the fact that if

relevant material was before the CWT about the applicability of the principle of the circular on which the CWT relied on, the order of the CWT

was right. We find from the record that the CWT has referred to the total land and the ratio of the constructed portion over it. Whether on the

general principles or on the basis of the circular, existence of which has not been disputed, the conclusion of the Tribunal that CWT had no relevant

material before him is not well founded. This alone is sufficient to vitiate the findings of the Tribunal.

We are, therefore, of the view that the Tribunal was not right in law in setting aside the CWT''s orders. The question referred to us is, therefore,

answered in the negative in favour of the Revenue. Reference stands disposed of accordingly with no order as to costs.