Gopal Krishna Singhania vs Commissioner of Wealth Tax, Kanpur

The income tax appellate Tribunal, Allahabad has referred the following questions of law u/s 27(1) of the Wealth-tax Act, 1957 (here-in-after referred to as the Act) for opinion to this Court:- Whether on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that interest of a partner of the firm is to be evaluated as per section 7(1)(2) and Rule 2A and 28 of the Wealth-tax Act, 1957 and the same could be rectified by the WTO u/s 35 of the Wealth-tax Act, 1957?

The present reference relates to the assessment year 1976-77.

Briefly stated the facts giving rise to the present reference are as follows.

The assessee was assessed on the net wealth of Rs. 26,47,830. The wealth consisted of various movable properties, such as quoted and unquoted shares, deposits, jewellery and investment in the partnership firm M/s J.K. & Sons, Bombay and Plywood, Sitapur. While computing the assessment u/s 16(3) of the Wealth-tax Act on 30-3-1981, the WTO had taken the assessee''s interest in the partnership firm M/s. J.K. & Sons, Bombay at Rs. 3,26,161. Subsequently by notice u/s 35 of the Wealth-tax Act, the W.T.O. sought to include the interest of the assessee in the partnership firm as mistakes apparent from the records by revaluing the shares of the companies held by the firm as stock in trade. The assessee''s contention that there was no apparent mistake and thus a debatable Point cannot be corrected u/s 35, was not accepted by the W.T.O. In appeal, the C.W.T. (Appeals) confirmed the order of the W.T.O. and in second appeal also, the Tribunal upheld the said order.

We have heard Sri R.S. Agarwal, learned counsel for the assessee and Sri A.N. Mahajan, Learned Standing Counsel appearing for the revenue.

It is agreed that the Apex Court in the case of Juggilal Kamlapat Bankers v. WTO (1984) 145 1TR 485 has held that the assessee''s interest on the firm was chargeable to Wealth-tax in his hands in the status of HUF and further the Wealth-tax assessment was justified in making the reference to the valuation officer for valuation u/s 16-A of the Act, the Hon''ble Supreme Court has further held that valuation has to be done in accordance with section 2B(2) of the Rules. Respectfully, following the aforesaid decision we are of the considered opinion that the Tribunal was justified in holding that the interest of a partner of the firm to be assessed in accordance with section 7(1)(2) and Rule-2A and 2B of the Wealth-tax Rules and the mistake in valuing the same could be rectified by the W.T.O. u/s 35 of the Wealth-tax Act. We answer the question referred to us in the affirmative i.e. in favour of the revenue and against the assessee. However, there shall be no order as to costs.