JAGDISH SAHAI J. - By this reference under section 27 of the Wealth-tax Act (hereinafter referred to as the Act), the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as the Tribunal), has referred the following questions of law for the opinion of this court :
'1. Whether the assessment of wealth-tax on the assessee Hindu undivided family for the assessment years 1957-58 to 1961-62 both inclusive is intra vires the Constitution ?
2. Whether, for the assessment year 1961-62 the Wealth-tax Officer was justified in valuing the closing stock of the shares at market value instead of at cost price as shown by the assessee ?'
The assessee is a Hindu undivided family which deals in shares of companies and has also income from dividends, properties and share in the partnership firm of M/s. Radheylal Garg and Company.
The assessee was assessed to wealth-tax for the assessment years 1957-58 to 1961-62. The main objection taken by the assessee before the Wealth-tax Officer was that the assessee being a Hindu undivided family could not be assessed to the wealth-tax. The Wealth-tax Officer overruled the plea of the assessee and assessed it.
The assessee filed an appeal before the Assistant Commissioner (Judicial) who dismissed it. It then filed a second appeal before the Tribunal. That appeal was also dismissed.
For the assessment year 1961-62, the assessee had valued the closing stock of its shares in its share dealing transactions at cost in accordance with the usual practice. The Wealth-tax Officer, however, valued the same at market value. The assessee objected on the plea that the Wealth-tax Officer could not have ignored the provisions of section 7(2) of the Wealth-tax Act, and that the Wealth-tax Officer should have valued the shares on the basis of global valuation as shown in the assessees balance-sheet. This contention of the assessee was also not accepted by the Wealth-tax Officer, that is, the assessing authority. The assessees appeals to the Appellate Assistant Commissioner and the Tribunal were dismissed.
We have no difficulty in answering the first question referred to us in the affirmative, against the assessee and in favour of the department. The matter is concluded by the decision of the Supreme Court in Banarasi Dass v. Wealth-tax Officer, Special Circle, Meerut.
Coming to the second question we would like to point out that the Wealth-tax Officer had a discretion either to proceed under section 7(1) of the Act or to have recourse to section 7(2)(a) of the Act. Section 7 as it is relevant for our purposes reads :
'7. (1) The value of any asset, other than cash for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date.
(2) Notwithstanding anything contained in sub-section (1), -
(a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as the circumstances of the case may require;....'
It is clear from this provision that the Wealth-tax Officer could either proceed under section 7(1) or under section 7(2)(a) of the Act. The words 'may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance sheet of such business' clearly show that section 7(2)(a) of the Act provides for an alternative manner for valuing the assets and not the sole method. In the present case the assessee insisted that the procedure provided by section 7(2)(a) of the Act and not that provided by section 7(1) of the Act should be followed. But it has not been shown to us that the Wealth-tax Officer was bound to follow the procedure provided in section 7(1)(a) of the Act and was not free to have recourse to the provisions of section 7(1) of the Act.
Inasmuch as we are of opinion that the Wealth-tax Officer had a discretion in the matter and he was fully at liberty to have followed the procedure given under section 7(1) of the Act, we answer the second question in the affirmative, in favour of the department and against the assessee. We would like to point out that the view that we have taken finds support from Commissioner of Wealth-tax v. Indian Standard Metal Company Ltd. and Commissioner of Wealth-tax v. Mysore Commerci al Union Ltd.
In view of the circumstances that the reference was in respect of several years we are of the opinion that the Commissioner of Wealth-tax is entitled to receive from the assessee a sum of Rs. 400 by way of costs of these proceedings. We, therefore, direct that the assessee shall pay that amount as costs of the reference to the Commissioner of Income-tax, Uttar Pradesh. We fix the fee of the learned counsel for the department in the same figure.