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Rattan Chand and Sons Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Judge
Reported in(1983)5ITD508(Chd.)
AppellantRattan Chand and Sons
RespondentWealth-tax Officer
Excerpt:
.....the learned aac has observed that, "the wealth-tax officer should have referred the case to the valuation officer under section 16a(1) of the act. considering the totality of circumstances, it would be fair to both the sides to set aside this assessment. the wto is directed to make a fresh assessment after a reference to the valuation officer and after giving the appellant an adequate opportunity of being heard." there were some other grounds which the aac observed could be decided by the wto after giving the appellant an opportunity of being heard. the assessment was set aside.5. the grievance of the assessee before us is that the aac stepped beyond the powers vested in him by directing the wto to make a reference to the valuation officer for determining the true and correct value of.....
Judgment:
1. This appeal by the assessee is directed against the order of the AAC dated 15-6-1981 relating to the assessment year 1975-76. In order to understand the grievance of the assessee, a look at the factual canvass of the case would be very essential.

2. The assessee is a HUF. For the assessment year under appeal, the assessee filed the return of its net wealth declaring net wealth of Rs. 6,27,600. In this net wealth was included the value of a house owned by the assessee at College Road, Ludhiana. This value was taken at Rs. 71,917. For this house, the value had been declared by the assessee at Rs. 98,513 in the immediately preceding assessment year. The WTO, therefore, asked the assessee to explain the discrepancy. The assessee explained that some portion of the land appurtenant to the house was proposed to be acquired by the Government leading to fall in the fair market value of the house. The WTO did not accept this contention. He took the value of the house at Rs. 1,10,000 as against Rs. 71,917 declared.

3. The value of this house declared by the assessee at Rs. 71,917 was not by a mere estimate but was based upon a registered valuer' s report dated 31-3-1975. There were certain other decisions taken by the WTO in the impugned assessment order dated 22-1-1980. The assessee challenged the above decision of the WTO regarding valuation of the house along with some other grounds before the AAC.4. The AAC was apprised of the fact that the WTO enhanced the value of the house without assigning any cogent reasons especially when the value returned was based upon an approved valuer' s report. Instead of deciding the issues on merits, the learned AAC has observed that, "the Wealth-tax Officer should have referred the case to the Valuation Officer under Section 16A(1) of the Act. Considering the totality of circumstances, it would be fair to both the sides to set aside this assessment. The WTO is directed to make a fresh assessment after a reference to the Valuation Officer and after giving the appellant an adequate opportunity of being heard." There were some other grounds which the AAC observed could be decided by the WTO after giving the appellant an opportunity of being heard. The assessment was set aside.

5. The grievance of the assessee before us is that the AAC stepped beyond the powers vested in him by directing the WTO to make a reference to the Valuation Officer for determining the true and correct value of the house for the purpose of its inclusion in the net wealth of the assessee for the year under appeal. It was submitted by the learned counsel for the assessee that the failure of the WTO was not arising out of any mandatory provisions of law which he had d to comply. It was further contended that whether the WTO should or should not make a reference to the Valuation Officer is a matter of his discretion. This discretion could not be interfered with by the AAC in the manner done by him. There fore, the order of the AAC is unjustified. His order may be set aside and he be directed to dispose of the appeal on merits.

6. Opposing these submissions, the revenue, relying upon the decision of the Supreme Court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451, contended that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against who se decision the appeal is preferred. It was contended that Section 16A of the Wealth-tax Act, 1957 ('the Act'), is merely procedural enabling the Valuation Officer to step into the shoes of the WTO and any error in the procedure could be made up by the AAC in view of the judgment of the Delhi High Court in the case of Uday Kaushish v. CWT [1982] 137 ITR 906.It was also submitted that the AAC is the watch-dog of the revenue and if there are any errors made by the WTO, he is duty bound to correct them. It was further submitted that the AAC has the plenary powers indisposing of an appeal and his powers are co-terminus and coextensive with that of the assessing officer.

Therefore, he can do what the officer can do and can also direct him to do what he failed to do. For these sub-missions the Supreme Court decision in the case of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 was relied upon. In nutshell, the argument of the revenue was that since the WTO has not given any reasons for as to why Section 16A, for making the reference to the Valuation Officer about the value of the house property, was not invoked, it cannot be said that he failed to exercise his discretion under Section 16A and has, there-fore, rightly been directed by the AAC to do so now. As such there is no case for an interference in his order at the instance of the assessee.

7. We have given careful considerations to the rival submissions. The issue involved in this appeal really is whether, on the facts and in the circumstances of the case, the AAC has the powers to direct the WTO to invoke the provisions of Section 16A for making a reference to the Valuation Officer about the value of an asset when the value of such asset the WTO had considered for purpose of inclusion into the net wealth during the course of assessment which is under appeal before him. For the determination of this issue, we have to keep in focus the provisions of Section 16A(1) which is as under : For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, the Wealth-tax Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer, if the Wealth-tax Officer is of opinion that the value so returned is less than its fair market value (b) in any other case, if the Wealth-tax Officer is of opinion that the fair market value of the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf or (i) that the fair market valjue of the asset exceeds thje vbalue of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf ; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do.

A careful reading of this section shows that the WTO is the only authority under the Act empowered to exercise a discretion whether to refer the valuation of any asset to a Valuation Officer or not because in the opening lines of Sub-section (1), the words used are, 'the Wealth-tax Officer may refer'. Thus, judicial discretion has been vested by the Legislature only in the WTO during the course of assessment proceedings. Now the Chambers' Twentieth Century Dictionary defines 'discretion' as, 'liberty to act at pleasure'. In Stroud's Judicial Dictionary, Fourth edition by Sweet& Maxwell, 'discretion' has been described as of several degrees, i.e., Discretio generalis, Discretio legalis, Discretio specialis-Discretio generalisis required of every one in everything that he is to do, or attempt. Discretio legalis is merely to administer justice according to the prescribed rules of the law and discretio specialis is where the laws have given no certain rule and discretion is the absolute judge of the cause and gives the rule. It is thus clear that discretion is to be exercised by the one who is either entitled or empowered to do an act. The discretion vested with the WTO was his sole domain and no interference from any quarter there in could be accepted because if the discretion were to be subjected to the fiat of another, it would cease to be discretion of the one in whom it was vested.

8. In the case before us the WTO considered the value of the house shown by the assessee at Rs. 71,917. However, he did not accept this value. Rightly or wrongly he exercised his discretion and increased the value of this house to Rs. 1,10,000. In doing so he reasoned out that the assessee had shown the value of this house at Rs. 98,513 in the last year and the mere fact that there was a proposal to acquire a portion of the appurtenant to the house by the Government, it would not affect the value of the property at all. This shows judicial discretion exercised by the WTO in adopting the value of the house at Rs. 1,10,000 and not making are ference to the Valuation Officer for it.

9. The AAC has no powers under Section 16A so as to either him self refer the value of a property/asset to the Valuation Officer or to direct the WTO to do so under the provisions of Section 16A. The Hon'ble Supreme Court in the case of Kapur Chand Shrimal (supra), did lay down the law that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appealis preferred but this is with a rider that he can do so only if he could do that in law. The Hon'ble Court has circumscribed their observations with the words, 'unless forbidden from doing so by statute'. Therefore, the powers of the AAC, when they are considered as plenary and co-terminous as well as co-extensive with that of the WTO, these are to be under stood within the circumscription of law under which he can act.

10. We are of considered opinion that there is no power vested in the AAC to direct the WTO to use his discretion under Section 16A in the manner required by the AAC. Therefore, the directions issued by the AAC in this regard are without any legal authority and as such void.

11. Since the directions are not valid and the WTO cannot carry the out in view of the above position, we are of the opinion that the AAC erred in issuing the directions and in setting aside the assessment. We set aside his order and, restore the entire appeal back to his file with the directions that the AAC should dispose it of on merits in accordance with law after affording reasonable opportunity of being heard to both the sides.

12. Before we close, we would like to clarify a contention by the revenue. The revenue argued before us that in the absence of reasons recorded by the WTO why discretion for making a reference to Valuation Officer was not exercised, it raises a presumption of non utilization of the discretion vested in him and, therefore, he failed to perform a procedural act which he could be directed to perform by the AAC. This contention of there venue is fallacious and quixotic. The WTO has to perform various act sunder the statute and in doing so in the normal course of his duties fore very discretion that he uses, he cannot record his reasons in writing fordoing so when there is no specific requirement of law for it. If his actions were to be adjudged by the standard which the revenue is requiring us to do because of this contention, it will be very difficult for the WTO to perform duties and this may lead to practical difficulties in the working of the Act. We, therefore, reject this contention outright as untenable.


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