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Wealth-tax Officer Vs. Gopi Chand Rawat - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)5ITD667(Delhi)
AppellantWealth-tax Officer
RespondentGopi Chand Rawat
Excerpt:
1. wt appeal nos. 62, 60 and 61 (jp.) of 1981 are the appeals filed by the revenue, whereas cross-objection nos. 93, 94 and 92 are by the assessee arising out of the appeals of the revenue. both the appeals as well as the cross-objection relate to the same assessment year, viz., 1975-76.2. wt appeal nos. 62, 60 and 61 (jp.) of 1981 relate to three assessees, i.e., s/shri gopi chand rawat, ram mohan rawat and s.m.rawat, respectively, who are the partners of the firm maliram puranchand, jaipur. since the wt appeals and cross-objections involve identical contentions and also relate to the same group of the assessees, we have consolidated these appeals and cross-objections for the sake of convenience and the same are disposed of by a common order.all the three assessees are partners in the.....
Judgment:
1. WT Appeal Nos. 62, 60 and 61 (Jp.) of 1981 are the appeals filed by the revenue, whereas cross-objection Nos. 93, 94 and 92 are by the assessee arising out of the appeals of the revenue. Both the appeals as well as the cross-objection relate to the same assessment year, viz., 1975-76.

2. WT Appeal Nos. 62, 60 and 61 (Jp.) of 1981 relate to three assessees, i.e., S/Shri Gopi Chand Rawat, Ram Mohan Rawat and S.M.Rawat, respectively, who are the partners of the firm Maliram Puranchand, Jaipur. Since the WT Appeals and cross-objections involve identical contentions and also relate to the same group of the assessees, we have consolidated these appeals and cross-objections for the sake of convenience and the same are disposed of by a common order.

All the three assessees are partners in the firm Maliram Puranchand, Jaipur, having one-third share each. The group of appeals in the departmental appeals relate to the value of interest of each of the three assessees in the above firm.

3. The first and second grounds of departmental appeals which are common in the cases of the three assessees are as under : The learned Appellate Assistant Commissioner of Wealth-tax has erred in : (i) holding that the Wealth-tax Officer was not justified in invoking the provisions of Rule 2B(2) to determine the net wealth of the firm Maliram Puranchand, Jaipur and then in making pro rata addition of Rs. 2,59,911 in the assessee's hands ; 4. The dispute relates to the applicability of Rule 2B(2) of the Wealth-tax Rules, 1957. Rule 2B(2), inter alia, provides that where the market value of an asset exceeds the value adopted for the purpose of assessment under the Income-tax Act, 1961 ('the 1961 Act') by more than 20 per cent, the value of that asset, for the purpose of wealth-tax assessment, to be taken to be its market value. It is a common ground between the parties that for the assessment for the assessment year 1975-76 in the case of the firm Maliram Puranchand, Jaipur, wherein the assessees are partners, the firm has valued the closing stock at cost.

The value of the closing stock is, therefore, not the market value.

Under Rule 2B(2), the WTO has been empowered to value the closing stock of the firm at market value only when there is difference of more than 20 per cent in the market value and the value adopted in the income-tax assessment, which is the cost price in the present case. The dispute before the authorities below was two-fold : (1) whether Rule 2B(2) can at all be invoked while valuing the interest of a partner in the firm and (2) whether, as a fact the market value exceeded 20 per cent of the value adopted for the purpose of assessment under the 1961 Act and what exactly is the market value thereof. So far as the first issue is concerned, even though it has been decided by the AAC in favour of the asses see, the learned counsel for the assessee did not argue the same.

In the circumstances, this issue is decided in favour of the revenue.

The learned counsel for the assessee with reference to the second issue, argued that the market value of the closing stock in the firm of Maliram Puranchand, Jaipur did not exceed 20 per cent of the value adopted for the purpose of the income-tax assessment and, therefore, Rule 2B(2) had no application. The issue involved in the cases of all the three assessees is identical. I shall, therefore, consider the case of Gopi Chand Rawat and the conclusions in his case will equally apply to the other two assessees.

5. The facts briefly stated are that Shri Gopi Chand Rawat was a partner having one-third share in the firm Maliram Puranchand, Jaipur.

The main trading account of this firm was 'Jewellery Account'. The value of closing stock in this account was shown at Rs. 27,51,139. The same was stated by the assessee to have been valued at cost as in the past. The firm declared gross profit of Rs. 6,75,839 on sales of Rs. 26,67,960 reflecting rate of 25.20 per cent. The WTO observed that declaration of gross profit rate of 25.20 per cent meant that if the cost of closing stock was Rs. 74.80, the market value was Rs. 100 on average. On this basis he worked out the market value of the closing stock at Rs. 36,77,993 as against the value disclosed at Rs. 27,51,139.

The excess of market value over the value adopted for the purpose of income-tax assessment in terms of percentage, therefore, worked out to 33.68 per cent. The WTO then observed that from the above facts it was apparent that the provisions of Rule 2B(2) applied to the case of the assessee and the assessee's representative was given an opportunity in the matter. He vide his letter, dated 20-3-1979, addressed to the WTO contended as under : (a) If the firm had earned a gross profit rate of 25 per cent in one of the years, it should not be made the basis for invoking the provisions of Rule 2B(2). Further, that even in the earlier years, these provisions had not been invoked.

(b) The gross profit rate during the year was, of course, more than 20 per cent. It did not, however, mean that the fair market value of the closing stock of the firm was more than 20 per cent of its book value.

(c) The jewellery trade had its own peculiar features inasmuch as the goods might remain in stock for years together and may not be saleable at all. Besides, some of the goods were sold at a profit of 10 per cent while the other might be sold at a profit margin of 25 per cent. One has to take an overall view of the matter for estimating the fair market value of the closing stock. While doing so, it has also to be considered that the goods in stock if offered for sale on the last day of the year in lump sum to a willing buyer, none would agree to purchase the same in entirety at a profit rate exceeding 20 per cent of the book value.

(d) The said firm was prepared to sell its entire stock at a rate above 18 per cent of its cost/book value.

(e) If the department had any material with it to evidence the fact that the fair market value of the closing stock of the firm as on 31-3-1975 was more than 20 per cent of its cost/book value, the assessee be confronted with it for rebuttal, as the onus for proving the same lay upon the department.

6. The above contention did not find favour with the WTO. He, however, allowed a deduction of 4 percent for the above submissions and other commercial and variable factors. On this basis the fair market value of the firm's closing stock was worked out by the WTO at Rs. 35,30,873.

The difference was, therefore, worked out by the WTO at Rs. 7,79,734 which represents 29.68 per cent excess over the value adopted for the purpose of assessment under the income-tax against 20 per cent contemplated in Rule 2B(2). One-third share of the assessee in the excess worked out to Rs. 2,59,911 which was included by the WTO in the net wealth of the assessee.

7. On appeal before the AAC, he deleted the addition. His conclusions are recorded in paras 13 and 14 of his order which are reproduced below : 13. On the facts and in the circumstances of the case also, there is a great force in the submissions made by the learned counsel for the assessee. The assessee had to hold the stock for a long period which entailed expenditure on chemical treatment, reassortment and sometimes recutting besides locking up of substantial capital resulting in loss of interest. Besides, in this line of business, the margin of profit can heavily fluctuate. The profit rate on sale to a foreign tourist visiting India would normally be much higher than the profit earned on the sale to a local dealer/party. The profit rate on sale through foreign buyers would stand in between.

That a particular item of closing stock would find its ultimate destination to a specific purchaser out of the three categories referred to above, cannot be predicated. The sale to local dealers would not fetch a margin of more than 10 to 15 per cent. Hence, in my opinion, it would not be correct to apply this rule of thumb in enhancing the value of closing stock by the gross profit rate of the year to arrive at the so called fair market value of the same on the valuation date.

14. I have, therefore, no hesitation in holding that the learned WTO was not justified in invoking the provisions of Rule 2B(2) to determine the net wealth of the firm Maliram Puranchand, Jaipur and then in making pro rata additions of Rs. 2,59,911 in the assessee's hands. The additions made by the learned WTO are deleted accordingly.

8. The revenue is aggrieved against the above findings of the learned AAC. The departmental representative supported the order of the WTO.The learned counsel of the assessee has repeated his submissions that were made before the authorities below which I have reproduced earlier.

He also relied upon the decisions of the Jaipur Bench of the Tribunal in WTO v. Smt. Land Kanwar Dhadha & Smt. Jatan Devi [WT Appeal Nos. 756 and 757 (Jp.) of 1980, dated 23-7-1981] and of the Calcutta Bench 'E' Camp at Jaipur in the case of IAC v. Vimal Chand Golecha [WT Appeal Nos. 778 and 779 (Jp.) of 1980 dated 28-8-1981]. It was also urged that the Calcutta Bench 'E' had followed the decision of the Smt. Lad Kanwar Dhadda (supra). The learned counsel of the assessee, therefore, adopted the reasoning of the AAC as in the case of Vimal Chand Golecha (supra) as well. The reasons of the AAC are reproduced in the Calcutta Bench 'E's order, dated 28-8-1981, which are reproduced below : The assessee is only a trader in precious stones and admittedly the closing stock is valued at cost price. At first blush it does appear reasonable to believe that the market value of the closing stock would correspond to value above cost price corresponding to the gross profit rate of the year. It would have been indeed so if the goods dealt in were articles of mass consumption cheaply priced on which the percentage of profit is nominal and easily ascertainable.

But in a trade of high priced goods like precious stones, so many diverse factors would have an interplay in the determination of market value of closing stock as on the valuation date. To my mind, inter alia, the following factors have to be taken note of for determination of the market value of the closing stock : (i) market for the goods, i.e., whether they are earmarked for export or are ultimately sold in the local market to customers or to local dealers ; The gross profit rate of a particular year, of course, is a good piece of evidence of forming a tentative belief about the expected market value of the goods in stock but it would be not correct to equate the market value with the cost price plus the gross profit rate of the year. Indeed, the learned WTO himself rightly took note of the submissions made to this effect by the assessee before him.

However, the learned WTO did not spell out the reasons of giving a margin of only 4 per cent on account of the factors mentioned above for determination of market value of the closing stock. In terms of the provisions of Rule 2 of the Wealth-tax Rules, the value of the business assets have to be determined with reference to the price which a willing buyer would pay, if such assets are sold on the valuation dates. Now if the entire closing stock of the precious stones is to be sold as on the valuation date, the only buyers, as pointed out by the learned counsel for the assessee, would be fellow traders and naturally they would not pay the same price as lay customers, foreign tourists or customers in foreign countries. It certainly stands to reason in these circumstances, that it would be a buyers market and naturally, the price, the closing stock would fetch on each of the valuation dates, would not be more than 10 per cent to 15 per cent over the cost price, keeping in view the fact that these high priced articles dealt in are to be held over for long periods before sale. The fact that unlike precious metals like gold and silver, the prices of precious stones did not register any abrupt boom during the years in appeal also cannot be ignored.

Taking all these factors into consideration, I am of the view and hold, accordingly, that the market value of the closing stock of the assessee as on each of the valuation date was not above 20 per cent of the book value and as such the learned WTO was not justified in invoking the provisions of Rule 2B(2) of the Wealth-tax Rules for revaluation of the closing stock. For the assessment year 1974-75 wherein the gross profit rate disclosed was only 22 per cent the WTO having himself adjusted a margin of 4 per cent, according to his unreckoning the market price of closing stock was below 20 per cent over the book value and as such the provisions of Rule 2B(2) were not applicable on the basis of his own working.

9. I have considered the rival submissions. At the outset it may be pointed that similar issue had come up before the Calcutta Bench Camp at Jaipur in the case of WTO v. Gyanchand Kothari, partner of Gem Trading Corporation Jaipur, where a different view was taken vide order in [WT Appeal Nos. 451 and 452 (Jp.) of 1980 dated 25-7-1981]. It was brought to the notice of the learned counsel of the assessee by the Bench at the time of hearing of the appeals. When conflicting decisions of different Benches of the Tribunal functioning at the same station are there, the matter ought to have been referred to a larger Bench consisting of members not involved with earlier decisions, but this course has not found favour with the learned Judicial Member. I have, therefore, proceeded to record a separate judgment. Before considering the rival submissions, I would like to point out that there is a factual error in the order of the AAC in the case of Vimal Chand.

Golecha (supra) which has been relied upon on behalf of the assessee.

The extract of his order has already been reproduced earlier. He has observed that for the assessment year 1974-75 wherein the gross profit rate disclosed was only 22 per cent, the WTO having himself adjusted a margin of 4 per cent, the market price of closing stock was below 20 per cent over the book value and as such the provisions of Rule 2B(2) were not applicable on the basis of his own working. It may be pointed out here that in terms of Rule 2B(2), the percentage of difference has to be worked out with reference to the cost price as adopted in the income-tax assessment and not the sale price. Excess of gross profit over cost price in that case in terms of Rule 2B(2) works out to 28.20 per cent and after making adjustment of 4 per cent the difference still will remain at 24.20 per cent and not below 20 per cent as pointed out by the AAC. This fact alone is sufficient to vitiate his decision in the case of Vimal Chand Golecha (supra) apart from other considerations. The learned counsel of the assessee has heavily relied upon the earlier decisions of the Benches of the Tribunal functioning at Jaipur. He has heavily relied on the decision of the Jaipur Bench dated 23-7-1981, Relevant extracts from this order are reproduced below : An ad hoc method based on empirical reason cannot be said to be correct. It might so happen that the more valuable gems have already been sold out and what remained was the inferior variety which can fetch much less profit. The assessee might have had a very good year, but on the last date the market value could get depressed. As argued by the learned counsel for the assessee, it might so happen that the overall gross profit is high because of sale of larger number of profitable items leaving inferior material at the end of the year in the closing stock. Hence, unless the facts are analysed properly and positive material brought on record to show that the market value was very much higher than the cost price as on the last day of the accounting year, it would not be possible to uphold the WTO's action. In fact, the burden rests heavily on the WTO to show that the market value was 20 per cent higher than the value disclosed for the wealth-tax purposes before invoking Rule 2B(2).

10. Relevant portion of the Calcutta Bench 'A' decision on the contrary reads as under : 7. So far as the actual addition to the valuation of the closing stock is concerned, prima facie, Rule 2B(2) appears to be applicable to the assessee's case inasmuch as the gross profit disclosed by the assessee in both the head office and the branch office is more than 20 per cent and the valuation of the closing stock according to the WTO has been taken at cost so that the value can exceed the written down value or the book value adopted for the purpose of assessment of income-tax by more than 20 per cent. However, since the actual manner of valuation of the closing stock was not available before us and the AAC has made some general observations in the case of Dhanwar Singh, that realisation of higher profits would be the result of export sales to tourists, matching, designing, repeated assortment, chemical treatment, etc. It would have to be found out as a fact as to what more expenses have to be incurred before the closing stock would be ready for same and what was its market value on the relevant date involved in each case. The AAC has accepted the assessee's contention on the basis of some general arguments advanced on its behalf without actually coming to any conclusion about the exact market value of the closing stock and the difference between it and the value taken for the purpose of income-tax assessments of the firms. We, therefore, are of the opinion that on this limited question, the matter shall go back to the AAC who shall decide the same afresh in the light of our aforesaid observations.

11. After going through the rival submissions and the two decisions of the Benches, in my opinion, the controversy is as to on whom the onus lies to prove that. The market value of the stock-in-trade in the firms is more than 20 per cent in terms of Rule 2B(2), the extent thereof and also the type of material for determining the value. In my opinion, therefore, the following issues are involved in this case for determination : 1. Whether, on the facts and in the circumstances of the case, the gross profit rate in the case of the firm Maliram Puranchand at 33.68 per cent with reference to cost price for the assessment year 1975-76 will not prima facie show that the difference in terms of Rule 2B(2) of the Wealth-tax Rules is more than 20 per cent and whether the WTO has discharged the initial burden cast on him 2. If the answer to 1 above is in the affirmative whether the burden shifts to the assessee to prove that prima facie difference of 33.68 per cent is not real by leading positive evidence and whether any evidence has been adduced by the assessee to discharge this onus 3. Whether market value has to be found as a fact, if so what is the market value of the closing stock and the assessee's share therein 12. In my opinion, the value of the closing stock has to be found as a fact. In a trading account, where the method of valuing the closing stock is taken at the cost price, the gross profit will only be a difference between the purchase price and the sale price. Sale price is normally the market value of an asset on the date of its sale and the purchase price will be the cost of inclusion of the asset out of which profit has been earned. In other words, the market value will be the purchase price as increased by the gross profit earned thereon. Now the percentage of gross profit earned by the firm in the case before us is 25.20 per cent. In other words, the market price is more than 33.68 per cent of the cost price. This is the position which emerges prima facie from a trading account, where the method of valuing the closing stock is the cost price. This prima facie difference between the cost price and the market value can, however, be dislodged by certain factors.

Depending upon the relevant facts, sometimes the market value with reference to the valuation date may be less than the sale price and sometime it may be more. In my opinion, the onus to dislodge this position, i.e., the apparent is not real, consequently, falls on the assessee by giving positive evidence that the real market value of the closing stock is lower than the increase in the gross profit rate over cost price. The submissions made by the assessee have to be considered in this context and to be found out whether the assessee has brought any material on record to dislodge the above prima facie position. I have reproduced above the extracts from the assessee's letter, dated 20-3-1979, to the WTO about the submissions made. The first contention is that if the firm earned a gross profit rate of 25 per cent in one of the years, it should not be made the basis for invoking the provisions of Rule 2B(2). Further even in earlier years, these provisions have not been invoked. This is merely an argument and general in nature. I have pointed out above that gross profit plus the cost of acquisition will prima facie be the market value. If in one assessment year, this is the position, then it has to be taken into consideration irrespective of the fact whether in earlier years gross profit was more than 20 per cent or loss. Each year has to be considered separately. The contention that in earlier years, provisions of Rule 2B(2) were not invoked in my opinion, is of no consequence. I am not aware as to for what reason the WTO did not invoke the provisions of Rule 2B(2) in earlier years. It is, therefore, unnecessary for me to consider this aspect. The second contention made was that simply because that the gross profit was more than 20 per cent did not mean that the fair market value of the closing stock was more than 20 per cent of its book value. I have already discussed this issue above. The gross profit shows the prima facie position of increase in value over cost price so as to arrive at the market value which has to be dislodged by the assessee. A mere statement is not enough. Another contention was that the jewellery trade has its own peculiar feature, inasmuch as, the goods might remain in stock for years together and may not be saleable at all. Besides some of the goods may be sold at a profit of 10 per cent while the others might be sold at a margin of 25 per sent. Therefore, one has to take an overall view of the matter for estimating the fair market value of the closing stock. While doing so, it has also to be considered that the goods in stock if offered for sale on the last day of the year in lump sum to willing buyers, none would agree to purchase the same in entirety at a profit rate of 20 per cent of the book value. Here also I notice that hypothetical statements have been made, what to speak of a positive statement and the supporting material thereto. It is said that the goods might remain in stock for years together and may not be saleable at all. This hypothetical statement made on behalf of the assessee leads one to nowhere. If such goods which had remained in stock for years together and had no saleable value had been specified and supporting evidence given in support thereof, the assessee certainly had a case for reviewing the prima facie position with reference to the gross profit rate. No material whatsoever has been brought on behalf of the assessee on record to show that certain quantities of goods were being brought forward from year after year and had no saleable value at all. The learned counsel of the assessee during the course of the hearing of the appeal was specifically asked by the Bench if such details could be furnished. The reply was in the negative as according to the learned counsel of the assessee, no such details were maintained. Then another hypothetical statement is that some of the goods might be sold at a profit of 10 per cent while others might be sold at a margin of 25 per cent and, therefore, the gross profit will not be the correct for adopting the market value. Here also no positive material has been brought on record as to what was the quantity/inventory of goods lying in the closing stock with margin of profit of 10 per cent or even less than the average rate of 33.68 per cent were purchase price and what were the goods lying in the closing stock where the margin of profit was more than 25 per cent even (sic).

These factors would certainly influence the gross profit but it has to be established as a fact that there were goods in the closing stock where the margin of profit was less than 10 per cent. The learned counsel of the assessee was unable to furnish such details at the time of hearing of the appeal by the Bench. We, therefore, do not find any merit in these submissions as well. Assuming that there was such a fluctuation in the margin of profit of different goods but the overall gross profit is the result of such fluctuations which has taken care of all these contingencies, the lesser value in one particular item will be compensated by higher value in other articles and the average of such values will be the figure which will reflect an overall position.

The margin of profit of 33.68 per cent which is over the whole year has taken care of such fluctuations and, therefore, in my opinion contention of the assessee deserves to be rejected. Then the other point made out by the learned counsel of the assessee is that the value has to be considered in lump sum to willing buyers and none would agree to purchase the same in entirety at a profit exceeding 20 per cent of the book value. This is also a general statement. It is not necessary that the entire property should be sold in one lump to find out the market value. The market value has to be considered on the basis of sales at the close of the year of similar goods lying in the closing stock. Even if some inferior goods are left over in the closing stock then the inventory of such goods has to be clearly brought out and the reasons for valuing them at a lower rate have to be spelt out. There is no material to support this.

13. Another submission is that if the entire closing stock of precious stone was sold on the valuation date, the only buyers would be the fellow traders and naturally they would not pay the same price as lay customers, foreign tourists or customers in foreign countries. Further, the fact that these high priced articles are to be held over for a long period would tend to reduce the value. I have also pointed out above that it is not necessary to sell the entire commodity in one lot. A prudent businessman would try to fetch the highest price by selling it in piece-meal or even the whole lot depending upon the circumstances of each case. The valuation of the closing stock has to be made on notional basis, keeping in view the market trends for similar goods. If there is high demand of such articles by the tourist or the foreign customers, then the market value has to be judged with reference to these situations. The market value is not to be restricted to the local market but even to international market when there are no restrictions for export. Undoubtedly, there are no restrictions as such for export as the assessee has exported the goods during the course of the year.

There is no merit in this contention of the assessee as well. Shri Ranka, the learned counsel of the assessee, also stressed that when goods are sold on credit basis it also contains the element of interest to be recovered and, therefore, it is the in flated value and does not reflect true market value. This argument was not made before the lower authorities and, therefore, it is not allowed to be raised now. At any rate, the argument is only one way. Similarly, there might be credit purchases. Such purchases will set of the higher value in credit sale, inasmuch as, the value of such goods in closing stock will also include the inflated value on account of credit purchases. It will, therefore, not effect the value of the closing stock as such. Then generally cash discount is given for cash purchases. At best the percentage of discount for cash sale will have to be reduced in case of sales on credit. The percentage of discount given on cash sale or the discount actually given has to be taken into consideration. No such information has been furnished. This contention, therefore, also deserves to be rejected. It has also been argued that managerial expenses, interest on borrowing and other office expenses such as stationery, accountant's salary, etc., also will have to be reduced from the gross profit for working out the market value. In other words, the net profit has to be taken as the base for arriving at the market value. I am not in agreement with this contention either. Market value is different from the net results of a business. It is from the market value that all expenses have to be excluded for arriving at the net profit. Market value is a stage much interior to the net profit and, therefore, this contention also deserves to be rejected. The argument that the firm was prepared to sell its entire stock at the rate of 18 per cent of its cost/book value also has no merit, inasmuch as, the revenue is not the purchasing agency and when the assessment was made by the WTO, the goods in the closing stock on the valuation date were no longer available with the assessee or at least major portion thereof was not there as the same would stand sold by them. This position was conceded by the learned counsel of the assessee at the time of hearing of the appeal.

14. The last submission made by the learned counsel of the assessee is that the WTO should have confronted the assessee with the material in his possession as the onus for proving that the market value of the closing stock was more than 20 per cent of the cost price (sic). I have already held earlier that the WTO has discharged the onus upon him with reference to the gross profit rate that the market value was more than 20 per cent of the cost price. Thereafter, the onus shifts to the assessee to disprove that the apparent was not real by leading positive evidence. The assessee has miserably failed to bring any material on record to show that actual value of the closing stock was much less than the gross profit rate. He has merely made some hypothetical statement which in my opinion cannot be advanced in a Court of law. In a Court of law, what is asserted has to be substantiated. In the present.case what to speak of substantiating a statement, the statements themselves are hypothetical and not positive for which no cognizance can be taken. In view of the above discussions, my findings on the questions framed earlier are as under : 1. I answer the first question in the affirmative, i.e., the difference is more than 20 per cent in terms of Rule 2B(2) and the WTO has discharged the initial burden cast on him.

2. My answer to Question No. 2 is also in affirmative. The assessee has also failed to lead any evidence to discharge the onus which shifted upon him.

3. Market value has to be found as a fact and the value placed by the WTO is upheld in the absence of any material brought on record to the contrary on behalf of the assessee.

15 to 20. [These paras are not reproduced here as there was no dispute between the members on the points covered in those paras.] 1. I have carefully gone through the combined order being passed by my learned brother. As I do not agree with my learned brother on one count, a separate order has to be recorded. 1 find it difficult to agree with his decision being given in WT Appeal Nos. 62, 60 and 61 (Jp.) of 1981 on the issue : whether the WTO was justified in coming to the conclusion that the market value of the stock-in-trade in the firm Maliram Puranchand, Jaipur, exceeded by more than 20 per cent the value shown by the assessee for the wealth-tax purposes simply on the ground that gross profit shown by the assessee was higher than 20 per cent and thereby invoking the provisions of Rule 2B(2) to determine the value of the stock-in-trade on the market value. Similar question came up for consideration in WT Appeal Nos. 756 and 757 (Jp.) of 1980 before this Bench and by the combined order dated 23-7-1981, to which I was a party, the Tribunal found that mere gross profit rate of more than 20 per cent shown by the assessee did not constitute adequate material to come to the conclusion that market value of the assets exceeded by more than 20 per cent than the value shown by the assessee and that for invoking the provisions of Rule 2B(2), the WTO should have brought some cogent material to prove that market value exceeded by more than 20 per cent than the value shown by the assessee. As my learned brother has already reproduced the relevant portion of the order Smt. Lad Kanwar Dhadda (supra) at pages 11 and 12 of his order, 1 do not want to burden my dissenting order by reproducing the same. In my opinion, the issue : whether on the facts and in the circumstances of the case can Rule 2B(2) be invoked, is fully covered by earlier decision dated 23-7-1981 of this Bench, which has been extensively reproduced on pages 11 and 12 by my brother in his order. Following the said order dated 23-7-1981, I hold that the WTO was not right in invoking Rule 2B(2) merely on the basis of gross profit rate shown by the assessee and without determining the value of the closing stock at the end of the year by any other cogent material. On all other points, I agree with the learned brother.

2. In my opinion, the three appeals of the revenue may be treated to have been allowed only for statistical purposes and, 1 accordingly order.

1. On a difference of opinion between the learned Members of the Jaipur Bench on the following points, this case has been referred to me by the President, Tribunal. The points of difference, as stated by the learned Accountant Member vide his order dated 23-12-1981 are as under : 1. Whether, on the facts and in the circumstances of the case, the gross profit rate in the case of the firm in which the assessee is a partner at 33.68 per cent with reference to the cost price for the assessment year 1975-76 will not prima facie show that the difference in terms of Rule 2B(2) of the Wealth-tax Rules is more than 20 per cent and whether the WTO has discharged the initial burden cast on him 2. If the answer to Question No. 1 is in the affirmative whether the burden shifts to the assessee to prove that the prima facie difference of 38.88 per cent is not real by leading positive evidence and whether any evidence has been adduced by the assessee to discharge its onus 3. Whether the market value of the closing stock has to be found as a fact and whether and in the absence of any details having been furnished by the assessee, the value adopted by the WTO has to be accepted or not The point of difference, as stated by the Judicial Member in his order dated 1-1-1982, is as under : Whether, on the facts and in the circumstances of the case, does the gross profit rate taken in the case of the firm, constitute adequate material to come to the conclusion that market value of the closing stock of the firm exceeds the cost price as adopted by the firm by more than 20 per cent and whether merely on that basis, can Rule 2B(2) of the Wealth-tax Rules, 1957 be invoked 2. The facts giving rise to the difference of opinion on the points mentioned above may be stated : S/Shri Gopi Chand Rawat, Ram Mohan Rawat and S.M. Rawat are partners of the firm Maliram Puranchand, Jaipur. This firm has its head office at Jaipur and a branch at Bombay.

At Jaipur the firm has showrooms at Haldion-Ka-Rasta, Rajasthan Handicrafts Emporium and Rajasthan State Hotel, Khasa Kothi. The firm deals in precious stones, jewellery studded with precious stones, paintings, curios and silver articles. The firm also exports jewellery.

The previous year of the firm relevant to the assessment year 1975-76 ended on 31-3-1975. The date, viz., 31-3-1975 is the valuation date for the assessment year 1975-76 in respect of the three partners of the assessee-firm. The firm disclosed sales of Rs. 26,67,960 and the gross profit at Rs. 6,75,839 which gave a rate of 25.2 per cent. The value of the closing stock as on 31-3-1975 shown by the firm was Rs. 27,51,139 (Rs. 15,64,804 at head office and Rs. 11,86,335 at showrooms). Shri Gopi Chand Rawat had shown the value of his interest in the aforesaid firm at Rs. 1,02,660, Shri Shyam Mohan Rawat had shown the value of his interest in the aforesaid firm at Rs. 1,80,637 and Shri Ram Mohan Rawat had shown the value of his interest in the aforesaid firm at Rs. 2,00,647. These amounts represented the capital standing to the credit of their different accounts in the books of the firm. The WTO was of the opinion that the declaration of the rate of gross profit of 25.2 per cent by the firm meant that if the cost of closing stock was Rs. 74.80, the market value would be Rs. 100 on an average. On this basis he worked out the value of the closing stock as shown by the aforesaid firm at Rs. 36,77,993 as against Rs. 27,51,139 declared. On this basis the WTO intended to apply the provisions of Rule 2B(2) which provides for adjustment in the value of an asset disclosed in the balance sheet.

The aforesaid rule provides that where the market value of an asset exceeds its book value for purposes of assessment under the Income-tax Act, 1961 by more than 20 per cent, the value of that asset shall, for the purpose of Rule 2A of the Wealth-tax Rules, 1957 be taken to be its market value. Shri Gopi Chand Rawat in his letter dated 20-3-1979 made the submission that if the firm had earned the gross profit rate of 25.2 per cent, it did not mean that the provisions of Rule 2B(2) should be invoked. The provisions of the rule had not been invoked in earlier years. It was further submitted that the jewellery trade had its own peculiar features inasmuch as the goods in stock might remain in stock for years together and some goods may be sold at the gross profit rate of 10 per cent whereas some other may be sold at the profit rate of 25 per cent. The market value, it was asserted, of the entire closing stock would not exceed 20 per cent of the book value of the stock because there would be no willing buyer who would buy such a large stock at a profit exceeding 20 per cent of the book value. He submitted that the firm was prepared to sell its entire stock at a rate about 18 per cent of its book value. He also made the submission that if the department had any material to show that the market value of the closing stock of the firm exceeded its book value by 20 per cent, the assessee should be confronted with this material because the onus for purposes of applying Rule 2B(2) lay on the revenue. The other two partners made similar submissions. The WTO did not accept the submissions made on behalf of the three assessees. He, however, allowed a margin of 4 per cent in view of the submissions made by the assessees. On this basis the market value of the closing stock in the books of the aforesaid firm was worked out at Rs. 35,30,873 and the difference in the market value and the book value of the stock was worked out at Rs. 7,79,734 (Rs. 35,30,873 minus Rs. 27,51,139).

One-third share of each partner was worked out at Rs. 2,59,911 and this amount was included in the wealth-tax assessment of the three assessees. This amount was over and above the value of their interest in the aforesaid firm already shown by the three assessees in their returns for the present year.

3. All the three assessees filed appeals to the AAC. It was argued on behalf of the assessees that Rule 2B(2) itself was not applicable in these cases. It was then argued that the gross profit rate of 25.2 per cent in this year would not conclusively establish that the market value of the closing stock of the firm was more than 20 per cent of the book value. It was submitted that the firm had to hold stocks for long time which entailed expenditure of chemical treatment, reassortment and sometimes recutting besides blocking of substantial capital resulting in substantial loss of interest. A part of the closing stock comprised of raw stones on which margin of profit would not exceed even 10 per cent. The margin of profit in the business of jewellery fluctuated heavily. The rate of profit on sales to foreign tourists would be different, the margin of profit on export sales would be different and the margin of profit on sales within the country would be different.

The sale to dealers did not give margin of 10 per cent to 15 per cent.

The AAC held that the provisions of Rule 2B(2) could not be invoked. On merits also he held that it would not be correct to apply the rule of thumb in enhancing the value of closing stock by the gross profit rate of the year to arrive at the so-called fair market value of the same on the valuation date. He then deleted the addition of Rs. 2,59,911 made in the hands of each of the three assessees.

4. Against these orders of the AAC the revenue came in appeal before the Tribunal and raised, inter alia, the following grounds of appeal which are common in all the three cases : The learned Appellate Assistant Commissioner of Wealth-tax has erred in : (i) holding that the Wealth-tax Officer was not justified in invoking the provisions of Rule 2B(2) to determine the net wealth of the firm Maliram Puranchand, Jaipur and then in making pro rata addition of Rs. 2,59,911 in the assessees' hands.

5. These appeals came to be heard by the Jaipur Bench of the Tribunal.

The learned Accountant Member, who wrote the leading order, framed the following three issues, which are mentioned in paragraph 11 of his order : 1. Whether, on the facts and in the circumstances of the case, the gross profit rate in the case of the firm Maliram Puranchand at 33.68 per cent with reference to cost price for the assessment year 1975-76 will not prima facie show that the difference in terms of Rule 2B(2) of the Wealth-tax Rules is more than 20 per cent and whether the WTO has discharged the initial burden cast on him 2. If the answer to 1 above is in the affirmative whether the burden shifts to the assessee to prove that prima facie difference of 33.68 per cent is not real by leading positive evidence and whether any evidence has been adduced by the assessee to discharge this onus 3. Whether market value has to be found as a fact, if so what is the market value of the closing stock and the assessee's share therein After taking into consideration the arguments advanced on behalf of both the parties, the learned Accountant Member recorded the following answers to the issues framed above : 1. I answer the first question in the affirmative, i.e., the difference is more than 20 per cent in terms of Rule 2B(2) and the WTO has discharged the initial burden cast on him.

2. My answer to Question No. 2 is also in the affirmative. The assessee has also failed to lead any evidence to discharge the onus which shifted upon him.

3. Market value has to be found as a fact and the value placed by the WTO is upheld in the absence of any material brought on record to the contrary on behalf of the assessee.

Before the Tribunal the assessee relied on the decision of the Jaipur Bench of the Tribunal in the case of WTO v. Smt. Lad Kanwar Dhadda & Smt. Jatan Devi Dhadda [WT Appeal Nos. 756 and 757 (Jp.) of 1980, dated 23-7-1981] for the assessment year 1975-76, wherein also the firm had shown the gross profit at the rate of 25 per cent and the WTO had applied the provisions of Rule 2B(2) but the AAC had deleted the additions made by the WTO and the appeals by the revenue were dismissed. An extract from that order has already been give in para 9 of the order of the learned Accountant Member. Reference was also made to an order in the case of Vimal Chand Golecha (supra) pertaining to the assessment years 1973-74 and 1974-75 wherein the rates of gross profit shown by the concerned firm for the assessment years 1973-74 and 1974-75 were 29 per cent and 22 per cent, respectively and the WTO had applied the provisions of Rule 2B(2). The additions made were deleted by the AAC and his order was confirmed. During the course of this order, the afore-said order of the Jaipur Bench of the Tribunal was followed. The learned Accountant Member did not follow these orders and he referred to an order in the case of Gyanchand Kothari (supra) pertaining to the assessment years 1974-75 and 1977-78. In that case the firm had shown the rate of gross profit at 26.8 per cent for the assessment year 1974-75 and the rate of gross profit shown for the assessment year 1977-78 was 28 per cent. It was held that so far as the actual addition to the valuation of the closing stock was concerned, prima facie Rule 2B(2) appeared to be applicable to the assessee's case inasmuch as the gross profit disclosed by the assessee in both the head office and the branch was more than 20 per cent and the valuation of the closing stock according to the WTO had been taken at cost so that the market value could exceed written down value or the book value adopted for the purpose of income-tax by more than 20 per cent. For determining the actual market value, however, the matter was referred back to the AAC. An extract from this order appears in para 10 of the order of the learned Accountant Member. The learned Accountant Member was of the opinion that on this point the order of the AAC should be reversed and that of the WTO should be restored.

6. The learned Judicial Member, who was party to the order in the case of Smt. Lad Kanwar Dhadda (supra) preferred to follow that order, wherein it was held that the mere fact that gross profit rate shown by the firm was more than 20 per cent did not constitute adequate material to come to the conclusion that market value of the closing stock of the firm exceeded the book value by more than 20 per cent and that for invoking the provisions of Rule 2B(2) the WTO should have brought some cogent material to prove that the market value of the closing stock of the firm exceeded its book value by more than 20 per cent. It is in these circumstances that the point of difference, referred to above, has been framed and has been referred to me as a Third Member.

7. The learned departmental representative relied on the order of the Accountant Member, the order of the Calcutta Bench 'A', Camp at Jaipur in [WT Appeal Nos. 451 and 452 (Jp.) of 1980 dated 25-7-1981] and the Special Bench order of the Tribunal in the case of IAC v. Cosmopolitan Trading Corporation [IT Appeal No. 560 (Jp.) of 1981, dated 13-10-1982]. He submitted that when the firm Maliram Puranchand had itself shown the rate of gross profit at 25.2 per cent, it was apparent that the market value of the closing stock as on 31-3-1975 exceeded its book value by more than 20 per cent. Therefore, Rule 2B(2) was clearly applicable to the three cases. According to him, for purposes of ascertaining the market value a hypothetical sale had to be considered.

Relying on the aforesaid Special Bench order, he submitted that market value of the closing stock represented the cost plus the gross profit shown for the year ending 31-3-1975. According to him, the onus that lay on the revenue had been discharged by pointing out that the closing stock was admittedly valued at cost and when the rate of gross profit shown was 25.2 per cent for the year ending 31-3-1975, the market value of the closing stock would work out to more than 20 per cent of the book value. He submitted that it was for the assessee to produce material before the WTO to show that in the face of the gross profit rate of 25.2 per cent shown in this year, the market value of the closing stock did not exceed 20 per cent of the book value. It was also argued that by not furnishing any information on this point intentionally, the onus that lay on the assessee was not discharged and the correct market value of the closing stock was not shown.

8. The learned counsel for the assessee submitted that up to the assessment year 1974-75 the provisions of Rule 2B(2) had not been invoked though the three partners of the firm were wealth-tax assessees from the assessment year 1958-59 onwards. After referring to the judgments in the cases of Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC) and CWT v. Man Industrial Corporation Ltd. [1980] 123 ITR 298 (Raj.) he sub-mitted that the onus was on the revenue to prove that the market value of the closing stock of the firm was more than 20 per cent of its book value. He submitted that the precious stones consisted of emeralds, rubies, sapphires, etc., which were uncut and unset. The closing stock included cut and polished precious stones, jewellery studded with precious stones, diamonds, pearls and other stones, paintings, curios and silver articles. After submitting that the items dealt in by the assessee were items of luxury and not of day-to-day necessity, he submitted that there was no mechanism for arriving at the market value of the items of closing stock held by the firm. The value that could be placed on the closing stock varied from person to person and even from place to place. If the goods were sold to dealers, the price would be comparatively small. If the payment is delayed, the price would go down because the element of risk of recovery would be there. He submitted that the gross profit would not help in finding out the market rate because the gross profit was not constant. He furnished the following chart which is at page 26 of the paper book :Assessment Sales in Gross profit Gross profityear jewellery rate1973-74 24,84,095 4,80.001 19.3 per cent1974-75 25,76,571 5,00,001 19.4 per cent1975-76 26,67,960 6,75,839 25.3 per cent1976-77 21,50,403 4,74,001 22.04 per cent1977-78 32,09,900 7,22,251 22.5 per centAssessment Total Sales Total Gross Total Gross Profityear Profit Rate1973-74 31,33,544 5,82,650 18.5 per cent1974-75 34,22,955 5,94,306 17.3 per cent1975-76 27,57,720 6,88,443 24.9 per cent1976-77 30,45,771 4,93,676 16.2 per cent1977-78 91,70,105 8,50,824 9.2 per cent He also referred to the following chart which is given at page 28 of the paper book :Assessment Net profit Opening stock Closing stockyear as per He pointed out that the closing stock held by the firm was slow moving items and it was for this reason that the assessee had to carry huge stocks and for carrying such huge stock the assessee has to raise loans. The capital of the three partners including the profit of this year amounted to Rs. 4,83,944 and the interest alone paid by the firm in this case amounted to Rs. 3,74,618. He referred to the decisions of the Tribunal dated 23-7-1981 in WT Appeal Nos. 756 and 757 (Jp.) of 1980, (Jaipur Bench) (the rate of gross profit shown in that case was 25 per cent), dated 28-8-1982 in WT Appeal Nos.778 and 779 (Jp.) of 1980, of the Calcutta Bench 'E' Camp at Jaipur (the rates of gross profit shown by the firm were 29 per cent and 22 per cent), dated August 1981 in WT Appeal No. 429 (Jp.) of 1980 (Jaipur Bench) (the rates of gross profit shown in the subsequent years were 30 per cent and 40 per cent), dated 15-9-1981 in WT Appeal No. 450 (Jp.) of 1980 (Calcutta Bench 'C' Camp at Jaipur) and dated 23-7-1981 in WT Appeal Nos. 594 to 596 (Jp.) of 1980 (Jaipur Bench), the rate of gross profit shown by the firm for one of the three years was 24 per cent). In all these cases, the additions made by the WTO were deleted by the AAC and the orders of the AAC were confirmed by the Tribunal. He submitted that there was no evidence with the department to prove that the market value of the closing stock of the firm exceeded book value by more than 20 per cent. He also submitted that there was no material for giving credit of only 4 per cent as done by the WTO. He pointed out that in the Special Bench order, referred to by the learned departmental representative, the point in issue was different. He submitted that the share of Shri Gopi Chand Rawat in the firm in this year amounted to Rs. 29,425 and after the order of the Tribunal in the case of the firm such share amounted to about Rs. 25,000. The capital of Shri Gopi Chand Rawat was Rs. 1,02,660 and if salary was taken on a conservative basis at Rs. 2,000 per month, the yield from about Rs. 1,00,000 would be about Rs. 1,000. The point that he made was that if the value of the interest was increased in the manner done by the WTO, nobody would buy the interest of the assessee (Shri Gopi Chand Rawat) in the firm considering the yield. On the question of the determination of the interest of the partners in the firm like valuation of shares he referred to the judgments in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38 (SC), CWT v. Mahadeo Man [1972] 86 ITR 621 (SC) and CIT v.Smt. Vimlaben Bhagwandas Patel & Smt. Kamlaben Kanjibhai Patel [1979] 118 ITR 134 (Guj.). He also submitted that if the two methods were available, the method beneficial to the assessee should be applied. On this point, he referred to the decision in the cases of Jaswant Rai v.CWT [1977] 107 ITR 477 (Punj. & Har.) and Debi Prosad Poddar v. CWT [1977] 109 ITR 760 (Cal.). He submitted that even after the valuation of the property was done on the basis of yield method, further deduction had to be allowed as was done in the cases of Prodyut Kumar Dutta v. Competent Authority, IAC [1982] 134 ITR 42 (Cal.) and Lalita Jabbar v. Competent Authority [1982] 133 ITR 389 (Cal.). He pointed out that more than 50 per cent of the closing stock consisted of coloured stones and it was very difficult to place the market value of such stones and the market value of the entire closing stock of the firm could certainly not be arrived at on the basis of the average rate of gross profit shown in this year.

9. In reply, the learned departmental representative submitted that the cost of the goods in this case was not in dispute, the rate of gross profit shown was not in dispute and as the assessee had not given any specific information for arriving at the correct market value, the WTO was justified in giving credit of 4 per cent and thereafter determining the market value of the closing stock in the manner done by him. He reiterated the submission that the Special Bench order was fully applicable to this case.

10. I have carefully considered the rival submissions. Though the point of difference between the two learned members is couched in different language, but the pith and substance of the difference of opinion is whether the rate of gross profit shown by the firm constitutes adequate material to come to the conclusion that the market value of the closing stock of the firm exceeds the cost of the closing stock by more than 20 per cent and for that reason can the provisions of Rule 2B(2) be invoked. It is not controverted by the learned departmental representative that the firm Maliram Puranchand values its closing stock on the basis of cost and that the value of the stock of Rs. 27,51,139 is based on cost. In the case of Man Industrial Corporation Ltd. (supra) it has been held as under : A review of the aforesaid decisions makes it clear that the law is now well settled that when the WTO proceeds to assess the value of the assets of the assessee, by adopting the global method of valuation under Section 7(2)(a) of the Act, then the valuation of the assets given in the balance sheet of the assessee for the relevant year should normally be taken to indicate the real value of the assets, for the purposes of determining the net wealth. However, the value of the assets shown in the balance sheet is subject to adjustment, on the basis of acceptable evidence produced by the assessee before the WTO..." (p. 312) ... As observed by their Lordships of the Supreme Court in the cases referred to above, the assessee is the best person to know about the real value of his assets and it is for him to adduce evidence before the WTO, if he desires to convince the authority that the value specified in the balance sheet does not represent the correct figure about the value of his assets.... (p. 313) The Supreme Court judgments have been referred at page 309 of the report and these are the cases of CWT v. Aluminium Corporation of India Ltd. [1970] 78 ITR 483, Kesoram Industries & Cotton Mills Ltd. (supra) and CWT v. Tungabhadra Industries Ltd. [1970] 75 ITR 196. The valuation of the closing stock is shown in the balance sheet of the firm and that value as having been shown at cost has, thus, to be accepted. The value of the closing stock shown in the balance sheet of the firm has been accepted in the income-tax assessment of the firm and that is obvious from a copy of the assessment order of the firm filed before me. Now, the assessee is not required to lead any evidence for purposes of invoking Rule 2B(2), because it is not the assessee's case that the value of the closing stock shown in the balance sheet of the firm does not represent its correct value. The evidence to prove the market rate of the closing stock of the firm has to be led by the revenue, because the revenue wants to make the necessary adjustment for invoking Rule 2B(2). The revenue cannot make a grievance of the fact that the assessee has not led any evidence for proving the market value of the goods shown as closing stock of the firm. The firm produced its books of account and it was for the WTO to ascertain the market value for invoking Rule 2B(2).

11. Now, let me examine the material on the basis of which the revenue argues that the market value of the closing stock of the firm is more than 20 per cent of its value shown in the balance sheet. The case of the revenue is sought to be built on the fact that in the assessment year 1975-76 the firm has shown the gross profit rate of 25.2 per cent, This rate has been shown on the following sales :Exports 22,20,659Showroom 3,67,412Rajasthan Handicrafts Emporium 78,102Rajasthan State Hotel, Khasa Kothi 1,787 26,67,960 The closing stock details shown in the balance sheet are as under : Rs.Head office 15,64,804Showroom 11,86,335 27,51,139 The details of the closing stock do not indicate as to goods of what value are meant for export on the valuation date. The argument of the assessee is that on exports, the firm makes good profit and for that reason the rate of gross profit shown in this year is better and the rate of gross profit cannot be uniform in different years. Without even knowing which goods are meant for export, it will be only guesswork to first imagine that a certain part of the goods are meant for export and then put some imaginary value on the goods to be exported. In K.J.Aiyer's Judicial Dictionary 'market value' has been defined as : 'The price for which the goods can be had in the market irrespective of any contract regarding the price between the parties'. For purposes of the Mysore Land Acquisition Act (IV of 1894) the term 'market value' has been held to mean the price that an owner willing and not obliged to sell might reasonably expect to obtain from a willing purchaser. For purposes of Rule 2B(2) only a hypothetical sale is to be considered, but even so there has to be positive material for establishing the market value of the closing stock on the valuation date. This market value cannot just be arrived at on the basis of the rate of gross profit shown in this year. The value of goods involved is fairly large The firm has to keep a large amount of goods to effect the sales in different years. The following figures will show the opening stock purchases and sales in different years : The amount of closing stock carried over in different years suggests that the goods in which the assessee deals the sales are slow. The sales are not the type of sales which can be expected in items of consumer goods. The investment in closing stock is large. Before the items of jewellery can be sold different permutations, combinations, settings, etc., have to be made. Some items of jewellery may be sold quickly, but for others the stock may have to be carried over a period of certain years. The coloured precious stones require treatment. It is not easy to fix the value of emeralds, rubies, sapphires, etc. The rates would differ from person to person and even from place to place.

If such large quantity of goods as the firm carries are to be sold on the valuation date, the buyer would in all probability be a dealer and he would certainly not pay the price which the assessee can get from sales to different parties over a period of 12 months. I have thus no hesitation in coming to the conclusion that on the basis of the mere gross profit of 25.2 per cent shown in this year, the value of the closing stock cannot be considered to be more than 20 per cent of the value shown in the books of the firm.

12. The view that I am taking is supported by the orders of the Tribunal in WT Appeal Nos. 756 and 757 (Jp.) of 1980 dated 23-6-1981 (Jaipur Bench), WT Appeal Nos. 778 and 779 (Jp.) of 1980 dated 28-8-1982 (Calcutta Bench 'E' Camp at Jaipur), WT Appeal No. 449 (Jp.) of 1980 dated August 1981 (Jaipur Bench), WT Appeal No. 450 (Jp.) of 1980 dated 15-9-1981 (Calcutta Bench 'C' Camp at Jaipur) and WT Appeal Nos. 594, 595 and 596 (Jp,) of 1980 dated 23-7-1981 (Jaipur Bench). The only decision taking a different view is in WT Appeal Nos. 451 and 452 (Jp.) of 1980 dated 25-7-1981 (Calcutta Bench 'A' Camp at Jaipur). In that case also, it is noticed that the matter was remitted back to the AAC, for fixing the exact market value of the closing stock.

13. The learned counsel for the assessee had referred to certain judgments for the proposition that the interest of a partner in the partnership firm should be fixed on the basis of yield. It is unnecessary to go into the details of those judgments, because it was conceded before the Bench, when the appeal was first heard, that while valuing the interest of partners in a firm Rule 2B(2) could be invoked.

It is also unnecessary to refer to the other judgments cited by the learned counsel for the assessee as they are not very relevant to the issue involved in this case.

14. The learned departmental representative had placed reliance on the order of the Special Bench in the case of Cosmopolitan Trading Corpn.

(supra). In that case, the assessee reduced the export invoice value of the goods by adopting disparity rate of 48 per cent and the balance so arrived at was taken as cost of the goods in closing stock. The dispute was whether this method should be accepted for valuation of closing stock. The ITO had allowed disparity rate of 40 per cent and on that basis an addition of more than Rs. 7 lakhs was made. That addition was deleted by the Commissioner (Appeals) and the revenue's appeal challenging the deletion of the addition made by the ITO was dismissed by the Special Bench. That order of the Special Bench has no relevancy to the issue involved in this case.

15. For the aforesaid reasons I agree with the view of the learned Judicial Member. This file may now be sent to the Jaipur Bench for passing an order under Section 24(11) of the Act read with Section 255(4) of the Income-tax Act, 1961.


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