As the Commissioner's presumption that the property had been undervalued was unfounded and not supported by any specific instances, therefore, he was not justified in assuming jurisdiction under section 25(2) and by applying the multiple suggested by the Commissioner, the value of the property went down as compared to the value adopted by the Wealth Tax Officer and therefore question of loss of revenue's interest did not arise.
1. In these three appeals, the assessee challenged (he validity of the orders under Section 25(2) of the Wealth-lax Act, 1957 ("the Act") passed by the Commissioner for the assessment years 1974-75 to 1976-77.
2. The assessee is a minor. He filed his returns of wealth through his guardian for the years under consideration showing the immovable properties as follows :- Assessment year Rs. 1974-75 38,510 1975-76 1,70,000 1976-77 2,70,000 At the time of the assessment, the WTO did not accept the valuation shown for the assessment year 1974-75 and enhanced it to Rs. 2 lakhs on agreed basis and accepted the valuation shown for the subsequent years.
The assessments were completed on 30-3-1978. The Commissioner initiated proceedings under Section 25(2) as he considered these orders to be erroneous insofar as these are prejudicial to the interest of the revenue and passed a consolidated order dated 20-2-1980 which is challenged now before us.
3. Shri C.S. Aggarwal, the assessee's learned counsel, challenged the order of the Commissioner on the ground that the landings arrived at by him are untenable, unjustified and not based on materials on record.
The assessments in these cases were completed by the WTO under Section 16(3) of the Act after full hearing and discussions. The details of the investment and the income from the property were all placed before the WTO. He did not accept the returned net wealth and made enhancement accordingly for the assessment year 1974-75. However, he found the returned net wealth acceptable for the subsequent years as the same was supported by the cost of investment and the yield of the property, etc.
Since, the assessments were completed after due process and consideration of the facts, they cannot be said to have been done on ad hoc basis and without proper inquiry. Secondly, the alleged prejudice to the interest of the revenue arises in the mind of the Commissioner due to probability and not on account of actual fact. The Commissioner computed the possible net value of the property by applying a multiple of 16 times to the net annual letting value. However, this multiple of 16 times has got no basis and no property in the area was assessed at that rate. The probability being not substantiated could not form a basis for assuming jurisdiction by the Commissioner under Section 25(2). Lastly, it is maintained by the learned counsel that the income yielding capacity of the property was duly taken into account by the assessee at the time of filing of the returns and by the WTO at the time of assessment. The cost of investment in the property was also properly shown so as to arrive at the correct value of the property.
Since, the cost of investment including the land came to approximately Rs. 1,65,000 and the net value on the basis of the annual letting value on a gross receipt of Rs. 30,780 came to approximately Rs. 2,69,328 on the basis of multiple of 12 on net annual value of Rs. 22,444 (Rs. 30,780 less deductible allowance=net value of Rs. 22,444), the Commissioner was not justified in assuming that there was prejudice to the interest of the revenue in these cases. Since, there was absolutely no basis for the Commissioner to assume jurisdiction in these cases, his orders arc liable to be cancelled.
4. On the other hand, Shri B.L. Chhiber, the learned departmental representative, supported the orders of the Commissioner. According to him, the Commissioner need not necessarily record the final conclusion about the points in controversy before passing the order under Section 25(2). Since, the Commissioner did not settle the assessment finally but only directed the WTO to make the assessment de-novo after proper inquiry and in accordance with law, the order is quite in order and liable to be sustained. Reliance is placed on Addl. CIT v. Mukur Corporation [1978] 111 ITR 312 and Gee Vee Enterprises v. CIT [1975] 99 ITR 375.
5. We have given our careful considerations to the rival submissions In the above cases, the main consideration in the mind of the Commissioner was that the order of the WTO did not take into account appropriate multiple while adopting capitalisation method in computing the net-value of the property. If the value of the property is computed on net rental basis and a multiple of 16 times is applied, then he considers that there is a loss due to underassessment by the WTO. Even accepting this proposition, we find that the assessment year 1974-75 did not fall within the provision of Section 25(2). The property income assessed for the assessment year 1974-75 was Rs. 9,711. Applying a multiple of 16 times the value of the property will come to Rs. 1,55,379. Since the WTO assessed it at Rs. 2 lakhs, we do not find any prejudice to the interest of the revenue for this year. Similarly, in the subsequent assessment years, the Commissioner opines that a multiple of 16 times should be applied on the net annual letting value which would bring the net value of the property to a much higher figure than assessed by the WTO. However, the Commissioner did not bring out the circumstances under which this multiple of 16 times should be applied in preference to lower multiple applied in this case. Since the net value of the property assessed by the WTO for these two years compared favourably with the cost of investment and the value determined on net rental basis by applying a multiple of 12, the orders cannot be said to be prejudicial to the interest of the revenue without any specific instance on record of higher multiple adopted in the cases of other assessees in the area. Since the probability is unfounded and not supported by any specific instances, we are of the opinion that the Commissioner was not justified in assuming jurisdiction under Section 25(2). We, accordingly, cancel the order.