1. In this revenue's appeal cancellation of penalty of Rs. 1,40,800 by the Commissioner of Wealth (Appeals)-VII, New Delhi, which was levied by the WTO Under Section 18(l)(c) of the Wealth-tax Act, 1957 (hereinafter referred as 'the Act'), in respect of assessment year 1971-72 is contested.
2. The assessee filed her return declaring wealth at figure Rs. 94,269 but later revised it to Rs. 1,04,394 because in the original return amount due from one Shri A.C. Chopra was omitted to be included in the wealth. In the return, the assessee declared value of 2-A, Metcalf Road House, Delhi at Rs. 68,700 and value of 50 per cent share in the factory land & building at 14/5, Mathura Road, Faridabad at Rs. 73,500.
The value taken in the assessment framed on 27-11-1973 Under Section 16(3) of the Act for the two properties amounted to Rs. 1,83,000 and Rs. 95,000, respectively. In the assessment order, it is stated that as far as Metcalf Road property was concerned, it was valued by the valuation cell and the value of the other property was adopted keeping in view the past pattern of assessment.
3. It is an accepted fact and important to note that assessment came to be accepted by the respondent.
4. The WTO holding the appellant to be a defaulter in terms of section 18(l)(c), read with Explanation 4 thereto issued notice, to which the assessee responded by submitting that in returning the value of the aforesaid properties, she was guided by the valuation certificate dated 24-6-1969 of a Government approved valuer which was submitted during the course of assessment proceedings in respect of the assessment year 1968-69. The assessee's case was that in view of the approved valuer's certificate, the assessment based on departmental valuation cell could not bring her within the ambit of concealment provision of section 18(l) (c) even read with Explanation 4.
5. Referring to the valuation of the property at Faridabad, the WTO in his penalty order stated as under : As regards the value of the property No. 15/5, Mathura Road, Faridabad, Haryana though the assessee has filed valuation certificate dated 24-6-1969 showing the value at Rs. 73,500 and the same was taken accordingly in the assessment year 1969-70 but in 1970-71 the value was determined by the ITO at Rs. 92,290 and the same was accepted by the assessee. It is on these basis that in the year under consideration the value of the above property was taken at Rs. 95,000 and confirmed by the Appellate Assistant Commissioner in appeal.
6. In relation to Metcalf property the WTO observed that though the area had been correctly stated by the assessee's registered valuer and no addition and alteration were made in the building since 1953, the Government valuer had shown that the property consisted of double storeyed residential building without house and compound wall, whereas the assessee's valuer mentioned the property consisting of ground floor and barsati only without out-house. From these the WTO concluded that the valuation report submitted by the assessee's valuer, seemed to be misleading. He also referred to the assessment having been accepted on the basis of Government Valuation Officer as a factor against the assessee.
7. In addition to above the assessee asserted that in respect of Metcalf property, the WTO in respect of the assessment years 1968-69 to 1970-71 had accepted the offered valuation of Rs. 68,700 and in respect of Faridabad building also the assessee's version was accepted for 1968-69 and 1969-70 offering value of Rs. 49,876 and Rs. 73,500, though for the assessment year 1970-71 the value was enhanced on the declared version of 1969-70 to Rs. 92,290.
8. The burden of the assessee's argument was that even though the assessed figure exceeded 25 per cent of the declared return, but the conduct showed that there was no attempt much less any concealment which could attract the penal provision.
9. The WTO, however, levied penalty at Rs. 1,40,800 by holding that there was concealment to the extent of Rs. 21,500 in respect of Faridabad building and Rs. 1,19,300 in relation to Metcalf Road house.
10. The learned Commissioner of Wealth-tax (Appeals) after stating facts cancelled the entire penalty and it is considered expedient to reproduce the following portion at pages 5, 6 and 7 of his orders : The question, therefore, which has to be resolved in this appeal is whether on the above facts and circumstances of the appellant's case, the WTO was justified in regarding the appellant as a defaulter and in imposing the said impugned penalty on her. The learned counsel Shri C.S. Agarwal, urges before me that the Wealth-tax Officer has not properly appreciated all the facts and circumstances of the appellant's case in coming to the conclusion that the appellant had come within the ambit of the said concealment penalty section of the WT Act. He also draws my attention to some of the decided cases of the IT Act. On careful consideration of the submissions made before me and on going through the records I am of the view that the WTO was not justified in regarding the appellant as a defaulter Under Section 18(l)(c) of the WT Act (read with Explanation 4 thereto) and in imposing the penalty on the appellant.
As pointed out by me earlier, the assessment order of the WTO does not at all discuss anywhere the appellant's attempt at concealing her wealth by understating the value of the above-said properties.
The WTO should have, in my opinion, discussed at length why he considers that the appellant had come within the ambit of section 18(l)(c) (read with Explanation 4 thereto) of the WT Act in his assessment order itself while mentioning that penalty proceedings have been separately initiated. As stated earlier, the appellant had acted with due care and caution while filing her return of wealth for this assessment year she had based the value of these two properties on the valuation certificate given to her by her approved valuers, no doubt in the earlier assessment years. As regards the residential property, as stated earlier, in the immediately preceding assessment year, the department itself had adopted the value of the said property at Rs. 68,700 which was the valuation placed on the said property by the appellant's approved valuer in his valuation report. It is, therefore, clear that the appellant had furnished all the relevant information in her return of wealth when she merely based the valuation of the said house property on the valuation certificate given to her by her approved valuer, which was also accepted by the department in the immediately preceding assessment year. The WTO, no doubt was justified in examining the matter in great detail and in seeking the assistance of the department's valuer while framing his assessment order for this assessment year. That does not mean that the appellant has attempted at concealing the particulars of this house property simply because she bona fide, based her valuation of the said property on the valuation report given to her by her approved valuer in the immediately preceding assessment year. In my opinion, the appellant could not be charged with the attempt at concealing her wealth by understating the value of her property just because the departmental valuer has placed the valuation of the said property at a higher figure. As regards the discrepancy noticed in the valuation report given by the appellant's approved valuer and by the departmental valuer, it may be pointed out here that the appellant cannot be said to have deliberately furnished inaccurate particulars regarding the covered area, etc., of her residential property. If at all, the mistake has been committed by the appellant's approved valuer and as stated earlier, the department had also accepted the said valuation report in toto in the past. The appellant, who is an elderly lady she was aged about 56 years in the assessment year 1971-72 appears to have accepted the said valuation report of her approved valuer without getting into all the technicalities of the said report. The appellant has also brought on record that she was not the owner of the entire building but was one-half owner of the said house property, the other half, according to the appellant, belonged to her sister. The appellant had urged before the AAO in her appeal against the wealth-tax assessment order for this assessment year that the valuation of the department's valuer is erroneous as, according to the appellant, it had inadvertently taken the entire building for the purpose of valuation. Though the appellant had lost the appeal mainly on the ground that she had not objected to the valuation report of the departmental valuer, the fact remains that the appellant had pointed out that the department's valuer's report could have proceeded on wrong assumptions as regards the covered area. In any case, in my opinion, the appellant cannot be considered to be coming within the ambit of Section 18(l)(c) of the WT Act read with Explanation 4 thereto, as the appellant has taken due care and caution by relying upon her approved valuer's valuation certificate in valuing her residential property for this assessment year.
The other property was also valued by the appellant on the basis of the valuation certificate of her approved valuer. Here again, the WTO has substituted his valuation for the appellant's valuation. The WTO has not referred the question of proper valuation of this property to the departmental valuer in the case of this property. It is, therefore, clear that as regards the appellant's immovable property located in Faridabad all that has happened, is the substitution of WTO's valuation for the valuation made by the appellant's approved valuer in the earlier asstt. year. Just because the WTO has taken the value of higher figure (which has finally been confirmed in appeal) the WTO was not justified in regarding the appellant as a defaulter Under Section 18(l)(c), read with Explanation 4 thereto of the WT Act and in imposing the penalty on the appellant. It may be noted here that in the immediately preceding assessment year, the WTO has substituted his valuation for the valuation placed on the said property by the appellant's approved valuer, but the WTO does not appear to have invoked the provisions of section 18(l)(c) of the WT Act for that asstt. year. The facts and circumstances of the appellant for this asstt. year as far as this property in Faridabad is concerned, are similar to the facts and circumstances which obtained in the earlier asstt. year. In my opinion, the appellant has acted bona fide, with due care and caution while filing her return of wealth showing therein the value of this property in Faridabad basing the said value of her approved valuer's valuation certificate.
For all these various reasons I am of the view that the penalty order of the WTO for this asstt. year required to be cancelled. The penalty order of the WTO is hereby concelled." [Emphasis supplied] 11. Before us for the revenue Shri S.P. Jain relied on the WTO's order and Shri C.S. Agarwal, Advocate staked his entire case on the Circular No. 4P (LXXVI-65) dated 7-6-1968 issued by the Central Board of Direct Taxes and particularly para 15 of the same, which must be brought in close focus, and, therefore, reproduced below : 15. The scale of penalty under the new provision is very steep as it is intended to provide an effective deterrent to evasion of wealth-tax through concealment of assets, over-statement of the value of debts or the under-statement of the value of assets. These provisions are, however, not attracted in a case where the understatement of the value of assets or over-statement of the value of debts does not arise due to any fraud or any gross or wilful neglect on the part of the taxpayer, even though the amount by which the value of assets has been understated or, as the case may be, the value of debts has been overstated, is more than 25 per cent of the amount determined on assessment. Thus, where a taxpayer has given relevant particulars of his assets correctly and the value thereof declared by him in the return is in accordance with the valuation made by an approved valuer, the taxpayer will not be subjected to penalty for under-statement of the value of any asset merely on the ground that its value has been determined in the assessment at a higher amount. Approved valuers referred to above or those notified, from time to time, by the Central Government in the Official Gazette Under Section 4(3) of the Estate Duty Act. These valuers are competent to act as valuers also for the purposes of the Wealth-tax Act. The term 'valuer' has been defined in section 2(r) of the Wealth-tax Act to mean a valuer appointed Under Section 4 of the Estate Duty Act. In cases where a dispute regarding the valuation of any property is to be settled at the stage of appeal to the Appellate Tribunal by the arbitration of two valuers (one nominated by the appellant and the other by the respondent) in accordance with the procedure specified in section 24(6) of the Wealth-tax Act, these valuers are to be selected out of the penal of valuers notified by the Government Under Section 4(3) of the Estate Duty Act. Th3 valuers notified by the Government Under Section 4(3) of the Estate Duty Act include a sufficient number of surveyors, engineers and architects for valuation of immovable property, chartered accountants for valuation of company shares and business assets including goodwill, specialists in valuation of jewellery, precious stones, ornaments and works of art, and actuaries (for valuation of life interest, reversions, etc.), in various important cities, and towns. Their services can be engaged by a taxpayer on payment of fees at the prescribed scale. [Emphasis supplied] 12. Sub-clauses (i), (ii), (in) and Explanations 1, 2, 3 and 4 was substituted for Clauses (i), (ii) and (iii) and Explanations 1 and 2 by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1-4-1976. Earlier Clause (Hi) and Explanation were substituted by new Clause (iii) and Explanations 1 and 2 by the Finance Act, 1968 w.e.f. 1-4-1968; Clauses (i) and (ii) were substituted by new clause and Explanation by the Finance Act, 1969 w.e.f. 1-4-1969 and Clause (i) was substituted by the Finance (No. 2) Act, 1971, w.e.f 1-4-1972.
13. Though there is no change in the circular, paragraph 15 of which we have reproduced in this order, neither the same has been withdrawn the question would arise whether it would be applicable in relation to Explanation 4, which is referred to by the A AC, when the relevant provisions of 1968 were contained in Explanation I (1) of Clause (c) of sub-sectiton (1) of section 18 of the Act. The said provisions of Explanation I (1) effective in 1968 and Explanation 4 and the related provision substituted by the Taxation Laws (Amendment) Act, 1975 w.e.f.
1-4-1976 are also noticed below : the value of any asset returned by any person is less than seventy-five per cent of the value of such asset as determined in an assessment Under Section 16 or section 17 (the value so assessed being referred to hereafter in this Explanation as the correct value of the asset), or then, such person shall, unless he proves that the failure to return the correct value of the asset or, as the case may be, the correct value of the debt or the correct net wealth did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of assets or furnished inaccurate particulars of assets or furnished inaccurate particulars of assets or debts for the purposes of Clause (c) of this Sub-section.
Explanation 4 : Where the value of any asset returned by any person is less than seventy per cent of the value of such asset as determined in an assessment Under Section 16 or section 17, such person shall be deemed to have furnished inaccurate particulars of such asset within the meaning of Clause (c) of this Sub-section, unless he proves that the value of the asset as returned by him is the correct value.
14. The answer would be that though the provisions seem different, the purport is the same, i.e., once there is difference in the returned and the assessed wealth of over 25 or 30 per cent, then the onus to prove innocence shifts on the assessee and the revenue is absolved of the responsibility of establishing any guilt.
15. In the present case it must be clarified that though the Departmental Valuation Officer stated the Metcalf House property to be double storeyed building, the revenue has not alleged that the assessee's valuer's version that the second storey consisted of a Barsati etc. was wrong or some construction was sought to be suppressed. The assessing officer as a fact stated that the covered up area was as stated by the assessee's valuer and that, according to us, is an important factor.
16. Again in respect of assessment years 1968-69 to 1970-71 a static value of Rs. 68,700 for the property was accepted as declared. It is correct that there was variation in respect of Faridabad building in the assessment year 1970-71 also, but the assessee's assertion and contention that under a bona fide belief she declared valuation on the basis of approved valuer's report, though given in 1969, should not have been discarded as frivolous unworthy of taking notice of.
17. As far as the revenue's case that unless the assessee could prove that the returned value was correct there was no escape from the concealment penalty, cannot be accepted because it would lead to absurd results, because if the assessee fails in a given case in respect of quantum of assessment it would lead to automatic penalty because failure to succeed in appeal in itself would indicate that the declared version could not be established as correct.
18. Therefore, after giving our thoughtful moments and holding that the present case came within the ambit of the exceptions as stated in para 15 of the circular (supra), we hold that the ultimate decision of the learned Commissioner (Appeals) to cancel the penalty has been correct, though reasons stated are different.