Judgment:
1. These are the appeals filed by the Wealth-tax Officer, Dist. VI(2), New Delhi against the orders of the Appellate Asstt. Commissioner in relation to the assessments made on the assessee for the wealth-tax assessment years 1979-80 and 1980-81 in the case of Shri Ranjit Singh and 1981-82 and 1982-83 in the case of Shri Amar Jeet Singh. Since the point involved is identical in both the cases, they are disposed of by a common order.
2. The assessee is a partner in a firm of jewellers called Jewellers Corner holding 55 per cent share therein. The copy of the trading account of the firm of Jewellers Corner in respect of gold disclosed the average selling price of the jewellery at Rs. 924 per 10 gm. The closing stock was valued at Rs. 595 per 10 gm. By applying the provisions of Rule 2B(2), the Wealth-tax Officer revalued the closing stock at Rs. 790 per 10 gm. and arrived at a difference of Rs. 1,79,985 out of which the assessee's share was worked out to Rs. 98,990.
Similarly, in the silver account as against the average sale price of Rs. 1,730 per kg. the closing stock was valued at Rs. 1,240 per kg.
Here again by applying the provisions of Rule 2B(2) the Wealth-tax Officer redetermined the value of the closing stock by valuing it at Rs. 1,688 per kg. and on that basis arrived at a difference of Rs. 3,890 as assessee's share. These two sums were added to the wealth shown by the assessee as under valuation. For the other assessment year 1980-81 also additions were made on the same basis. As against the value of Rs. 638 shown by the assessee in gold the value taken by the Wealth-tax Officer was Rs. 1,130. In the silver account the value adopted by the Wealth-tax Officer was Rs. 2,655 as against Rs. 1,713 shown by the assessee. On the basis of the revaluation of the closing stock, a sum of Rs. 2,41,105 was arrived at as additional wealth in respect of gold and a sum of Rs. 14,506 in the case of silver and these two amounts were added to the wealth disclosed by the assessee.
3. In appeal filed against these assessments, the Appellate Asstt.
Commissioner was of the opinion that the basis adopted by the Wealth-tax Officer was incorrect though there was a case for the addition of some amount. She arrived at the value of the gold at Rs. 513 and Rs. 1,268 respectively in these two years and for silver at Rs. 864 and Rs. 1,991 respectively and on that basis directed the Wealth-tax Officer to revalue the closing stock. The main reason that prevailed with the Appellate Asstt. Commissioner was that the Wealth-tax Officer had adopted the market value of pure gold in respect of jewellery whereas the jewellery must be valued at the value of the alloy. She thought that a reduction of 35 per cent in the case of gold jewellery and 25 per cent in the case of silver would be sufficient to bring down the value of the bullion into the alloy state. It was on that basis the value stated above were worked out by her, no doubt, this was on ad hoc basis. The claim of the Revenue was that the Appellate Asstt. Commissioner was not justified in reducing the value of the gold jewellery and silverware by those percentages.
4. We have heard the learned Departmental Representative and the learned counsel for the assessee and we are of the opinion that the basis adopted by the Wealth-tax Officer cannot be said to be wholly correct in view of the decision of the Tribunal in the case of WTO v.Gopi Chand Rawat [1983] 5 ITD 667 (Delhi) (TM). The mere existence of a selling price being higher than the value of the closing stock does not mean or lead to the conclusion that the difference between the value adopted in the books and the market value was more than 20 per cent so as to attract the provisions of Rule 2B(2). In that case even though the Wealth-tax Officer revised the valuation of the closing stock on the ground that the margin of gross profit shown by the trading account was much more than 20 per cent and that meant that the provisions of Rule 2B(2) were clearly attracted, this argument of the Revenue was not accepted by the Tribunal. The Tribunal held that the mere existence of gross profit rate higher than the stipulated percentage of 20 per cent in the rules does not mean that the market value of the closing stock was more than the stipulated percentage in the rule. The Tribunal considered several factors to disprove this theory on which the reliance was placed by the Revenue. We now find that the Wealth-tax Officer in this case also was relying upon this very theory to invoke the provisions of Rule 2B(2). Since we did not approve of this theory as enabling the department to revalue the closing stock by calling in aid the provisions of Rule 2B(2), we cannot approve of the basis adopted by the Wealth-tax Officer to redetermine the value of the closing stock. Eventhough the Appellate Asstt. Commissioner had disapproved of the basis adopted by the Wealth-tax Officer, still she felt that the market value of the jewellery could be arrived at by reducing from the market value of the pure gold the percentage attributable to the alloy. No doubt, there is some justification for the supposition but the revaluation of the closing stock cannot be said to be resorted to with reference to the provisions of Rule 2B(2). Since the Appellate Asstt. Commissioner has gone on the view that it should be the market value for the closing stock that should be adopted and not the inflated value as worked out by the Wealth-tax Officer, meaning thereby that the value adopted by the Wealth-tax Officer was inflated value, the Appellate Asstt. Commissioner should have brought in proof to show that the market value of the closing stock was much more than what was shown in the books. We have already stated that she had gone only on supposition. Closing stock cannot be disturbed if the principles laid down in the case of Gopi Chand Rawat (supra) are to be followed. Since there was no basis for the adoption of the percentage of alloy and since the basis adopted by the Appellate Asstt.
Commissioner was only to adopt the inflated value taken by the Wealth-tax Officer and then to reduce the content of alloy and since for the adoption of the inflated valued only Rule 2B(2) of the Wealth-tax Rules was applied and since application of Rule 2(B)(2) was not warranted in a case of this type, we think the proper course to be adopted in these appeals is to set aside the orders of the Appellate Asstt. Commissioner and direct that authority to find out the market value of the gold independent of applying Rule 2B(2) of the Wealth-tax Rules and then arrive at the difference if any to be added.
5. With these observations, we set aside the orders of the Appellate Asstt. Commissioner and restore the matter to the file of the Appellate Asstt. Commissioner for redetermination.