Judgment:
1. The appeal is by the assessee and it is directed against the order of the C.W.T. passed under section 25(2) of the Wealth-tax Act.
2. The assessee filed her wealth-tax return for the assessment year 1991-92 (valuation dated 31-3-1991) on 5-9-1992. In the statement of wealth accompanying the return, she disclosed the value of the vacant land at Chincholi, Bombay at Rs. 60,000 which was an estimate. The cost price of the land was Rs. 31,228 and this was also disclosed in the statement. The assessee also held land and building at Chiprupalli in Andhra Pradesh which were valued at Rs. 59,656. Together the aforesaid properties were disclosed at an aggregate Value of Rs. 1,19,656.
3. On 30-10-1992 notice under section 16(2) was issued fixing the hearing on 9-11-1992. On the date of hearing the assessee was directed to file a valuation report in respect of the land as well as the jewellery and the case was adjourned to 17-12-1992. On 17-12-1992, the assessee's representative appeared and filed a letter bearing the same date. It was stated in the letter that the value of the land at Bombay was estimated at Rs. 50,000 up to the assessment year 1991-92 and it was requested that reasonable value of the same may be taken while completing the assessment for the year under consideration.
4. The assessment was completed on 2-3-1994 under section 16(3) of the Act in which the value of the land and building at Chiprupalli, Andhra Pradesh and the vacant plot of land at Chincholi, Bombay was estimated at Rs. 3 lakhs. The assessment was completed accordingly.
5. Subsequent thereto, notice under section 25(2) of the Act was issued by the C.W.T. It was stated therein that it had come to his notice that the land at Bombay was sold by the assessee at Rs. 25 lakhs in October 1991 and he was therefore of the opinion that the Assessing Officer fell into an error in taking the sum total of the value of the said land as well as the properties in Andhra Pradesh at an aggregate sum of Rs. 3 lakhs as on 31-3-1991. He, therefore, considered the assessment to be erroneous insofar as it was prejudicial to the interests of the revenue. He invited the assessee's objections to the proposed action.
In response thereto, it was pointed out by the assessee by a letter dated 28-2-1996 that there was nothing in the Wealth-tax Act to show that the valuation as on the valuation date should be guided by subsequent events and that the subsequent sale cannot be the basis for estimating the Value at an early date. It was also pointed out that the value of the land was increased after considering the written reply filed by the assessee in the course of the assessment proceedings. The C.W.T., however, was not convinced with the assessee's objections. He concluded as under : "I have given a careful consideration to the submissions put forward on behalf of the assessee in this behalf. Whereas it may be that a subsequent event of a sale of a property may not to be fully relevant to determine the valuation of the property on a particular valuation date, the revenue cannot be so blind as not to take notice of such an event, particularly when such an event took place within a short period of six months from the valuation date, and not seek to remedy any aberration in the decision that might have been taken.
In other words, the Assessing Officer having made the assessment in a stereotyped manner and having thus displayed total non-application of mind, the only conclusion that may be reached is that proper enquiries in the matter have not been made. In such circumstances, the Commissioner is duty bound to set aside such aberration within the powers vested in him under section 25(2) of the W.T. Act, 1957.
In this case also as indicated above, there has been lack of application of mind resulting in complete lack of enquiries that ought to have been made, and in this view of the matter, I set aside the assessment in question and direct the Assessing Officer to complete the same de novo, although on this limited issue, after making suitable enquiries in the matter." 6. The contention of the ld. counsel for the assessee before us is that the action taken under section 25(2) was without jurisdiction. He pointed out that in the notice the C.W.T. did not say that the action was proposed on the ground of lack of enquiry or non-application of mind on the part of the Assessing Officer whereas in the final order he has set aside the assessment on that basis. According to the ld.Counsel, this was not permissible in law. He also submitted that there was no finding by the C.W.T. in the order that the assessment was erroneous and prejudicial to the interests of the revenue. His next submission was that even assuming that one could infer that the action was taken on the ground of lack of enquiry, that would not hold good because the value of the land in Bombay together with the value of the properties in Andhra Pradesh was enhanced from Rs. 1,19,656 to Rs. 3 lakhs on estimate by the W.T.O. only after making necessary enquiries, which will be clear from the letter filed by the assessee in the course of the assessment proceedings. This showed not only that there was an enquiry but also that the W.T.O. had applied his mind to the question of valuation.
7. The ld. D.R., however, submitted that the order of the C.W.T. should be read as a whole and together with the notice, and if so read, it would be clear that the assessee had been put on notice that the action was proposed on the ground of lack of enquiry or non-application of mind on the part of the W.T.O. to the question of valuation of the plot in Bombay. He further contended that when the very same property was sold for a price which was nearly nine times than that of the value estimated as on the date which was just seven months earlier to the date of sale, that itself is sufficient to initiate proceedings for further enquiry and this is that the C.W.T. has said. He laid considerable emphasis on the fact that the C.W.T. has only set aside the assessment and it would be open to the assessee to raise all points regarding the merits of the valuation in the fresh round-off proceedings.
8. On a careful consideration of the rival contentions, we are of the view that the order of the C.W.T. cannot be upheld. It is no doubt true, as contended by the ld. counsel for the assessee, that in the notice issued under section 25(2), there is no allegation that the assessment was completed without any enquiry or any application of mind. All that is stated in the notice is that since the plot of land in Bombay fetched a price of Rs. 25 lakhs in October 1991, the action of the W.T.O. in estimating the value of that property at Rs. 3 lakhs (together with the properties in Andhra Pradesh), was erroneous. Even so, we would assume, having regard to the observations made in the operative portion of the order of the C.W.T. which we have extracted above, that the C.W.T. was taking recourse to the section only on the ground that there was no enquiry by the Assessing Officer. Even on the basis of such assumption the order cannot be upheld because the record reveals that the W.T.O. had in fact made enquiries and had applied his mind to the question of valuation of the property at Bombay. At our instance, the Id. D.R. made available, the records. We have perused the same. We find that on the first date of hearing, namely, 9-11-1992 the following entry has been made in the order sheet : "Shri O.P. Singhania, A.R. Appears. On query it is submitted that the land at Bombay is old and no valuation has been done. Also regarding jewellery and ornaments there is no valuation report for last few years it is estimated market value. A.R. is requested to - 2. File explanation regarding liability of CMC Luthera world service and other liability and to file confirmation of loan accounts.
On 17-12-1992, an explanation was submitted in writing with regard to all the points and insofar as the explanation relates to the valuation of the plot in Bombay, it is as under : "Regarding valuation report of land. - My client has purchased a small plot of land at Chincholi village, Bombay, suburban dist. for a sum of Rs. 31,228. The value thereof has been estimated at Rs. 50,000 in assessment years 1988-89, 1989-90, 1990-91 and 91 and Rs. 60,000 in assessment year 1991-92. In assessment years 1978-79 to 1980-81 your predecessor had estimated the value thereof at Rs. 50,000 which was confirmed by A.A.C. in the assessment years 1978-79, 1979-80 and 1980-81.
In the above premises, we submit that a reasonable value of the same be taken while completing the assessment.
I trust you will find the particulars in order. If any further or other particulars are required by client is ready and willing to comply with the same.
"Shri O.P. Singhania, A.R. appears and filed written statement explaining the points raised, bank pass-book produced. Discussed.
There was a further hearing on 28-2-1994 on which date the A.R. again appeared and the case was discussed with him. Thereafter the assessment was completed on 2-3-1994 after estimating the aggregate value of the Bombay and Andhra Pradesh properties at Rs. 3 lakhs.
9. In the light of the above position revealed by the assessment record, We are unable to agree with the C.W.T. that the valuation of the plot at Bombay was not enquired into or that there was non-application of the mind on the part of the Assessing officer to this question. It is true that mere lack of enquiry can confer jurisdiction upon the C.W.T. to set aside the assessment for being redone after due enquiry [please see Thalibai F. Jain v. ITO [1975] 101 ITR 1 (Kar.), Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) and Addl. CIT v. Mukur Corpn. [1978] 11 ITR 312 (Guj.)]. But if the record reveals that an enquiry has been made by the Assessing Officer, it is not open to the C.W.T. to substitute his views or conclusions in the place of those of the Assessing Officer. The power given to the C.W.T. under section 25(2), which is in Pari materia with section 263 of the I.T. Act, has been held not to be an appellate power by the Madras High Court in the case of Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129/30 Taxman 528. It is a supervisory power. The C.W.T.is not an appellate authority. The power conferred upon him under section 263 [similar to section 25(2)] is an extra-ordinary revisional power and is not to be employed as a review of subordinate's order in exercise of the supervisory power. The power under section 25(2) cannot in any manner be equated to or regarded as approaching in any way the appellate jurisdiction. A similar view has been taken by the Bombay High Court of CIT v. Gabriel India Ltd. [1993] 203 ITR 108. At page 115 it has been held that the revisional jurisdiction does not envisages a case of substitution of the judgment of the C.W.T. for that of the assessing authority who passed the order. It has further been held that even though the C.W.T. on a perusal of the records is of opinion that the estimate made by the Assessing officer was on the lower side and left to himself, the C.W.T. would have arrived at a higher estimate, that would not vest the C.W.T. with the power to re-examine the record and estimate the value at a higher figure. The conclusion drawn by the assessing authority after making an enquiry cannot be termed erroneous simply because the C.W.T. does not feel satisfied with the conclusion.
It has been held that in such cases the order of the assessing authority may be prejudicial to the interest of the revenue but cannot be termed erroneous. At page 114, the High Court observed that an erroneous assessment refers to an assessment that deviates from law and is, therefore, invalid and is a defect that is jurisdiction in nature and does not refer to the judgment of the Assessing officer in fixing the amount of valuation of the property. In the present case the ratio of the above two decisions applies with full force. As rightly pointed out by the ld. counsel for the assessee, there is no finding in the order of the C.W.T. that the assessment made by estimating the value of the properties at Bombay and Andhra Pradesh at Rs. 3 lakhs was erroneous, though such an allegation had been made in the notice issued proposing the revision. Thus, the allegation remains unsubstantiated.
It has to be remembered that under section 7(1) of the Wealth-tax Act as it applies from the assessment year 1989-90, the value of the plot in Bombay shall be the value determined in the manner laid down in Schedule III. Rule 20(1) of part H of Schedule III, which makes provision for valuation of assets other than assets for which specific provision has been made in the earlier rules applies in the case of valuation of the plot of land since in respect of a vacant land no specific provision has been made in any of the earlier rules of the Schedule. As per rule 20(1) the value of the plot shall be estimated to be the price which in the opinion of the W.T.O., it would fetch, if sold, in the open market on the valuation date. It is after considering the assessee's written explanation dated 17-12-1992 and after observing therefrom the details regarding the value estimated up to the assessment year 1990-91, that the W.T.O. has arrived at the opinion that the aggregate value of the Bombay plot and the Andhra Pradesh properties may be estimated at Rs. 3 lakhs instead of Rs. 1,19,658. It may be that the C.W.T. is unable to agree with the estimate made by the W.T.O. but as already seen, on the basis of the judgment cited (supra), he cannot substitute his opinion regarding the market value of the plot at Bombay in the place of the opinion of the W.T.O., arrived at after an enquiry. The impact of the subsequent sale for much higher amount on the value of the plot as on the valuation date is a matter which would require expert assessment and is a question where much can be said in favour of both views, but the assessment cannot be stated to be erroneous merely because of the subsequent sale of the property at a much higher value, especially in the absence of all the material and relevant facts relating to the nature of the property and the other factor affecting its valuation. It must be remembered that it is the C.W.T. who is taking action under section 25(2) and it is for him to bring all such jurisdictional facts clearly into the picture with a view to demonstrate that the estimate made by the W.T.O. was erroneous.
It may be prejudicial to the interests of the revenue in the sense that had the property been estimated at a higher figure, that would have brought more revenue, but it has to be borne in mind that the assessment has to be both erroneous and prejudicial to the interests of the revenue and satisfaction of only one of the two conditions would be insufficient to uphold the jurisdiction of the C.W.T. to take action under section 25(2). As already stated, there is nothing in the operative portion of the order of the C.W.T. to demonstrate as to how the estimate made by the W.T.O. was erroneous, expect saying that the assessment was made in a stereo-typed manner without application of mind or without making proper enquiries, an allegation which we have found not borne out by the record. Therefore, though there might be prejudice to the interests of the revenue, the assessment cannot be held erroneous on the basis of the observations made either in the notice or in the order passed by the C.W.T. under section 25(2) of the Act.
10. For the above reasons, we set aside the order of the C.W.T. and allow the Appeal.