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Wealth Tax Appeals Nos. 6, 7, 8 and 9 of 1980-81, decided on 26^th April 1986 .

---Ss. 3 & 4--Wealth Tax Rules, 1985, R. 8(1) & (3)--Assessment- Estimated value of immovable property--Inflationary trend--Assessing Officer filled in blanks of Form 'D' and framed assessment without advancing any reasons in support of his estimated value--Assessing Officer was required to pass speaking orders--Such order of Wealth Tax Officer set aside and case remanded for framing assessment according to law, keeping into consideration inflationary trend of prices of immovable property.

---Ss. 3 & 4--Wealth Tax Rules, 1985, R. 8(1) & (3)--Assessment--Value of immovable property--Opinion of Wealth Tax Officer, very material for estimating market value of a property--Such opinion not supposed to be subjective opinion depending on whims--Assessing Officer was required to collect some material like sale deeds etc. of other parties of locality, nature and size of property, amenities available and price prevailing for similar property in same locality before formulating his opinion.

---Ss. 3 & 4--Wealth Tax Rules, 1985, R. 8(1) & (3)--Assessment--Value of immovable property--Value given in P.T.I. not at all binding on Wealth Tax Officer.

---Ss. 3 & 4--Wealth Tax Rules, 1985, R. 8(1) & (3)--Assessment--Value of immovable property--Reasonable rent does not mean rent which has been agreed upon between landlord and tenant--Reasonable rent may be lesser or more than agreed rent depending upon existing circumstances of each case.

Mian Ali Hassan for Appellant.

Abdul Minam Jafri, D.R. for Respondent.

Date of hearing: 26th April, 1986.

-These wealth-tax appeals are directed against consolidated order of learned Appellate Assistant Commissioner recorded by her on 3rd May, 1980 regarding assessment years 1974-75, 1975-76, 1976-77 and 1977-78. The dispute, however, is very much restricted to the estimated value of certain properties mentioned hereinbelow:

This shop is allegedly self-occupied. The appellant's assessment declared its value at Rs.37,500 in each assessment year. The Wealth-tax officer, however, estimated its value at Rs.200,000. Rs.2,25,500, Rs,2,50,500 and Rs.2,85,000. On appeal, it was contended that since the Annual Letting Value of the shop was Rs.1,080 only, it was incumbent on Wealth-tax Officer to seek the Prior approval of his Inspecting Assistant Commissioner if he wanted to estimate the market value of the same at a figure which was more than ten times of its Annual Letting Value. The learned Appellate Assistant Commissioner upheld the contention and set aside the orders and directed the Wealth-tax officer to frame fresh assessments. Mr. Ali Hassan, Advocate, the learned counsel for the appellant, however, contended before us that the learned Appellate Assistant Commissioner should have annulled the estimated value instead of setting it aside. Mr. Minam Jafri, however, supported the impugned order.

The appellant declared the value of this lard at Rs.1,30,000. It was shown to be 11 Marlas in measurement situated at Mall Road. The Wealth-tax Officer, however, estimated its value at Rs.1,75,000, Rs.2,00,000, Rs.2,20,000 and Rs.2,50,000 in each year respectively. On appeal, the learned Appellate Assistant Commissioner has confirmed the order of Wealth-tax Officer. Mr. Ali Hassan, Advocate, however, argued that only 7 Marlas of land belong to the appellant and as 4 Marlas belong to his minor son. He contended that both the Officers below erred in estimating the value of 11 Marlas of land. Moreover, he also submitted that the estimated value was excessive and very high. Mr. Minam Jafri, however, supported both the officers below.

This land was declared to be worth Rs.48,936 and it was claimed as part of his residential house. The Wealth-tax Officer on the other hand, estimated it at Rs.84,200, Rs.1,05,000, Rs.1,25,000 and Rs.1,45,000, in each year respectively. He also held that this land was not part of any residential house. On appeal the order of learned Appellate Assistant Commissioner was confirmed. Mian Ali Hassan, Advocate submitted before us that this piece of land was purchased by four persons through two sale-deeds; one piece of land measured one Kanal and 15 Marlas and the second piece of land measured 4 Marlas and 140 feet. According to him, the first sale-deed was dated 29^th September, 1971 and was for Rs.78,946 whereas the second was dated 25th February, 1972 and was for Rs.32,000. He further contended that the Wealth-tax Officer erred in treating the entire land as asset of the appellant. He also called the estimated valuation as highly excessive and exorbitant. Mr. Minam -4afri supported the orders of both the officers below.

This plot measures one Kanal and its declared value was Rs.4,200. However, the Wealth-tax officer assessed it at Rs.80,000, Rs.1,00,000, Rs.1,24,000 and Rs.1,39,200 in each year respectively. On appeal, his order was confirmed by the learned Appellate Assistant Commissioner. Mian Ali Hassan submitted before us that the estimated value was excessive and exorbitant.

In addition to the argument reproduced above, Mian Ali Hassan, Advocate also submitted before us that before learned Appellate Assistant Commissioner he had taken additional grounds of appeal to bring in issue several points but neither he was allowed to argue nor the learned Appellate Assistant Commissioner had dealt with them in her order. The learned counsel also submitted additional grounds of appeal before us and produced the appellate order of the same properties regarding assessment years 1978-79, 1979-80, 1980-81 and 1981-82 to show that the valuations made by the Wealth-tax Officer were excessive and axorbitant. As far as his additional grounds of appeal are concerned, we think that in the interest of justice the learned Appellate Assistant Commissioner should have allowed the appellant to agitate the additional grounds and then after setting aside the assessment order directed the Income-tax Officer to frame fresh assessment. Mian Ali Hassan has referred to certain registered sale deeds in support of his additional grounds of appeal. We feel that we would do grave injustice if we confine levy of tax on the appellant despite the fact that it is ultimately held that he was not the owner of the asset. It is true that all these facts should have been brought to the notice of Wealth-tax Officer at the very beginning but the explanation that it was because of the death of the appellant that all documents could not be traced out at that time, appears to be satisfactory. As regards the order of the learned Appellate Assistant Commissioner for assessment years 1978-79 to 1981-82 is concerned it appears to be irrelevant for these appeals.

Reverting to the case of the appellant regarding each property separately, we would like to point out as to how the- market value of a property is to be ascertained. However, before doing that let us point out that the assessment orders as produced before us by the appellant are to be very much discouraged. It appears that the Wealth-tax Officer got form "D" of the Wealth-tax Rules typed out and then by filling in the blanks has framed the assessment. He has not advanced any reasoning worth the name in support of his estimated value although he is required by law to frame speaking orders so that the appellate Courts could be, in a position to appreciate wording of his mind.

Now turning to the method of valuation, let us first reproduce hereinbelow rule 8 (1) and (3) of the Wealth-tax Rules, which read-

-- (1) Subject to the provisions of sub-rules (2) (3), (3-A), (4), (4-A), (4-C), (5), (6), (7), (8) and (9), the value of any asset (other than cash) shall, for the purposes of assessment to wealth-tax be estimated to be the price, which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date.

(2)- - - -- - - -- - - -- ----- -- -

(3) Lands and buildings: The value of lands and buildings, excluding agricultural land shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality:

Proviso: Omitted by No. S.R.0.593 (1)/71, dated 29th July, 1971.

Provided that the Wealth-tax Officer shall not, except with the prior approval of the Inspecting Assistant Commissioner of Wealth-tax, determine the value of any property at a sum higher than ten times the gross annual rental value of such property:

Provided further that any amount by way of advance or security, which is not adjustable against the rent payable by the tenant shall be taken into consideration for determining gross annual rental value.

Where the Assessing officer assessed certain property at higher than ten times the gross annual letting value without approval of the Inspecting Assistant Commissioner, the action was depreciated and the order of the Appellate Assistant Commissioner reducing such valuation was upheld.

.-- For the purposes of this sub-rule, "gross annual value" means the sum for which the property might reasonably be expected to let from year to year."

From perusal of Rule 8(1) it appears that it is the opinion of Wealth-tax Officer, which is very material for estimating the market value of a property. However, such opinion is not supposed to be a subjective opinion depending on his whims. He is required by law to collect some material like sale deeds etc., of other parties of the locality before formulating his opinion. Sub-rule (3) of Rule 8 indicates as top what factors the Wealth-tax Officer has to keep in mind while forming his opinion about the market value of a particular property. He has to keep into consideration the nature and size of the property, the amenities available and the price prevailing for similar property in the same (locality.) From perusal of rule 3 it further appears that the Wealth-taxi Officer has been given another mode of estimating the value of a particular property. This is by way of multiplying ten times more than gross annual rental value. If he wants to adopt this mode firstly he would have to find out as to what the Property could reasonably be expected to yield as annual rent. Now either a property may be self occupied or given on rent to some tenant. It is possible that in either case, it should have been assessed by Provincial Excise & Taxation authorities. But let us emphatically point out that the value given in PT-1 is not at all binding on a Wealth-tax Officer. As pointed out earlier, it is his opinion, which matters and before formulating it he can of course, take into consideration the valuation given in PT-1 also. But that alone is not and would not be sufficient. Let us also point out that reasonable rent does not mean the rent, which has been agreed upon between the landlord and the tenant. It may be lesser or more than the agreed rent depending upon the existing circumstances of each case. Let us also observed that while determining the rent which a property may reasonably be expected to let from year to year, the Wealth-tax Officer would have to keep into consideration the nature' and size of the property, the amenities available and the rent in the locality or in its neighbourhood. This he would have to keep into consideration irrespective of the fact whether a property is self-occupied or given on rent. In short, every thing would depend upon the material collected by the Wealth-tax Officer before formulating his opinion. Thus, it is clear that the market value of an immovable property for Wealth-tax purposes may be determined either by finding out its value in open market or by estimating it on the basis of its estimated GALV. Let us, however, point out that he would have to seek the prior approval of his Inspecting Assistant Commissioner if the value of property determined by him on the basis of open market value or on the basis of GALV, whatever it may be, is at a sum higher than ten times the GALV of such property.

Now turning to the findings of learned Appellate Assistant Commissioner, we are of the view that though the impugned order setting aside the assessment order regarding shop at Anarkali is, our judgment, correct, but not because the value of the property determined by Income-tax Officer was more than ten times the ALV Rs.1,080. We have already pointed out that it is for the Wealth-tax Officer to determine the reasonable GALV under facts and circumstances of each case. Here the ALV Rs.1,080 on the face of it appears to be highly inadequate. We, therefore, confirm the order setting aside the estimated value but for different reasons as discussed above the Income-tax Officer is directed to determine the GALV of this shop according to law as discussed above, and then frame assessment accordingly.

As far as the plot of land at Mall Road is concerned, the learned counsel himself pointed out that it was purchased on 4th October, for Rs.3,54,465. He has, however, contended that out of 11 Marlas only 7 Marlas belonged to him. We are setting aside this part of the order also so that the Wealth-tax Officer may make further 'investigation and frame assessment accordingly in the light of the Sale Deed mentioned above. Needless to say that he would decide all the issues involved Let us also point out that in estimating the value of the plot he should keep into consideration the inflation, which has been playing important role throughout.

About the second plot at Abdali Road, Mr. Ali Hassan, Advocate contended that it was purchased by four persons through two Sale Deeds, dated 23rd September, 1971 and 25th February, 1972 for a consideration of Rs.78,946 and Rs.32,000 respectively. Here, again this material was not available to the Wealth-tax Officer and, as such, we feel very much constrained to set aside his order so that he can re-estimate the value of this plot. Let us point out that here again the Wealth-tax Officer would keep into consideration not only inflationary trend in the prices of immovable property but would also make investigation to find out whether the plot is part of a house as alleged.

About Sant Nagar plot Mr. Ali Hassan submitted that it was also purchased sometime in 1965. He, however, neither could give us exact amount of the Sale Deed nor the date on which it was executed. He, however, contended that this order be also set aside so that the Wealth-tax Officer could frame fresh assessment after estimating the value of this property. We think that it would be fair and just that the impugned order regarding this property is also set aside We, therefore, send this matter also to Wealth-tax Officer after setting aside the impugned order with the directions as discussed above.

Thus, in view of discussion made above the impugned order is hereby set aside and the Wealth-tax Officer is directed to frame assessment according to law as discussed above. Before parting with these appeals, let us point out that the order of learned appellate Assistant Commissioner, dated 15th June, 1982 regarding assessment years 1978-79, 1979-80, 1980-81 and 1981-82 as produced before us is not relevant for the disposal of these appeals. Since this order is not tinder appeal before us, we offer no comment on it. However, tire direct the Wealth-tax Officer once again to frame de novo assessment according to law as discussed above.

The appeal stand disposed of as discussed above.

M.Y.H Case remanded.

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