1987 (10) TMI 19 - HC - Wealth-tax

Reference to Valuation Officer when assessing officer's asset estimate exceeds r.3B threshold held mandatory; remitted to Tribunal

Whether a reference to the Valuation Officer under s.16A(1)(b) read with r.3B of the Wealth-tax Rules is mandatory where the assessing officer's estimated ... Reference To Valuation Officer - value of assets - Whether, the Tribunal was justified in holding that a reference to the Valuation Officer by the Wealth-tax Officer under section 16A of the Wealth-tax Act, 1957, was discretionary and not mandatory, even when the difference in wealth returned by the assessee and the wealth assessed by the Wealth-tax Officer was more than the limit prescribed under rule 3B of the Wealth-tax Rules ? - HELD THAT:- Admittedly, the estimated value of the assets exceeded the returned value of the said assets by more than what is envisaged by rule 3B, ibid. The question, therefore, arises as to whether, in that eventuality, the Wealth-tax Officer bad perforce to make a reference to the Valuation Officer for assessing the true value of the asset. In our view, the provisions of section 16A(1), clause (b), when read with rule 3B, ibid, mandatorily require the Wealth-tax Officer to make a reference. With due respect to Kripal J., in our opinion, the Wealth-tax Officer was not required to convey his estimated value to the assessee and wait for his reaction. In our opinion, the moment the estimated value exceeded the returned value of the asset by more than what is envisaged by rule 3B, then he had no option but to make a reference and he is not to wait for a request from the assessee to make a reference. It would be a different matter if the assessee, on coming to know about the estimated value, whether as a result of the communication from the Wealth-tax Officer or on his own and, in writing, accepts the estimated value to be the correct value. For the reasons aforementioned, we answer the question referred to us in the negative, i.e., against the Revenue and in favour of the assessee and remit the case back to the Tribunal to deal with it in accordance with law. Issues: Whether, when the estimated value of an asset exceeds the value returned by the assessee by more than the limits prescribed in rule 3B of the Wealth-tax Rules, the Wealth-tax Officer is obliged to refer the valuation to a Valuation Officer under section 16A(1) of the Wealth-tax Act, 1957, or whether such reference is discretionary.Analysis: The Court examined section 16A(1) of the Wealth-tax Act, 1957 and rule 3B of the Wealth-tax Rules, 1957, noting that clause (b)(i) of section 16A(1) prescribes contingencies when a reference should be made and rule 3B fixes the percentage and amount thresholds. The Court applied principles of statutory interpretation, including contemporanea expositio, and considered the legislative scheme and constitutional constraints under Article 14 against arbitrary discretion. The Court rejected reliance on the mere use of the word 'may' as decisive and held that the statutory contingencies and prescribed thresholds indicate a mandatory duty to refer where those thresholds are crossed. The Court also considered prior authority and administrative circulars as interpretive aids and declined the Revenue's submission that a reference is required only upon the assessee's request.Conclusion: The Wealth-tax Officer is required to refer the valuation to the Valuation Officer under section 16A(1) read with rule 3B when the estimated value exceeds the returned value by more than the limits prescribed in rule 3B. This answer is against the Revenue and in favour of the assessee.Ratio Decidendi: Where a statute prescribes specific contingencies and quantitative thresholds for action, crossing those prescribed thresholds converts the statutory provision into a mandatory duty to take the prescribed action rather than leaving it to administrative discretion.