Court quashes Wealth-tax Commissioner's notice on share valuation, upholds Circular, invalidates proposed method.

The court quashed the notice issued by the Commissioner of Wealth-tax under section 25(2) of the W.T. Act, which sought to revise the WTO's orders for undervaluation of shares. It held that the Board's Circular dated October 31, 1967, providing valuation methods for unquoted equity shares, was binding and not abrogated by the Supreme Court decision. The Commissioner's proposed valuation method contrary to the circular was deemed invalid. The court allowed the Special Civil Application, directing the Commissioner to refrain from acting on the notice and ordering costs to be paid by the respondent.

---

---

Issues Involved:
1. Validity of the notice issued by the Commissioner of Wealth-tax u/s 25(2) of the W.T. Act.
2. Applicability and binding nature of the Board's Circular dated October 31, 1967, in light of the Supreme Court decision in CWT v. Mahadeo Jalan [1972] 86 ITR 621.
3. Jurisdiction of the Commissioner to revise the WTO's orders based on valuation principles.

Summary:

1. Validity of the Notice Issued by the Commissioner of Wealth-tax u/s 25(2) of the W.T. Act:
The petitioner challenged the notice issued by the Commissioner of Wealth-tax u/s 25(2) of the W.T. Act, which sought to revise the orders passed by the WTO for the assessment years 1974-75 to 1977-78. The Commissioner issued the notice on January 5, 1980, stating that the WTO had undervalued the shares of Cloth Traders Pvt. Ltd., leading to under-assessment of wealth.

2. Applicability and Binding Nature of the Board's Circular Dated October 31, 1967:
The main question was whether the Board's Circular dated October 31, 1967, was superseded by the Supreme Court decision in CWT v. Mahadeo Jalan [1972] 86 ITR 621. The court noted that the circular provided specific methods for valuing unquoted equity shares of investment companies, which were binding on all officers employed in the execution of the W.T. Act. The court held that the circular was not abrogated by the Supreme Court decision, as the Supreme Court did not lay down any hard and fast rules for valuation but recognized both the break-up method and the yield method.

3. Jurisdiction of the Commissioner to Revise the WTO's Orders Based on Valuation Principles:
The court observed that the WTO had followed the Board's Circular in valuing the shares, which was binding on the Commissioner. The notice issued by the Commissioner proposed a valuation method contrary to the circular, which was not permissible. The court held that the WTO's orders were not erroneous in law as they were in accordance with the circular, and the Commissioner's notice was contrary to the circular and thus invalid.

Conclusion:
The court quashed and set aside the notice dated January 5, 1980, issued by the Commissioner of Wealth-tax, and directed that a writ of mandamus be issued restraining the Commissioner from acting on the notice. The Special Civil Application was allowed, and the respondent was ordered to pay the costs to the petitioner.

---