Fair market value governs wealth-tax valuation of acquired land; later compensation cannot justify revision where marketability was impaired.

Revision under section 25(2) of the Wealth-tax Act was not justified where the assessments were made on the basis of the return and valuation material furnished by the assessee. The later compensation paid by the Government for acquired land did not by itself establish undervaluation, because the land was affected by disputed possession, adverse claims, title uncertainty and the absence of a normal market. For valuation under section 7(1), the governing test is fair market value in a hypothetical open market with a willing buyer, and the subsequent compensation figure, shaped by special circumstances, could not replace that test on the relevant valuation dates. The assessee's valuation was upheld and the assessments were restored.

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Issues: (i) Whether the Commissioner was justified in exercising revisionary jurisdiction under section 25(2) of the Wealth-tax Act, 1957 to set aside the assessments on the ground that the wealth returned for the acquired land was understated. (ii) Whether, on the relevant valuation dates, the acquired land had to be valued at the compensation later received from the Government or at the value adopted by the assessee.

Issue (i): Whether the Commissioner was justified in exercising revisionary jurisdiction under section 25(2) of the Wealth-tax Act, 1957 to set aside the assessments on the ground that the wealth returned for the acquired land was understated.

Analysis: The assessments had been completed on the basis of the return and the valuation material furnished by the assessee. The Commissioner proceeded on the footing that the compensation ultimately paid by the Government necessarily showed undervaluation, but the facts disclosed prolonged litigation, disputed possession, adverse claims, uncertainty over title and the absence of any ordinary market for transfer of the property. In these circumstances, the assessments could not be treated as erroneous and prejudicial merely because a later compromise compensation figure existed.

Conclusion: The exercise of revisionary power under section 25(2) was not justified and was against the assessee.

Issue (ii): Whether, on the relevant valuation dates, the acquired land had to be valued at the compensation later received from the Government or at the value adopted by the assessee.

Analysis: For valuation under section 7(1) of the Wealth-tax Act, 1957, the test is fair market value in a hypothetical open market with a willing buyer. The property was burdened by continued dispute, absence of possession, threatened and actual governmental intervention, and no realistic open market existed on the valuation dates. The later compensation was influenced by special circumstances and could not be equated with fair market value on the valuation dates. The assessee's adopted valuation was therefore reasonable.

Conclusion: The compensation subsequently paid by the Government could not be adopted as the fair market value for the wealth-tax valuation dates, and the assessee's valuation was upheld.

Final Conclusion: The assessments made by the Wealth-tax Officer were restored, and the Commissioner's revisionary order setting them aside was vacated.

Ratio Decidendi: For wealth-tax valuation, property must be valued on the basis of fair market value in a hypothetical open market with a willing buyer, and a later compensation figure arising from exceptional or compelled circumstances cannot by itself justify revision where the property's marketability and possession were materially impaired on the relevant date.

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