Mandatory valuation rules under the Gift-tax Act barred revision where the Assessing Officer used the prescribed method

Revisionary jurisdiction under section 24(2) of the Gift-tax Act was considered in relation to valuation of gifted property under Schedule III of the Wealth-tax Act. The valuation rules introduced by Schedule II from 1-4-1989 were treated as mandatory and procedural, and therefore applicable to pending matters. Where the Assessing Officer adopted the prescribed recognised valuation method, and no legally sustainable basis was shown for treating rule 3 as impracticable on the facts, the assessment could not be characterised as erroneous or prejudicial to the revenue. On that basis, the revision was unjustified.

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Issues: Whether the Commissioner was justified in exercising revisionary jurisdiction under section 24(2) of the Gift-tax Act, 1958 on the ground that the assessment order adopting valuation under Schedule III to the Wealth-tax Act, 1957 was erroneous and prejudicial to the interests of the revenue.

Analysis: The valuation scheme introduced by Schedule II to the Gift-tax Act, 1958 from 1-4-1989 required the value of gifted property to be determined in the manner laid down in Schedule III to the Wealth-tax Act, 1957. The Court treated the valuation rules as mandatory and procedural in character, applying to pending matters. It further held that the Assessing Officer had followed the prescribed and recognised method of valuation, and that the Commissioner had not shown any legally sustainable basis to hold that rule 3 was impracticable in the facts of the case. Since the adopted valuation was in accordance with law, the assessment could not be branded erroneous or prejudicial to the revenue.

Conclusion: The revision under section 24(2) was unjustified, and the assessee succeeded.

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