TaxTMI 
TaxTMI 
1987 (9) TMI 96
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.... if the cost of its closing stock at the head office was Rs. 73, its market value was 100 on an average, similarly if the stock of closing stock of Bombay branch was Rs. 77, its market value was 100. Thus, the market value of the closing stock of Head Office which has been shown at Rs. 3,55,608 came to Rs. 4,87,000 in round figures and the market value of the closing stock of Bombay branch which has been shown at Rs. 6,42,075 came to Rs. 8,80,000. The WTO thus worked out market value of the closing stock of the firm in which the assessee was a partner at Rs. 13,67,000 against the value disclosed at Rs. 9,97,683. The difference between the book value of the closing stock shown by the assessee and its market value as worked out by the WTO came to Rs. 3,69,400 and the assessee's share therein was worked out by the WTO at Rs. 81,200. The WTO has observed that the assessee has not shown the value of his interest in the firm of M/s Gems Trading Corpn. in accordance with the provisions of rule 2B (2) of the Wealth-tax Rules. 1957. The WTO, therefore, issued a show-cause notice to the assessee as to why the interest in the firm should not be valued under rule 2B (2). The assessee took lega....
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....C and has further relied on the order of the AAC for the assessment year 1976-77 in the case of Shri Bhanwar Singh Kothari, another partner of the same firm. 2. We have given a careful consideration to the rival submissions. The order of the AAC in the case of Shri Bhanwar Singh Kothari relating to the asst. year 1976-77 which has been relied upon by the AAC for the asst. year under appeal came up for consideration before the Calcutta Bench 'A' of the Appellate Tribunal (Camp at Jaipur) and vide its order dt. 25-7-1981 in WTA Nos. 453 and 454/Jp. /80 it has restored the issue of actual valuation of the closing stock to the file of the AAC to find out whether there is difference of 20 per cent as envisaged in rule 2B(2) as the decision of the AAC was based on generalisation and not on specific assets included in the closing stock. Following the reasoning in the decision of the Calcutta Bench 'A' which covers both the issues raised, i.e., whether rule 2B(2) will be applicable for valuing the interest of a partner in the firm as also on actual value of the closing stock, we restore the issue regarding finding of the actual value of the closing stock to the file of AAC as directed in ....
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....in this case is whether on the basis of the g. p. rates as shown by the firm in the Mal Khata A/c of the Head Office and branch office was the WTO justified in coming to the conclusion that the market value of the closing stock exceeded the value as adopted by the firm by more than 20 per cent. The submission of Shri Mathur, the ld. counsel for the assessee is that g. p. rate shown by the firm cannot constitute a good guideline to determine the market value and that if the g. p. rate is more than 20 per cent that does not necessary mean that the market value of the closing stock on the valuation date exceeded the value as adopted by the firm by more than 20 per cent. He says that the WTO invoked rule 2B (2) simply on the surmises, conjectures and wholly inadequate material. Why the g. p. cannot constitute a good guideline for determining the market value as on the valuation date. Shri Mathur made the same submissions at the time of hearing that were made in the case of Smt. Lad Kanwar Dhadha [WT appeal Nos. 756 and 757 (Jp.) of 1980] assessment year 1975-76 by the assessee's counsel. The said case was decided by Jaipur Bench to which I was a party by order dated 23-8-1981 and then ....
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....t by hypothetical general statements ? 3. Whether any evidence had been adduced by the assessee to discharge the above burden ? 4. Whether the market value of the closing stock has to be found as a fact and whether any value has been fixed by the CWT (Appeals). If not, whether the issue regarding actual market value of the closing stock should be restored to the file of the CWT (Appeals) for fresh determination ?" Per Shri Om Prakash, Judicial Member - I have carefully perused the questions framed by my learned brother (Accountant Member) for decision by the Third Member. In my opinion, the question that arises is as follows : "Whether, on the facts and circumstances of the case, the GP rate taken in the case of the assessee constitutes adequate material to come to the conclusion that market value of closing stock of the assessee exceeds the value as adopted by the assessee by more than 20 per cent within the meaning of rule 2B (2) of the Wealth-tax Rules, 1957 and to invoke the provisions of rule 2B (2) of the WT Rules, 1957 ?" and the same is referred to for decision by a Third Member. ORDER UNDER SECTION 24(11) OF THE WEALTH-TAX ACT, 1957 READ WITH SECTION 255(4) OF THE IN....
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.... I have heard the case at length and my task is made much easier by the decision of the Special Bench in the case of WTA No. 9 (Delhi) /1984 where the Special Bench after considering the elaborate arguments addressed to it, and after carefully considering all the relevant aspects of the case came to the conclusion that the solitary fact that higher rate of gross profit was shown by the trading account would not by itself be taken to be conclusive proof of the fact, that the market value of the closing stock shown in the trading account would be more than the book value by 20 per cent in order that rule 2B (2) could be invoked. This is also the view taken by another Bench of the ITAT in WTA Nos. 62, 60 & 61/JP/1981 where on a difference of opinion between the Members, the Third Member came to the same view as that of the Special Bench referred to above. This also is the view taken by the several other Benches of the Tribunal. There, thus, appears to be unanimous view that mere fact that the trading account showed higher rate of profit (more than 20 per cent) could not by itself conclusively show that the market value of the closing stock shown in the books is more by 20 per cent tha....