Valuation Report of Assets once made is effective for Four Assessment Years: Delhi High Court [Read Judgment]

Valuation Report - Delhi High Court - Taxscan

The division Bench of the Delhi High Court in Pr.Commissioner of Wealth Tax vs. Raghu Hari Dalmia held that a valuation report made by a registered valuer once adopted shall be in effect for four assessment years unless an event has occurred whereby the value is increased or decreased.

The High Court made it clear that the event of “search” under Section 132 of the Income Tax Act, 1961 cannot compel the assessee to undertake a fresh valuation.

The assessees were subjected to search. Upon valuation by the Wealth Tax Officer (WTO), an addition of Rs.88 Lakhs was found. This attracted wealth tax liability. An appeal made before the Commissioner of Wealth Tax failed.  Thereafter, the assessee preferred appeal before the Income Tax Appellate Tribunal (ITAT), which granted relief, based upon a circular.

Commissioner of Wealth Tax appealed before the Hon’ble High Court of Delhi against the order of the ITAT. The question of law before the court was whether the learned ITAT was right in directing the Assessing Officer to disregard the recent valuation report and adopt old valuation report inspite of the fact that current valuation of the assets was available with the assessee at the time of filing of Wealth Tax return.

On behalf of the Revenue, it was contended that the circular in this case merely allowed the assessee to use the report of the registered valuer obtained for one assessment year to assess the value of jewellery for subsequent four assessment years but under no circumstances it undermines the power of the Wealth Tax Officer to rely upon the later valuation report.

The assessee apart from referring to the Circular relied upon Rules 18 & 19 of the Third Schedule to the Wealth Tax, to urge that the valuation report once adopted is deemed to be in effect for four years and that in the present case, the time for filing the fresh valuation report, had not yet arisen. The occasion for a fresh valuation occurred on account of search which resulted in a separate valuation. Learned Counsel for the assessee also relied upon Rule 19A to highlight that the value of assets other than gold and jewellery, did not require fresh annual revisiting.

While dismissing the Petition, the division bench comprising of Justice S. Ravindra Bhat and Justice A. K Chawla observed “It is evident that a conjoint reading of the Rules requires valuation of all assets; furthermore, the valuation operates not on a year to year basis but for a four-year cycle. The only exception made out is that where jewellery includes gold or silver or any other alloy, the valuation of gold has to be undertaken annually. Furthermore, if the jewellery or any part of such asset is sold or acquired before valuation date (i.e. within the four year period) such value has to be reduced or increased as the case may be and has to be reflected in the subsequent assessment year. It is evident from the facts of the present case that the search was an event which per se could not have compelled the assessee to go in for fresh valuation unless there was a compulsion in law to do so. In these circumstances, the assessees acted within their rights in relying upon the prevailing valuation”.

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