1985 PLP (Trib (PTD)

The facts giving rise to this appeal are these. The Wealth Tax Officer P by an order under section 16(5) of the Wealth Tax Act (hereinafter referred to as "the Act"). assessed the value of the immovable property known as K ..G C .K B .P for the charge year 1979‑80 at Rs. 10,00,

000. After allowing the statutory exemptions of Rs. 5,00,000 he worked out the taxable wealth at Rs. 5,00,

000. This property, it may be noted was admittedly sold out by the appellant‑owners on 14th July, 1979 through a registered sale deed bearing No. 345 for a consideration of Rs. 10,00,000 to one Haji Akbar Jan and 22 others. Being aggrieved by the order of assessment, the assessee went in appeal before the Appellate Assistant Commissioner, Wealth Tax P . Range. The following grounds were taken in the Memorandum of Appeal :‑ (i) The building K G ..C K B ..P .., was not the property of the appellant on the valuation date because it had been sold out before the 30th June, 1979. Hence the assessment was illegal. (ii) Since the A. O. P. was indebted to banks and loans were paid but of the sale proceeds of the said building, its valuation at ' Rs. 10,00,000 was excessive and contrary to the facts of the case.

2. The learned Appellate Assistant Commissioner repelled both the contentions and consequently rejected the appeal. He further observed "During the years in appeal relating to assessment years 1980‑81 and 1981‑82 preferred by the owners of M . H ..K B P (the new name of "K . G .C... ..") it was noticed that the gross Annual Letting Value of this property during the period 1‑7‑1978 to 30‑6‑1979 was not less than Rs. 1,51.,200.

3. Relying upon the provisions of rule 8(3) of the Wealth Tax Rules, the learned Appellate Assistant Commissioner formed an opinion that the value of the property in question as adopted by the Wealth Tax Officer was on the lower side. He, therefore, on 9‑7‑1983 issued a notice of enhancement under subsection (3) of section 23 of the Act, 1983. It is reproduced below :‑‑ "While examining the assessment record relating to the new owners of Messrs M ..H ..(K ..G ...C ..) it was noted that the Annual Letting Value of this property for the assessment year 1979‑80 was not less than Rs. 1,51,

200. Under the Wealth Act Rules its value would have been taken ten times of the annual letting value whereas it has been adopted at Rs. 10,00,000 on the basis of the registered sale deed which is an under‑assessment. You are, therefore, directed to explain as to why the value as taken by the Wealth Tax Officer should not be enhanced on the basis of the A. L. V. of this building. This may please be treated as a notice under subsection (3) of sec tion 23 of the Wealth Tax Act, 1963. Reply to this notice must reach this office on or before 17th July, 1983."

4. In reply to the said notice the assessee submitted his explanation contending, inter alia, that the proposed action was not in accordance with law. In support of his contention he also filed a certificate from the Cantonment Executive Officer dated 14‑1‑19.80 wherein the valuation of the property in question was estimated at Rs. 9,67,

800. The learned Appellate Assistant Commissioner repelled the various contentions raised on behalf of the appellant and enhanced its value from Rs. 10,00,000 as estimated by the Wealth Tax Officer to Rs. 18,25,

800. The assessee had claimed liabilities to the extent of Rs. 4,62,879 on account of loan taken from Habib Bank Limited against mortgage of the said property. The learned Appellate Assistant Commissioner set aside the order on this point with certain direction to Wealth Tax Officer, hence this further appeal.

5. I have heard the parties representatives. Mr. E H .learned counsel for the appellant contends that both the notice of enhancement and the ultimate order enhancing the value of the property in question, as made by the learned Appellate Assistant Commissioner were without jurisdiction and hence void. He also contends that there is documentary evidence in the shape of registered sale‑deed available on record and in the presence thereof there was justification or necessity for the learned Appellate Assistant Commissioner to have made enquiries through the Inspector, Circle‑II P .The learned counsel for the appellant further emphasises that .the Valuation Certificate dated 14‑1‑1980 issued by the Executive Officer Cantonment Board, P ,estimating the value of the said property at Rs. 9,67,800 was yet another reliable piece of evidence establishing that the open market price of the property in question on the valuation date, has not .more than Rs. 10,00,

000. The learned Departmental Representative, on the other hand, supports the impugned order. In his opinion, the criterion for determining the value of the property is the Annual Letting Value as defined in the Act. It Letting Value of the property as adopted by the learned Appellate Assistant Commissioner was not correct. He, therefore, submits that the learned Appellate Assis tant Commissioner had rightly issued the notice of enhancement to the assessee and so also he has committed no error in estimating the value of the property at Rs. 18,25,800 on the basis of ten times the gross Annual Letting Value. In order to appreciate rival contentions of the learned counsel and for the proper determination of the important question of law involved herein, it seems appropriate to set out hereinbelow the relevant provisions of law as contained in section 7(I) of the Act and in sub-rules ( I ) and (3) of rule 8 of the Wealth Tax Rules, 1983 ("the Rules)." "Section 7.‑Value of assets how to be determined.‑The value of any assets, other than cash, for purposes of this Act, shall be estimated by the Wealth Tax Officer in accordance with the rules under section 46 of the Act." "Rule 8.‑Valuation of assets other than cash.‑(1) Subject to the provisions of sub‑rules (2), (3), (3‑A), (4), (4‑A), (4‑C), (5), (6), (7), (8) and (9), the value of any asset (other than cash) shall for the purposes of assessment to wealth tax, be estimated to be the price, which in the opinion of the Wealth Tax Officer, it would, fetch if sold in the open market on the valuation date. (2) . . . . .. (3) Land and building.‑The value of lands and buildings, ,excluding agricultural land shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality. Provided that the Wealth Tax Officer shall not except with the prior approval of the Central Board of Revenue determine the value of any property at a sum higher than ten times the gross annual rental value of such property."

6. Before proceeding further I would like to pause here for a while) to state that object and ambit of the proviso as enunciated by some eminent authors on Interpretation of statutes and the superior Courts. To begin with a reference may be made to Craies on Statute Laws, 17th Edit on, page 218 under the caption Construction, of provision :- "The effect of an excepting or qualifying proviso, according to the ordinary rules of construction is to except out of the preceding portion of the enactment or to qualify something enacted therein which but for the proviso would be within it and such a provisos cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed without attributing to it that effect."

7. In Pramath Nath Ch. v. Kamir Mondal (P L D 1965 S C 434), Hamoodur Rahman, J. (as his Lordship was then) held : A proviso is generally accorted, as in the nature of exception to the substantive provision to which it has been appended." The Supreme Court of India in C. I. P. v. Indo Mercantile Bank Limited (1959) 36 1 T R 1 (S C) while considering the proper function of a proviso observed :‑ "The territory of a proviso therefore, is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that is its necessary effect."

8. I have given due consideration to the submissions made at the Bar and I am clearly of the view that the contentions of Mr. E H are well founded. A bare perusal of the impugned order of the learned Appellate Assistant Commissioner manifestly indicates that he has not in the least expressed any doubt with regard to the genuineness of the sale consideration given in the instrument of conveyance duly executed and registered on 14‑7‑1979. Even at the time of issuance of notice of enhancement he did not entertain any doubt that there was some collusion between the purchaser and the assessee (the seller) and consequently the value given in sale‑deed could not be treated as being market value of the property. The fact that the Annual Letting Value of the property was Rs. 1,51,200 was prevalent even on the assessment record of the assessee appellant above named and it was thus not a new fact that came to his knowledge during the examination of the assessment record relating to the new owners of K G .C .

9. A bare perusal of the rule 8(3) of the Rules already reproduced above, menifestly lays down that the value of any asset (other than cash) shall be estimated to be the price, which, in the opinion of the Wealth Tax officer, it would fetch if sold in the open market on the valuation date. The proviso to the said sub‑rule is couched in the negative language and it only puts a restriction on the powers of the Wealth Tax Officer not be determine the value of any property higher than ten times the gross annual rental value of such property without seeking prior approval of the Central Board of Revenue. The purpose of the proviso is to except out of the preceding portion of the main enactment, or to restrict the powers of the Wealth Tax Officer laid down therein. In the absence of the proviso it would have been well within the powers of the Wealth Tax Officer to adopt any value of lands and building as prevalent on the valuation date irres pective of the whether it was a sum higher than ten times the gross annual rental value of such property. It would also be proper to point out that the learned Appellate Assistant Commissioner completely ignored to keep, in mind the fact that the gross annual value is also defined by virtue of Explanation appended to the proviso as follows:- "For the purposes of this sub‑rule Gross Annual Value' means the sum for which a property might reasonably be expected to let out from year to year." It is thus further evident that the learned Appellate Assistant Commissioner erred in taking the actual letting value as the gross annual value although, there was no legal justification for it. He did not even make any effort to ascertain or determine the `gross annual value' of the property in question. It is definitely fallacious on the part of the learned Appellate Assistant Commissioner in the instant case to take it for granted that the actual rental received by the landlord from his tenant represented the bona fide annual value of the property in question. He further fell into an error in presuming that "under the Wealth Tax Rules its (property it question) value should have been taken ten times of the letting annum value". The learned Appellate Assistant Commissioner thus manifest, acted illegally and in violation of the cardinal of Interpretation of proviso in construing the proviso to rule 8(3) of the Wealth Tax Rules as a sub stantive provision of law. He was not legally justified in enhancing the value of the property simply on the basis of the annual letting value, and consequently. I find it difficult to maintain his order. The Wealth Tat Officer while accepting the declared sale consideration of Rs. 10,00,00` had impliedly, if not explicitly held that it was in conformity with criteria laid down for estimating the value of lands and building in sub‑rule (3 of rule 8 of the Wealth Tax Rules. The learned Appellate Assistant Commission a as already stated also did not disturb this aspect of the case The Central Board of Revenue, vide its Wealth Tax Circular No. 2 of 1971‑G. No. 8(10)‑WT/71, dated 13‑1‑1971 also made it clear that "the valuation of all lands and buildings were to be made on the market price by the Wealth Tax Officer and that where the value of the property was to be determined at a sum higher than ten times gross annual rental value such property, the Wealth Tax Officer had to obtain the prior approval of the Inspecting Assistant Commissioner."

10. It is by now too well‑established a proposition of law to be emphasised that the gross annual rental value is a question of fact and it determining that value all the circumstances of the case must be borne in mind and given due consideration. The actual rental value of the property could not in all circumstances be taken to be 'gross annual value' which term, as already stated, means the sum for which the property might reason‑. ably be expected to let out from year to year. It needs no mention as it is a matter of every day's experience that in certain case a house may be let out at much higher sum under certain circumstances whereas in certain other set of circumstance it could not fetch even a fair rental value. At this stage it seems appropriate to refer to the following observations of Rankin, C. J in the case of Krishan Lal Sil (A I R 1932 Cal. 886). "The house may have been let cheap or dear, the lease may be eighty years old or a thing of yesterday, personal relations or business;' relations may have led to exceptional terms as to rent. But in general at least, the actual terms obtained by the landlord in the` particular case are some evidence of the sum from which the property might reasonably be expected to let from year to year."

11. If the actual rent received by the landlord from his tenant does not represent the 'gross annual value' the factum of such annual value may be ascertained by the rents paid for similar other properties situated in the) same locality or in the neighbourhood of the said locality.

12. Under the aforesaid facts and circumstances of the case and for the reasons given hereinabove, the impugned order of the learned Appellate Assistant Commissioner is hereby cancelled in so far as it concerns the enhancement of the value of property and consequently, the order of the Wealth Tax Officer in that behalf stands restored. M. B. A. Order accordingly.