Commissioner of Wealth-tax vs Smt. Kiran Agarwal

The Income Tax Appellate Tribunal, Allahabad, has referred the following question of law u/s 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), for the opinion of this Court.

Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was legally correct in holding that the accountant''s certificate can be furnished even during the course of assessment proceedings when as per the second proviso to Rule 9A of Schedule III of the Wealth-tax Act, 1957, the same is specifically required to be attached to the return of wealth ?

The reference relates to the assessment year 1991-92.

Briefly stated the facts giving rise to the present reference are as follows:

In the return of her wealth for the assessment year under consideration, filed on October 30, 1991, the respondent-assessee had declared the value of some of the shares held by her on average basis as per the special provisions contained in Rule 9A of Schedule III to the Act. The Assessing Officer pointed out to the respondent-assessee that the requisite formalities for exercising option for returning the value of shares at the average price, namely, attaching of certificate from an accountant was not complied with and required her to show cause as to why the value of the shares in question should not be taken on market price (as per Rule 9 of Schedule III to the Act). In reply, the respondent-assessee filed an accountant''s certificate dated October 25, 1991, i.e., of a date anterior to the date of filing of return of wealth. The Assessing Officer, however, held that the respondent-assessee had failed to comply with the requirement of Rule 9A of Schedule III to the Act. Accordingly vide order u/s 16(3) of the Act dated December 22, 1993, an addition of Rs. 17,15,098 was made to the declared wealth representing the difference between the market value (as per Rule 9) and the average value (as per Rule 9A). The action of the Assessing Officer was upheld by the learned first appellate authority vide her order dated May 22, 1995. In appeal before the Tribunal, the respondent-assessee relied upon the fact that the certificate of the "accountant" as required by Rule 9A of Schedule III to the Act, was obtained on October 25, 1991, i.e., before filing the return on October 30, 1991. Relying upon the ratio of certain judicial decisions, including the decision of this Court in Addl. Commissioner of Income Tax Vs. Murlidhar Mathura Prasad, it was submitted that the requirement of attaching the accountant''s certificate with the return of wealth was a mere procedural requirement. On consideration of the facts, the Tribunal held that while compliance with the requirement of obtaining the accountant''s certificate was mandatory, the manner of submitting proof of such compliance along with the return was only directory. Because it fell in the realm of procedure for furnishing of evidence in support of the claim. Accordingly, the Assessing Officer was directed to value the relevant shares as per the special provisions of Rule 9A of Schedule III to the Act, after verification of facts from the accountant''s certificate.

We have heard Sri A.N. Mahajan learned standing counsel for the Revenue.

Learned standing counsel submitted that in terms of the second proviso to Rule 9A of the Third Schedule to the Act if the assessee opts for market value of quoted shares of the company on the basis of the average of the values so quoted mentioned in the Rule 9A then the assessee has to attach the certificate of the accountant along with the return of wealth and only thereafter the assessee is entitled to claim the market value of such quoted shares on average basis. As in the present case the certificate of the accountant was not attached along with the return but was filed subsequently, the Tribunal was not justified in giving the benefit of Rule 9A of the IIIrd Schedule. The submission is misconceived. Filing of the certificate given by the accountant for the average value of the quoted shares is only directory and not mandatory. As in the present case the assessee had filed the certificate of the accountant in the course of assessment proceedings, the assessee was certainly entitled for getting the benefit of market value of the quoted shares on the average price. It may be remembered that the certificate of the accountant is only the basis of evidence in respect of the claim made by the assessee under Rule 9A of the Third Schedule to the Act. Such document can be filed during the course of assessment proceedings and it is not a mandatory requirement. We, therefore, find that there is no illegality in the order of the Tribunal.

We, accordingly, answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.