K.T. Kuruvilla vs District Valuation Officer and Another

R. Jayasimha Babu, J.—The assessee is aggrieved by the valuation report in respect of the property owned by him and the property being a

shopping complex, which was partly under construction as on the date of valuation and situated at 444/8, Main Road, Chalakkudi, in the State of

Kerala. Prior to the assessment, the Wealth-tax Officer, having felt the need for valuation report, wrote to the Valuation Officer, u/s 16A of the

Wealth-tax Act, 1957, on November 26, 1989. As the report had not been received even by March 26, 1990, he completed the assessment for

the assessment year 1985-86 and he estimated the value of this property at Rs. 40 lakhs. Reference made to the valuer was not only for the

assessment year 1985-86 but also for subsequent assessment years including the assessment year 1988-89. The valuer submitted his report on

January 18, 1991. As on the date of submission of his report he found that the building was still incomplete and a portion of the building has been

let out and some portion was lying vacant, he valued the portion which has been rented out, by adopting the rent capitalisation method and valued

the remaining portion by adopting the land and building method. He arrived at Rs. 33 lakhs as the value for the entire property. This amount is

lower than the amount as estimated by the Wealth-tax Officer in the wealth-tax assessment for the year 1985-86.

Learned counsel for the assessee contended that this report is not in accordance with law and, therefore, cannot be acted upon. His submission

was that the reference to the valuer was after the assessment order. That submission is factually incorrect. The valuation report was called for long

prior to the making of the assessment order. As the assessment had to be finalised, he proceeded to do so even though the report had not been

received. It was open to the assessee to challenge the assessment. It is not clear as to whether the order of assessment was appealed against. So

far as the valuation report is concerned, the valuer did not lose jurisdiction on account of the fact that the assessment had been completed for one

of the assessment years, even while his report was called for with reference to several assessment years. The reference had been made even

before the assessment had been completed in respect of one of the assessment years. Section 16A of the Wealth-tax Act provides for reference

by the Assessing Officer. That section does not provide that the Valuation Officer shall not proceed with the valuation if the assessment is

completed before the valuation is completed. Section 16A(6) of the Act no doubt provides that the assessment shall be completed in accordance

with the valuation made by the Valuation Officer. That provision, however, cannot be read as imposing an embargo on the completion of the

assessment, till such time the valuer submits his report. Delay on the part of the valuer, cannot have the effect of deterring the Assessing Officer

from proceeding to complete the assessment, and allow the proceeding to be barred by limitation. It is open to the Assessing Officer to invoke

Section 35 of the Act after the valuation report is received to correct the value stated in the assessment order in conformity with the valuation made

by the Assessing Officer. The reference to the record in Section 35 of the Act would include the report of the Valuation Officer when it is received

by the Assessing Officer and is made to form part of the record of assessment. That report being the result of a reference made in the course of the

assessment proceedings, the report submitted by the valuer would legitimately be a part of the record. The fact that the valuation report was

submitted subsequent to the making of the assessment order for one of the assessment years 1985-86, therefore, does not in any way invalidate

the valuation.

The other ground raised by counsel for the assessee is that the procedure prescribed in Schedule III to the Wealth-tax Act has not been

followed by the valuer. In the valuation report it has been stated by the Valuation Officer that the draft report has been furnished to the assessee.

Though he was given an opportunity to state his objections he did not do so. It is only after such an opportunity has been given, the Valuation

Officer proceeded to finalise the report. The assessee having failed to make use of the opportunity provided, cannot question the mode of valuation

now. Moreover, the building being one which was still under construction, with the constructed part being partly vacant and partly in occupation of

the tenants, the provisions of rule 3 could not be strictly applied by the Valuation Officer. Schedule III is not inflexible. The need on occasions for

adopting a method different from that set out in the other portion of that Schedule has been recognised in Rule 20.

The Valuation Officer in this case has in fact adopted the rent capitalisation method so far as the portions let out are concerned, and he has

adopted the market value for the portions which remain vacant and for the portion under construction. Under Rule 20, in cases where it is not

practicable to apply the other provisions of the Schedule, the valuation has to be on the basis of the price that the property would fetch if sold in

the open market on the valuation date. The land and building method was adopted to ascertain the value for which the properties could have been

sold in the open market, so far as the portions which were not let out are concerned. The portions which were let out were valued by adopting the

rent capitalisation method and in fact that is the method required to be adopted where the building is tenanted. The valuation had to be an amal-

gum of two methods, one by way of rent capitalisation and the other by an estimation of prices that could be fetched in the open market if sold on

the valuation date.

Thus the method of valuation relevant to the respective portions had been adopted. The method so adopted by the Valuation Officer cannot be

regarded as arbitrary and violative of the rules of valuation contained in Schedule III.

Learned counsel for the assessee invited attention to the decision of the Supreme Court in the case of Commissioner of Wealth Tax, Meerut Vs.

Sharvan Kumar Swarup and Sons, , wherein the court held that the rules providing for methods of valuation are not substantive, but procedural

and they are applicable to all pending proceedings. The valuation in this case has been made in accordance with the rules.

There is no merit in this writ petition. The petition is dismissed with costs of Rs. 1,500.

Consequently WMP is also dismissed.