R. Rangaswami Gounder and Others vs Income Tax Officer/Wealth Tax Officer, City Circle III(1), Coimbatore and Others

Venugopal, J.—The appellants in all these appeals are partner of a firm known under the name and style of M/s. Velumani Engineering

Industry. The partnership firm manufacture electrical switches, starters, pumps, etc. The total value of the plant and machinery, as disclosed in the

books of account, was Rs. 4,52,256 as on March 31, 1976. The WTO had reason to believe that the value of the value of the machinery

disclosed in the books did not reflect the correct value of the plant and machinery and by a letter dated November 12, 1979, he directed the

second respondents herein to value the plant and machinery and air-conditioning machines installed in the factory, for purposes of wealth-tax

assessment for the assessment year 1976-77. The appellant, who are partners of the firm, filed Writ Petition Nos. 2606 to 2609 of 1980

challenging the direction given by the first respondent to the second respondent to value the plant and machinery and other electrical installations for

purposes of making wealth-tax assessment for the assessment year 1976-77. The main contention of the appellants in the writ petitions is that the

firm is not an assessee under the W.T. Act and s. 16A cannot be made applicable in the case of a partnership firm and no notice can be issued to

the fir for the purposes of valuation of its assets and the direction by the first respondent to the second respondent to value the assets of the assets

of the partnership firm for purposes of wealth-tax assessment should be quashed. During the pendency of the writ petitions, the appellants file

W.M.P. Nos. 3718 to 3721 of 1980 for issue of an injunction restraining the respondents form proceedings with the valuation of the assets of the

partnership firm. The learned single judge of this court held that after the disposal of the writ petitions the period available for the Revenue to

complete the assessment would be only two months and there was no need to restrain the respondents from proceedings with the valuation of the

assets of the partnership firm. The learned single judge, however, held that there would be a stay of the assessment proceedings pending disposal

of the writ petitions. Against is order of the learned single judge, the present writ appeals have been filed.

The learned counsel for the appellants contended that the legal validity of the directors given by the first respondents to the second respondent

to value the assets of the partnership firm is the main dispute in the writ petitions and permitting the second respondents to proceed with the

valuation of the assets of the partnership firm during the pendency of the writ petitions tantamounts to virtually denying relief claimed in the writ

petitions and no prejudice would be causes to the respondents by not permitting them to proceed with the valuation of the assets of the partnership

firm pending an adjudication of the issue raised in all these writ petitions.

The learned counsel for the respondents contended that on May 2, 1980, a telegram was received from the appellants stating that a writ petition

had been filed challenging the reference to the valued under s. 16A of the W.T. Act and requesting the Department to stay all further proceedings

and on enquiry it was learnt that though the writ petitions were admitted, there was no order of stay, and in view of s. 17A(1)(b) of the W.T. Act,

the wealth-tax assessment for the assessment year 1976-77 should be completed on or before March 31, 1981 and as the valuation process itself

would take several months, there should be no injunction restraining the second respondent from proceedings with the valuation of the assets of the

partnership firm.

Under s. 17A(1)(b) of the W.T. Act, the wealth-tax assessment for the assessment year 1976-77 should be completed on or before March 31,

1981. Under Explanation I to s. 17A(4) of the W. T. Act, in computing the period of limitation of the purposes of making wealth-tax assessment,

the period during which the assessment proceedings were stayed by an order or injunction of any court should be excluded. In the instant case, the

learned single judge has himself passed an order staying the completion of the assessment proceedings. The period during which the assessment

proceedings are stayed by an order of any court gets automatically excluded in computing the period of limitation for purpose of making the

wealth-tax assessment. As the injunction staying the assessment proceedings has already been granted, the period of time during which the order of

injunction was in force, enlarges the period of limitation prescribed under s. 17A(1) of the W.T. Act. So the contention of the learned counsel for

the Revenue that after the disposal of the writ petitions there may not be much time available for the second respondent for submitting the valuation

report, cannot be accepted. The main contention in the writ petitions filed by the appellants is that s. 16A of the W.T. Act cannot be made

applicable in the case of a firm and the direction given by the first respondent to the second respondent to value the asset of the partnership firm is

invalid. When the adjudication of this main issued is pending in the writ petitions, it may not be proper for the second respondent top process with

the valuation of e assets of the partnership firm, as that would amounts to virtually concerning the claim of the respondents that s. 16A of the W.T.

Act can be resorted to for valuing the asserts of a partnership firm. Further, no prejudice will be causes to the respondents by retraining them form

proceedings with the valuation of the assets of the partnership firm during the pendency of e writ petitions, since the period during which the

injunction order is in force, correspondingly enlarges the period of limitation for completing the assessment. The contention of the learned counsel

for the appellants that there should be an injunction restraining the second respondent form proceedings with the valuation of the assets of the

partnership firm in pursuance of the directions given by the firms respondents, is well founded, and had to be accepted. In the result, the writ

appeals, are allowed and the injunction as prayed for to W.M.P. Nos. 3718 to 3721 of 1980 is granted. No costs.