ORDER
Shri G. Chowdhury, Judicial Member
1. The present appeal has been filed by the assessee against the order passed by the Commissioner (Appeals) for the assessment year 1983-84. The dispute is with regard to the valuation of the property at No. 5, Greams Road, Madras.
2. While completing the wealth-tax assessment under section 16(3) for the assessment year 1983-84 the aforesaid property was valued by the Assessing Officer at Rs. 3,64,092. The total area of the property was 31.5 grounds. By an agreement dated 23-4-1972 and a supplementary agreement dated 15-5-1974 the assessee agreed to sell the property to Mr. P.N. Arumugam of M/s. Seven Hills Real Estate, No. 14, Davidson Street, Madras. Pursuant to the agreement Mr. Arumugam was delivered possession of a portion of the property. Ultimately there was a dispute with regard to the said dealing and the matter went to the High Court of Madras. Subsequently the litigation was compromised in terms of the Memo of compromise passed by the High Court on 28.11.1992. In terms of the said compromise the assessee paid a sum of Rs. 21 lakhs to M/s. Seven Hills Real Estate who shall not claim any interest whatsoever in the disputed property. It appears that the firm M/s. Seven Hills Real Estate filed its return of income for the assessment year 1983-84 including the property in dispute within the net wealth returned by the firm. The Assessing Officer referred the matter of valuation of the Valuation Officer and the departmental valuer valued the land (31.5 grounds) at Rs. 55,86,000 as on the valuation date 31-3-1983. Now the Commissioner of Wealth-tax issued a show-cause notice under section 25(2) of the Wealth-tax Act on 25-10-1989 to the assessee with a view to revise the assessment order on the ground that in the light of the valuer’s report in the case of M/s. Seven Hills Real Estate the assessee had undervalued to the property. A detailed reply to the said notice was submitted by the assessee stating inter alia the details of dispute between them. Further it was stated that the appellant was not involved in the so-called valuation of the said property, which was made by the departmental valuer. However, on 5-3-1990 the Commissioner passed the revisionary order under section 25(2) of the Act, relying upon the valuation report available in the case of Seven Hills Real Estate and directed the Assessing Officer to adopt the proportionate market value on the basis of departmental valuer’s report in respect of the land and building allotted to the assessee as per the High Court order. Pursuant to the said assessment order the Wealth-tax Officer by letter dated 9-3-1990 requested the assessee to produce a copy of the valuation report of the departmental valuer. The letter is quoted below :
“In the proceedings of the Commissioner of Wealth-tax cited, your assessment for the asst. year 1983-84 requires revision. In this connection you are requested to produce before me the copy of valuation report of the Departmental valuer valuing 31.5 grounds at No. 5, Greams Road, Madras-6 for Rs. 55.86 lakhs to enable me to revise the assessment in accordance with the direction of the Commissioner of Wealth-tax.
Your case is posted for hearing at my office on 20-3-90 at 11 a.m.”
The assessee replied to the said letter that the valuation report referred to in the letter under reply is in relation to M/s. Seven Hills Real Estate and the assessee has nothing to do with that report and not in a position to furnish a copy of the report as called for by the Assessing Officer. The aforesaid reply is reproduced below :
“In reply to your notice dated 9-3-1990 asking for a copy of the valuation report of the Departmental valuer on 31.5 grounds at No. 5 Greams Road, Madras-600006 to enable you to revise the assessment for the wealth-tax assessment year 1983-84, following the direction of the Commissioner of Wealth Tax in his proceedings in C. No. 1244-11(13)/89 dt. 5-3-1990 we have to submit as follows :
In the proceedings of the Wealth Tax Commissioner cited above it is clearly stated that ‘in the case of Seven Hills Real Estate the Departmental valuer has valued the land 31.5 grounds at Rs. 55,86,000 as on 31-3-1983. This only shows that the Departmental valuer has valued 31.5 grounds of land as that belonging to the Seven Hills Real Estate during the relevant time’. As the above valuation report relates to Seven Hills Real Estate’s property with which we have nothing to do we are not in a position to furnish you copy of the report as called for by you.
Our representative will appear before you on 20-3-90 to explain in this regard.”
After receiving this reply the Assessing Officer revised the assessment following the valuation report in the case of M/s. Seven Hills Real Estate by order dated 21-3-1991. The revised order of the Assessing Officer is quoted below :
“Sub : Wealth-tax assessment in the case of Mrs. Zeebunnisa Begum C/o Sri Mohamed Javeed Ghatala, 19-Greams Rd., Madras-34 – Asst. year 1983-84 – revision-reg.
Order u/s. 25(2) of Wealth-tax Act
Consequent to the direction of the Commissioner of Income-tax’s order in C. No. 1244/11(13)/89 dt. 9-3-90 the original assessment made on 28-3-90 is revised as under :
Total wealth as per original order dt. 20-3-88 Rs. 9,88,662. Add : The difference between the value has been taken and already assessed for the property at No. 5, Greams Road, Madras (21 and 2835 sq. ft.)
Rs. 38,74,360 - Rs. 3,64,094 Rs. 35,10,266
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Rs. 45,08,918
Less : Wealth-tax liability Rs. 1,70,662
Rs. 44,38,256 or
Rs. 44,38,300
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Wealth-tax Rs. 1,70,662
Tax determined as
per original
order Rs. 13,723
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Rs. 1,56,939"
Against the said order the assessee moved the first appellate authority and the Commissioner (Appeals) by he impugned order confirmed the order of revised assessment holding that the Wealth-tax Officer had no option other than to follow the direction of the Commissioner. It was argued before the first appellate authority that the present revised assessment order was passed on the basis of the departmental valuer’s report, in which the assessee was not a party nor the assessee was afforded an opportunity of being heard before enhancing the valuation of the property. The Commissioner (Appeals) has not recorded any finding in respect of the aforesaid submission. Against the said order passed by the Commissioner (Appeals) the assessee is in appeal before us.
3. The learned counsel for the assessee has submitted that it is not in dispute that the original assessment for the assessment year 1983-84 was made by the Wealth-tax Officer under section 16(3) of the Act on 28-3-1988. Thereafter the said assessment was sought to be revised by the Commissioner on the basis of the so-called valuation report in which the assessee was not a party because that report is in relation to M/s. Seven Hills Real Estate. It was further submitted that while revising the assessment by letter dated 9-3-1990 the Assessing Officer requested the assessee to supply a copy of the valuation report and in reply to the said letter the assessee submitted that she was not in a position to furnish any valuation report because that valuation report related to M/s. Seven Hills Real Estate. Therefore on the basis of that valuation report the valuation of the assessee’s property cannot be enhanced by an order of revision. The assessee was not afforded any opportunity of being heard under section 16A(4) of the Wealth-tax Act, which was mandatory in nature. It was further submitted that on behalf of the assessee submission were Commissioner (Appeals) did not make any comment on those issues in passing his order. On the other hand the departmental representative has submitted that the valuation of the property in question was rightly revised by the Officer under section 16A of the Act. Therefore it cannot be said that the valuation was arbitrary. The departmental representative supported the order passed by the Commissioner (Appeals).
4. We have heard both the sides. In the present case the question that falls for consideration is whether the enhancement of the valuation of the property pursuant to the revisional order is proper or not. We find that the original assessment order was passed under section 16(3) of the Act. Thereafter the assessee sold a portion of the property to the firm M/s. Seven Hills Real Estates. After completion of the assessment of the assessee the Assessing Officer for the purpose of making the wealth-tax assessment in the case of the said firm referred the matter of valuation to the Valuation Officer and the property was valued at an enhanced rate. The Assessing Officer followed the aforesaid valuation for the purpose of valuing the property in the case of the said firm. Now the Commissioner of Wealth-tax sought to revise the order of assessment in the case of the assessee on the basis of the said report of the Valuation Officer. It is not in dispute that the Assessing Officer referred the valuation in the case of the firm and not in the case of the assessee. Therefore the assessee was not a party to that valuation report nor the Valuation Officer gave any opportunity of being heard to the assessee. Section 16A provides the procedure for reference to the Valuation Officer. According to sub-section (1) the Assessing Officer may refer the valuation of any asset to the Valuation Officer under some circumstances. Sub-section (4) of section 16A provides that where the Valuation Officer is of opinion that the value of asset is higher than the value declared in the return by the assessee or disclosed by the assessee, in that case the Valuation Officer shall serve notice on the assessee intimating the value which he proposed to estimate and giving the assessee an opportunity to state his objections or to produce evidence in support of his objections. The aforesaid provision is mandatory in nature. For the purpose of valuing the property the Assessing Officer steps into the shoes of Valuation Officer because under sub-section (6) on receipt of the valuation report the Assessing Officer shall have to value the property in question in conformity with the estimate of the Valuation Officer. Therefore for the purpose of valuing the property by the Valuation Officer the procedure has been prescribed under section 16A of the Wealth-tax Act. The Valuation Officer being a creature of the statute is to act within the four corners of the statute.
5. In the case of J.K.K. Natarajah v. WTO [1983] 142 ITR 804 the Madras High Court has held that the Valuation Officer must give an opportunity to the assessee to raise objections, which cannot be dispensed with even if the assessment is becoming time barred. In the present case we find that the Assessing Officer referred the valuation matter in the case of M/s. Seven Hills Real Estate and while estimating the valuation, no notice to show cause was served on the assessee inviting her objections because the Valuation Officer might have felt that the case related to the firm. Further we find that pursuant to the said valuation report the order of revision under section 25(2) was passed by the Commissioner. Admittedly in the said valuation report neither the assessee was a party nor any reference u/s. 16A of WT Act was made in the case of the assessee during the pendency of assessment proceedings, which is sine qua non for the purpose of referring to the Valuation Officer. During the process of estimating the valuation of the property by the Valuation Officer no notice to show cause was issued to the assessee under section 16A(4) of the Wealth-tax Act. On the other hand pursuant to the revisional order at the time of framing fresh assessment the Assessing Officer asked for the valuation report from the assessee and the assessee in her reply stated her inability to supply the same because no reference was made by the Assessing Officer to the Valuation Officer in her case. From the impugned order we find that all these objections were raised by the assessee before the first appellate authority, but the Commissioner (Appeals) did not record any finding on those issues. The first appeal was dismissed on the ground that the Wealth-tax Officer had no option other than to follow the direction of the Commissioner. In our opinion the order passed by the Commissioner (Appeals) cannot be sustained because the original assessment order was revised on the basis of the valuation report in the case of Seven Hills Real Estate, in which the assessee was not afforded any opportunity of being heard as required under section 16A(4) of the Act. In that view of the matter that valuation of assets. In the result the assessment order passed by the Wealth-tax Officer pursuant to the revisional order is set aside and the appeal is allowed.