Law:

Section:

section 2(e) of the Wealth-tax Act, 1957, read with rule 2 of the Wealth-tax Rules, 1957 - Assets - Uncollected fees - Assessee was a partner in a chartered accountant firm - Firm had maintained its accounts on cash basis and for relevant assessment year it had drew up its balance sheet and profit and loss account - Assessee in his return valued his share in firm on basis of balance sheet - WTO after finding out outstanding fees due to firm which had not been taken into account in balance sheet at end of relevant accounting years, included share of assessee in his net wealth in view of provisions of rule 2C - Whether WTO's action was justified - Held, yes Words and phrases - Word 'disclosed' as occurring in rule 2C of the Wealth-tax Rules, 1957 Facts The assessee was a partner of a chartered accountant firm. The firm maintained its accounts on the cash basis and, upon that basis, it had drawn up balance sheet and profit and loss account for the assessment years in question. The assessee in his returns for the relevant assessment years, valued his share in the firm on the basis of the balance sheet. The WTO after finding out the outstanding fees due to the firm which had not been taken into account in the balance sheet at the end of each of the accounting years relevant to the assessment years in question, included the share of the assessee in his net wealth. On appeal, the AAC excluded the additions made by the WTO. On appeal by the revenue, the Tribunal upheld the order of the AAC. On reference, the assessee contended that rule 2C could only be applied in regard to an asset which ought to have been disclosed in the balance sheet but had not been disclosed and outstanding fees were not required to be disclosed because those related to income and, on the cash basis, income which had not been received was not liable to be shown in the balance sheet. Held If there is an asset under section 2(e) as defined and it has not, for good reason or otherwise, been shown in the balance sheet, the WTO is entitled to apply the provisions of rule 2C. The word therein 'disclosed' only means 'shown'. It must follow that the WTO was entitled, in the instant case, to apply the…

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