Law:

Section:

Section 7(2)(a) of the Wealth-tax Act, 1957 read with rule 2B of the Wealth-tax Rules, 1957 - Valuation of assets - Business assets - Assessment years 1972-73 to 1974-75 - Whether when there is no other positive material to establish market value of the closing stock with WTO, gross profit rate alone shown by assessee is not sufficient evidence to determine market value and it is not right to conclude that market value of closing stock of the firm in which assessee is a partner exceeds more than 20 percent of its book value, as contemplated in rule 2B(2) of the Wealth-tax Rules, 1957 - Held, yes - Whether burden is on revenue to prove that valuation of the closing stock given in balance sheet was not the true value and that market value of closing stock exceeded the valuation disclosed by more than 20 per cent and it is only after this burden had been discharged by revenue that rule 2B(2) can be invoked - Held, yes Facts For the relevant assessment years, the assessee, who was a partner in a firm, declared certain profit from a firm, giving a gross profit rate of 24 per cent. The WTO determined the net value of the business assets under section 7(2) (a) and held that since the gross profit was in excess of 20 per cent the provisions contained in rule 2B(2) was attracted. Accordingly, the WTO, after giving a deduction of 4 per cent, estimated the value of closing stock of the firm. Thereafter, the assessee's share therein was calculated by the WTO and necessary additions were made in the net wealth of the assessee for the relevant assessment years. The AAC held that rule 2B(2) was not attracted. On appeal by the revenue, the Tribunal held that the burden was on the WTO to show that the market value exceeded more than 20 per cent the valuation given in the balance sheet in order to invoke rule 2B(2) and as there was no definite evidence for that purpose rule 2B(2) was not attracted. On reference: Held It is now well settled principle that when the assessee relies on the valuation of the closing stock shown in the balance sheet of the firm and the mode of determination of market value adopted is that provided under section 7(2)(a), the burden lies on the revenue,…

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