KISHINDAS RAMCHAND NAGPAL vs. ASST. COMM. OF WEALTH TAX INV. CIRCLE 27(1), MUMBA I and ANR.

Heard Mr. Idnani, Learned Counsel for the appellant and Mr. Walve, for the respondent.

The issue relates to sustenance of addition towards the unaccounted wealth on the basis of the seized hundis. It appears, the premises of the assessee were searched on 21st January, 1990 and the assessee being a Finance Broker, 911 blank hundis were found. The matter travelled upto the Tribunal in income-tax proceedings. That for the Assessment Year 1992-93, a sum of Rs.30,99,375/- was sustained by the Income-Tax Appellate Tribunal on account of undated Bills of Exchange in income-tax proceedings. The Tribunal considered all the factual details and as such the value of Blank Bills of Exchange/hundis found during the search operations, was held to be liable for tax in the hands of the assessee in the proceedings under the Income-Tax Act. Consequently, additions to the above extent were maintained even by Tribunal in income-tax proceedings. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:45:11

It appears before the Tribunal, in the income- tax proceedings, the assessee had filed affidavits of the borrowers and denied the receipts and loans confirmation. These affidavits were rejected by the Tribunal having found there was enough material evidence, that the assessee had advanced money to these persons. In the proceedings before the Appellate Tribunal in the wealth tax proceedings, such Affidavits were also examined by the Tribunal and held that no credence can be attached to these Affidavits. Resultantly, the Tribunal in the wealth-tax proceedings upheld the order of the CIT (Appeals) and sustained the additions on this ground, after discounting the value determined by the Tribunal in income-tax proceedings by 25%.

The alternate ground advanced by the assessee before the Tribunal was that, in the given set of facts, the market value of the asset i.e. of hundis/Bills of Exchange has to be taken at Rs.6,20,000/- as declared. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:45:11

Mr. Idnani, Learned Counsel for the appellant has taken us through the order passed by the authorities and in particular the finding recorded by the Tribunal in para-6 of the impugned order. Mr. Idnani, would submit that, the Tribunal being the last fact finding forum, has recorded a finding that such hundis and the Bills of Exchange were “inchoate” negotiable instruments and the realisation of the actual value of such Bills of Exchange/hundis was not possible. He would thus submit that the Bills of Exchange/hundis having been found of no actual value, the Tribunal ought to have held that such hundis/Bills of Exchange being inchoate negotiable instruments, had no market value. He submits that provision of Section 7 of the Wealth Tax Act, regulates how the value of the asset is to be determined and thus has taken us through the provisions of Section 7, as well as, Rules namely “Rules for determination of the value of the Assets” appended to Schedule-III of the Act. Mr. Idnani, would therefore submit, that the authorities below, Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:45:11

On the other hand, Mr. Walve, Learned Counsel appearing for the respondent-Revenue, has supported the orders and the findings recorded by the authorities under the Wealth Tax Act, as well as, supported the order passed by the Tribunal against which this Appeal is preferred.

Section 7 of the Wealth Tax Act reads as under : Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:45:11

That even otherwise, the Tribunal in para-6 of the impugned order, has recorded the finding in the following terms : “Coming now to the alternate ground, we find that the contention of the assessee is correct. In our opinion, the market value of the asset ought to be appropriately discounted. We have noted that these were the inchoate, negotiable instruments. Litigation was pending. Asset was in the possession of the Department. Realisation of the actual value was not possible. Ends of justice would meet adequately if some discount is allowed for ascertaining the value, which the property would fetch if sold in the open market. In our opinion, in the facts and circumstances of the present case, 25% from the value as adopted for wealth-tax purposes on account of depressing factors and to modify the assessment accordingly.” (emphasis supplied) In view of the aforesaid discussion, we answer the question in negative i.e. in favour of the assessee and Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 03:45:11

Accordingly, Appeal allowed. (SANDEEP K. SHINDE, J) SANDEEP K. SHINDE, J)