Circular No. 384

1383. Whether valuation fixed in one assessment year cannot be disturbed for two succeeding years - Para III(b) of Circular 3(WT), dated 28-9-1957 superseded

What this is

Circular No. 384 was issued by the Central Board of Direct Taxes on 6 July 1984. Its subject is 1383. Whether valuation fixed in one assessment year cannot be disturbed for two succeeding years - Para III(b) of Circular 3(WT), dated 28-9-1957 superseded.

What it does

Puts an end to the argument that a wealth-tax valuation once fixed holds for the next two years. Paragraph III(b) of Circular No. 3(WT) of 1957, dated 28-9-1957 had said the valuation fixed in one assessment year need not be disturbed for two succeeding years except in certain circumstances, and that circular was withdrawn by the Board's letter of 5-4-1974. The Board now clarifies that in view of the insertion of section 16A in the Wealth-tax Act, 1957, under which the Wealth-tax Officer may refer a valuation to the Valuation Officer, paragraph III(b) stands superseded and is no longer in force. Circular No. 96 describes the occasions for a reference: where the assessee has returned the value estimated by a registered valuer and the officer thinks that estimate is below fair market value, where he thinks fair market value exceeds the returned value by more than one-third of it or by more than Rs. 50,000, whichever is less, or where he considers a reference necessary having regard to the nature of the asset and other relevant considerations.

Why it was issued

References had come to the Board that assessees were relying on the 1957 circular before Valuation Officers to say that a value adopted in an earlier year could not be enhanced where there had been no substantial improvement or extension to the property.

Who it reaches

Wealth-tax assessees owning immovable property
Assessees whose valuation is referred under section 16A
Valuation Officers and Wealth-tax Officers

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.16A	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1383. Whether valuation fixed in one assessment year cannot be disturbed for two succeeding years - Para III(b) of Circular 3(WT), dated 28-9-1957 superseded
Attention is invited to instructions contained in Para III(b ) of the Board’s Circular No. 3(WT) of 1957, dated 28-9-1957 wherein it was stated that the valuation fixed in one assessment year need not be disturbed for two succeeding assessment years except in certain circumstances. The said circular was withdrawn by the Board’s Letter No. 319/12/74-WT, dated 5-4-1974. Certain references have been received in the Board to the effect that some assessees rely on Circular No. 3 to argue before Valuation Officers that there is no valid reason for enhancing the value adopted in an earlier assessment year by the Wealth-tax Officer in cases where there is no substantial improvement or extension to the property. The matter has been considered in the Board and it clarified that, in view of insertion of section 16A in the Wealth-tax Act, 1957, and the Board’s Circular No. 96, which, inter alia, states as under:
"Under this provision, the Wealth-tax Officer may refer the valuation of any capital asset to the Valuation Officer in a case where the assessee has got the asset valued by a registered valuer and the value returned is in accordance with the estimate made by the registered valuer if he is of the opinion that the value as estimated by the registered valuer is less than the fair market value of the asset. Other cases in which reference may be made to the Valuation Officer would be where the Wealth-tax Officer is of the opinion that the fair market value of the asset exceeds the value of the asset as returned by more than 331 /3 per cent of the value returned or by more than Rs. 50,000, whichever is less, or where having regard to the nature of the asset and other relevant considerations, the Wealth-tax Officer considers it necessary to do so."
The instructions contained in para III(b) of the Board’s Circular No. 3 of 1957 stand superseded. In view of what is stated above and particularly the Board’s Letter No. 319/12/74-WT, dated 5-4-1974, it is obvious that para III(b) of Circular No. 3 WT of 1957 is no longer in force.
Circular: No. 384 [F.No. 319/8/84-WT], dated 6-7-1984.

What to watch

This is a Wealth-tax Act circular, not an income-tax one.
The two-year rest in paragraph III(b) of the 1957 circular is gone, and had already been withdrawn by the Board's letter of 5-4-1974; this circular only puts the position beyond argument.
The reference thresholds it recites -- one-third of the returned value or Rs. 50,000, whichever is less -- come from Circular No. 96, not from this circular.
Absence of improvement or extension to the property is no answer to a fresh valuation.

Where you meet it

In a wealth-tax assessment where the officer refers the property to a Valuation Officer despite an accepted valuation in an earlier year.

What it names

It mentions. Circular No. 3/1957

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.