The onus of proof lies on the Revenue to show that the market value exceeds the balance-sheet value by more than 20%.

1. Both these applications have been moved by the Revenue under section 27(3) of the Wealth-tax Act, 1957, for referring the questions of law which are said to Arise out of the order of the Income-tax Appellate Tribunal (hereinafter referred to as " the Tribunal ") dated October 30, 1987. In Reference Application No. 93 of 1988, which relates to the assessment year 1979-80, the questions sought to be referred for the consideration of this court are as under :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the finding of the Appellate Assistant Commissioner that rule 2B(2) of the Wealth-tax Rules was not applicable in the assessee's case and consequently in deleting the addition of Rs. 2,75,415 for assessment year 1979-80 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in not holding that the onus was on the assessee to prove that the market value of the closing stock of Messrs. Lall's Gems and Jewels, Jaipur, did exceed by more than 20% the value disclosed by him and whether the assessee could be said to have discharged that onus ? "

2. In Reference Application No. 56 of 1988 which relates to the assessment year 1978-79, the questions are the same except that, in question No. 1, instead of the sum of Rs. 2,75,415, the sum of Rs. 2,58,800 has been mentioned.

3. Manmohan Lal (hereinafter referred to as "the assessee") is a partner in the firm, Messrs. Lall's Gems and Jewels, Jaipur. In respect of the assessment year 1978-79, the assessee valued his share in the capital of the firm at Rs. 2,19,659. The Wealth-tax Officer made an addition of Rs. 2,58,800 in the share of the assessee in the capital of the firm on the basis of rule 2B(2) of the Wealth-tax Rules. The said figure was arrived at by the Wealth-tax Officer on the view that the gross profit declared by the firm in the previous year relevant to the said assessment year was 35.7% which is more than 20% and, on that basis, the Wealth-tax Officer increased the market value of the closing stock of the firm. Similarly, in respect of the assessment year 1979-80, the assessee, in his return, had declared his share in the capital of the firm at Rs. 91,100. The Wealth-tax Officer made an addition of Rs. 2,75,415 under the said head by applying rule 2B(2) of the Wealth-tax Rules on the basis that the gross profit of the firm in the previous year relevant to the said assessment year was 34%. The Appellate Assistant Commissioner deleted the aforesaid additions made by the Wealth-tax Officer under rule 2B(2) of the Wealth-tax Rules in both the assessment years for the reason that rule 2B(2) could not be applied solely on the basis of the gross profit rate disclosed by the firm in which the assessee is one of the partners. The said view has been affirmed in appeal by the Tribunal. The Tribunal has held that rule 2B(2) could not be invoked on the basis of the gross profit shown by the assessee in the trad ing account. The Revenue thereafter submitted applications under section 27(1) of the Act for referring the questions of law for the consideration of this court. The said applications have been rejected by the Tribunal. Hence, these reference applications in this court.

4. We have heard Shri V. K. Singhal, learned counsel for the Revenue, and Shri Anant Kasliwal, learned counsel for the assessee.

5. Before we deal with the submissions urged by Shri Singhal, we may mention that the provisions of rule 2B(2) of the Wealth-tax Rules have been considered by this court in CWT v. Moti Chand Daga 1988 (174) ITR 379. In that case, this court was considering the question whether the market value of the closing stock could not be determined on the basis of the gross profit rate alone shown by the assessee. This court has held that where the only material available is the gross profit rate and there is no positive material to indicate the extent of deduction which has to be made therefrom for purpo