Chandurkar, J.:— The assessee-company held shares of some foreign companies, the value of which in the balance-sheet was shown at the cost price of the shares. In the proceedings for assessment to wealth-tax for the assessment years 1957-58, 1958-59 and 1959-60, the relevant valuation dates for these years being 31st March, 1957, 31st March, 1958, and 31st March, 1959, respectively, the WTO adopted the global method of valuation. However, in respect of the shares held by the assessee in foreign companies, the WTO valued the shares at the market value which was shown in the balance-sheet in the inner column against the entry relating to these assets. The value shown in the balance-sheet as well as the market value of the shares shown in the inner column was as follows:

1957-58 1958-59 1959-60 Rs Rs. Rs. Value shown in balance-sheet 23,05,039 22,33,505 23,42,942 Market value 45,40,180 36,37,401 42,51,828

2. The assessments made by the WTO taking into account the market value of the shares was confirmed by the AAC who dismissed the appeal filed by the assessee.

3. When the assessee took up the matter to the Appellate Tribunal in appeal, it was contended on behalf of the assessee-company that the adjustment of the value made by the WTO was not permissible under s. 7(2)(a) of the W.T Act (hereinafter referred to as “the Act”). The Tribunal took the view that even though s. 7(2)(a) permitted the adjustment which the circumstances of the case required, they were not satisfied that any adjustment was called for on the facts of the present case. The ‘Tribunal referred to the fact that the market value of the shares was far higher than the cost and that the market value was also readily ascertainable. But, according to the Tribunal, these were not considerations for which one of the items could be singled out and valued on a basis other than that followed in the balance-sheet when for all-other assets, the balance-sheet value has been accepted. The Tribunal, therefore, directed that in respect of all the assessment years the book value of the shares may be considered for the purposes of computation of net wealth of the assessee. At the instance of the revenue, the following question has now been referred to this court under s. 27(1) of the Act:

“Whether, on the facts and in the circumstances of the case and on a proper interpretation of the provisions of section 7(2)(a), the value of the foreign shares to be included in the net wealth is the market value or the value at cost as shown in the balance-sheet?”

4. Shri Kotwal, appearing on behalf of the revenue, has contended that the market value of the shares in question being much higher than the value of these shares as disclosed in the balance-sheet, the WTO, while adopting the global method of valuation under s. 7(2)(a), had power to reject the value of the assets, namely, the shares in question as shown in the balance-sheet and in its place take the market value of the shares and according to the learned counsel, there was no justification for valuing the shares at cost value when, admittedly, even according to thes assessee, the market value was much higher, than what was adopted for the purposes of the balance-sheet.

5. Shri Dinesh Vyas, appearing on behalf of the assessee-company, has not disputed the power of the WTO to adopt a different valuation of an asset from the one shown in the balance-sheet. But, Shri Vyas has placed reliance on a circular issued by the CBDT, being Circular No. 3(WT) of 28th September, 1957, which has been reproduced in Taxmann's Direct Taxes Circulars, Vol. I, 4th Edn. at page 914, at Serial No. 545. The relevant part of the circular on which reliance is placed reads as follows:

“2. Valuation of a business taken as a whole: —(a) Bulk valuation.— Where the valuation of the various assets of a business is likely to involve difficulty, section 7(2) enables Wealth-tax Officer to evaluate the assets in bulk, taking the business as a whole. As a matter of practice, the Wealth-tax Officer should ordinarily apply this ‘global valuation ‘in all cases of business, particularly in the case of companies, if the accounts have been found to be reliable, and there is no reason to suspect any fraud on the part of the assessee.”

6. Shri Vyas, therefore, contends that in the absence of any fraud on the’. part of the assessee and the accounts not having been found to be unreliable, in view of the circular issued by the Board, the WTO should have accepted the global valuation and it was not, therefore, open to him to alter the value of any particular asset.

7. Shri Kotwal, appearing on behalf of the revenue, has contended that this circular is now being relied upon for the first time which the assessee is not entitled to do and the circular should, therefore, be left out of consideration. Alternatively, it was contended that the circular does not lay down any rule which necessarily requires the WTO to accept in all cases the balance-sheet of the company for the purposes of computing the net wealth of the company. It is argued that the circular issued by the Board only directs that the global valuation method should be “ordinarily applied” in case of business and particularly so in the case of a company and that this circular does not deprive the WTO of his discretion to find out whether any particular item of asset is undervalued in the balance-sheet. It is argued that if it is found that any asset is undervalued for the purposes of wealth-tax assessment, the market value of such asset can be taken into account for the purposes of assessment to wealth-tax.

8. Now, on principle, there is no difficulty in holding that the WTO is entitled to take a value of an asset at a different figure than the one at which it is valued in the balance-sheet if it is found that the asset has been undervalued. In Birla Jute-Manufacturing Co. Ltd. v. CWT, [1971] 82 ITR 142 (SC), dealing with the global method of valuation under s. ‘7(2) of the W.T Act, the Supreme Court has observed as follows (p. 145):

“It is quite clear, under section 7(2) of the Act, the Wealth-tax Officer may determine the net value of the assets of the business' as a whole having regard to the balance-sheet of the business as-on the valuation date. It must be remembered that under section 211 of the Companies Act, 1956, every balance-sheet of a company must give a true and fair figure of the state of its affairs as at the end of the financial year. If the assessee has shown the net value of the assets at a certain figure in the balance-sheet the Wealth-tax Officer would be entitled to accept it on the footing that the assessee knew best what the valuation of the assets was. It was, however, open to the assessee to satisfy the authorities that the said figure had been enhanced or increased or inflated ‘for acceptable reasons’. It was equally open to the Wealth-tax Officer not to accept the figure given by the assessee but to arrive at another figure if he was satisfied for good reasons that the valuation given in the balance-sheet was wrong. There can be no doubt that section 7(2)(a) of the Act contemplates that the book value in the balance-sheet should be taken as the primary basis of valuation and if any adjustment is required it is open to the Wealth-tax Officer to make such an adjustment in the valuation as given in the balance-sheet as may be necessary in the circumstances of the case.”

9. There is, therefore, no doubt that if on the circumstances of any case the WTO finds that an adjustment in the valuation of an asset, shown in the balance-sheet is necessary, he is competent to do so even while accepting the global method of valuation.

10. The question which has been raised by Shri Vyas, however, is that according to the directions of the Board as contained in the circular referred to above, unless the WTO suspects any fraud on the part of the assessee or unless the accounts have been found to be unreliable, the WTO is bound to act as directed by the circular and the direction, according to the learned counsel, is that the balance-sheet must be accepted as it is, indicating the value of the several assets which, find a place in the balance-sheet.

11. Now, it is important to note that the circular is a direction requiring the WTO to “ordinarily apply this global valuation This direction has to be read in the light of the earlier statement made in the circular where it has been stated that the valuation of the various assets of a business is likely to involve difficulty and, therefore, s. 7(2) enables the WTO to evaluate the assets in bulk, taking the business as a whole. The circular, therefore, is a mere direction to adopt a global valuation instead of independently valuing each asset of a business. Now, when the WTO, functioning under s. 7(2Xa) of the Act, adopts the global valuation but finds that certain assets are undervalued in the balance-sheet, that does not mean that he is not adopting the global valuation. As the direction to adopt global valuation is given merely to indicate that the global method of valuation should be adopted in preference to the valuation of each asset separately, the circular cannot be, in our view, read as meaning that the balance-sheet should always be accepted as it is. There is nothing in the circular which can be read as prohibiting the WTO from ascertaining the true value of an asset if he suspects that any particular asset has been undervalued in the balance-sheet. Therefore, where a particular asset has been shown to be undervalued in the balance-sheet and the WTO having regard to the provisions of s. 7(1) takes the view that the said asset should be valued at the market value, he is neither discarding the global method of valuation nor can he be said to be acting contrary to the circular issued by the Board on which reliance is placed on behalf of the assessee-company.

12. In the instant case, the market value of the shares in question is indicated by the assessee itself in its balance-sheet. However, for the purposes of the balance-sheet only the cost value of the shares has been taken. Section 7(1) of the Act provides that the value of any asset other than cash shall be estimated to be the price which, in the opinion of the WTO, it would fetch if sold in the open market on the valuation date for the purposes of the Act. The provisions of s. 7(2)(a) only lay down a method of estimating the value of net wealth. If, as in the instant case, the shares have been valued at less than the market value, and so far as an asset is concerned, it has to be valued at the market value and the market value is indicated by the assessee itself, it is difficult to see that fault could be found with the WTO, when he took into account the market value of the shares in question. The method adopted by the WTO was, in our view, therefore, not at all in breach of s. 7(2)(a) or ‘in breach of the circular relied upon. We may notice the objection on behalf of the revenue that the circular has been relied upon for the first time in this court and point out that the objection must be rejected in view of the decision of this court in Navnitlal Ambalal v. CIT, [1976] 105 ITR 735, where also the circulars were relied upon for the first time in this court in the course of hearing of a reference under the I.T Act and yet it was given effect to because the view taken was that the circulars issued by the CBR are binding on the ITOs and must be given effect to by the court. It is true that in the view which we have taken-on the merits of the question, the objection raised on behalf of the revenue really did not survive, but since the point was argued on behalf of both sides, we have referred to that contention.

13. In the view which we have taken, the question referred must be answered by holding that the value of the foreign shares to be included in the net wealth is the market value and not the value at cost as shown in the balance-sheet. The revenue to get the costs of this reference.