2016 (5) TMI 1430 - AT - Wealth-tax

Wealth Tax Appeals Outcome: No Penalty Upheld, Seized Cash Excluded

Mrs. Sarita Kaur Chopra Versus The Wealth Tax Officer (Central) -I

Mrs. Sarita Kaur Chopra Versus The Wealth Tax Officer (Central) -I - TMI Issues Involved:1. Validity of the revision order passed under section 25(1) of the Wealth Tax Act for the assessment year 2009-10.2. Validity of the revision order passed under section 25(1) of the Wealth Tax Act for the assessment year 2010-11.Issue-Wise Detailed Analysis:1. Validity of the Revision Order under Section 25(1) for the Assessment Year 2009-10:The primary issue here is whether the Commissioner was correct in invoking section 25(1) of the Wealth Tax Act to revise the Wealth Tax Officer's (WTO) order dropping penalty proceedings under section 18(1)(c). The assessee initially declared a net wealth of Rs. 16,64,000, which was later revised to Rs. 1,67,95,900 after a search and seizure operation. The WTO accepted this revised return and dropped the penalty proceedings based on a letter from the assessee.The Commissioner noted non-application of mind by the WTO, as there was clear concealment of net wealth. The Commissioner issued a notice under section 25, stating that the penalty order was erroneous and prejudicial to the interest of Revenue. The assessee argued that the revised return was filed after the search and that the WTO was aware of the search, thus the order could not be considered erroneous.However, the Tribunal found that the WTO did not provide detailed reasons for dropping the penalty and had blindly accepted the assessee's submissions. The Tribunal upheld the Commissioner's order, stating that the WTO's order was both erroneous and prejudicial to the interest of Revenue due to the non-imposition of penalty for concealment. The appeal for the assessment year 2009-10 was dismissed.2. Validity of the Revision Order under Section 25(1) for the Assessment Year 2010-11:For the assessment year 2010-11, the Commissioner exercised his power of revision under section 25(1) against the wealth tax assessment order passed by the WTO. The assessee had declared a net wealth of Rs. 27,45,600. During the search and seizure operation, cash of Rs. 1.67 crores was seized, which was not considered for wealth tax purposes in the assessment order. The Commissioner held that this resulted in under-assessment of wealth and issued a show-cause notice.The assessee argued that the cash seized was not held by her on the valuation date and thus not liable to wealth tax. The Tribunal noted that the cash seized was deposited in the PD Account of the Commissioner, changing its form from cash in hand to a bank deposit. Citing the Supreme Court's decision in K.C.C. Software Ltd., the Tribunal held that once the cash is deposited in the PD Account, it is not includable in the net wealth of the assessee as on the valuation date.The Tribunal concluded that the assessment order was not erroneous and canceled the revision order passed by the Commissioner under section 25(1) for the assessment year 2010-11. The appeal for this assessment year was allowed.Conclusion:The Tribunal dismissed the appeal for the assessment year 2009-10, upholding the Commissioner's revision order, and allowed the appeal for the assessment year 2010-11, canceling the Commissioner's revision order. The judgment highlights the importance of detailed reasoning in tax orders and the implications of cash seized during search operations on wealth tax assessments.