2009 (12) TMI 658 - HC - Wealth-tax

Court rules property valuation under specific rules, penalties unjustified without evidence of concealment

Commissioner of Wealth-tax Versus Bhanno Mal and Sons (HUF)

Commissioner of Wealth-tax Versus Bhanno Mal and Sons (HUF) - [2012] 344 ITR 514 Issues Involved:1. Reopening of assessments under section 17 of the Wealth-tax Act.2. Valuation of the property under Rule 1BB of the Wealth-tax Rules.3. Imposition of penalty under section 18(1)(c) of the Wealth-tax Act.Issue-wise Detailed Analysis:1. Reopening of Assessments under Section 17 of the Wealth-tax Act:The respondent-assessee filed returns for the assessment years 1987-88, 1988-89, and 1989-90, declaring the value of a property at Rs. 200 per square yard. The Assessing Officer (AO) later discovered that the Land and Development Officer had fixed the value at Rs. 23,000 per square metre. Consequently, the AO reopened the assessments under section 17 of the Act and made additions to the declared wealth. The Income-tax Appellate Tribunal (ITAT) upheld the reopening, citing that the information about the higher value was valid and relevant for reopening the assessments.2. Valuation of the Property under Rule 1BB of the Wealth-tax Rules:The AO valued the property at Rs. 23,000 per square metre, leading to significant additions to the assessee's declared wealth. The ITAT directed the AO to value the built-up portion of the property under Rule 1BB, ensuring the value was not less than Rs. 20,730 as shown by the assessee. The ITAT also instructed to ignore the value of certain portions of the land and to add 50% of the value of the back lawn. The High Court agreed that prior to April 1, 1989, the property should be assessed under Rule 1BB, but for the assessment year 1989-90, the valuation should follow the amended provisions in Part B of Schedule III of the Act.3. Imposition of Penalty under Section 18(1)(c) of the Wealth-tax Act:The AO initiated penalty proceedings under section 18(1)(c) for concealment of net taxable wealth. The Commissioner of Wealth-tax (Appeals) allowed the appeal for the assessment year 1987-88 but dismissed the appeals for subsequent years. The ITAT later dismissed the Department's appeal for 1987-88 and allowed the assessee's appeals for 1988-89 and 1989-90, holding that the penalty was unjustified. The High Court noted that the assessee had consistently shown the same property value since 1967-68, which the Department had accepted. There was no evidence that the assessee knew about the Ministry of Urban Development's notification when filing returns. Given these circumstances, the High Court concluded that penalty under section 18(1)(c) was not warranted.Conclusion:The High Court dismissed the Revenue's appeals and upheld the ITAT's decisions. The property should be valued under Rule 1BB for years prior to April 1, 1989, and under the amended provisions for 1989-90. The penalty imposed under section 18(1)(c) was deemed unjustified due to the lack of evidence of concealment and the consistent valuation accepted by the Department over the years. The High Court directed the ITAT to pass necessary orders to dispose of the quantum cases in conformity with this judgment.