2013 (8) TMI 55 - AT - Wealth-tax

Appellate Tribunal rules in favor of assessee in Wealth Tax Act assessment case

The Appellate Tribunal ITAT Mumbai found in favor of the assessee in a case involving the re-opening of assessment under the Wealth Tax Act, 1957, and the ... Inclusion of asset for wealth tax - Validity of re-assessment – Held that:- Re-assessment proceedings were initiated after the period of four years from the assessment year in question. As per the settled principle of taxation jurisprudence if an assessment is to be re-opened after a period of four years, the first condition is that there should be failure on the part of the assessee to disclose full and true all the necessary facts. Not only this, the AO should mention in the reasons recorded about the alleged failure and has to explain as which material facts were not disclosed by the assessee – Decided in favor of Assessee. Assessee to be owner of land - Held that:- Even on merits, the order of the AO/FAA cannot be endorsed. It is a fact that assessee had sold a plot of land to one developer and except for the conveyance deed all legal formalities were completed. Therefore, the assessee could not be treated as owner of the said plot of land – Therefore, no wealth tax – Decided in favor of Assessee. Issues:1. Re-opening of assessment under section 16(3) r.w.s. 17 of the Wealth Tax Act, 1957.2. Valuation of impugned land for wealth tax purposes.Re-opening of Assessment:The case involved cross appeals filed by the Assessing Officer (AO) and the assessee company challenging the order of the Commissioner of Wealth Tax (Appeal)-6, Mumbai. The AO re-opened the assessment under section 16(3) r.w.s. 17 of the Wealth Tax Act, 1957, alleging that the wealth of the assessee had escaped assessment due to the non-inclusion of the value of certain land. The AO's reasons for re-opening the assessment were based on a development agreement entered into by the assessee with a developer. However, the Tribunal found that the AO failed to establish any failure on the part of the assessee to disclose full and true material facts. The Tribunal noted that the assessee had disclosed the relevant facts while filing the return of wealth/income and had paid tax under the head 'Capital Gains' on the sale of the land in question. Citing legal precedents, the Tribunal concluded that the re-opening of the assessment after the period of four years was unjustified, as there was no reasonable basis for the AO's actions. Consequently, the Tribunal allowed the cross objections filed by the assessee, thereby setting aside the order of the First Appellate Authority (FAA) upholding the re-opening of the assessment.Valuation of Impugned Land:The dispute also centered around the valuation of the impugned land for wealth tax purposes. The AO had made an addition of Rs. 7.43 Crores towards the value of the land, considering the transfer of development rights to a developer. The FAA upheld this addition, stating that 20% of the development rights could reasonably be considered as the interest of the assessee in the land. However, the Tribunal disagreed with this valuation. It noted that except for the conveyance deed, all legal formalities regarding the land transfer had been completed, indicating that the assessee could not be treated as the owner of the land. Relying on the judgment of the High Court of Punjab & Haryana, the Tribunal concluded that the assessee's ownership of the land was not established. Therefore, the Tribunal allowed the cross objections filed by the assessee-company and dismissed the appeal filed by the AO, while allowing the appeal of the assessee for statistical purposes.In summary, the judgment by the Appellate Tribunal ITAT Mumbai addressed issues related to the re-opening of assessment under the Wealth Tax Act, 1957, and the valuation of impugned land for wealth tax purposes. The Tribunal found that the re-opening of the assessment was unjustified as there was no failure on the part of the assessee to disclose material facts, leading to the allowance of cross objections by the assessee. Additionally, the Tribunal disagreed with the valuation of the land by the AO and FAA, concluding that the legal formalities for the land transfer indicated that the assessee was not the owner of the land. As a result, the Tribunal allowed the cross objections filed by the assessee-company and made decisions regarding the appeals filed by the AO and the assessee.