2023 (1) TMI 1038 - AT - Wealth-tax

Tribunal rules bungalow valuation per Wealth Tax Act, not income tax return. AO's addition deleted, assessee's appeal allowed.

The Tribunal concluded that the valuation of the bungalow should be done as per the Wealth Tax Act, not based on the income tax return. The addition made ... Addition of wealth of the assessee on account of immovable property - valuation of property - value as per the provisions of wealth tax Act or the value of the property declared in the income tax return - As submitted that the value of the property in dispute has to be determined in the manner laid down in part B of schedule III of the Wealth Tax Act - whether the property for the purpose of wealth tax has to be valued as per the provisions of wealth tax Act or the value of the property declared in the income tax return can be adopted for the purpose of the wealth tax? - HELD THAT:- As no ambiguity to the fact that the assessee has furnished the necessary details before the AO during the assessment proceedings. However, the AO without pointing out any defect in the details furnished by the assessee has adopted the value of the bungalow in dispute declared in the balance sheet filed in the income tax return. We note that the provisions of section 7 of the Wealth Tax Act is a substantive procedure as laid down in the case Commissioner of Wealth Tax Vs Shravan Kumar Swarup & Sons [1994 (9) TMI 2 - SUPREME COURT] No ambiguity to the fact that the value of the property has to be determined in accordance to the method prescribed under the Wealth Tax Act and without making any reference to the valuation done for any other purpose under any other Act. In our humble understanding, the case laws referred by the learned Commissioner of Wealth Tax (Appeals) in his order in the case of K.E.M.I Kwaja Mohideen V. Income Tax Officer Ward I(1) Nayapattinam [2019 (7) TMI 1442 - MADRAS HIGH COURT] is not applicable in the given facts and circumstances for the reasons as discussed above. As such the issue before The Hon’ble High Court of Madras was with regard to computation of capital gain under section 48 of the Income Tax whereas the issue before us is related the valuation of property for the purpose of wealth tax. Allahabad High Court in the case of CIT vs. Padampat Singhania [2016 (11) TMI 708 - ALLAHABAD HIGH COURT] has held that the value asset/property is govern by section 7 of wealth tax Act read with Schedule –III of Wealth tax Act We are of the opinion that the valuation of the bungalow in dispute has to be done as per the provisions specified under the Wealth Tax Act. Thus, the value declared under the income tax Act of the bungalow in dispute cannot be adopted for the purpose of the Wealth Tax Act. Accordingly, we set aside the finding of the learned Commissioner of Wealth Tax (Appeals) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. Issues Involved:1. Legality of notice issued under Section 17 of the Wealth Tax Act, 1957.2. Addition of Rs. 9,85,737 for alleged two cars.3. Addition of Rs. 31,70,225 based on the valuation of a residential house.Detailed Analysis:1. Legality of Notice Issued Under Section 17 of the Wealth Tax Act, 1957:- The assessee challenged the action of the Assessing Officer (AO) in issuing a notice under Section 17 of the Wealth Tax Act, 1957.- The Learned Commissioner of Wealth Tax (Appeals) dismissed this ground, stating it was general in nature and not supported by any specific written submissions.- The assessee did not press this ground during the appeal, and it was dismissed as not pressed.2. Addition of Rs. 9,85,737 for Alleged Two Cars:- The assessee contested the addition of Rs. 9,85,737 made by the AO for alleged two cars.- This ground was also not pressed by the assessee during the appeal and was dismissed accordingly.3. Addition of Rs. 31,70,225 Based on Valuation of Residential House:- The primary issue raised was the addition of Rs. 31,70,225 to the wealth of the assessee on account of an immovable property (bungalow).- The assessee disclosed the bungalow at Rs. 37,88,500 in the financial statement but valued it at Rs. 6,18,375 in the wealth tax return, leading to a difference of Rs. 31,70,225.- The AO questioned this discrepancy and added the difference amount to the total wealth of the assessee, citing the lack of supporting documents for the Net Maintainable Rent (NMR) calculation.- The assessee argued that the valuation should be as per Schedule III of the Wealth Tax Act, which involves calculating the annual rent and multiplying it by 12.5.- The Learned Commissioner of Wealth Tax (Appeals) upheld the AO's valuation, referencing a Madras High Court ruling that the same property cannot have different valuations under the Wealth Tax Act and the Income Tax Act.- The assessee provided municipal tax receipts and other documents to support the lower valuation but claimed these were not duly considered by the authorities.Tribunal's Findings:- The Tribunal examined whether the property should be valued as per the Wealth Tax Act or the value declared in the income tax return should be adopted.- Section 7 of the Wealth Tax Act mandates that the value of any asset should be determined as per Schedule III.- Schedule III specifies that the NMR should be calculated by reducing the gross maintainable rent by taxes levied by any local authority and 15% of the gross maintainable rent.- The Tribunal noted that the property was within a local authority's jurisdiction, with an annual value of Rs. 49,470 as per the local authority.- The assessee had furnished necessary details during the assessment, but the AO did not point out any defects in these details.- The Tribunal referred to the Supreme Court's ruling in Commissioner of Wealth Tax vs. Shravan Kumar Swarup & Sons, which emphasized that the value of the property must be determined as per the Wealth Tax Act's prescribed method.- The Tribunal also cited the Allahabad High Court's decision in CIT vs. Padampat Singhania, reinforcing that property valuation should follow the Wealth Tax Act's provisions.Conclusion:- The Tribunal concluded that the valuation of the bungalow should be done as per the Wealth Tax Act, not based on the income tax return.- The addition made by the AO was directed to be deleted, and the appeal of the assessee was allowed.Order:- The appeal of the assessee was allowed, and the order was pronounced on 09/12/2022 at Ahmedabad.