2006 (10) TMI 356 - AT - Wealth-tax

Summary

Issues Involved:

1. Whether the property held by the assessee as stock-in-trade is an "asset" u/s 2(ea) of the Wealth-tax Act, 1957.
2. Whether the application for rectification u/s 35 of the Wealth-tax Act was rightly rejected by the Assessing Officer and upheld by the CWT(A).

Summary:

Issue 1: Definition of Asset u/s 2(ea) of the Wealth-tax Act, 1957

The assessee, engaged in property development through M/s. Krishna Organizers, included the value of a property in the Wealth-tax returns for the assessment years 1993-94, 1994-95, and 1995-96. The property was valued at Rs. 22,48,754. Later, the assessee contended that the property, being stock-in-trade, did not fall within the definition of "asset" u/s 2(ea) of the Wealth-tax Act, 1957. The assessee argued that any house for residential purposes forming part of stock-in-trade was not to be included in the definition of "assets" as per section 2(ea) effective from 1-4-1993.

Issue 2: Application for Rectification u/s 35 of the Wealth-tax Act

The assessee filed applications u/s 35 for rectification, claiming the inclusion of the property in the taxable assets was a mistake. The Assessing Officer rejected the applications, stating the mistake was not apparent from the records. The CWT(A) upheld this decision, noting that the property's status as stock-in-trade for residential purposes was not evident from the records. The CWT(A) concluded that the mistake did not fall within the purview of section 35.

Tribunal's Decision:

The Tribunal emphasized the duty of the Department to assist taxpayers in claiming reliefs, referencing Circular No. 14 (XL-35) of 1955 and the Gujarat High Court's decision in Chokshi Metal Refinery v. CIT. The Tribunal noted that if the basic facts/material to support the claim were on record, the Assessing Officer should guide the assessee to claim such relief. The Tribunal found that the balance sheet of M/s. Krishna Organizers indicated the property was held as business property, thus supporting the assessee's claim. The Tribunal concluded that the Department should have accepted the application for rectification and allowed the assessee to prove its claim on merits.

Conclusion:

The Tribunal restored the issue to the file of the Assessing Officer with directions to examine the claim on merits and pass a speaking order regarding the exclusion or inclusion of the property from assessable wealth. The appeals were allowed for statistical purposes.