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

Penalty proceedings u/s 18(1)(c) - wealth tax assessment - Held that - There is total non-application of mind by the Wealth Tax Officer while dropping penalty proceedings under section 18(1)(c) and in this regard the assessment order passed is erroneous and since the amount of penalty leviable has failed to be levied then the said order is also prejudicial to the interest of Revenue. AR for the assessee vehemently stressed before us that no penalty is leviable under section 18(1)(c) in the hands of present case in view of Explanation 5 under the said section. Wealth Tax Officer has failed to address the issue at all. Even the assessee had not pleaded any such thing before Assessing Officer. The reply only asks the Assessing Officer to drop penalty proceedings and Assessing Officer refers to the said reply and drops proceedings without any reasons either raised by assessee or referred by the Assessing Officer. In the absence of the same we find no merit in the plea of the assessee in this regard. Since the same needs to be addressed by the Assessing Officer accordingly we uphold the order of Commissioner in setting aside the order of Wealth Tax Officer. Hence the grounds of appeal raised by the assessee are dismissed. Commissioner power of revision under section 25(1) against wealth tax assessment order passed by the Assessing Officer under section 16(3) of the Act - Held that - where the money is deposited in the PD Account of Commissioner which in turn is held on behalf of the assessee has changed the form from being cash in hand available with the assessee which was seized by the Department and is now available in the form of bank deposit. Once the form of cash has changed into a bank deposit the same is not includable in the hands of assessee as cash in hand as on valuation date. In the totality of the above said facts and circumstances of the case where the amount of cash seized from the assessee is now deposited in PD Account of Commissioner the same is not includable in the net wealth of assessee as on 31.03.2010. Consequently the assessment order passed by the Wealth Tax Officer in not including the same in the hands of assessee is not erroneous. In this regard we find no merit in the exercise of power by the Commissioner for revision of assessment order passed under section 16(3) of the Act.

Summary

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 ?16,64,000, which was later revised to ?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 ?27,45,600. During the search and seizure operation, cash of ?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.