1985 (9) TMI 47 - HC - Wealth-tax

Summary

Issues:
Whether intangible additions in income-tax assessments constitute wealth under the Wealth-tax Act, 1957.

Analysis:
The case involved a reference under section 27 of the Wealth-tax Act, 1957, concerning an individual assessee who was a jeweler. The question revolved around whether intangible additions in income-tax assessments constituted the wealth of the assessee for specific assessment years. The assessee did not maintain books of account and estimated net profits based on disclosed sales. The Income-tax Officer and appellate authority disagreed on the net profit estimate, leading to certain additions treated as intangible assets in the Wealth-tax Act proceedings.

The Appellate Assistant Commissioner of Wealth-tax ruled in favor of the assessee, stating that intangible additions were not covered by the definition of "assets" under the Act. The Tribunal also rejected the Revenue's argument, citing a decision by the Kerala High Court. However, the High Court analyzed the definition of "assets" under the Wealth-tax Act, which includes property of every description, movable or immovable. Referring to a Supreme Court decision, it concluded that intangible additions were real assets and could be subject to assessment under the Act.

The High Court discussed a conflicting Supreme Court decision in another case involving intangible additions, emphasizing the need for the Revenue to show the availability of such additions with the assessee on the valuation date. It considered the time lapse between estimated assessments and the valuation date, concluding that the intangible additions were indeed available with the assessee.

The High Court opined that the onus was on the assessee to explain the state of affairs regarding intangible additions, and failure to do so could lead to an adverse inference. It disagreed with the Tribunal's view and held that intangible additions constituted wealth of the assessee for the relevant assessment years. The reference was answered against the assessee and in favor of the Revenue, with no order as to costs.

In conclusion, the judgment clarified the treatment of intangible additions as assets under the Wealth-tax Act, emphasizing the need for availability with the assessee on the valuation date and the onus on the assessee to explain their state of affairs.