2016 (2) TMI 487 - AT - Wealth-tax

Inclusion of assets in to the the net wealth of the assessee (Individual) - whether assets are belonging to bigger HUF - Commissioner of Wealth Tax (Appeals) further directed the Assessing Officer that in case the Bigger HUF is not able to show the source of funds for acquiring the aforesaid properties, the same should be included in the net wealth of the assessee. - Held that - There is no infirmity in the order of Commissioner of Wealth Tax (Appeals) in directing the Assessing Officer to make addition of assets in the net wealth of M.N. Navale (Bigger HUF) to the extent of matching sources of funds available and the remaining assets, if any in the net wealth of the assessee. - Decided against the assessee.

Summary

Issues Involved:
1. Existence and recognition of M.N. Navale (Bigger HUF).
2. Inclusion of specific assets in the net wealth of the individual or HUF.
3. Assessment of agricultural income and source of funds for acquiring assets.
4. Directions for assessment on substantive or protective basis.

Issue-wise Detailed Analysis:

1. Existence and Recognition of M.N. Navale (Bigger HUF):
The Tribunal in ITA No. 149/PN/2010 had previously accepted the existence of M.N. Navale (Bigger HUF). This finding was crucial as it laid the foundation for the subsequent issues regarding the ownership and inclusion of assets in the net wealth of either the individual or the HUF. The Tribunal reiterated that there is no dispute about the existence of HUF any more.

2. Inclusion of Specific Assets in the Net Wealth of the Individual or HUF:
The assets in question included residential flats, a bungalow, a farmhouse, and cash in hand, among others. The Assessing Officer initially included these assets in the net wealth of the individual, questioning the existence of the HUF. However, the Commissioner of Wealth Tax (Appeals) directed the exclusion of these assets from the individual's net wealth, provided the HUF could establish the source of funds for their acquisition. The Tribunal upheld this directive, stating that the assets should be included in the net wealth of the HUF to the extent of matching sources of funds available, and any remaining assets should be included in the net wealth of the individual.

3. Assessment of Agricultural Income and Source of Funds for Acquiring Assets:
The HUF claimed that the assets were acquired mainly out of its agricultural income, with land holdings increasing from 60.40 acres in 1952 to 188 acres in 2006. The Commissioner of Wealth Tax (Appeals) directed the Assessing Officer to ascertain the source of funds for acquiring the assets by estimating the agricultural income. If the source of funds was established, the assets would be excluded from the individual's net wealth; otherwise, they would be included.

4. Directions for Assessment on Substantive or Protective Basis:
In WTA Nos. 08 to 11/PN/2014, the issue was whether the net wealth disclosed by the HUF should be assessed substantively in its hands or in the hands of another entity within the Navale group. The Commissioner of Wealth Tax (Appeals) directed the Assessing Officer to complete the assessment based on the results of the exercise to estimate the agricultural income and the source of funds. If the sources were established, the assessment would be substantive in the hands of the HUF; otherwise, the assets would be excluded from the HUF's net wealth.

Conclusion:
The Tribunal found no infirmity in the orders of the Commissioner of Wealth Tax (Appeals) and upheld the directions given for the assessment of assets based on the source of funds. The appeals were dismissed, affirming the reasoned and justified decisions of the lower authorities. The judgment emphasized the importance of substantiating the source of funds for asset acquisition to determine the correct entity for wealth assessment.