2016 (6) TMI 471 - AT - Wealth-tax

Escapement of wealth chargeable to tax - cash found in excess of ₹ 50,000/-, being the limit prescribed under Wealth Tax Act, 1957 - Held that - Revenue s submission that since the cash balances are in excess of the limit prescribed under Wealth Tax Act, 1957, the cash balance in excess of ₹ 50,000/- are to be treated as wealth of the assessee. On the other hand, apart from other submissions, it is assessee s submission that the cash which is owned up by assessee as reflected in the Settlement Commission order, represents the cash of various entities (i.e. 65 entities) and is not the cash of assessee alone. We find that there is no finding of any of the lower authorities as to the amount of cash of the various entities. In such a situation, we are of the view, that the issue needs to be re-examined at the end of AO. AO is directed to consider the cash as wealth of the assessee in accordance with law and only to the extent of the cash as at the close of year that belongs to the assessee. We therefore remit the issue to the file of AO to decide the taxability of cash as wealth as noted herein. The assessee is also directed to co-operate by promptly furnishing all the details called for by the authorities. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
- Interpretation of cash balances as assets under the Wealth Tax Act, 1957
- Validity of reopening assessment proceedings based on Settlement Commission application

Interpretation of cash balances as assets under the Wealth Tax Act, 1957:
The case involved appeals by the Revenue and cross-objections by the assessee against the Commissioner of Wealth-tax (Appeals) order for Assessment Years 2004-05 to 2007-08. The AO treated cash balances exceeding ?50,000 as assets under section 2(ea)(vi) of the Wealth Tax Act, leading to additions in each assessment year. However, the CWT(A) ruled in favor of the assessee, stating that the cash balances were commercial assets used for business transactions and not chargeable to wealth tax. The CWT(A) referenced the decision in A. A. Salam v/s ACWT, highlighting the distinction between productive and non-productive assets. The Tribunal remitted the issue to the AO to determine the taxability of cash belonging to the assessee specifically, directing cooperation from the assessee in providing necessary details.

Validity of reopening assessment proceedings based on Settlement Commission application:
The assessee raised objections regarding the validity of reopening assessment proceedings based on the application before the Settlement Commission. The assessee argued that the cash balance reflected in the Settlement Application was not within the scope of section 2(ea) of the Wealth Tax Act, as it represented the movement of funds among various entities and not actual cash balance. The Tribunal dismissed the assessee's objections, stating that the issue of reopening assessment proceedings was not strongly argued by the assessee, leading to the dismissal of the cross-objections.

In conclusion, the Tribunal allowed the Revenue's appeals for statistical purposes, directing a reassessment of the taxability of cash balances belonging to the assessee. The Tribunal dismissed the assessee's cross-objections regarding the validity of reopening assessment proceedings. The judgment highlighted the importance of distinguishing between commercial assets and non-productive assets under the Wealth Tax Act, emphasizing the need for a detailed examination of the specific cash balances in question.