2016 (7) TMI 464 - AT - Wealth-tax

Penalty leviable on the mortgaged assets claimed by the assessee as exempt u/s.2(m) of the W.T. Act - denial of deduction u/s.2(m) of the Act on account of mortgaged assets - Held that - Tribunal in batch appeal has already deleted such addition/disallowance on the ground that properties mortgaged to the bank cannot be held as assets belonging to the assessee u/s.2(m) of the Wealth Tax Act. Since the quantum addition has already been deleted, therefore, no penalty u/s.18(1)(c) of the Act is leviable on account of such amount.- Decided in favour of assessee. Penalty on account of addition being the difference between value of assets considered for loan purpose by the valuer of the bank and the value considered by the assessee as per Govt sub Registrar s office for stamp duty purpose - Held that - We find the assessee has disclosed all the particulars of the properties and has not concealed anything from the Department. We find merit in the submission of assessee that those assets were valued by the bank valuer at higher rate for obtaining loan purpose and that was merely an estimate. Since the assessee has declared the valuation of the assets as per Sub Registrar s office for stamp duty purpose and since all the particulars are already furnished, therefore, we do not find any infirmity in the order of the CWT(A) deleting the penalty on account of the addition being the difference between the valuation report of the valuer of the bank and the valuation as per Sub-Registrar s office for stamp duty purpose. In our opinion the reasons given by the CWT(A) while deleting the penalty is a reasoned one. We therefore do not find any infirmity in the same. Accordingly, the order of the CWT(A) is upheld and the grounds raised by the Revenue are dismissed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Penalty under Section 18(1)(c) of the Wealth Tax Act, 1957.
2. Valuation of immovable property for wealth tax purposes.
3. Deduction under Section 2(m) of the Wealth Tax Act for mortgaged properties.

Detailed Analysis:

Penalty under Section 18(1)(c) of the Wealth Tax Act, 1957:
The primary issue revolves around the penalty imposed by the Assessing Officer (AO) under Section 18(1)(c) of the Wealth Tax Act for concealment of wealth. The AO levied a penalty of ?3,54,510/- on the assessee, which was later reduced by the Commissioner of Wealth Tax (Appeals) [CWT(A)] to ?5,995/-. The Revenue appealed against this reduction, arguing that the penalty should have been upheld in full since the addition on account of the difference in property valuation had been confirmed.

Valuation of Immovable Property for Wealth Tax Purposes:
The AO noted that the assessee had valued immovable properties based on the government rates published in the Ready Reckoner by the Government of Maharashtra. However, for obtaining loans, the properties were valued at a higher rate by the bank's valuer. The AO added the difference between these valuations to the net wealth of the assessee, resulting in an addition of ?1,45,55,920/-. The assessee argued that the valuation for wealth tax purposes was done on a reasonable basis as per the government rates and that the valuation by the bank's valuer was merely an estimate for loan purposes.

Deduction under Section 2(m) of the Wealth Tax Act for Mortgaged Properties:
The AO disallowed the assessee's claim for deduction of debts owed under Section 2(m) of the Wealth Tax Act, amounting to ?2,05,92,303/-, on the grounds that the debts were not directly owed by the assessee but were secured against the assessee's properties for loans taken by a company. The CWT(A) confirmed the AO's order but deleted the penalty on the grounds that the Tribunal had previously ruled that mortgaged assets could not be included in the net wealth of the assessee.

Tribunal's Findings:

1. Penalty on Wealth Tax Liability:
- The CWT(A) had confirmed the penalty on the disallowance of Wealth Tax liability as a deduction from the net wealth. Since the assessee did not appeal this decision, the Tribunal did not address this issue further.

2. Penalty on Mortgaged Assets:
- The Tribunal noted that the quantum addition/disallowance for mortgaged assets had already been deleted in previous appeals (WTA Nos. 27 to 31/PN/2014). Consequently, no penalty under Section 18(1)(c) was leviable on this account.

3. Penalty on Property Valuation Difference:
- The Tribunal found that the assessee had disclosed all particulars of the properties and had not concealed any information from the Department. The difference in valuation was due to the higher estimates provided by the bank's valuer for loan purposes, which were not intended for wealth tax calculations. The Tribunal agreed with the CWT(A) that the issue was debatable and that the assessee had reasonably valued the properties as per the government rates. Thus, the penalty for concealment of wealth under Section 18(1)(c) was not justified.

Conclusion:
The Tribunal upheld the CWT(A)'s decision to reduce the penalty and dismissed the Revenue's appeals across all assessment years (2005-06 to 2009-10). The Tribunal concluded that the assessee had reasonably valued the properties and disclosed all relevant information, and therefore, no penalty for concealment of wealth was warranted.

Pronouncement:
The judgment was pronounced in the Open Court on 30-06-2016, dismissing all appeals filed by the Revenue.