2017 (11) TMI 237 - AT - Wealth-tax

Additions of cash in hand held and recorded in regular books of accounts and shown in the business balance sheet of the appellant - meaning of assets as defined in Section 2(ea) of the Wealth Tax Act - Held that - Having carefully examined the orders of lower authorities in the light of rival submissions, we find that the assessee is an individual and filed its return of income in the capacity of individual, though he has been doing his own business. Provisions of section 2(ea)(vi) of the Act clearly states that cash in hand in excess of ₹ 50,000 of individuals & HUF is an asset and in the case of others, any amount not recorded in the books of account is an asset. Provision in the Act which says that cash in hand recorded in the books of account of individual s business is not an asset. In the Act, a classification is made between the individual, HUF and other persons. Admittedly, the assessee is an individual, therefore, the provisions laid down for an individual would apply. According to the provisions of section 2(ea)(vi) of the Act, any cash in hand in excess of ₹ 50,000 is an asset. It is irrelevant whether the individual is doing business or not. The argument of the assessee that cash in hand is recorded in the books of account of the business of assessee is a productive asset, therefore it cannot be chargeable to wealth-tax, has been examined by the Hon ble Kerala High Court in the case of CWT v. Smt K.R. Ushasree (2009 (7) TMI 834 - Kerala High Court) in which held that there is nothing that stops the assessee from utilizing the cash in hand which may be the business asset on the valuation date for any non-productive purpose on the next day. Therefore the argument of assessee that cash in hand of businessmen should be treated as productive asset also is meaningless. - Decided against assessee.

Issues Involved:
1. Justification of additions of ?1,77,46,755 cash in hand as net wealth.
2. Applicability of Section 2(ea) of the Wealth Tax Act, 1957.
3. Interpretation of cash held for business purposes as productive assets.
4. Examination of relevant judgments and circulars.
5. Principles of natural justice in the order of the Commissioner of Income Tax (Appeals).

Issue-wise Detailed Analysis:

1. Justification of Additions of ?1,77,46,755 Cash in Hand as Net Wealth:
The primary issue revolves around whether the cash in hand amounting to ?1,77,46,755, recorded in the appellant's books of accounts and shown in the business balance sheet, falls within the definition of assets under Section 2(ea) of the Wealth Tax Act, 1957. The appellant argued that this amount should not be included as it is a business asset and productive in nature.

2. Applicability of Section 2(ea) of the Wealth Tax Act, 1957:
According to Section 2(ea)(vi) of the Wealth Tax Act, 1957, cash in hand in excess of ?50,000 for individuals and Hindu Undivided Families (HUFs) is considered an asset. The appellant, being an individual, argued that the cash in hand recorded in the business books should not be treated as an asset exceeding ?50,000. However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) did not accept this argument, leading to the addition of the excess amount to the appellant's net wealth.

3. Interpretation of Cash Held for Business Purposes as Productive Assets:
The appellant relied on judgments from the Cochin and Kolkata Benches of the Income Tax Appellate Tribunal (ITAT), which stated that cash held for business purposes and recorded in the books should not be treated as an asset for wealth tax purposes. However, the Revenue argued that there is no provision in the Wealth Tax Act that excludes cash in hand recorded in the business books of an individual from being considered an asset. The Kerala High Court's judgment in CWT v. Smt K.R. Ushasree was cited, which held that cash in hand exceeding ?50,000 for individuals and HUFs is an asset under the Wealth Tax Act, regardless of its business usage.

4. Examination of Relevant Judgments and Circulars:
The appellant cited judgments from ITAT Cochin and Kolkata Benches, which supported their stance that business cash should not be part of net wealth. However, the Kerala High Court's judgment in CWT v. Smt K.R. Ushasree and CBDT Circular No. 636 were considered more authoritative. The Kerala High Court explicitly stated that cash in hand in excess of ?50,000 held by individuals and HUFs is an asset for wealth tax purposes, irrespective of its classification as a productive asset.

5. Principles of Natural Justice in the Order of the Commissioner of Income Tax (Appeals):
The appellant contended that the CIT(A)'s order was against the principles of natural justice and should be annulled. However, the Tribunal found that the CIT(A) had thoroughly examined the issue in light of various CBDT circulars and the Kerala High Court's judgment, leaving no room for infirmity in the order.

Conclusion:
The Tribunal upheld the CIT(A)'s order, confirming that cash in hand exceeding ?50,000 for individuals, even if recorded in business books, is an asset under Section 2(ea)(vi) of the Wealth Tax Act, 1957. The appeals of the assessee were dismissed, and the additions made by the AO were justified. The judgment emphasized that statutory provisions do not exclude business cash from being considered an asset for wealth tax purposes.

Result:
The appeals of the assessee were dismissed, and the order of the CIT(A) was confirmed. The Tribunal pronounced this judgment in the open court on September 27, 2017.

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