2019 (11) TMI 1155 - AT - Wealth-tax

Net wealth assessment - value of the land as on the date of valuation - whether the same is includable as net wealth in the hands of the assessee in the absence of permission received for construction from the competent authority or any construction being carried out, as on the valuation date ? - HELD THAT - As decided in own case for AY 2014-15 we direct the Assessing Officer to include the value of the aforesaid lands in the hands of the assessee in the respective years. However, for the purpose of determining the value as on the valuation date, the assessee shall file the valuation report from the Registered Valuer or the Assessing Officer may obtain the necessary valuation report from the DVO in this regard and compute the net wealth and Assessing Officer is also directed to allow the value of debts as on the dates of purchase of plot in the hands of the assessee, if still outstanding. Fair Market Value (FMV) of the land owned by the assessee, as on the date of valuation, was to be included in the hands of the assessee - assessee is also aggrieved by the order of CWT(A) in not allowing the deduction of debts accrued - HELD THAT - The said issue also stands squarely covered by our decision in own case which was an appeal filed by the Revenue as the CWT(A) in those cases had allowed the claim. Value of the lands to be adopted and the costs of the debts to be allowed - HELD THAT - In line with our directions above in the case of Rajendra M. Developers and Builders Pvt. Ltd., Assessing Officer shall compute the value of the said land as on the date of valuation of the lands in line with our directions in paras above and also allow the claim of the debts against the value of the property after due verification and if still outstanding. Thus, all these appeals filed by the assessee are allowed for statistical purposes. Escapement of wealth - notice u/s 17 of WT Act - reasons recorded for re-opening - HELD THAT - We have in the paras above held that the lands owned by the assessee are taxable wealth and to be included in the hands of the assessee, then the claim of the assessee that the aforesaid agricultural lands were exempt from wealth tax do not stand. In any case, no such plea was raised before us. Time and again the assessee pleaded that the lands in question were not urban-land . We have already decided the issue that the value of the said lands were includable in the hands of the assessee as on the valuation date. In such circumstances, we uphold the initiation of assessment proceedings in the hands of the assessee and dismiss the grounds raised by the assessee

Summary

Issues Involved:
1. Maintainability of appeals filed by the Revenue based on monetary limits.
2. Taxability of lands as "urban land" under Section 2(ea) of the Wealth-Tax Act.
3. Valuation of the land and allowability of debts against the value of the land.
4. Validity of assessment proceedings initiated under Section 17 of the Wealth-Tax Act.

Detailed Analysis:

1. Maintainability of Appeals Filed by the Revenue Based on Monetary Limits:
The Revenue filed appeals against the orders of the Commissioner of Wealth Tax (Appeals) for assessment years 2008-09 to 2014-15. The assessee also filed Cross Objections. The monetary limits for filing appeals by the Revenue before the Income Tax Tribunal were enhanced by Circular No.17/2019 dated 08.08.2019, prescribing that appeals with a tax effect of less than ?50 lakhs are not maintainable. Consequently, appeals for assessment years 2008-09 to 2011-12 were dismissed as the tax effect was below ?50 lakhs. The Cross-Objections filed by the assessee for these years were also dismissed as academic.

2. Taxability of Lands as "Urban Land" Under Section 2(ea) of the Wealth-Tax Act:
For assessment year 2014-15, the issue was whether the lands owned by the assessee fell within the definition of "urban land" as per Explanation 1(b) of Section 2(ea) of the Wealth-Tax Act. The Revenue contended that the lands were non-agricultural and taxable. The Commissioner of Wealth Tax (Appeals) held that the lands were exempt from wealth-tax as no construction was permissible on the valuation date. However, the Hon'ble Bombay High Court in Sarovar Hotels Pvt. Ltd. v. DCWT ruled that lands where construction is permissible but requires permission are still considered "urban land." Consequently, the Tribunal directed the Assessing Officer to include the value of such lands in the net wealth of the assessee.

3. Valuation of the Land and Allowability of Debts Against the Value of the Land:
The Tribunal directed the Assessing Officer to determine the value of the lands as on the valuation date, either through a valuation report from the District Valuation Officer (DVO) or based on the valuation report filed by the assessee. The Assessing Officer was also directed to allow the deduction of debts raised as on the date of acquisition of the said lands, provided the assessee submits necessary proof. This directive applied to both Rajendra M. Developers and Builders Pvt. Ltd. and Pariwar Marketing Pvt. Ltd.

4. Validity of Assessment Proceedings Initiated Under Section 17 of the Wealth-Tax Act:
The assessee challenged the validity of the notice issued under Section 17(1) of the Wealth-Tax Act and the consequent assessment proceedings. The Tribunal upheld the initiation of assessment proceedings, noting that the assessee had failed to file wealth tax returns despite holding substantial land. The reasons recorded for reopening the assessment were deemed valid, and the lands were included in the net wealth of the assessee as they were considered "urban land."

Conclusion:
- Appeals of Revenue for assessment years 2008-09 to 2011-12 were dismissed due to low tax effect.
- Appeals for assessment year 2014-15 and similar cases were decided based on the inclusion of non-agricultural lands as "urban land."
- The Assessing Officer was directed to determine the value of the lands and allow deductions for debts.
- The initiation of assessment proceedings under Section 17 of the Wealth-Tax Act was upheld.