1985 (2) TMI 65 - AT - Wealth-tax

Summary

Issues Involved:

1. Levy of penalty under section 18(1)(c) of the Wealth-tax Act, 1957.
2. Jurisdiction and procedural objections regarding the Commissioner (Appeals).
3. Inclusion of tenancy rights as assets in the net wealth.
4. Justification for the penalty levied by the Wealth-tax Officer (WTO).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 18(1)(c) of the Wealth-tax Act, 1957:

The primary issue revolves around the penalties levied by the WTO for the assessment years 1966-67 to 1971-72. The penalties were imposed because the assessees allegedly concealed assets by not including the value of tenancy rights in their wealth-tax returns.

2. Jurisdiction and Procedural Objections:

The department argued that the appeals against the penalties were initially filed before the Appellate Assistant Commissioner (AAC) but later transferred to the Commissioner (Appeals), making the latter's order void. This objection was dismissed as the records showed that the Commissioner (Appeals) had jurisdiction and had called for the records and issued a notice of hearing. The department's objection was deemed to arise from a misconception, and the grounds raised were decided against it.

3. Inclusion of Tenancy Rights as Assets in the Net Wealth:

The respondents were tenants in a building that was later sold and demolished for constructing a new building. The assessees were offered flats in the new building at a concessional rate. The WTO argued that the difference in price between what the assessees paid and what outsiders paid represented a valuable asset that should have been included in the net wealth. The Commissioner (Appeals) held that the assessees did not act in defiance of the law or in conscious disregard of their obligations, and thus, canceled the penalties.

4. Justification for the Penalty Levied by the WTO:

The department's counsel argued that the assessees were aware of the valuable asset they possessed and failed to include it in their wealth-tax returns. The counsel cited various legal precedents to support the argument that the tenancy rights constituted an asset. The assessees' counsel countered that the tenancy rights were not includible in the net wealth and that the assessees had a bona fide belief that they were not required to include these rights. The Tribunal agreed with the assessees' counsel, noting that the tenancy rights were precarious and had no market value. The Tribunal also pointed out that no other cases were presented where tenancy rights were included in the net wealth, reinforcing the assessees' belief that they were not required to include these rights.

Conclusion:

The Tribunal upheld the orders of the Commissioner (Appeals) canceling the penalties. It was concluded that the inclusion of the tenancy rights in the net wealth was unjustified and erroneous in law. The penalties were based on incorrect assessments and were thus not sustainable. The departmental appeals were dismissed, and the cross-objections by the assessees were allowed.