2004 (9) TMI 312 - AT - Wealth-tax

Summary

Issues Involved:
1. Reopening of assessment and validity of the order passed under section 16(3) r.w.s. 17 of the Wealth Tax Act (WT Act).
2. Inclusion of the value of properties 'Mafatlal House' and 'Mafatlal Centre' in the net wealth of the appellant.
3. Valuation of motor cars.

Detailed Analysis:

1. Reopening of Assessment and Validity of Order:
The first issue concerns the reopening of the assessment and the validity of the order passed under section 16(3) r.w.s. 17 of the WT Act. The original wealth return filed by the assessee on 28-11-1997 declared a net wealth of Rs. 17,05,70,689, which was assessed at Rs. 17,34,44,200 under section 16(3) of the WT Act. The Revenue Authorities later noticed that the assessee had not included the value of 'Mafatlal House' and 'Mafatlal Centre' in the wealth statement, despite declaring rental income from these properties under 'house property income' in IT returns. Consequently, a notice under section 17 of the WT Act was issued to explain why these properties should not be taxed for wealth tax purposes.

The assessee argued that letting out property was part of its business and thus not liable to wealth tax under Section 2(ea)(i)(3) of the WT Act. However, the Assessing Officer (AO) determined that the lease rent from these properties was correctly taxed as income from house property and should be included as assets for wealth tax purposes. The AO observed that the buildings were commercial properties leased out to various companies for rental income, thus falling under the definition of 'asset' in section 2(ea)(i) of the WT Act.

The CIT(A) upheld the reopening, stating there was no change of opinion since the AO had reason to believe that wealth had escaped assessment. The tribunal concurred, noting that no opinion was formed initially regarding these properties, and new material information justified the reopening. The case was distinguished from precedents where reopening was based on a mere change of opinion. The tribunal upheld the reopening of the assessment, dismissing the ground raised by the assessee.

2. Inclusion of Value of Properties in Net Wealth:
The second issue involved the inclusion of 'Mafatlal House' and 'Mafatlal Centre' in the net wealth of the appellant. The assessee claimed these properties were exempt from wealth tax under item (3) of Clause 2(ea)(i). The tribunal examined whether the rental income should be classified as 'house property income' or 'business income'. The assessee had declared rental income under 'Income from house property' in IT returns and let out the properties to various companies, including Mafatlal Group and a bank.

The tribunal noted that the taxpayer should not take inconsistent views in different proceedings. The properties were treated as 'house property income' in IT proceedings to avail deductions under section 24, while claiming exemption as business assets in wealth tax proceedings. Citing various judicial precedents, the tribunal concluded that the properties could not be treated as business assets for wealth tax purposes. The properties were used for earning rental income and did not qualify as business assets under section 2(ea)(i)(3) of the WT Act. The tribunal affirmed the orders of the authorities below, holding that the properties were rightly taxed for wealth tax purposes.

3. Valuation of Motor Cars:
The third issue raised was the valuation of motor cars. However, this ground was not effectively argued before the tribunal. Consequently, the tribunal found no reason to interfere with the findings of the CIT(A) and dismissed this ground.

Conclusion:
The tribunal dismissed the appeal of the assessee, upholding the reopening of the assessment and the inclusion of the value of 'Mafatlal House' and 'Mafatlal Centre' in the net wealth for wealth tax purposes. The valuation of motor cars was also upheld as there were no effective arguments presented.