1995 (1) TMI 132 - AT - Wealth-tax

Summary

Issues:
1. Whether the assets of a taxpayer could be re-characterized as non-business assets for the purpose of levying additional wealth tax under section 35 of the Wealth Tax Act.
2. Whether the Commissioner of Wealth Tax (CWT) had the authority to direct rectification under section 35 of the Wealth Tax Act.

Analysis:
1. The appeal concerned the re-characterization of assets for the levy of additional wealth tax under section 35 of the Wealth Tax Act. The taxpayer had initially moved an application under section 35 of the Act, claiming that certain immovable properties were commercial assets and should not be subject to additional wealth tax. The Assessing Officer (AO) accepted this claim and rectified the assessment order accordingly. However, the CWT disagreed, stating that the buildings in question were not being used for the taxpayer's business but were leased out to others. The CWT held that the AO was not justified in exempting these assets from additional wealth tax and directed a fresh order under section 35, excluding only specific buildings as business assets. The CWT's decision was based on the premise that the rectification required a fresh application of mind and could not be covered under a rectificatory provision like section 35. The Tribunal ultimately reversed the CWT's decision, holding that the CWT had erred in setting aside the AO's order and restored the original assessment, allowing the appeal by the revenue.

2. The second issue revolved around the authority of the CWT to direct rectification under section 35 of the Wealth Tax Act. The AO had passed a fresh order to give effect to the CWT's directions under section 35. The taxpayer challenged this order before the CWT(A), arguing that the rectification was not merely apparent from the record and involved an application of mind, making it non-rectifiable. The CWT(A) agreed with the taxpayer, stating that the recharacterization of certain assets could not be covered under section 35 and required a fresh application of mind. The CWT(A) allowed the taxpayer's appeal, leading to a further challenge before the Tribunal. The Tribunal, however, held that the CWT(A) had exceeded his jurisdiction by attempting to correct the order passed under section 25(2) through appellate proceedings. The Tribunal emphasized that the CWT(A) could not undo the final and binding order passed by the CWT under section 25(2) and, therefore, reversed the CWT(A)'s decision, restoring the AO's order.