2012 (10) TMI 162 - AT - Wealth-tax

Whether cash seized and was deposited in PD account with CIT, liable to includible in Wealth of assessee Assessee argued that this amount was declared as income in subsequent year and the assessee had paid the tax, therefore, the same cannot be included on the valuation date under Wealth Tax Held that - As the money which was seized by the Police and transferred to the P.D. account of the CIT. Therefore, although the money was lying in the P.D. account of the CIT, still the assessee is the owner of the money which shall be returned to him after appropriation of due taxes as per the provisions u/s. 132B. The money so retained by the department in the P.D. Account of the CIT was not confiscated and was only a mere seizure. Therefore, the assessee in our opinion continues to be the legal owner of the cash and therefore it belongs to the assessee and is includable in his Net Wealth. Appeal decides in favour of revenue

Summary

Issues:
Assessment of wealth tax on cash seized and deposited in P.D. Account

Analysis:
The appeal was filed against the order of the CWT(A) relating to the assessment year 2006-07. The assessee was engaged in the business of selling lottery tickets and plying vehicles on hire. Cash amounting to Rs. 1,71,72,012 was seized during a search action by police authorities, and later handed over to the Income Tax Department. The assessee filed a revised return of wealth excluding the seized cash, arguing that it no longer constituted wealth chargeable to wealth tax as it was in possession of the department. However, the Assessing Officer rejected this claim, asserting that the ownership of the cash still vested with the assessee, who was considered the legal owner until the tax liability was discharged. The AO included the seized cash in the net wealth assessment, leading to a dispute.

Before the CIT(A), the assessee argued that the seized cash, once deposited in the P.D. Account, lost its character of "cash in hand" and should not be subject to wealth tax. Reference was made to the definition of assets under the Wealth Tax Act and the concept of ownership for wealth tax liability. The assessee contended that the cash seized belonged to the Income Tax Department during the block period assessments, and the assessee had no control over its use during that time. The CIT(A), however, disagreed with this interpretation, stating that if the assessee was the legal owner of the asset, lack of possession did not negate ownership. The CIT(A) relied on legal precedents to support the inclusion of the seized cash in the net wealth assessment.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee remained the legal owner of the cash even after it was seized and deposited in the P.D. Account. Since the cash was not confiscated and the assessee had paid the tax on it, it was deemed includable in the net wealth. The Tribunal found no fault in the CIT(A)'s reasoning and dismissed the appeal. The arguments presented by the assessee were deemed inapplicable to the case, and the decision was upheld based on the provisions of the Wealth Tax Act and relevant legal interpretations.

In conclusion, the Tribunal affirmed the assessment of wealth tax on the cash seized and deposited in the P.D. Account, ruling in favor of the department's position that the cash remained part of the assessee's net wealth despite being in the possession of the Income Tax Department. The legal ownership of the cash by the assessee, coupled with the absence of confiscation, led to its inclusion in the net wealth assessment for the relevant year.