2015 (8) TMI 235 - AT - Wealth-tax

Validity of notice issued u/s 17 - Notice issued on he basis of audit objection - Addition in net wealth - Business Income - Assessing Officer observed that in this case the assessee was not carrying on any business in the impugned premises - Property given on lease rent - Held that - There is nothing on the record to suggest that the Assessing Officer had issued the notice u/s 17 of the Act based on the audit objection. How the assessee came to the conclusion that the notice issued by the Assessing Officer was based on the objection of the audit, is not known. No material has been pointed out by the assessee that the notice u/s 17 of the Act was based on the basis of the audit objection. - The Assessing Officer had applied his mind after issuing the notice u/s 17of the Act. Therefore the question of change of opinion does not arise. This aspect was considered by the CWT(Appeals) by following the decision of the Hon ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007 (5) TMI 197 - SUPREME Court) upheld the notice issued by the Assessing Officer u/s 17. We find no infirmity in the order passed by the CWT(Appeals). Any house which an assessee may occupy for the purpose of any business or profession carried on by him. As per clause (3) if the assessee occupies the house for the purpose of any business or profession it is excluded from assets . Therefore no wealthtax is required to be paid. But in the present case the assessee had leased out the land, building and machinery to a third party. Therefore, it cannot be said that the assessee has occupied land and building for the purpose of its business. Whatever portion was occupied by the assessee the same was excluded by the Assessing Officer and therefore we are of the opinion that as per sec. 2(ea) of the Act the assets leased out by the assessee are not excluded from the definition of assets - Decided against assessee.

Summary

Issues:
1. Validity of notice issued under section 17 of the Wealth Tax Act.
2. Assessment of wealth tax on the leased out land and building.

Issue 1: Validity of notice issued under section 17 of the Wealth Tax Act:
The case involved appeals against the order of the CWT(Appeals) for the assessment years 1997-98 and 1998-99. The Assessing Officer initiated proceedings under section 17 of the Act as the assessee had not filed a return of wealth voluntarily. The assessee objected to the proceedings, claiming they were based on an audit objection and lacked jurisdiction. However, the Assessing Officer maintained that the action was based on information from the return of income, not from audit objections. The CWT(Appeals) upheld the Assessing Officer's view, stating that since the assessee had not filed a wealth tax return, the notice under section 17 was valid. The Tribunal also found no infirmity in the CWT(Appeals) decision, dismissing the ground raised by the assessee.

Issue 2: Assessment of wealth tax on the leased out land and building:
The second ground of appeal related to the addition of Rs. 8,50,00,000 as taxable wealth due to the lease of land and building. The Assessing Officer determined the taxable wealth based on the lease agreement, which indicated rental income of Rs. 72 lakhs for the assessment year 1997-98. The assessee argued that the property was exploited for business purposes and the income received was accepted as business income by the department. However, the CWT(Appeals) and the Tribunal held that the leased property fell within the definition of "asset" under section 2(ea) of the Act. The Tribunal noted that the property leased out by the assessee did not qualify for any exceptions under section 2(ea) and dismissed the appeal, stating that the assets leased out were not excluded from the definition of "assets" for wealth tax purposes.

In conclusion, the Tribunal upheld the orders of the lower authorities, dismissing the appeals filed by the assessee regarding the validity of the notice issued under section 17 of the Wealth Tax Act and the assessment of wealth tax on the leased out land and building.