2016 (9) TMI 243 - AT - Wealth-tax

Nature of land - wealth assessment - urban land - Held that - We find that the asset considered for wealth tax by the AO is claimed to be agricultural land by the assessee. Before the CIT (A), assessee has allegedly filed copies of the sale deeds and also pahanis for the relevant A.Ys. However, we find that the CIT (A), has neither verified the veracity and authenticity of the said documents by herself, nor has she called for a remand report from the AO. We find that she has accepted the assessee s contentions without any verification. The assessee has also filed before us the statement of the total income over the A.Ys 2006-07 to 2015-16 wherein the assessee has been declaring agricultural income also. In our opinion, all these documents need verification by the AO in view of the provisions of Rule 5A(3) of the Wealth Tax Rules, 1957. In view of the same, we deem it fit and proper to remand the issue to the file of the AO only for verification as to whether the said land is agriculture land and falls within the meaning of urban land u/s 2(ea) of the W.T. Act or not. Needless to mention that the assessee shall be given a fair opportunity of being heard - Decided in favour of revenue for statistical purposes.

Summary

Issues: Revenue's appeal against deletion of assessed wealth by CIT (A) without AO's opportunity to rebut additional evidence.

Analysis:
1. The Revenue's appeal pertains to the A.Y 2006-07 challenging the CIT (A)'s deletion of assessed wealth without granting the AO an opportunity to rebut additional evidence submitted by the assessee. The AO initially observed taxable net wealth of ?80,69,950 for the assessee, who did not file the wealth tax return. Subsequently, the AO treated a portion of this wealth as taxable and raised a tax demand.

2. The assessee contended before the CIT (A) that the land in question was agricultural and thus not subject to wealth tax. The CIT (A) accepted this argument, noting that the land fell outside the definition of "urban land" under the Wealth Tax Act, 1957. The CIT (A) also considered the Memorandum of Association of the assessee company, which indicated a business focus on builders, developers, and proprietors of properties, not agriculture. Consequently, the CIT (A) ruled in favor of the assessee.

3. The Revenue, dissatisfied with the CIT (A)'s decision, argued that the CIT (A) erred in admitting and considering additional evidence without the AO's involvement, contravening Wealth Tax Rules. The Revenue contended that the CIT (A) should have verified the evidence or sought a remand report from the AO. The Revenue sought a remand of the issue to the AO for proper verification.

4. On the other hand, the assessee defended the CIT (A)'s decision, highlighting the company's investment in agricultural land and subsequent agricultural operations. The assessee cited acceptance of agricultural income in later assessment years as supporting evidence. Additionally, the assessee referenced a Tribunal decision emphasizing the distinction between agricultural and urban land for wealth tax purposes.

5. The Tribunal noted the conflicting arguments and the need for verification of the land's agricultural status. The CIT (A) had not independently verified the documents submitted by the assessee, leading the Tribunal to remand the issue to the AO for thorough examination. The Tribunal emphasized the importance of adherence to Wealth Tax Rules and granted the assessee a fair opportunity to present their case before the AO.

6. Ultimately, the Tribunal allowed the Revenue's appeal for statistical purposes, directing a remand of the issue to the AO for verification of whether the land in question qualified as agricultural land exempt from wealth tax. The decision aimed to ensure a fair and thorough assessment in line with legal provisions.

This comprehensive analysis outlines the key arguments, decisions, and the Tribunal's direction for further verification, maintaining procedural fairness and legal compliance in the assessment of wealth tax.