2021 (2) TMI 46 - AT - Wealth-tax

Reassessment of wealth tax - vacant urban land not included within the definition of asset as defined u/s. 2(ea) of the Wealth tax Act - JDA Entered for construction of building after demolition of existing building - definition of asset for the purpose of Wealth Tax Act - whether the impugned land was a vacant urban land or there existed any building - Whether AO as well as CWT(A) has brought out various reasons to come to the conclusion that the land in question was a vacant urban land and there was no structure in the impugned land as on the date of valuation of asset? - HELD THAT - On perusal of details filed by the assessee including Joint Development Agreement we find that Joint Development Agreement dated 4-7-2009 has clearly spelt out the main purpose of agreement and as per which the sole object of agreement is for construction of building after demolition of existing building. At the time of signing joint development agreement there was a building on the impugned land. Unless there is building then the question of specifying a condition for demolition of existing building does not arise. JDA agreement was entered into on 4-7-2009 and said date falls within the financial year 2008-09 relevant to assessment year 2009-10. From the above it is undoubtedly clear that there was a building up to the end of financial year 31-03-2008 and thus for the impugned Asst. years 2007-08 and 2008-09 the land was a vacant urban land and the existing building was demolished is not supported by any evidence. Sole basis and evidence for the lower authorities to draw an adverse inference against the assessee is copy of letter from the Corporation of Chennai dated 06.08.2007 where permission has been given for demolition of old structure. AO as well as the ld. CWT(A) on the basis of above letter assumed that the assessee must have demolished existing building immediately after receipt of permission and at the time of entering joint development agreement the land was vacant - said finding is not supported by any evidence but purely on suspicion and conjectures. Unless the AO brings on record any evidence to prove that there was a structure we cannot concur with findings of the AO only on the basis of letter of Corporation of Chennai that the assessee has demolished the building before entering into joint development agreement more particularly when JDA dated 4-7-2009 is specifically mentioned about existing structure on the land. Since the JDA dated 4-7-2009 is clearly mentioned about existing building and demolition of said building before commencement of construction we cannot agree with the findings of the ld. AO and ld. CWT(A). We therefore are of the considered view that the findings recorded by the lower authorities to conclude that said land is urban vacant land and which comes under the definition of asset as defined u/s 2(ea) of the wealth tax Act 1957 is incorrect. Alternative argument taken by the assessee that there existed incomplete or semi-finished building on the impugned land on the date of valuation and thus the said land fall outside the definition of asset for the purpose of Wealth Tax Act - In absence of any evidence to prove that the assessee has necessary permission from the authorities to commence construction of building and further any evidence to prove that there existed a semi-finished building on the impugned land as on the date of valuation the arguments of the assessee that there existed a semi-finished building as on the date of valuation cannot be accepted. This fact is further strengthened by the Gift Deed dated 25.04.2009 executed by the assessee and other co-owners in favour of CMDA where it was clearly indicated the fact that there was no approval from the authorities for construction of building. Therefore on this count also the arguments of the assessee that there existed a semi-finished or under construction building on the impugned land is incorrect - there is no merit in the alternative arguments of the ld. AR for the assessee that there exists a semi-finished building on the impugned land. In this case the whole argument of the assessee stands on the pretext of the land in question was not a vacant land because there was a building or structure in the land as on the date of valuation. Even the AO has not gone in to the aspect of whether the building is used for own residential purpose or business purpose or the same has been let out during the relevant previous year. Unless these facts are examined simply on the ground that there was a building in the impugned land the same cannot be excluded from the ambit of wealth tax. We therefore are of the considered view that the AO needs to verify above facts before coming to the conclusion that whether particular asset comes under the definition of asset as defined u/s.2(ea) of the Act or not. Appeals filed by the assessee go back to the file of the AO.Hence we set aside appeals to the file of AO and direct him to re-examine the issue in light of our findings given hereinabove in accordance with law. Appeal filed by the assessee for both assessment years are treated as allowed for statistical purpose.

Summary

Issues Involved:
1. Validity of the reassessment notice issued under Section 17 of the Wealth Tax Act.
2. Determination of whether the land in question was vacant urban land as defined under Section 2(ea) of the Wealth Tax Act.
3. Levy of interest under Section 17B of the Wealth Tax Act.

Detailed Analysis:

1. Validity of the Reassessment Notice Issued Under Section 17 of the Wealth Tax Act:
The assessee challenged the reassessment notice issued under Section 17 of the Wealth Tax Act, claiming it was bad in law, barred by limitation, and devoid of jurisdiction. The Commissioner of Wealth Tax (Appeals) [CWT(A)] upheld the reassessment, stating that the reasons recorded for reopening the assessment clearly established the fact of escapement of wealth chargeable to tax. The reassessment notice was therefore deemed valid and within the jurisdiction.

2. Determination of Whether the Land in Question Was Vacant Urban Land as Defined Under Section 2(ea) of the Wealth Tax Act:
The primary issue was whether the land in question was vacant urban land or had a building on it as of the valuation date. The Assessing Officer (AO) and CWT(A) concluded that the land was vacant urban land based on the Joint Development Agreement (JDA) and other evidence indicating that the existing building was demolished before the valuation date. The AO included the land within the definition of "assets" under Section 2(ea) of the Act and assessed it for wealth tax.

The assessee argued that the land was not vacant as the building was demolished only between April 2009 and March 2010, supported by the JDA clauses. However, the CWT(A) found this argument untenable, citing the demolition permission received on 06.08.2007 and subsequent agreements indicating the land was vacant by the valuation date.

The Tribunal reviewed the evidence, including the JDA dated 04.07.2009, which indicated that the building existed at the time of the agreement. The Tribunal found that the AO's conclusion that the land was vacant based on the demolition permission was not supported by concrete evidence. The Tribunal noted that the AO and CWT(A) relied on conjectures without substantial proof of the building's demolition before the JDA.

The Tribunal emphasized that the definition of "assets" under Section 2(ea) includes urban land but excludes buildings used for residential or commercial purposes. The Tribunal directed the AO to re-examine whether the land had a building fit for habitation or use as of the valuation date and whether it met the exceptions under the Act.

3. Levy of Interest Under Section 17B of the Wealth Tax Act:
The assessee contested the levy of interest under Section 17B, arguing there was no obligation to file a return or pay wealth tax. The CWT(A) upheld the interest levy, and the Tribunal did not specifically address this issue in detail, focusing more on the primary issue of whether the land was vacant urban land.

Conclusion:
The Tribunal set aside the appeals to the AO for re-examination, directing a thorough review of the evidence to determine if the land was indeed vacant urban land or had a building as of the valuation date. The Tribunal emphasized the need for concrete evidence rather than conjectures to conclude whether the land falls within the definition of "assets" under Section 2(ea) of the Wealth Tax Act. The appeals were allowed for statistical purposes, pending further examination by the AO.