• Tuesday, 24 Dec 2024, 07:11:36 am

Wealth Tax Act, 1957 – Sections 2(ea) and 18(1)(c) – Business asset – Tax liability – Appellant/assessee filed his return of wealth for Assessment Year 2009-10 declaring total taxable wealth consisting of value of motor car and gold bar – Assessing Officer determined taxable net wealth after considering lands owned by assessee as assets within meaning of Section 2(ea) of the Act and demanded Wealth Tax thereon – CIT(A) confirmed additions made by AO – Whether CIT(A) has erred in confirming addition of value of land as chargeable to wealth tax – HELD – Assessee has placed on record, the findings of CIT(A) in his appellate order in penalty proceedings for same AY 2009-10 in assessee’s own case, wherein levy of penalty under Section 18(1)(c) of the Act have been deleted – In penalty proceedings, CIT(A) observed that land at Sakarda is treated as business asset not liable to Wealth Tax – In regard to land at Kapurai, CIT(A) similarly observed that said land is treated as business activity of assessee which is not an asset under Section 2(ea) of the Act, as assessee is not the owner of land and he is a Power of Attorney holder to sell above land to third party – Revenue could not able to inform either penalty order is a subject matter of appeal before this Tribunal, thus findings made by CIT(A) in penalty proceedings has attained finality – Since lands in question are not assets within meaning of Section 2(ea) of the Act, additions made by AO are deleted – Appeal is allowed

 

2022-VIL-1642-ITAT-AHM

 

IN THE INCOME TAX APPELLATE TRIBUNAL

AHMEDABAD “D” BENCH

 

WTA No. 1/Ahd/2020

Assessment Year 2009-10

 

Date of hearing: 20.09.2022

Date of pronouncement: 16.12.2022

 

SHRI ARVIND DWARKADAS JANI

 

Vs

 

THE WEALTH TAX OFFICER

 

Appellant by: Shri N.M. Darj i, A.R

Respondent by: Shri Atul Pandey, Sr.D.R

 

Bench

Ms. Annapurna Gupta, Accountant Member

Shri T.R. Senthil Kumar, Judicial Member

 

ORDER

 

PER: T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

 

This appeal is filed by the Assessee as against the order dated 29.01.2020 passed by the Commissioner of Income Tax (Appeals), Vadodara-5, as against the Assessment order passed under section 23 of the Wealth Tax Act, 1957 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2009-10.

 

2. The Registry has noted that there is a delay of 53 days in filing the above appeal. The appeal is filed on 05.06.2020. This period falls under COVID-Pandemic situation, thus following Hon’ble Supreme Court judgment dated 23.3.2020 in suo moto Writ Petition (Civil) No.3 of 2020, vide Hon’ble Supreme Court has extended time limit for filing appeals w.e.f. 15.3.2020. Thus, there is no delay in filing the above appeal and we take the appeal of the assessee for adjudication.

 

2.1. The brief facts of the case is that the assessee is an individual and owner of motor car, gold bars, land at Kapurai, land at Sakarda and property at BIDC, Gorwa. However the assessee has not filed his Return of wealth. Hence a notice u/s. 17(1) of the Act was issued on 01.09.2013. In response, the assessee filed his Return of wealth on 05.02.2015 declaring total taxable wealth of Rs. 6,50,663/- consisting of motor car worth at Rs. 4,78,695/- and gold bar valuing at Rs. 1,71,968/-. The Assessing Officer issued a show cause notice on the three lands mentioned above and reflecting in the balance sheet and why not considered the same as assets within the meaning of Section 2(ea) of the Wealth Tax Act.

 

2.2. The assessee submitted that the land at Sakarda worth Rs. 27,39,000/- which is an agricultural land, hence not an asset within the meaning of explanation (1)(b)(ii) to Section 2(ea) of the Wealth Tax Act. The assessing officer held that the land was situated within the distance of 2-3 k.m. from the municipal limits of Vadodara and the assessee failed to establish the said land was used for agricultural purpose and therefore added as an asset for Wealth Tax purpose.

 

2.3. Regarding the land at Kapurai, Baroda, the assessee had advance of Rs. 3,11,175/- and possession of the said land was not held with the assessee due to various litigations and also this is an agricultural land on the record of the Government. The assessing officer held that the assessee declared the Kapurai land as an investment and is also situated within the distance of 2-3 k.m. from the municipal limit of Vadodara and therefore an asset within the meaning of Section 2(ea) of the Wealth Tax Act and therefore taken the value of Rs. 3,11,175/- for the purpose of computing net Wealth of the assessee.

 

2.4. Regarding property at BIDC, Gorwa, the assessee explained that an advance of Rs. 35,40,530/- was given and it was not an outright purchase and the same is not concluded and moreover it’s a commercial property not an asset within the meaning of Wealth Tax. The Assessing Officer rejected the above claim and held that the assessee has declared it as an investment in the balance sheet and has not carried out any business activities, so as to prove that the property as a commercial establishment. Therefore the same is added as the asset for the purpose of Wealth Tax. Thus the Assessing Officer determined the net wealth taxable as Rs. 72,41,368/- and demanded Wealth Tax of Rs. 95,310/-.

 

3. Aggrieved against the same, assessee filed an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee filed additional evidences before Ld. CIT(A). The ld. CIT(A) called for objection and remand report from the Assessing Officer and thereafter admitted the additional evidences as per sub-rule (2) of rule 5A of Wealth Tax Rule. The Ld. CIT(A) found that the assessee has filed Form No. 8A wherein it is mentioned that the land at Sakarda is for agricultural purpose but did not file any evidence to show the land was actually used for agricultural purposes and therefore confirmed the additons.

 

3.1. Regarding land at Kapurai, the assessee has not filed any documentary evidence to prove that it as an agricultural land. Thus both the land are not proved to be agricultural land. Therefore the conditions laid down in Explanation [1](b) to Section 2(ea) of the Wealth Tax Act not attracted and these lands are to be treated as urban land, which are “assets” for the purpose of wealth tax. However the assessee’s claim of loan, for purchase of Sakarda land. Therefore the A.O. was directed to consider the assessee’s debts of Rs. 26,47,751/- which are directly related to the payment of Rs. 27,39,000/-. The A.O. was directed to verify the same and value the land for wealth tax purposes.

 

3.2. Regarding the land at BIDC, Gorwa, the same is excluded from the definition of “assets” under sub-clause (5) of Section 2(ea) (i) of the Wealth Tax Act. Thus the Ld. CIT(A) partly allowed the appeal of the assessee.

 

4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:

 

1. On the facts and in the circumstances of the case, the Ld. Commissioner of Wealth Tax (A) has erred in confirming addition of Rs. 27,39,000/- as value of Land at village Sakarda made by the AO as chargeable to wealth tax, without considering the fact of the case.

 

2. On the facts and in the circumstances of the case the CWT(A) has erred in confirming the addition of Rs 3,11,175/- as value of Land at Kapurai, Baroda as chargeable to wealth tax without considering the fact of the case.

 

3. The Appellant craves to add, alter, amend and/or withdraw any ground or grounds of Appeal either before or during the course of hearing the same.

 

4.1. The assessee has also filed additional Grounds of Appeal as follows:

 

1. On the facts and in the circumstances of the case, the Ld. Commissioner of Wealth Tax (A) has erred in confirming

 

(i) addition of Rs. 27,39,000/- as value of Land at village Sakarda made by the AO as chargeable to wealth tax, and,

 

(ii) Addition of Rs 3,11,175/- as value of Land at Kapurai, Baroda as chargeable to wealth tax on the following Grounds. (a) While finalizing the Income Tax assessment for A.Y. 2008-09 the AO has assessed as business income of the assessee instead of capital gain claimed by the assessee. The Ld. CIT(A) confirmed the assessment made by the AO and before Hon. ITAT the assessee has accepted it as his business income

 

(b) While deleting the penalty imposed u/s 18(l)(c) of the Act for the A.Y. 2009-10 (under consideration) the CWT(A) vide his order dated 20/07/2020 relying on the facts referred in (a) above holding that the asset are not chargeable to Wealth Tax.

 

5. The Ld. Counsel for the assesse taken us through the appellate order passed by the Co-ordinate Bench of this Tribunal in assessee’s own case in the Income Tax Proceedings in ITA No. 3021/Ahd/2011 and Others dated 17/08/2017 wherein it is held as follows:

 

12. We have duly considered rival contentions and gone through the record carefully. As far as second fold of grievance is concerned, i.e. whether the profit earned by the assessee on sale of these two pieces of land is to be assessed as capital gain or business income, the Ld. Counsel for the assessee did not address much arguments on this issue, and accepted that, if it is assessed as business income, the assessees have no objection. Therefore, this fold of grievance is rejected.

 

5.1. The Ld. Counsel further submitted as follows:

 

1) Grounds of appeal no 1 regarding addition of the value of the land at sakarda worth Rs. 27,39,000/-

 

As per facts available on records it is submitted that

 

(1) Rs. 27,39,000/- represents advance paid for agriculture land. Land classified as agriculture land in the record of Government, will not be treated as an "asset" U/s 2(ea) of Wealth Tax Act, 1957 with retrospective effect from the AY 1993-94. Thus this land is not an asset for wealth tax purpose.

 

2) Sakarda Sanyukt Kheti Sahkari Mandli Ltd. (Seller) has filed the suit in the court of Hon. Vadodara's Board of Nominees bearing lavad case no 2175/2007 against Shri. Arvindbhia Jani & others challenging the validity of registered Sale Deed bearing No. 9851 Dtd 25/11/2007.

 

3) The society has contended that on even date the land in dispute is agriculture land in revenue records. There is ownership of the society. The land in dispute is agricultural land under the possession of the society. There was no possession of the Appellant and there will be no possession of any other member.

 

4) There is no possession with the Appellant, hence sale/purchase transaction of agricultural land in dispute is not a complete transaction. In the circumstances the amount paid Rs 27,39,000/- remains advance paid for purchase of agricultural land.

 

5) The Assessee is holding rights as POA. He is not a full-fledged owner of the property.

 

Grounds of Appeal No. 2 regarding agricultural land at Kapurai worth Rs. 3,11,175/-

 

As per facts available on record it is submitted that

 

(I) It represent advance of Rs. 3,11,175/- paid for agriculture land. Land classified as agriculture land in the record of Government, will not be treated as an "asset" U/s 2(ea) of Wealth Tax Act, 1957 with retrospective effect from the AY 1993-94, even if such land is situated in an urban area. Thus this land is not an asset for wealth tax purpose.

 

(II) As per banakhat dated 11/01/2002 there was agreement to sale the agriculture land subject to get NA CERTIFICATE by the seller, hence advance was paid Rs, 3,11,175/-.

 

(III) No sale deed was executed and registered before sub-registrar as on 31/03/2009. The property was under litigation. In the circumstances the amount paid Rs.3,11,175/- remains advance payment, as ownership was not registered in the name of Appellant.

 

(IV) The Assessee is holding rights as POA. He is not a full-fledged owner of the property.

 

No sale deed has been executed and registered in sub registrar as on 31/03/2009, hence the ownership of land is not proved. In the circumstances the payment made remains the advance. The LD AO is not justified to make the addition of RS.3,11,175/- as the value of land at Kapurai as chargeable to wealth tax.

 

Reliance is placed on decision of the ITAT Jaipur bench. In the case of Niranjanlal Data Alawar VS Department of Income tax bearing WTA No. 4/JP/2012 dated 18/07/2014 as para supra.

 

5.2. The Ld. A.R. also placed on record, the findings of the CIT(A) in his Appellate order dated 20.07.2020 in the penalty proceedings for the same Assessment Year 2009-10 in assessee’s own case, wherein levy of penalty u/s. 18(1)(c) of the Wealth Tax have been deleted as follows:

 

4.2 Property at Sakarda:- The appellant has drawn my attention to the order of the A.O. , CIT(A) as well as Hon'ble ITAT w.r.t. quantum addition u/s 143(3) of the Act for A.Y. 2008-09 whereas it has been held that the appellant was engaged in purchasing and selling of right in the property and one of such property was property at Sakarda. The appellant had declared capital gain on such activity but the department as well as Tribunal has held that his activity comes under the purview of business activity being adventure in nature. This shows that the property at Sakarda worth Rs. 27,39,000/- has already been treated as business assets by AO, my predecessor as well as Hon'ble ITAT and therefore, this property doesn't comes under the purview of assets under the W.T. Act, 1957. Hence, the appellant cannot be penalized for non-disclosure of the particulars of this property in the Wealth tax Return for A.Y. 2009-10. Thus, penalty levied for concealment of particulars of this asset is hereby deleted.

 

4.3 Land at Kapurai, Baroda:- During the appellate proceedings, the appellant submitted that the land was an agricultural land as per the Government record and Rs. 3,11,175/- represents advance. The appellant submitted various documents in support of his these claim. After careful consideration of the submission of the appellant, it is observed that the appellant was engaged in dealing of land/property through power of attorney/agreement to sell. After the POA/Agreement to Sell, the appellant searched the buyer for the land/property and got the land/property directly transferred from the land/property owner to the real purchaser and earns the income for this arrangement. Therefore, the appellant did not become absolute owner and this modus operandi/practice has been accepted by the AO, Ld. CIT(A) as well as ITAT in the A.Y. 2008-09 by treating the income out of this activity under business head in the appellant's case. Further, the advances were duly declared in the balance sheet of the appellant for the concerned year. In view of these facts and circumstances, it is held that the land at Kapurai was an agricultural land and the appellant had advanced some money under banakhat dated 11.01.2002. Hence, this land doesn’t fall under the category of "assets" u/s 2(ea) of the W.T. Act. Therefore, the appellant cannot be penalized for non-disclosure of the particulars of this property in the Wealth Tax Return. Thus, penalty levied for concealment of particulars of this asset is hereby deleted.

 

5.3. Thus the Ld. A.R. pleaded Wealth Tax is not attracted on the land at Sakarda as well as land at Kapurai.

 

6. Per contra, the Ld. D.R. appearing for the Revenue supported the orders of the Lower Authorities, however could not dispute the appellate order passed by Ld. CIT(A) in the penalty proceedings.

 

7. We have given our thoughtful consideration and perused the materials available on record. The findings of the Ld. CIT(A) in the penalty proceedings that the land at Sakarda is treated as business asset not liable to Wealth Tax. Similarly, the land at Kapurai wherein the assessee is the Power of Attorney holder and agreement to sell the above land to third party. Thus the assessee is not the owner of the land at Kapurai and the same is treated as business activity of the assessee, which is not an asset u/s. 2(ea) of the Wealth Tax Act. The Ld. D.R. appearing for the Revenue could not able to inform, whether this penalty order is also a subject matter of appeal before this Tribunal. Thus the findings made by the Ld. CIT(A) in penalty proceedings has attained finality.

 

8. For the above reasons, the addition made on the land at Sakarda and land at Kapurai are not an “asset” within the meaning of Section 2(ea) of the Wealth Tax Act. Therefore the additions made by the A.O. are hereby deleted. Thus the grounds raised by the Assessee is hereby allowed.

 

9. In the result, the appeal filed by the Assessee is allowed.

 

Order pronounced in the open court on 16-12-2022.

 

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