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2008 DIGILAW 120 (KAR)

Commissioner of Wealth-tax v. Arif Noor Mohammed

2008-02-15

DEEPAK VERMA, K.L.MANJUNATH

body2008
JUDGMENT Deepak Verma, J.— Heard Sri M.V. Seshachala, learned Counsel for the appellants and Sri S. Parthasarathi, learned Counsel for the respondent. 2. The Revenue is before us against the order dated May 17, 2005, passed by the Income Tax Appellate Tribunal, Bangalore Bench "A" in W. T. A. No. 25/Bang/2003 for the assessment year 1998-99. This appeal has been preferred under Section 27A of the Wealth-tax Act, 1957 (hereinafter shall be referred to in short as "the Act"). 3. The appeal before the Tribunal was preferred by the assessee against the order of the Commissioner of Wealth-tax (Appeals) -II, Bangalore, dated February 11, 2003. The said appeal having been allowed by the Tribunal, the Revenue is before us challenging the correctness of the said order. 4. Even though learned Counsel for the appellants has formulated three questions of law, but after having heard learned Counsel for the parties and after perusal of the records, we are of the considered opinion that only the following substantial question of law would arise for consideration of this Court: 1. Whether the Tribunal was correct in holding that the property bearing No. 54, Richmond Road, Bangalore, should be treated as stock-in-trade of the assessee and consequently exempted from wealth-tax since it was treated as stock-in-trade of the firm from which the assessee acquired it on dissolution? 5. The short facts, material for deciding the same matter, are mentioned hereinbelow: The assessee is being assessed in the status of an individual. In respect of the assessment year 1998-99, the assessee filed a return of income. In the said return it was found that the assessee is the owner of house property No. 54, Richmond Road, Bangalore, and Soma said Building, Cash Bazaar, Coonoor, No. 24A, Health Park Road, Coimbatore. According to the Revenue, these properties constituted wealth within the meaning of Section 2(a) of the Act, notice under Section 17 of the Act was issued, calling upon him to furnish return of wealth. Subsequent thereof notice was also issued under Section 16(2) of the Act. The assessee ultimately replied to the said notice on March 4, 2002, mentioning that the details of the properties mentioned here-in above are not liable to wealth-tax. The Assessing Officer held that property at No. 54, Richmond Road, Bangalore, is liable to be brought to wealth-tax. Subsequent thereof notice was also issued under Section 16(2) of the Act. The assessee ultimately replied to the said notice on March 4, 2002, mentioning that the details of the properties mentioned here-in above are not liable to wealth-tax. The Assessing Officer held that property at No. 54, Richmond Road, Bangalore, is liable to be brought to wealth-tax. The contention of the assessee that this property fell to his share after the partnership firm, in which this property was held as stock-in-trade, was dissolved. It was contended by him that even though the firm has dissolved, but it is pertinent to note that the said firm all through held it as stock-in-trade. Consequently, on its dissolution, the same would continue in the same status, but in the hands of the assessee. Despite these objections, the Assessing Officer proceeded to reject the assessee's contention and brought it to tax by treating it as part of the assessee's wealth. The Assessing Officer further found after verifying the record and the evidence available thereof that the assessee in fact was not carrying on any business in real estate. With regard to the property situated at Coimbatore, the Assessing Officer proceeded to examine the same as it was recorded that the assessee continues to be in occupation of the same. The assessee feeling aggrieved by the said order passed by the Assessing Officer, preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) concurred with the findings recorded by the Assessing Officer and proceeded to dismiss the appeal preferred by the assessee. Against this order passed by the Commissioner of Income Tax (Appeals), the assessee was constrained to prefer an appeal before the Tribunal. The appeal has been allowed by the Tribunal on the ground that the said stock-in-trade of the firm of which admittedly the assessee was one of the partners can be considered as stock-in-trade. Consequently, it was held that the same cannot be brought within the ambit and scope of the provisions of the Wealth-tax Act. The appeal having been allowed by the Tribunal, this further appeal is preferred by the Revenue under Section 27A of the act. 6. Consequently, it was held that the same cannot be brought within the ambit and scope of the provisions of the Wealth-tax Act. The appeal having been allowed by the Tribunal, this further appeal is preferred by the Revenue under Section 27A of the act. 6. Learned Counsel for the appellants strenuously contended before us that the order passed by the Tribunal is wholly perverse and erroneous inasmuch as it has not been held by the Tribunal that the assessee had become the absolute owner of the property on dissolution of the firm and the same had fallen to his share being partner of the firm on its dissolution and unless this finding had been recorded it could not have been held by the Tribunal that the property can be treated as stock-in-trade of the firm. As far as this aspect of the matter is concerned, despite examining the order passed by the Tribunal, we are not able to find out any specific reasoning in this regard even though the Revenue had raised this ground. 7. Even from the orders passed by the Assessing Officer, we are of the opinion that necessary evidence which ought to have been adduced by the assessee with regard to the aforesaid factual aspect of the matter could not be produced even though he was granted time for doing so. In view of this, we are of the considered opinion that the impugned order passed by the Tribunal deserves to be set aside and the matter requires to be remitted to the Assessing Officer so as to record a finding whether the assessee had become the absolute owner of the property on dissolution of the firm of which he was the partner. Consequently, the option, which could have been exercised by the assessee as provided under Section 5(vi) of the Act was not given to him. Section 5(vi) of the Act reads as under: (vi) one house or part of a house or a plot of land belonging to an individual or a Hindu undivided family: Provided that wealth-tax shall not be payable by an assessee in respect of an asset being a plot of land comprising an area of five hundred square metres or less. 8. 8. Thus, for the aforesaid reasons, we deem it fit and proper to set aside and quash the impugned order passed by the Tribunal and remit it to the Assessing Officer for deciding the aforesaid issue as mentioned herein-above. Since the matter has been remanded to the Assessing Officer, we refrain at this juncture to answer the substantial question of law as formulated in this appeal. Accordingly, the appeal stands disposed of.