SH. VIPAN KUMAR GUPTA,LUDHIANA V. ACWT, C-2, LUDHIANA

WTA 1/CHANDI/2018

AI Insights

The case involves an appeal by Sh. Vipan Kumar Gupta against the order of the Commissioner of Wealth Tax (Appeals)-1, Ludhiana, which sustained the addition of Rs. 2,98,43,000 to the declared wealth of Rs. 60,70,000 for the assessment year 2013-14. The addition was based on a reassessment initiated following an income tax assessment that reclassified the rental income from properties owned by Gupta under 'Other Sources' instead of 'House Property'. The Wealth Tax Officer later assessed these properties as taxable assets under the Wealth Tax Act, 1957, based on an inspector's report from 2016, which was contested by Gupta. The Tribunal's decision highlighted the inconsistency in using a 2016 report to assess the status of properties in 2013-14, leading to the allowance of Gupta's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28824 (ITAT-CHANDIGARH)
• Appeal Type: Wealth Tax Appeal
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Laws Referred To: Wealth Tax Act, 1957, Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT KAUR
• Assessee Lawyers: PARIKSHIT AGGARWAL
• Keywords: Reopening of assessment; Reason to believe
• Section: 143(3); 13

Judgement Text

" आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ W.T.A. No. 1/CHD/2018 Ǔनधा[रण वष[ / Assessment Year: 2013-14 Sh. Vipan Kumar Gupta, Prop. M/s J.V. Traders, Bazar Kharadian, Ludhiana Vs ACWT, Circle-2, Ludhiana èथायी लेखा सं./PAN NO. ACVPG 6763B अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Assessee by : Sh. Parikshit Aggarwal, C.A. Revenue by : Sh. Ranjit Kaur, Addl. CIT, Sr. D.R. Date of Hearing : 13.01.2025 Date of Pronouncement : 01.04.2025 PHYSICAL HEARING O R D E R PER KRINWANT SAHAY, AM: Appeal in this case has been filed against the order dated 22.10.2018 passed by the ld. Commissioner of Wealth Tax (Appeals)-1, Ludhiana for assessment year 2013-14. 2. Grounds of appeal taken by the assessee are as under: WTA No. 1/CHD/2018 A.Y. 2013-14 2 “1. That the Learned Commissioner of Wealth Tax (Appeals)- 1, Ludhiana has erred in sustaining the addition of Rs. 2,98,43,000/- to the declared Wealth amounting to Rs. 60,70,000/- of the appellant without any basis and reasons mentioned in hi order. Therefore, addition of Rs. 2,98,43,000/- made by the Learned Assistant Commissioner of Wealth Tax, Circle-2, Ludhiana and sustained by the Learned Commissioner of Wealth Tax (Appeals)-1, Ludhiana is illegal, uncalled for, unwarranted and needs to be deleted. 2. That the Learned Commissioner of Wealth Tax (Appeals)- 1, Ludhiana has erred in sustaining the addition of Rs. 2,98,43,000/- to the declared Wealth amounting to Rs. 60,70,000/- of the appellant without considering the submissions filed by the appellant. Therefore, addition of Rs. 2,98,43,000/-made by the Learned Assistant Commissioner of Wealth Tax, Circle-2, Ludhiana and sustained by the Learned Commissioner of Wealth Tax (Appeals)-1, Ludhiana is illegal, uncalled for, unwarranted and needs to be deleted. 3. That the Applicant craves to leave or to amend the grounds of Appeal before or at the time of hearing.” 3. During the proceedings before us, the ld. counsel of the assessee has filed a brief note as well as written arguments in the case which are reproduced as under: “1. The present appeal is against re-assessment of Wealth Tax of the assessee framed by Ld. AO. WTA No. 1/CHD/2018 A.Y. 2013-14 3 2. Originally, the income tax assessment for this year was framed by Ld.AO. during the course of which, it was found that the assessee was owning certain plots of land. The assessee has suo-motto declared the rental income from these properties. The year in question is FY 2012-13. But the Ld. AO deputed his inspector who filed a report (PB Pg No. 13-14) dtd 18.10.2016, wherein on certain properties he reported that they are built-up, some he reported to be plots, some he reported to be vacant and for some, he didn't state about occupancy or vacancy. 3. The assessee has declared the above income under the head House Property. In the assessment order passed u/s 143(3) of the Income Tax Act (PB page 2-7), he accepted the above rental income but assessed the same under the head Other Sources on the contention that this rental income has not been earned from built- up property but has been earned from plots. 4. Based on above income tax assessment and inspector's report, wealth tax reassessment u/s 17(1) was initiated by recording reasons on 30.03.2016 (PB page 12), extract whereof is reproduced as under: \"Wealth tax proceedings required initiated separately in the current assessment year. The assessee has claimed a rental income of Rs.1,88,400/- during the year but has failed to produce any rental agreement in support of the same on various plots own by the assessee. During the proceedings it has been established (By recording the statement of Sh. Vipan Kumar Gupta) that these properties do not fall under WTA No. 1/CHD/2018 A.Y. 2013-14 4 exemption under Wealth tax and should be taxed as per the provision of Wealth tax. The rental income shown is being considered as income from other sources under the 1.T. Act and the Wealth tax proceedings need to be initiated separately. In light of explanation 1 clause (b) to section 17 of Wealth Tax Act, 1957. I am justified that an income of Rs.34407000 has escaped assessment under Wealth Tax Act, 1957 and hence it's fit case for reopening of assessment u/s 17 (1) of the Wealth Tax Act 1957.\" 5. In the impugned assessment, Ld.AO has held that the inspector's report categorically held the plots to be vacant and therefore they were taxable assets as per s. 2(ea) and were not exempt. Vide para 6 of her order, the Worthy CIT(A) has also affirmed the order of Ld. AO on this very reasoning. 6. However, both the lower authorities have failed to appreciate and understand the undisputed fact that the rental income earned from the plots in FY 2012-13 has been accepted as such in scrutiny assessment which actually triggered Wealth tax assessment. Further, the inspector visited the locations in Oct. 2016 and solely on the basis of his visit that a report came about that plots are lying vacant. Based on visit in Oct. 16, it has been wrongly held that the plots were lying vacant in FY 2012-13, 7. Copy of relevant provision of section 2(ea) of Wealth Tax Act, 1957 is appended herewith. 8. Further, the reopening in itself is bad in law due to: WTA No. 1/CHD/2018 A.Y. 2013-14 5 a) it is based on inspector's report which in turn is based solely on his visit in Oct. 2016 whereas the assessment is for FY 2012-13. The status of plots in Oct. 2016 cannot be the basis for formation of reason to believe that the plots were lying vacant in FY 2012- 13 also. b) The reopening of Wealth tax on 30.03.2016 was triggered due to income tax assessment framed on 23.03. 2016. There is absolute contradiction in income tax assessment and reopening of wealth tax in as much as in income tax assessment, the rental income from plots has been assessed under the head other sources whereas in the reasons, they have been considered as vacant plots. 9. Further, even on merits, the value for the purposes of wealth tax assessment has been adopted as estimated value mentioned by assessee in one of his submissions made during income tax assessment. The same can only be assessed as per Wealth tax Rules or got valued from the valuer. Based on above arguments, it is most humbly and respectfully submitted that the appeal of appellant may please be allowed.” 4. The Commissioner of Wealth Tax (Appeals) in his appellate order has given his findings on this issue as under: WTA No. 1/CHD/2018 A.Y. 2013-14 6 “The oral submissions of the appellant substantiating the ground of appeal in this regard have been considered. It is a fact on record that during the income-tax assessment proceedings, in the absence of any documentary evidence regarding earning of rental income by letting out the immovable properties owned by the appellant, the purported rental income was assessed as \"income from other sources\". In the wealth tax proceedings, the AO got field enquiries conducted to check the veracity of the averment of the appellant to the effect that the properties in question were put on rent and that rental income was assessed in the income tax assessment. Upon such filed enquiries, it was found that the properties in question were vacant and were never put on rent. After such factual verification, again pleading that the properties in question enjoyed exemption from being treated as taxable wealth is nothing but a misrepresentation of the f acts. Insisting that the rental income was assessed in the income tax proceedings is again a mis-statement, as the appellant could not justify earning of rental income and, hence, the said amount was treated as income from 'other sources.’ The appellant has no case at all to get the properties in question treated as exempt f rom being charged to wealth tax. This appellate authority cannot be detained any longer in rejecting the ground of appeal challenging the impugned assessment of wealth. It is ordered accordingly. 7. In the result, the appeal is dismissed.” WTA No. 1/CHD/2018 A.Y. 2013-14 7 5. We have considered the findings given by the A.O. in the Wealth Tax Assessment Order and Commissioner of Wealth Tax (Appeals) in his appellate order. We find that the assessee has declared rental income from the land (under dispute) and the department has accepted that the rental income in the assessment year 2013-14 later on by making enquiries and verification in the year 2016-17. It was found that the land was vacant and therefore, perhaps there could not be any rental income from it. Accordingly, the A.O. made the addition in wealth tax taking the value of the land and the same was confirmed by the Commissioner of Wealth Tax (Appeals). Here it is important to know that rental income was shown in the assessment year 2013-14 but the enquiries and verification of the land were made by the Wealth Tax Officer in the year 2016-17. The counsel of the assessee has argued that the shades were constructed in the same land from which the rental income was received. Perhaps they could not be there know in the year 2016-17 but on the basis of findings of the year 2016-17, the rental income pertaining to assessment year 2013-14 cannot be denied. WTA No. 1/CHD/2018 A.Y. 2013-14 8 6. We have also considered submissions filed by the counsel of the assessee as well as the arguments made by the ld. DR. 7. The ld. DR relied on the order of the ld. Commissioner of Wealth Tax (Appeals). 8. In our considered view, the argument of the counsel of the assessee that on the basis of findings pertaining to assessment year 2016-17 cannot be applied on the actual acceptance of rental income in assessment year 2013-14 and therefore, we find it difficult in sustaining the order of the Commissioner of Wealth Tax (Appeals). Thus, the assessee’s appeal on this issue is allowed. 9. In result, the appeal of the assessee is allowed. Order pronounced on 01.04.2025. Sd/- Sd/- (RAJPAL YADAV) (KRINWANT SAHAY) VICE PRESIDENT ACCOUNTANT MEMBER “GP/Sr. PS” आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH WTA No. 1/CHD/2018 A.Y. 2013-14 9 5. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "