2017 (3) TMI 1603 - AT - Wealth-tax

Net wealth determination - valuation of assets - conversion of land - nature of land as agricultural land - Held that - Sri A R Narendranath made two applications dt 25.9.2006 for the conversion of non-agricultural & Residential and Non-agricultural and industrial purposes and followed it by paying huge sums viz Rs. 4, 75, 952/- & Rs. 3, 39, 823/- on 26.11/28.12.2006 respectively for the conversion and the conversion is granted on 06.10.2006 & 24.11.2008 respectively by an officer at the level of Special Deputy Commissioner. The order also elaborately mentions the conditions and the directions to the concerned authorities for doing all that is required in connection with the conversion. One of the conditions is that the land can not be used for any other purpose than the purpose for which the conversion was granted. Thus it is clear from the totality of the facts and circumstances mentioned above that the assessee had no intention to use the impugned land as an agricultural land. On the other hand wanted it to be non agricultural land pursued it and converted it as non agricultural land . The Government on due consideration allowed the conversion and classified the impugned land as non agricultural land or classified it as the land for Residential and Industrial use as sought by the assessee. Thus the impugned land is not an agricultural land after 26.11/28.12.2006 respectively and hence the assessee s other plea that it was put to agricultural use is not relevant. The impugned land is an asset under Wealth Tax. We have considered the assessee s plea on the valuation and gone through the assessment order. The AO has considered the valuation report furnished by the DVO who himself has valued the asset after considering the assesse s objections sent the assessee s objections to the VO considered the VO s reply and then passed his orders .- Decided against assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 17 of the Wealth Tax Act.
2. Classification and valuation of land as an asset under Section 2(ea) of the Wealth Tax Act.
3. Consideration of land as agricultural or non-agricultural for tax exemption.
4. Objections to the valuation of land by the District Valuation Officer (DVO).
5. Levy of interest under Section 17B of the Wealth Tax Act.

Issue-wise Detailed Analysis:

1. Validity of Proceedings Initiated under Section 17 of the Wealth Tax Act:
The assessee challenged the invoking of Section 17, claiming the absence of conditions required to invoke jurisdiction. The CWT(A) noted that the assessee did not seek a copy of the reasons recorded for the notice under Section 17 nor raised objections. The assessment records showed that the Assessing Officer (AO) had reasons to believe that wealth chargeable to tax had escaped assessment, justifying the issuance of notice. The CWT(A) upheld the proceedings, referencing the Supreme Court decision in ACIT vs. Rajesh Jhavery Stock Brokers Pvt Ltd, which supports the AO's reasons to believe that wealth had escaped assessment.

2. Classification and Valuation of Land as an Asset under Section 2(ea) of the Wealth Tax Act:
The AO treated the land at Sy. No. 11/3, T. Dasarahalli, as urban land, not agricultural, and included it in the net wealth. The land had been converted from agricultural to non-agricultural land on 06-10-2008. The CWT(A) upheld this classification, stating that the land's conversion date was crucial, and the land was not used for agricultural purposes after conversion. The land was included in the net wealth as per Section 2(ea) of the Wealth Tax Act.

3. Consideration of Land as Agricultural or Non-agricultural for Tax Exemption:
The assessee argued that the land remained agricultural in government records until 2013 and was used for agricultural purposes. However, the AO and CWT(A) found that the land had been converted to non-agricultural use in 2008, and the conversion was effective from that date. The land was leased for non-agricultural purposes from 01.01.2010, and a Joint Development Agreement was entered into in 2013. The nature of the land changed on the conversion date, and it did not qualify for exemption as agricultural land.

4. Objections to the Valuation of Land by the District Valuation Officer (DVO):
The assessee raised objections to the valuation determined by the DVO. The AO considered these objections, referred them to the DVO, and included the DVO's findings in the assessment. The CWT(A) upheld the valuation, noting that all objections were addressed, and the assessment was completed in conformity with the DVO's estimate as per Section 16A(6) of the Wealth Tax Act.

5. Levy of Interest under Section 17B of the Wealth Tax Act:
The assessee's appeal included a challenge to the levy of interest under Section 17B. However, the CWT(A) confirmed the levy of interest, and the appeals on this ground were dismissed.

Conclusion:
The appeals for the assessment years 2009-10 to 2013-14 were dismissed. The proceedings initiated under Section 17 were valid, the land was correctly classified and valued as an asset under Section 2(ea), and the objections to the valuation were adequately addressed. The levy of interest under Section 17B was upheld.