TMI Blog1992 (4) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing observations: "In Part-IV of the return viz. assets not included in the wealth and hence to be claimed exempt shows that building and assessee have stated the reason why exemption is being claimed. The reason mentioned is that the building is used for various purposes. During the course of assessment proceedings, the question was again raised about the ownership of the building and its user. It has been submitted by way of written arguments filed on10-3-1986that the property at 138 Sunder Nagar is co-owned by two companies, M/s Marudhar Theatres (P.) Ltd. and M/s. Marudhar Cultivators (P.) Ltd. It is also stated that the Directors of both these companies are living in their own houses and these premises (138 Sunder Nagaar) was being used entirely for the purpose of office. Assessee's A.R. has also pointed out that the ITO had allowed depreciation on the building which was being used for the purpose of office of the company, It has also been stated that the loans raised by the assessee-company are for the purpose of this property. After having seen the facts brought to my notice, I exempt the said building from taxation under the Wealth-tax Act passed nil." 3. The wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing statutes in the sense of an occupation and profession which occupies time and attention of and labour of a person normally with a object of making profit. To regard an activity as business, there must be course of dealings either actually continued or contemplated to be continued with a profit motive and not for pleasure. Had the assessee been interested in doing business of purchase and sale of flowers, he would have set up commercial place and employed some persons who are well trained in the sale of flowers but nothing has been done. The assessee has only prepared certain vouchers and shown sale of certain flowers to the persons intimately known to the assessee. I, therefore hold that no business of purchase and sale of flowers was done by the assessee coy." 4. In the light of the observations in the wealth-tax and income-tax assessment orders, the learned CWT considered that the findings were contrary to each other. According to the learned CWT, the assessee was not having any business and, therefore, according to him, there was no question of building in Sunder Nagar,New Delhibeing used for the purpose of business. According to him, the wealth-tax assessment was framed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order was neither erroneous nor prejudicial to the interest of revenue. It was the assessee's case before us that there was no justification for the learned CWT to assume jurisdiction in the matter. 6. On behalf of the Revenue, the learned Departmental Representative, Shri R.V. Ramanan, supported the order under challenge and submitted further that the finding recorded in the Income-tax assessment order for the year under consideration was still in tact, wherein it had been held that no business was conducted by the assessee and, according to the learned Departmental Representative, when there was no business, there was no occasion for the building being occupied for the purpose of assessee's business. According to the learned Departmental Representative, the finding in the income-tax assessment order was still undisturbed and there was a clear conflict between the finding in Income-tax and Wealth-tax assessment orders. According to him, since proper enquiry was not made at the relevant time, the same resulted in the assessment order being erroneous and prejudicial to the interest of Revenue and thus, according to him, the jurisdiction was correctly assumed. 7. Rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt, the appeal is dismissed. Per V.P. Elhence, Judicial Member - I have gone through the order prepared by my learned Brother and since it has not been possible for us to agree, I have to record a separate order. 2. I would like to narrate the facts first The assessee is a private limited company. For the assessment year 1984-85 in question, it filed its return of nil wealth on30-6-1984. The assessment was completed by the wealth-tax officer on31-3-1986under section 16(3) of the Wealth-tax Act, 1957, after issuing notice to the assessee under section 16(2), determining the assessable wealth at nil. The assessee had not included the value of the property at 138, Sunder Nagar,New Delhion the ground that it was being used for the business of the company. This building was jointly purchased by the assessee company and its sister concern M/s Marudhar Theatres (P.) Ltd. for Rs.25 lacs. In part IV of its return, namely, "assets not included in the wealth and hence to be claimed as exempt" the assessee showed that the building was being used for various purposes. During the course of assessment proceedings the question was again raised about the ownership of the building and its user ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wealth-tax assessment observing as follows: "4. To me it appears that the conflict between the Income-tax and wealth-tax will have to be resolved by going into the facts in greater detail. The 'Income-tax assessment has been taken in appeal and the appellate order is also awaited. In these circumstances, the wealth-tax assessment is set aside and the WTO is directed to redo the assessment in accordance with law after taking into account all the material placed by the company in support a its contention." 4. On behalf of the assessee it was submitted by Smt. Indra Bansal that the learned Commissioner had no jurisdiction to proceed under section 263 of the Income-tax Act on the basis of the assessment order dated 14-1-1987 passed by the Income-tax Officer after the wealth-tax assessment order dated 31-3-1986 as it should not be said to constitute the record of the proceeding. In this connection reliance was also placed by her on the decision of the Hon'ble Calcutta High Court in Ganga Properties v. ITO [1979] 118 ITR 447. She also submitted that there was no finding in the order of the learned Commissioner that no enquiries were made by the wealth-tax officer or that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue of the notice. This is clear from the fact that immediately after this sentence he says that "I, therefore, issued a notice under section 25 of the W.T. Act calling upon the assessee to show cause why proper directions should not be given to the wealth-tax officer to make correct assessment according to law". In the entire order, there is no finding of the I Commissioner either that due enquiries were not made or that the assessment had been completed in undue haste or that it was erroneous insofar as it was prejudicial to the interest of revenue. In fact the only reason, which seems to have influenced the Commissioner in setting aside the assessment was that it appeared to him that the findings recorded in the wealth-tax and income-tax assessments were contrary to each other. In the case of Ganga Properties it was pertinetly observed by the Hon'ble Calcutta High Court that section 263(1) uses the words "is erroneous" and not the words "has become subsequently erroneous". It was also held there that the Commissioner was to call for the record of the proceeding, which was before the income-tax officer and examine it in order to consider whether on the basis of the materials, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was residing at 3,Teen Murti Lane, Now Delhi. A perusal of the wealth-tax assessment order shows that not only a notice under section 16(2) was issued to the assessee, the assessee had also filed written submissions on 10-3-1986 and the wealth-tax officer also recorded the finding that after having seen the facts brought to his notice, he exempted the said building from tax under the Wealth-tax Act, 1957. At already observed above, it was therefore not a case of failure to investigate or failure to make enquiry or to make such enquiries as were provoked by the facts of the case before the, wealth-tax officer and therefore the decision of the Hon'ble Delhi High Court in the case Gee Vee Enterprises could also not assist the department. I would, therefore, take the view that the order of the learned Commissioner of Wealth-tax under section 25 is illegal, unsupportable and that it should be quashed and as a result, the appeal filed by the assessee should succeed ORDER UNDER SECTION 24 OF THE W.T. ACT, 1957 READ WITH SECTI0N 255(4) OF THE INCOME-TAX ACT, 1961 Since difference has occurred between us the file is being placed before the Hon'ble President of the ITAT for proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchased the building for a sum of Rs.13 lacs and the company had a paid up capital of Rs.9,50,330. Having found inconsistencies in the conclusions reached by the WTO and the ITO regarding the user of this building for business purposes, he held, relying upon the observations made in income-tax assessment that the WTO was wrong in granting exemption to the building on the ground that the building was used for business purposes. 4. In response to the notice issued by the Commissioner under section 25 of the Wealth-tax Act it was submitted that the two companies were having their offices one in Hotel Claridges, New Delhi and the other in Sunder Nagar building, that in the wealth-tax assessment of one of the concerns, the value of the property was taken at Nil on the ground that it was used for business purposes and it was re-emphasised that the building was never used for the of the Director. The Commissioner of wealth-tax finally observed: "To me, it appears that the conflict between the income-tax and wealth-tax will have to be resolved by going into the facts in greater detail. The Income-tax assessment has been taken in appeal and the appellate order is also awaited. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rically in the order that the assessment made by the WTO was erroneous because of lack of enquiry. Lack of enquiry according to the second Member was only mentioned in the notice issued by the Commissioner under section 25 of the Wealth-tax Act but not on the final order passed. He pointed out that there was no finding of the CWT in his entire order that due enquiries were not made or that the assessment was completed in undue haste or that it was erroneous insofar as it was prejudicial to the interest of the revenue. He held that the impelling fact that influenced the Commissioner to set aside the assessment was the conflict between the findings recorded in the wealth-tax and income-tax assessments. Relying upon Hon'ble Calcutta High Court decision in the case of Ganga Properties, he held that the CWT can only call for the record of the proceeding which was before the WTO and examine it in order to consider whether on the basis of the materials which was before, the ITO and formed part of the record, the order passed by him was erroneous and prejudicial to the interest of the revenue and that the materials which were not in existence at the time when the assessment was made but ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was not completed. The WTO, therefore, had taken all precautions necessary to protect the interests of the revenue when he appended this note to the assessment order. This fact was very clearly brought out in the order passed by the CWT. The CWT came to the conclusion that the order passed by the WTO was erroneous because of the conflict in findings recorded in the wealth-tax and income-tax proceedings as they were contrary to each other. He came to the conclusion that when there was no business carried on by the assessee-company, there was no question of the building being used for the purposes of business. He also mentioned in his order in para 3 that depreciation was allowed on this building for income-tax purposes and that in the wealth-tax assessment of the other company, the value of the property was taken at nil on the ground that it was used for office purposes. He also referred to the submission made before him that there were other companies as well which were accommodated in the premises which were carrying on business. The Directors of the company were not residing in the building and they were having their own separate residences as they belonged to the royal family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding that the building was not used for business purposes, the allowance of depreciation should also have been withdrawn by the CIT by invoking his powers under section 263 of The Income-tax Act. This was not attempted. It therefore follows that the building was used for business purposes, although the business conducted during the year was on a very small scale. The voluminous papers filed by the CIT to show that the property in question was not used for personal purposes of the Directors was not negatived by him. He set aside the assessment only to resolve the conflict between the income-tax and wealth-tax assessments. That in my opinion was not a proper reason to unsettle the assessment made. A building used for business purposes does not cease to be a building used for business purposes merely on the reason that the business conducted in a particular year happened to be on a very meagre scale. Scale of business carried on would depend upon the vicissitude of trade conditions. That does not determine the user of the building unless the building was used for residential purposes which was not a finding recorded at all. 8. It is also to be noted that for the assessment years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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