TMI Blog1992 (4) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 on10th March, 1986that the property at 138 Sundar nagar is co-owned by to companies, Marudhar Theatres (P) Ltd. and 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, Sundar Nagar) 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 the this property. After having seen the facts brought to my notice, I exempt the said building from the wealth-tax under the WT Act passed at nil." 3. The wealth-tax assessment record of the assessee for this year appears to have subsequently been scrutinized by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 know to the assessee. I, therefore, hold that no business of purchase and sale of flowers was done by the assessee company." 4. In the light of observations in the wealth-tax and income-tax assessment orders, the learned CWT considered that the findings were contrary to each other. Accoridng to the learned CWT, the assessee was not having any business and, therefore, according to him, there was no question of building in Sundar Nagar,New Delhibieng used for the purpose of business. Acording to him, the wealth-tax assessment was framed without proper investigation, and, in fact, only after accepting the contentions raised on behalf of the assessee, the wealth-tax assessment order, in those circumstances, was considered erroneous and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 intact, 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 submissions have been heard considered. The facts by and large are not seen to be in dispute in the sense that there is clear conflict in the findings in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red 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 asst. yr. 1984-85 in question, it filed its return of nil wealth on30 June, 1984. The assessment was completed by the WTO on31st March, 1986under s. 16(3) of the WT Act, 1957, after issuing notice to the assessee under s. 16(2), determining the assessable wealth at nil. The assessee had not included the value of the property at 138, Sunder Nager.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 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. It was submitted on behalf of the assessee by written arguments filed on 10th March, 1986 that the Director of both these companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of its contention." 4. On behalf of the assessee it was submitted by Smt. Indra Bansal that the learned CWT had no jurisdiction to proceed under s. 263 of the IT Act on the basis of the assessment order dt.14th Jan., 1987passed by the ITO after the wealth-tax assessment order dt.31 March, 1986as it could not be said to constitute the record of the proceeding. In this connections reliance was also placed by her on the decision of the Hon ble Calcutta High Court in Ganga Properties vs. ITO (1979) 118 ITR 447 (Cal). She also submitted that there was no finding in the order of the learned CWT that no enquiries were made by the WTO or that the assessment had been framed with undue haste or that it was erroneous in so far as it was prejudicial to the interests of the Revenue. Lastly she submitted that against the income-tax assessment framed on 14th Jan., 1987 the assessee s appeal was pending and that for the subsequent asst. yrs. 1985-86 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, there is no finding of the learned CWT either that due enquiries were not made or that the assessment had been completed in undue haste or that it was erroneous in so far as it was prejudicial to the interests of Revenue. In fact the only reason, which seems to have influenced the learned CWT 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 pertinently observed by the Hon ble Calcutta High Court that s. 263(1) uses the words "is erroneous" and not the words " has become subsequently erroneous." It was also held there that the CWT was to call for the record of the proceeding, which was before the ITO and examine it in order to consider whether on the basis of the materials, which were before the ITO and formed part of the record, the order passed by the ITO was erroneous and prejudicial to the interest of the Revenue. It was further clarified by their Lordships that the materials, which were not in existence at the time when the assessment was made but afterwards came into existence, could not form part of the record of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 WTO and, therefore, the decision of the Hon ble Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT could also not assist the Department. I would, therefore, take the view that the order of the learned CWT under s. 25 is illegal, unsupportable and that it should be quashed and as a result, the appeal filed by the assessee should succeed. 2nd March, 1989 ORDER UNDER S. 24 OF THE ACT, 1957 R/W SEC. 255(4) OF THE IT ACT, 1961 S. S. MEHRA v.P. ELHENCE, J. Ms.: Since difference has occurred between us the file is being placed before the Hon ble President of the Tribunal for proceeding further in accordance with law. The point of difference is as under : "Whether on the facts and in the circumstances of the case the order under s. 25 of the WT Act, 1957 is required to be sustained or quashed?" 29th April, 1992 CH. G. KRISHNAMURTHY, PRESIDENT (AS THIRD MEMBER) : This is a matter referred to me as a Third Member under s. 24 of the WT Act, 1957 r/w s. 255(4) of the IT Act, 1961. The point of difference of opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving 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 personal purposes of the Directors. The CWT 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 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 of its contention." Against this order, the assessee filed appeal before the Tribunal. 5. The contentions which were raised before the CWT were reiterated on behalf of the assessee before the Tribunal. On behalf of the Revenue, the order of the CWT was supported by drawing attention to the fact that in income-tax assessment, a finding was recorded that no business was car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wealth-tax and income-tax assessments. Relying upon Hon ble Calcutta High Court decision in the case of Ganga Properties vs. ITO (1979) 118 ITR 447 (Cal), he held that he 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 material 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 came afterwards into existence not form part of the record of the proceedings of the ITO at the time of passing the assessment order and that material could not be taken into consideration by the CWT for invoking his jurisdiction under s. 25 of the WT Act. The income-tax assessment order having been passed on14th Jan., 1987as against he wealth-tax assessment order made on31st March, 1986, income-tax assessment order could not form part of the record of the WTO to say that the WTO made a mistake in granting the exemption. When the finding given in the income-tax assessment was under challenge in appeal, it could not be said that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation 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 ofJodhpur. They were having offices earlier in Hotel Claridges,New Delhiand that after acquiring the property in Sunder Nagar, the office was shifted to Sunder Nagar property. Voluminous papers were filed before him in support of this claim and it was particularly pointed out to him that this building was never used for the personal purposes of the Directors. Having got so much of material before him, the CWT should not have held or could not have held that the WTO did not make any enquiry before making the assessment, granted the exemption. The observation made by the learned Member of the Tribunal to this effect appear to be wrong and the second Member who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 asst. yrs. 1985-86 and 1986-87, the income was taken as income from business and depreciation was allowed on the building in the hands of the co-owners which strongly suggest that the building was used for business purposes. Moreover, the WT Act grants exemption on the buildings used for the purposes of business which does not mean that they must continue to be used for business every year. If a building has been earmarked for business in one year, the building does not cease to be a building used for business purposes. Therefore, even if there is a finding given in income-tax assessment and even assuming that that finding had become final, still that only pertain to the income-tax assessment, namely ..... 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