COMMISSIONER OF WEALTH TAX Vs. MISHRILAL JAIN

JUDGEMENT

(1.) THIS is a reference under Section 27 of the Wealth-tax Act, 1957. The assessee is an individual and we are concerned in these four references with assessment years 1968-69 to 1971-72. In these four references, the question referred to us for our opinion is as follows :

(2.) THE assessee is a jeweller. He did not maintain books of account. THE sales were being disclosed and he was estimating net profits thereon by applying certain rates in the assessments under the Income-tax Act, 1961. THE Income-tax Officer did not accept the net profit estimate of the assessee. A higher rate of net profit was applied. On appeal, the appellate authority reduced and determined the net profit at 14 per cent. for the assessment years 1963-64 to 1970-71. THE assessee accepted that rate of net profit on the sales disclosed by him. THE assessment proceedings concluded in that manner. In the assessments for each year, certain additions were made to the profits. THEse were treated as intangible additions. In the proceeding under the Wealth-tax Act, the said intangible additions were taken as assets in the hands of the assessee on the dates of valuation. THE assessee contested it, but without success before the Wealth-tax Officer. He, however, succeeded on appeal before the Appellate Assistant Commissioner of Wealth-tax who allowed the appeal holding that intangible additions were not covered by the definition of "assets" under the Wealth-tax Act. He also observed that it is not merely the possession but also the ownership of the assets that is contemplated under the definition of "net wealth" in Section 2(m), and since the assessee was not owning the intangible additions but the Department had imputed them to the assessee, they were not liable to be assessed as wealth of the assessee. THE Wealth-tax Officer being aggrieved by the order of the Appellate Assistant Commissioner filed an appeal to the Tribunal. THE point urged on behalf of the Revenue before the Tribunal was that intangible additions are as much wealth as any other asset and, therefore, liable to be taxed as such. THE submission did not find favour with the Tribunal which, relying upon a decision of the Kerala High Court in Annamma, Paul Perincherry v. CWT [1973] 88 ITR 204, held that intangible additions cannot be included in the net wealth of an assessee. THE Tribunal also held that, as in regard to the assessment for earlier years, intangible additions had not been added to the assets of the firm in another batch of appeals to net profits, it was bound to follow the same dictum and reject the contentions of the Revenue for these years also. THE Revenue, having been thrown out by the Tribunal, has got the question referred to us, as mentioned above, for our opinion.

(3.) WE should, therefore, proceed to consider whether there has been considerable time lapse between the estimated assessments resulting in intangible additions and their consideration as net wealth on the date of valuation. In the instant case, we are concerned with four consecutive years. It thus appears that intangible additions of 1967-68 must be held to be available in the year 1968-69, under the WEalth-tax Act. Similarly, for each year, it must be held to be available in the succeeding year till 1971-72. On this principle, it is difficult to hold that there has been considerable time gap. The presumption must, therefore, follow.