ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, SURAT, SURAT vs. SHRI JAYANTIBHAI VIRJIBHAI BABARIYA, SURAT

WTA 1/SRT/2025Status: DisposedITAT Surat30 September 2026AY 2014-158 pages
AI SummaryPartly Allowed

What were the facts?

The Revenue filed appeals against the orders of the Commissioner of Wealth Tax (Appeals) for Assessment Years (AY) 2014-15 and 2015-16. The assessee, Shri Jayantibhai Virjibhai Babariya, had a net wealth of Rs.11,12,86,074/- comprising cars, jewellery, and landed properties. The Assessing Officer (AO) initiated proceedings under Section 16(1) of the Wealth Tax Act as the assessee failed to file a Wealth Tax Return. The AO completed the assessment on March 25, 2022, assessing the total wealth at Rs.11,12,86,070/-. The assessee appealed to the CWT(A), who allowed the appeal. The Revenue contended that the CWT(A) erred in allowing the assessee's claim that lands were stock-in-trade without proper verification and in accepting revised WDV for motor cars without remand.

What did the Tribunal hold?

The Tribunal noted that the CWT(A) had categorically mentioned that the lands were excluded from the asset list under Section 2(ea)(e)(4) of the Wealth Tax Act as they were held as stock-in-trade for business purposes and the 10-year period had not lapsed. The CWT(A) also considered the subsequent sale of lands as evidence. However, the Tribunal found that the CWT(A) was silent on the treatment of land income as business or capital income and had not called for a remand report from the AO. Therefore, the Tribunal held that these issues needed verification. Regarding the motor car WDV, the Tribunal noted that it was not verified whether the WDV as per income tax was taken. Consequently, the Tribunal decided to remand issues related to lands (Grounds 1 & 2) and motor cars (Ground 3) back to the file of the CWT(A) for calling upon a remand report from the AO and adjudicating the issues accordingly. Grounds 4 & 5 were dismissed as consequential. For AY 2015-16, the issue of land was identical, and the issue of cars was not adjudicated by the CWT(A), hence it was also remanded. The Tribunal's decision was to partly allow the appeals for statistical purposes.

What were the issues?

1. Whether the lands held by the assessee qualify as stock-in-trade, thereby being excluded from the definition of 'assets' under Section 2(ea)(v)(4) of the Wealth Tax Act, considering the intention of holding, frequency, volume of transactions, and treatment in books of account, and whether the CWT(A) erred in allowing this contention without factual verification? (Mixed law and fact, turns on Section 2(ea)(v)(4)) 2. Whether the CWT(A) erred in holding lands as stock-in-trade despite the assessee not showing any land as stock-in-trade in the prescribed columns of the income tax return and audit report for AY 2014-15? (Mixed law and fact, turns on Section 2(ea)(v)(4) and return filing requirements) 3. Whether the CWT(A) erred in allowing the assessee's contention regarding the cost of motor cars, accepting a revised WDV instead of the WDV as per the Wealth Tax Act, and ignoring that the AO had taken the WDV as on 31/03/2015 as shown in the audit report? (Mixed law and fact, turns on Wealth Tax Act provisions regarding asset valuation) 4. Whether the CWT(A) erred in admitting additional evidence during appellate proceedings without remanding the matter to the AO, violating Rule 5A of the Wealth Tax Rules? (Procedural, turns on Rule 5A of Wealth Tax Rules) Assessee's Contention: The assessee relied on the order of the CWT(A). The CWT(A) had held that lands held as stock-in-trade are excluded from assets, and since the lands were sold in subsequent years and the 10-year period under Section 2(ea)(e)(4) had not lapsed, they were rightly excluded. The CWT(A) also accepted the assessee's revised computation of WDV for motor cars. Revenue's Contention: The Revenue argued that the CWT(A) accepted the assessee's claims without factual verification, merely reproducing submissions. The CWT(A) failed to record findings on crucial aspects like the date of acquisition, holding period, reflection in books of account, maintenance of stock registers, disclosure in the balance sheet, and whether the assessee was engaged in the regular business of land sale. The reliance on subsequent sale of land was also deemed legally unsustainable. The CWT(A)'s order was also criticized as a non-speaking order. Regarding motor cars, the CWT(A) granted relief based on an unverified revised computation without calling for a remand report.

Which sections of the Income-tax Act were involved?

Section 2(ea)(v)(4),Section 14,Section 16(1),Section 16(5)(b),Section 17

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

Pronounced: 30.09.2026

PER : SUCHITRA KAMBLE, J M:

These appeals filed by the Revenue are against the orders passed by the Commissioner of Wealth Tax (Appeals), Surat [in short “CWT(A)”] even dated 15.04.2025 for the Assessment Year (in short “AY”) 2014-15 & 2015-

16.2.

First, we take up the WTA No.1/SRT/2025 for A.Y. 2014-15. 3. The Revenue has raised the following grounds of appeal:

WTA Nos.1 & 2/SRT/2025 SHRI JAYANTIBHAI

The order continues below.

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