In Shri B. Rajeswar Rao v. ACIT, a division bench of the Hyderabad ITAT held that the cash seized from the assessee during search cannot be made liable to Wealth Tax if the same was deposited with the PD A/c of the CIT on the valuation date.
In the instant case, Rs. 1,32,02,650 was recovered from the possession of the assessee during the course of search proceedings under section 132 of the Income Tax Act. The department said that assessee is liable to pay wealth tax since he has not filed return for the year 2009-10.
Assessee maintained that he had no cash in hand as required under clause (vi) of section 2(ea) of the Wealth Tax Act. He submitted that the cash seized from the assessee was deposited in the P.D. A/c of the Department and therefore, was not available with the assessee as on the valuation date and hence it cannot be considered as the wealth of the assessee.
On behalf of the department, it was contended that the cash found in the assessee’s premises during the course of search was seized and though it was deposited in the P.D A/c of the Department it continued to belong to the assessee. It is holding the said money as a custodian of the assessee and has no powers to appropriate the same except as provided under the provisions of section 132B of the I.T. Since the assessee is the legal owner of the cash so deposited, the said amount forms part of the wealth of the assessee and has rightly been brought to tax under the Wealth Tax Act.
After hearing both sides, the bench noted that under section 2(ea) of the Wealth Tax Act, the term ‘assets’ includes “cash in hand” in excess of Rs.50,000 of individuals and HUF. Clause (m) defines the net wealth to mean “the amount” by which the aggregate value computed in accordance with the provisions of Wealth Tax Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee (on the valuation date which have been incurred in relation to the said assets).
Accepting the contentions of the assessee, the bench observed that “the Longman Business dictionary defines “cash in hand” as the amount of money in the form of cash that a company has after it has paid all its costs; the amount of money held by a company in the form of notes and coins. But, in the case before us, the cash is no longer in the form of notes and coins, but is in the form of a deposit in PD A/c under the control of the Department. The interpretation of the provisions of the Wealth Tax Act by the learned CIT (A), in our opinion, is therefore, misplaced. The money belonging to the assessee was lying in the P.D A/c of the CIT as on the valuation date for appropriation in accordance with section 132B of the Act. Thus, it is not under the free control of the assessee. Therefore, we are of the opinion that the cash in hand in excess of Rs.50,000 found and seized by the Department from the premises of the assessee is not taxable under the Wealth Tax Act.”
Read the full text of the Order below.
