Even if there is a finding given in income-tax assessment and even assuming that that finding had become final, still that only pertains to the income-tax assessment namely that no business was carried on but that does not mean that the building ceased to be used for business purposes. If the building was so ceased to be used for business purposes, depreciation also would not have been allowed or would have been withdrawn. Therefore, non-user of the building in a particular year does not render the building used for business purposes to be a building used for a purpose other than business unless it was proved that the directors were using the building for residential purposes.
The Commissioner of Wealth Tax was not justified in setting aside the assessment under section 25.
1. The appellant-assessee, by its present appeal, challenges the order dated March 24, 1988, of the learned Commissioner of Wealth-tax, New Delhi, framed under Section 25 of the Wealth-tax Act, 1957, for the assessment year 1984-85, inter alia, on the following grounds : " 1. There was no reason or justification for the Commissioner of Income-tax-II to issue a notice under Section 25 of the Wealth-tax Act, 1957. The proceedings are invalid, illegal and bad in law.
2. The Commissioner of income-tax has erred in holding that the order of the Wealth-tax Officer should be set aside without himself examining the material placed before him. Therefore, the setting aside is illegal and bad in law." 3. The assessee, by status, in this case, is a private limited company and the relevant valuation date is December 31, 1983. Return of wealth was filed on June 30, 1984. The assessment was framed on March 31, 1986, and the building at Sunder Nagar was exempted from wealth-tax with the following observations : " In Part IV of the return, viz., assets not included in the wealth and hence claimed to be exempt shows that the building (sic) and the 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 on March 10, 1986, that the property at 138, Sunder Nagar, is co-owned by two companies, Messrs, Marudhar Theatres (P.) Ltd. and Messrs. 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 Nagar) was being used entirely for the purpose of office. The assessee's authorised representative has also pointed out that the Income-tax Officer 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 tax under the Wealth-tax Act, 1957, passed at nil (sic)." 4. The wealth-tax assessment record of the assessee for this year appears to have subsequently been scrutinised by the learned Commissioner of Wealth-tax. It was noted that the building was exempted presuming that the same was being used for the purpose of the assessee's business. The said building is said to be owned by two sister concerns. It was noted by the learned Commissioner of Wealth-tax that the learned Wealth-tax Officer accepted the submissions of the assessee and completed the assessment at nil wealth without properly considering the relevant facts. It was also noted that the learned Wealth-tax Officer had observed that proper enquiry will be made during the income-tax proceedings as to whether the entire building was being used for the purpose of business. The income-tax assessment for the year was framed on January 14, 1987, and the learned Income-tax Officer held there that no business of purchase and sale of flowers was conducted by the company during that year. In fact, the relevant observation is as under : "It was stated that dealing in flowers was one of the businesses of the company. As is noticed from the data furnished by the assessee the total purchase of the flowers amounted to Rs. 2,814 and also Rs. 3,927. The assessee has shown a profit of Rs. 1,113. The assessee is a company with a paid-up capital of Rs. 9,50,330. The assessee has purchased flowers ranging from Rs. 137 in January and Rs. 89 in December, 1983. The assessee company has seen that a few flowers are purchased every month from the stray malis and are sold in their office building which was purchased for over a sum of Rs. 13 lakhs.
The point to be seen in this case is whether the assessee carried on any business of purchase and sale of flowers. In the next year, no such business was undertaken by the assessee-company. The assessee did cultivation of lands and grew chillies and other articles of agriculture. Therefore, it can be said that no business was actually undertaken by the assessee. Only a few purchase and sale bills were so arranged to give colour to these transactions as business. Before Section 28 comes into operation, a business must have been carried on during the previous year. Bombay Steam Navigation Co. (1953) P. Ltd. v. CIT [1965] 56 ITR 52 (SC). The business as contemplated by Section 28 is actually capable of producing a product which can be taxed. CIT v. Lahore Electric Supply Co. Ltd. [1966] 60 ITR 1 (SC).
Ordinarily the expression ' business' connotes a customer's activity in carrying on a particular trade or a vocation. The expression is used for taxing statutes in the sense of an occupation and profession which occupies time, attention and labour of a person normally with the object of making profit. To regard an activity as business, there must be a 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 a 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-company. " 5. In the light of the observations in the wealth-tax and income-tax assessment orders, the learned Commissioner of Wealth-tax considered that the findings were contrary to each other. According to the learned Commissioner of Wealth-tax, the assessee was not having any business and, therefore, according to him, there was no question of the building in Sunder. Nagar, New Delhi, being used for the purpose of business.
According 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 these circumstances, was considered erroneous and also prejudicial to the interests of the Revenue. Notice under Section 25 of the Act was served on the assessee and in reply it is seen to have been submitted that the two companies were having their offices earlier in Hotel Claridges, New Delhi, and, subsequently, in the Sunder Nagar building. It was also mentioned that, in the wealth-tax assessment of the sister concern, the value of the property was said to have been taken at nil as the property was said to have been used as office premises. It appears that depreciation was also said to have been allowed. It was claimed before the learned Commissioner of Wealth-tax that the property at Sunder Nagar was used only for business purposes and was never used for the personal purposes of the directors.
6. The learned Commissioner of Wealth-tax, after considering the submissions and perusing the record, set aside the wealth-tax assessment order with the following observations : " 4. To me, it appears that the conflict between the income-tax and wealth-tax assessment 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 Wealth-tax Officer 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." 7. Hence, the present appeal by the assessee before us. Learned authorised representative, Smt. Indra Bansal, by and large, repeated the submissions seen to have earlier been made before the learned Commissioner of Wealth-tax. Mention was also made of page 40 of the paper book being a copy of show-cause notice dated March 18, 1988, issued by the learned Commissioner of Wealth-tax. Page 27 was mentioned being a copy of the Income-tax Officer's assessment order for the year under consideration. Reliance by the learned authorised representative was also placed on the case, Ganga Properties v. ITO [1979] 118 ITR 447 (Cal), especially at page 452. According to the learned authorised representative, the learned Commissioner of Wealth-tax considered the material which was not there at the time of framing the assessment and that the record meant only the record existing at the assessment stage and not the record or material brought into existence subsequent to the assessment. According to her, the wealth-tax assessment order was neither erroneous nor prejudicial to the interests of the Revenue. It was the assessee's case before us that there was no justification for the learned Commissioner of Wealth-tax to assume jurisdiction in the matter.
8. 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 the 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 findings in the 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 interests of the Revenue and thus, according to him, jurisdiction was correctly assumed.
9. The rival submissions have been heard and considered. The facts, by and large, are not seen to be in dispute in the sense that there is a clear conflict between the findings in the income-tax and wealth-tax assessment orders. It is further seen that no proper enquiry was made at the time of framing the wealth-tax assessment order. The learned Commissioner of Wealth-tax has observed that there was a note along with the wealth-tax assessment order stating that the Income-tax Officer will get the matter verified during the income-tax assessment proceedings as to whether the building was being used for the purpose of business. That note is indicative of the learned Wealth-tax Officer being aware of the absence of investigation and, in fact, he is seen to have deferred investigation to be carried out while framing the income-tax assessment. Thus, the finding in the wealth-tax assessment order is framed merely by making mention of the submissions raised on behalf of the assessee without cross-checking the same and verifying the facts. There is a clear lack of enquiry as the submission was accepted without any investigation.
10. Subsequently, when the income-tax assessment was framed, it was held by the learned Income-tax Officer that there was no business carried on by the assessee and that the building was not being used for business purposes. This finding, no doubt, is said to be under challenge but is intact still. Investigation appears to have been undertaken at the time of framing the subsequent income-tax assessment.
Thus, at the time of framing the wealth-tax assessment, since there was no proper enquiry, the jurisdiction was correctly assumed by the learned Commissioner of Wealth-tax. The ratio in the case Ganga Properties v. ITO [1979] 118 ITR 447 (Cal), relied upon by the learned authorised representative, does not help as the income-tax assessment order for the same year could not be ignored by the learned Commissioner of Wealth-tax and so also the contradictions in the two orders. We are, thus, clear that the order was both erroneous and prejudicial for want of enquiry by the learned Wealth-tax Officer and was thus rightly set aside for being framed afresh after proper enquiry and taking into consideration the ultimate finding in the income-tax assessment matter also. In such order, we do not see any mistake or error and thus no justification to interfere. For such conclusion, we derive full support from the ratio of the Hon'ble jurisdictional High Court decision in the case of Gee Vee Enterprises [1975] 99 ITR 375 (Delhi). The same is confirmed.
12. 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.
13. 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 on June 30, 1984. The assessment was completed by the Wealth-tax Officer on March 31, 1986, under 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 Delhi, on 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, Messrs. Marudhar Theatres (P.) Ltd., for Rs. 25 lakhs. In Part IV of its return, namely, " assets not included in the wealth and hence claimed to be 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 March 10, 1986, that the directors of both these companies were living,in their own houses and that the premises (138, Sunder Nagar, New Delhi) were being used entirely for the purposes of office. It was further pointed out that the Income-tax Officer had allowed depreciation on the building which was being used for the purpose of office of the company and the loans raised by the assessee-company were for the purposes of this property. After seeing these facts, the Wealth-tax Officer exempted the said building from taxation under the Wealth-tax Act, 1957. While accepting the return filed by the assessee, a note was made by the Wealth-tax Officer to the effect that, during the course of income-tax assessment proceedings, the inspector will be advised to verify whether the entire building was being used for the purposes of the business.
14. Thereafter, the learned Commissioner of Wealth-tax issued a notice dated March 18, 1988, to the assessee under Section 25 of the Wealth-tax Act, 1957. In that notice, it was stated that the assessee-company was not doing any business at all and was showing a nominal business activity of purchase and sale of flowers. It was also stated that further enquiries revealed that the building was used by the directors for their personal use and hence the company was liable to wealth-tax. The assessment order was, therefore, said to be erroneous in so far as it was prejudicial to the interests of the Revenue. The learned Commissioner noticed that the relevant income tax assessment for the assessment year 1984-85 was completed on January 14, 1987, wherein it was held that the company had no business and that the interest amount of Rs. 66,037 was taxed as income from " other sources ". The learned Commissioner took the view that the findings recorded in the wealth-tax and income-tax assessments were contrary to each other.
It was explained on behalf of the assessee before the Commissioner that the two companies had their offices in Hotel Claridges, New Delhi, and that, after acquiring property No. 138, Sunder Nagar, New Delhi, the office was shifted there. Papers were also filed before the learned Commissioner in support of the claim that the Sunder Nagar property was being used only for business purposes and was never used for the personal purposes of the directors. However, the learned Commissioner set aside the wealth-tax assessment observing as follows : " 4. To me it appears that the conflict between the income-tax and wealth-tax assessment 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 Wealth-tax Officer 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." 15. 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, 1961, on the basis of the assessment order dated January 14, 1987, passed by the Income-tax Officer after the wealth-tax assessment order dated March 31, 1986, as it could 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 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 January 14, 1987, the assessee's appeal was pending and that, for the subsequent assessment years 1985-86 and 1986-87, the contention put forward on behalf of the assessee had been accepted.
16. On the other hand, the learned Departmental Representative, Shri R.V. Ramanan, strongly supported the order of the learned Commissioner.
He submitted that no enquiries were made by the Wealth-tax Officer and that, in paragraph 2 of the order of the learned Commissioner, it had been stated that the wealth-tax assessment framed accepting the contention of the assessee appeared erroneous in law and prejudicial to the interests of the Revenue. Reliance was also placed by him on the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi).
17. My learned brother has made the following observations in paragraph 3 of his order : " It was noted by the learned Commissioner of Wealth-tax that the learned Wealth-tax Officer accepted the submissions of the assessee and completed the assessment at nil wealth without properly considering the relevant facts." 18. However, the only observation made by the learned Commissioner in paragraph 1 of his impugned order was as follows : "He accepted the submission of the assessee and completed the assessment at nil wealth." 19. Again, in paragraph 4 of his order, my learned brother has observed as follows : " According to him, the wealth-tax assessment was framed with out proper investigation, and, in fact, only after accepting the contentions raised on behalf of the assessee. " 20. I have also not been able to find such an observation in the order of the learned Commissioner. No doubt, in the notice dated March 18, 1988, under Section 25, the learned Commissioner did say that " the assessment order was, therefore, erroneous and prejudicial to the interests of the Revenue". However, no such finding was given by the learned Commissioner after the issue of notice and the assessee had been heard. A reference by the learned Departmental Representative to paragraph 2 of the impugned order also does not help because, while saying that" the wealth-tax assessment framed accepting the contention of the assessee appeared erroneous in law and prejudicial to the interests of the Revenue ", he was only pointing out to the stage before the issue 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 Wealth-tax 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 learned Commissioner 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 the Revenue. In fact, the only reason which seems to have influenced the learned 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 [1979] 118 ITR 447, it was pertinently 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 which were before the Income-tax Officer and formed part of that record, the order passed by the Income-tax Officer was erroneous and prejudicial to the interests 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 proceedings of the Income tax Officer at the time he passed the order and, accordingly, it could not be taken into consideration by the Commissioner for the purposes of invoking his jurisdiction under Section 263. He could only take into consideration the record as it stood before the Income-tax Officer. These observations appeared at page 452 of the aforesaid decision. Therefore, it would not be correct to say that the Commissioner could assume jurisdiction on the basis of the income-tax assessment order dated January 14, 1987, which was completed after the wealth-tax assessment order dated March 31, 1986.
It cannot be said that the non-making of enquiries on the part of the Wealth-tax Officer was a finding which had to be implied from the order of the learned Commissioner. The note of the Wealth-tax Officer would not be indicative of the fact that he was aware of the absence of investigation or that he had deferred investigation to be carried out while framing the wealth-tax assessment. Even otherwise, the finding contained in the income tax assessment order dated January 14, 1987, being under challenge, could not be said to be " intact still" as held by my learned brother in paragraph 8 of his order. The impugned order of the learned Commissioner makes mention of the voluminous papers filed by the assessee in support of the claim that the property at Sunder Nagar, New Delhi, was used only for business purposes and was never used for the personal purposes of the directors. Even in the reply dated March 23, 1988, to the notice under Section 25, the assessee had mentioned clearly that the evidence regarding the shifting of the registered office was to be found in the minutes book of the two companies. It was also mentioned that, in the case of Marudhar Theatres (P.) Ltd., the Wealth-tax Officer had accepted the valuation given by the assessee at nil because the property was used as office premises.
Next, it was submitted that, out of the two directors of the assessee-company, Shri Gaj Singh was residing in Umed Bhavan Palace at Jodhpur, whereas Mr. Jaswant Singh was residing at 3, Teen Murti Lane, New Delhi. A perusal of the wealth-tax assessment order shows that not only a notice under Section 16(2) was issued to the assessee but the assessee had also filed written submissions on March 10, 1986, and the Wealth-tax Officer also recorded a finding that, after having seen the facts brought to his notice, he exempted the said building from tax under the Wealth tax Act, 1957. As already observed above, it was, therefore,-not a case of failure to investigate or failure to make an 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 of Gee Vee Enterprises [1975] 99 ITR 375, 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.
21. Since difference has occurred between us, the file is being placed before the Hon'ble President of the Income-tax Appellate 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 Section 25 of the Wealth-tax Act, 1957, is required to be sustained or quashed " 22. This is a matter referred to me as a Third Member under Section 24 of the Wealth-tax Act, 1957, read with Section 255(4) of the Income-tax Act, 1961. The point of difference of opinion referred to me is : " Whether, on the facts and in the circumstances of the case, the order under Section 25 of the Wealth-tax Act, 1957, is required to be sustained or quashed ?" 23. The assessee in this appeal, a private limited company, filed a return of wealth on June 30, 1984. Inter alia, the assessee was owning a building in Sunder Nagar, New Delhi. It claimed exemption on the value of this building on the ground that the building was used for various business purposes. It was pointed out that this building was owned by two companies, that is, Messrs. Marudhar Theatres (P.) Ltd. and Messrs. Marudhar Cultivators (P.) Ltd. The directors of both the companies were living in their own houses and these premises were being used entirely for the purposes of office. It was also pointed out that depreciation on the building was allowed under the Income tax Act which would suggest that the Department was satisfied that this building was used for office purposes. It was also pointed out that some loans were raised by the assessee-company for the purpose of acquiring this property and those loans were also allowed as deductions. The Wealth-tax Officer was satisfied that this building was used for business purposes and granted exemption on the value of this building.
24. Subsequently, the Commissioner of Wealth-tax happened to scrutinise the assessment records of the assessee and he came to the conclusion that the exemption granted to this building was erroneous. The Commissioner of Wealth-tax happened to see also the income tax assessment for the year which was made on January 14, 1987. There, the Income-tax Officer had held that no business whatsoever was carried on by the asses-see in this year except some stray instances of dealing in flowers which was one of the main activities of the assessee-company.
The Income-tax Officer noted that, in that year, the assessee purchased flowers for only Rs. 6,000 and showed a profit of Rs. 1,113, while the assessee purchased the building for a sum of Rs. 13 lakhs and the company had a paid-up capital of Rs. 9,50,330. Having found inconsistencies in the conclusions reached by the Wealth-tax Officer and the Income-tax Officer regarding the user of this building for business purposes, he held, relying upon the observations made in the income-tax assessment that the Wealth-tax Officer was wrong in granting exemption to the building on the ground that the building was used for business purposes.
25. In response to the notice issued by the Commissioner under Section 25 6f 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 personal purposes of the directors.
The Commissioner of Wealth tax finally observed : " To me, it appears that the conflict between the income-tax and wealth-tax assessment 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 Wealth-tax Officer 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." 26. Against this order, the assessee filed an appeal before the Tribunal.
27. The contentions which were raised before the Commissioner of Wealth-tax were reiterated on behalf of the assessee before the Tribunal as well. On behalf of the Revenue, the order of the Commissioner of Wealth-tax was supported by drawing attention to the fact that, in the income-tax assessment, a finding was recorded that no business was carried on and that finding still holds good till it was upset by the appellate authority and, going by that finding which is binding on the Department, it must be held that this building was not used for business purposes and, consequently, the exemption under the Wealth-tax Act should not have been granted. The claim was that, when there was no business carried on, the question of the building being used for business purposes would not simply arise. It was also pointed out that proper enquiry ought to have been made by the Wealth-tax Officer before granting exemption and if an enquiry had been made, he would have come to know that, in income-tax proceedings, a finding was recorded that no business was carried on which would have led him to believe that the assessee was not entitled to the exemption under the Wealth-tax Act. The learned Judicial Member held that no proper enquiry was made by the Wealth-tax Officer at the time of making the assessment. He accepted the observation made by the Commissioner of Wealth-tax that there was a note along with the wealth-tax assessment order stating that the Wealth-tax Officer would get the matter verified during the income-tax assessment proceedings as to whether the building was being used for the purpose of business which note was indicative of the fact that the Wealth-tax Officer was aware of the absence of investigation and despite that no investigation was made. On this premises of not conducting a proper enquiry by the Wealth tax Officer at the time of making the assessment, he agreed with the view canvassed on behalf of the Revenue that the Commissioner of Wealth-tax had properly assumed jurisdiction to invoke the provisions of Section 25 of the Wealth-tax Act.
28. The other Member, after narrating the facts again in full, came to a different conclusion. He, first of all, disagreed with the observations made by his brother that the Commissioner of Wealth-tax had held categorically in his order that the assessment made by the Wealth-tax Officer 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 Commissioner of Wealth-tax in his entire order that due enquiries were not made or that the assessment was completed in undue haste or that it was erroneous in so far as it was prejudicial to the interests 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 the Hon'ble Calcutta High Court decision in the case of Ganga Properties v. ITO [1979] 118 ITR 447, he held that the Commissioner of Wealth-tax can only call for the record of the proceeding which was before the Wealth-tax Officer and examine it in order to consider whether, on the basis of the materials which were before the Income-tax Officer and formed part of the record, the order passed by him was erroneous and prejudicial to the interests 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 could not form part of the record of the proceedings of the Income-tax Officer at the time of passing the assessment order and that material could not be taken into consideration by the Commissioner for invoking his jurisdiction under Section 25 of the Wealth-tax Act. The income-tax assessment order having been passed on January 14, 1987, as against the wealth-tax assessment order made on March 31, 1986, the income-tax assessment order could not form part of the record of the Wealth-tax Officer to say that the Wealth-tax Officer 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 become final or in that sense was " intact still". After referring to the facts that led to the final framing of the wealth tax assessment order, he held that there was no failure to investigate or make enquiry into the case. He held finally that the order of the Commissioner of Wealth-tax under Section 25 was illegal, unsupportable and should be quashed. Hence, the above difference of opinion which was referred to me as a third member.
29. The only point of difference of opinion between my learned brothers was whether the Commissioner of Wealth-tax had made any observation in his order that the Wealth-tax Officer had not made any enquiry and came to an erroneous conclusion which had vitiated the assessment made by him and secondly whether any enquiries were made at all. In so far as the first point of difference of opinion is concerned, it appears to me that the second Judicial Member was right when he observed that the Commissioner of Wealth tax did not record a categorical finding or a suggestion that, on account of the failure of the Wealth-tax Officer to make a proper enquiry, a wrong exemption was granted. The order passed by the Commissioner of Wealth tax showed three things. One was that the assessee had filed a lot of material before the Wealth-tax Officer in support of its contention that the Sunder Nagar building was used for business purposes and that the Wealth-tax Officer, on the basis of material, was satisfied at that time that the building was used for business purposes. Being apprehensive of the fact that as to what would happen in income-tax assessment proceedings, he appended a note in the assessment order that, during the course of income-tax assessment proceedings, the Inspector would verify whether the entire building was being used for the purposes of business. This note was recorded by way of abundant caution as by then the income-tax assessment was not completed. The Wealth-tax Officer, therefore, has 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 Commissioner of Wealth-tax. The Commissioner of Wealth-tax came to the conclusion that the order passed by the Wealth-tax Officer was erroneous because of the conflict in the 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 paragraph 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 and 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 of Jodhpur. They were having their offices earlier in Hotel Claridges, New Delhi, and 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 Commissioner of Wealth-tax should not have held or could not have held that the Wealth-tax Officer 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 appears to be wrong and the second Member who disagreed with him appears to be right. Apart from this factual statement in the order passed by the learned first Member, another fact that becomes very evident is had there been a conflict between the income-tax and wealth-tax assessments, that conflict could have been resolved by the Commissioner of Wealth tax before setting aside the assessment because all the material was before him. The mere fact that, in the income-tax assessment proceedings, a finding was recorded that no business was carried on first of all was not a final fact when that fact was challenged in appeal and, secondly, there were references in the order that some purchases and sales of flowers were made and some income was returned as income from business which would show that some business activity was carried on there. The cost of the building and the paid-up capital were erroneously compared with the volume of the business turned out to hold that there was no business which, in my opinion, is not a proper method or a guideline to find out whether any business was carried on or not. In a building costing lakhs, a business in thousands might have been done. That does not mean that the building was not used for business purposes. It is also not the finding of the Department that the building was not used for business purposes in the earlier years or subsequent years. If no business was carried on during this year, it may be a temporary lull in the activity. The building none the less continued to be a building used for purpose of business and meant for business purposes and not for residential purposes. If the building had been used for residential purposes, depreciation would not have been allowed on the building in income-tax assessment. Consistent with the finding that the building was not used for business purposes, the allowance of depreciation should also have been withdrawn by the Commissioner of Income-tax 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 before the Commissioner of Income-tax 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 for 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 vicissitudes 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.
30. It is also to be noted that, for the assessment years 1985-86 and 1986-87, the income was treated 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 Wealth tax 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 purposes every year. If a building has been earmarked for business purposes and was being used for business purposes, even if there is a temporary lull in the activity of 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 the income-tax assessment and even assuming that that finding had become final, still that pertains only to the income-tax assessment, namely, that no business was carried on but that does not mean that the building ceased to be used for business purposes. If the building so ceased to be used for business purposes, depreciation also would not have been allowed initially or would have been withdrawn subsequently. Therefore, non-user of the building in a particular year does not render the building used for business purposes to be a building used for a purpose other than business unless it was proved that the directors were using the building for residential purposes which was not the case here. I am, therefore, of the opinion that the Commissioner of Wealth-tax was not justified in setting aside the assessment under Section 25 of the Wealth-tax Act, 1957. The assessment made by the Wealth-tax Officer does not suffer from any irregularity or infirmity. I, therefore, agree with the view expressed by the second Member, Shri V. P. Elhence.
31. The matter will now go back to the regular Bench for a decision according to the majority opinion.