Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
PETITIONER:
J.M. BHATIA, APPELLATE ASSISTANT COMMISSIONER OF WEALTH TAX&
Vs.
RESPONDENT:
J.M. SHAH
DATE OF JUDGMENT19/09/1985
BENCH:
TULZAPURKAR, V.D.
BENCH:
TULZAPURKAR, V.D.
MUKHARJI, SABYASACHI (J)
CITATION:
1986 AIR 268 1985 SCR Supl. (2) 872
1985 SCC (4) 655 1985 SCALE (2)845
ACT:
Wealth Tax Act 1957, s. 5(1)(viii) and 35 - Assessment
order passed under s. 5(1)(viii) - No appeal preferred -
Assessment Order - Whether final - Whether it is liable to
be modified or rectified under s. 35.
HEADNOTE:
The respondent-assessee was assessed for wealth tax
purposes on the total wealth of Rs. 6,07,690 which included
jewellery and ornaments of the value of Rs. 4,15,942 for the
assessment year 1969-70. In an appeal preferred by him, the
Assistant Appellate Commissioner by his order dated 26th
June 1970 excluded from her net wealth, the value of the
aforesaid jewellery and ornaments on the ground that they
were intended for personal use of the assessee under s.
5(1)(viii) of the Wealth Tax Act 1957. No further appeal was
filed against that decision of the AAC by either side.
On August 10, 1971, the Act was amended retrospectively
with effect from April 1, 1983 and under s. 5(1)(viii) the
words, "but not including jewellery" were added at the end
of that clause and these words were deemed to have been
inserted right from April 1, 1963. In view of this amended
provision the AAC served a notice on the respondent -
assessee and passed an order dated 22nd February 1972 under
s. 35 of the Act rectifying the original order dated 26th
June 1970 whereby he withdrew the exemption already granted
to her in respect of the jewellery and ornaments on the
ground that his predecessor had committed a mistake apparent
on the face of the record in excluding the said jewellery
and ornaments.
The assessee-respondent challenged the said order by
filing a writ petition in the High Court on the ground that
since the original assessment had been completed long before
the Amending Act was passed and had also become final as no
appeal was preferred against that by either side, the
amending Act could not reach or affect such completed
assessment and in any event the
873
question whether the Amending Act covered completed
assessment or not was a debatable question and therefore,
the AAC had no power to rectify his predecessor’s order. The
High Court set aside the impugned order of the AAC holding
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
that the question whether the Amending Act applied to
assessments which were already completed was a highly
debatable question and that it was not a case of an error
apparent on the face of the record which entitled the AAC to
rectify his predecessor’s order.
Allowing the appeal by the appellant-Revenue,
^
HELD: 1. This is not a case where the resort to the
rectification power was required to be made by reference to
any provision in the Amending Act but de horse the Original
section, namely 35(7) of the Wealth Tax Act. The AAC’s order
dated June 26, 1970 had not become final in the literal
sense of the word notwithstanding the fact that no appeal
had been preferred against that order or that the requisite
period for appeal was allowed to expire. The said order was
and continued to be liable to be modified under s. 35(7) of
the Act and in this view of the matter the assessee herein
also would not be in a position to invoke the principle of
finality of orders or the sanctity of the existing rights
which are said to have been acquired by her under the
initial order. [877 F-H]
In the instant case, the proceedings for rectification
of original order dated 26th June 1970 were undertaken by
the AAC in January 1972. It was well within four years of
period of limitation available to him under s. 35 of Wealth
Tax Act. Therefore, the rectification order passed by the
AAC is restored. [877 E-F]
M.K. Venkatachalam, Income-tax Officer v. Bombay Dyeing
and Manufacturing Co. Ltd. 34 ITR 143 followed.
Income-tax Officer, V Circle, Madras & Anr. v. S.K.
Habibullah 44 ITR 809 distinguished.
Commissioner of Wealth-tax v. Arundhati Balkrishna 77
I.T.R. 505, Volkart Brothers v. Income Tax Officer 82 ITR
50, Delhi Cloth and General Mills Co. Ltd. v. Income Tax
Commissioner AIR 1927 PC 242 and Colonial Sugar Refining Co.
v. Irving [1905] A.C. 369 referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 680 of
1974.
From the Judgment and Order dated 12.12.1973 of the
Bombay High Court in Misc. Petition No. 285 of 1972.
874
S.C. Manchanda, Dr. Gauri Shankar and Miss A.
Subhashini for the Appellants.
P.H. Parekh and Miss Divya Bhalla for the Respondent.
The Judgment of the Court was delivered by
TULZAPURKAR, J. This appeal seeks to raise the
following question of law for our determination:
Did the Appellate Assistant Commissioner of
Wealth-tax have the power to rectify his
predecessor’s order dated June 26, 1970 in view of
the fact that there was no error apparent on the
face of the record because the question as to
whether the Amending Act applied to assessments
which were already completed was a debatable
question?
The High Court certified the question to be of general
public importance which required a decision of this Court
but in our view on the facts of the case it is unnecessary
to decide that question as the appeal could be disposed of
briefly on the basis that the assessment in question could
not be regarded as having become final or complete and
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
therefore the postulate being absent the question does not
arise.
The facts which are said to give rise to the question
raised in the appeal are these. For the assessment year
1969-70 the respondent-assessee was assessed for wealth-tax
purposes on the total wealth of Rs. 6,07,690, which included
jewellery and ornaments of the value of Rs. 4,15,942 by an
assessment order made by the Wealth Tax Officer on February
11, 1970. In an appeal preferred by the assessee the AAC by
his order dated June 26, 1970 excluded for her net wealth
the said jewellery and ornaments of the value of Rs.
4,15,942 on the ground that they were intended for personal
use of the assessee under s.5(1) (viii) of the Wealth Tax
Act 1957. In doing so the AAC followed the decision of this
Court in Commissioner of Wealth-tax v. Arundhati Balkrishna,
77 I.T.R. 505. No further appeal was filed against that
decision of the A.A.C. by either side and in a sense the
order became final as the period provided for appeal against
it was allowed to expire. Section 5(1) (viii) of the Wealth-
tax Act was amended by the Finance (no. 2) Act of 1971 which
received the assent of the President on August 10, 1971 but
it was brought retrospectively into effect from April 1,
1963. By s. 32 of the
875
Amending Act in s.5(1) (viii) the words "but not including
jewellery " were added at the end of that clause and these
words, as stated earlier were deemed to have been inserted
right from April 1, 1963. In view of this amended provision
the assessee was served with a notice dated January 25, 1972
by the A.A.C. whereby he proposed to rectify her wealth-tax
assessment under s. 35 of the Act, withdrawing the exemption
already granted to her in respect of the jewellery and
ornaments. The assessee appeared and objected to the
proposed rectification but the AAC held that his predeessor
has committed a mistake apparent on the fact of the record
is excluding the said jewellery and ornaments and he was,
therefore, entitled to rectify the order passed by his
predecessor and actually passed the rectification order
against the assessee on February 22, 1972. The assessee
challenged the said order by filing a writ petition in the
High Court.
The counsel for the assessee contended before the High
Court that the AAC had no power to rectify his predecessor’s
order dated June 26, 1970 in view of the fact that there was
no error apparent on the face of the record because (a) the
original assessment when made was in accordance with law and
(b) the question as to whether the Amending Act applied to
assessments which were already completed was, in any event,
a debatable question. At the hearing counsel for the
assessee conceded that so far as the first ground was
concerned the matter was concluded by a decision of this
Court in M.K. Venkatachalam, Income-tax Officer v. Bombay
Dyeing and Manufacturing Co. Ltd., (34) I.T.R. 143, and
therefore, he did not press that ground. He, however,
strenuously urged that since the original assessment had
been completed long before the Amending Act was passed and
since the same had become final as no appeal had been
preferred against the order dated June 26, 1970 by either
side the Amending Act could not reach or affect such
completed assessment and in any event the question whether
the Amending Act covered completed assessments or not was
debatable question and, therefore, the AAC had no power to
rectify his predecessor’s order.
As regards the first ground the High Court took the
view that the matter had been concluded by this Court’s
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
decision in Bombay Dyeing and Manufacturing Co. ’s case
(Supra). But as regards the second ground, though it was
pointed out by Mr. Joshi, counsel for the Revenue to the
High Court that even that aspect had been concluded by the
same decision the learned Judges felt that the point could
not be said to have been finally concluded by that decision
because of this Court ’s subsequent
876
decision in Income-tax Officer, V Circle, Madras & Anr. v.
S.K. Habibullah 44 I.T.R. 809, and the observations made
therein and in fact one of the learned Judges who decided
the matter expressed the view that "if that decision (in
Bombay Dyeing’s case had stood alone I might have been
disposed to record the question that arises in the present
case as concluded by the Supreme Court (by reason of that
decision) and to decide this petition in favour of Mr.
Joshi. "The Court further felt that the question as to
whether the retrospectivity given by the Amending Act would
cover cases of completed assessment was itself a debatable
question and following the decision of this Court in Volkart
Brothers v. Income Tax Officer 82 I.T.R. 50, the Court did
not express any opinion on that point but took the view that
since it was a debatable question it could not be said to be
an error apparent on the face of the record and, therefore,
the AAC’s order was liable to be quashed. The High Court,
therefore, set aside the impugned order of the AAC whereby
the rectification had been effected. The Revenue has
challenged this view of the High Court before us in this
appeal.
It is clear that the ground which was urged before the
High Court and which seemed to find favour with it was that
the question whether the Amending Act applied to assessments
which were already completed was a highly debatable question
and therefore, it was not a case of an error apparent on the
face of the record which entitled the AAC to rectify his
predecessor’s order but the question thus raised would, in
our view, arise only if it is really a case of completed
assessment in the literal sense of the word. It may be
pointed out that this very aspect of the matter was pressed
in service in the Bombay Dyeing case (supra) and this Court
while negativing the contention has taken the view that the
assessment order that had been initially passed in that case
(which was under s. 18A(5) of the Income Tax Act, 1922)
could not be said to have become final in the literal sense
of the word and in that behalf this Court pointed out that
irrespective of the question whether any appeal had been
preferred or not against it that initial order was liable to
be modified or rectified under s. 35 of the Act and
therefore, could not be said to have become final or
complete and as such the contention raised would not be of
much assistance to the assessee. After referring to the
decision of the Privy Council in Delhi Cloth and General
Mills Co. Ltd. v. Income Tax Commissioner, A.I.R. 1927 PC
242, as also to the Board’s decision in Colonial Sugar
Refining Co. v. Irving, [1905] A.C. 369, this Court with
reference to the precise argument observed thus:
877
"The same argument was put in another form by
contending that the finality of the order passed
by the Income-tax Officer cannot be impaired by
the retrospective operation of the relevant
provision. In our opinion this argument does not
really help the respondent’s case because the
order passed by the Income Tax Officer under
section 18A(5) cannot be said to be final in the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
literal sense of the word. This order was and
continued to be Liable to be modified under
section 35 of the Act. What the Income-tax Officer
has purported to do in the present case is not to
revive his order in the light of the retrospective
amendment made by section 13 of the Amendment Act
alone but to exercise his power under section 35
of the Act; and so the question which falls to be
considered in the present appeal centres round the
construction of the expression ’mistake apparent
from the record’ used in section 35. That is why
we think that the principle of the finality of the
orders or the sanctity of the existing rights
cannot be effectively invoked by the respondent in
the present case."
We feel the aforesaid observations apply with equal
force to the facts of the present case. The AAC’s original
order whereby the jewellery and ornaments had been excluded
from the computation of the total wealth of the assessee had
been passed on June 26, 1970. After the amendment had come
into force with retrospective effect from April 1,1963,
proceedings for rectification were undertaken by the AAC in
January 1972. It was well within four years of period of
limitation available to him under section 35 of the Wealth
Tax Act. This is not a case where the resort to the
rectification power was required to be made by reference to
any provision in the Amending Act but de horse the Amending
Act power was sought to be exercised under the original
section, namely 35(7) of the Wealth Tax Act. If that be so
following the observations quoted above, it must be held
that the AAC’s order dated June 26, 1970 had not become
final in the literal sense of the word nothwithstanding the
fact that no appeal had been preferred against that order or
that the requisite period for appeal was allowed to expire.
The said order was and continued to be liable to be modified
under s. 35(7) of the Act and in this view of the matter the
assessee herein also would not be in a position to invoke
the principle of finality of orders or the sanctity of the
existing right which are said to have acquired by her under
the initial order.
878
If, therefore, the order which has been rectified had
not received a finality the contention that the amending
provision would not be available for the purpose of
effecting rectification on the ground that there was no
error apparent on the face of the record would not be
available to the assessee and therefore though that question
was the basis on which the certificate was issued by the
High Court for preferring this appeal to this Court we do
not think it is necessary to decide that question and the
appeal is capable of being allowed on this short ground.
We would, however, like to observe that in Habibullah’s
case (supra) the Court was really concerned with the aspect
of retrospectivity of the provisions contained in the new
sub-section (6) of s. 35 of the Income-tax Act, 1922
inserted by s. 19 of the Income-tax (Amendment) Act, 1953
(25 of 1953) and the question of giving a greater
retrospective operation than intended by its language was
considered by the Court in the context of the peculiar
provisions contained in the amending enactment. Such a
question does not arise in the instant case.
The result is that the appeal is allowed and the
rectification order passed by the AAC is restored. No Costs.
M.L.A. Appeal allowed.
879
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6