1. This is a petition under art. 226 of the Constitution of India in which the petitioner, who is an assessee under the W. T. Act, is seeking a writ of mandamus directing the respondent No. 1, who is the WTO, to give effect to the directions contained in the order of the Income-tax Appellate Tribunal dated 3rd April, 1971, without taking into account the provisions of s. 32 of the Finance (No. 2) Act, 1971 (hereinafter referred to as 'Act No. 32 of 1971'). The petitioner is assessed to wealth-tax for the assessment years 1965-66, 1966-67 and 1967-68. In respect of these assessment years, the assessee claimed that jewellery should be exempted from wealth-tax under s. 5(1)(viii) of the W. T. Act. The assessment order for the year 1965-66 does not show what was the exact value of the jewellery, but in the assessment years 1966-67 and 1967-68, exemption was sought in respect of jewellery of the value of Rs. 10,15,263. It is stated at the Bar that even in the assessment year 1965-66, the value of the jewellery was the same. The WTO declined to grant exemption as prayed for by the petitioner and he included the value of the jewellery while computing the total wealth assessable to wealth-tax.
2. The petitioner agitated his claim for exemption in respect of the jewellery before the AAC, who also declined to grant exemption. Three appeals filed by the assessee before the AAC in respect of the three assessment orders in question, therefore, came to be rejected.
3. The petitioner then filed three separate appeals before the Income-tax Appellate Tribunal. By the time, the appeals came up for hearing before the Tribunal, the Supreme Court had pronounced its decision in CWT v. Arundhati Balkrishna : 77ITR505(SC) , in which the Supreme Court had taken the view that the jewellery intended for the personal use of the assessee came within the scope of s. 5(1)(viii) of the W. T. Act, and that the value of all the jewellery of the assessee intended for personal use stood excluded under s. 5(1)(viii) of the W. T. Act, 1957, in the computation of the net wealth.
4. Having regard to the decision of the Supreme Court, the Tribunal took the view that the orders of the WTO and the AAC needed to be set aside. After having taken this view, the Tribunal made the following observations :
'It is seen, however, that the WTO has not gone into the factual aspect of the matter as to whether the articles of jewellery in respect of which exemption is claimed by the assessee under section 5(1)(viii) are articles intended for the personal or household use of the assessee. It will, therefore, be necessary for the WTO to go into this matter and determine whether the articles of jewellery in question are intended for the personal or household use of the assessee.'
5. The Tribunal thus allowed the appeals, subject to verification by the WTO as aforesaid. This order of the Tribunal was passed on 3rd April, 1971. By the time effect was to be given to the directions made by the Tribunal, Parliament enacted Act No. 32 of 1971, and introduced an amendment in clause (viii) of sub-s. (1) of s. 5. Originally these provisions stood as follows :
'5. (1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee-....
(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee.'
6. By s. 32 of Act No. 32 of 1971 it was provided as follows :
'In clause (viii), after the words 'articles intended for the personal or household use of the assessee', the words 'but not including jewellery' shall be inserted, and shall be deemed to have been inserted, with effect from the 1st day of April, 1963.'
7. Two provisos and two Explanations were also added in clause (viii), but since they are not relevant for the purposes of the present petition, it is not necessary to reproduce those provisions.
8. The effect of the amendment made by Act No. 32 of 1971 was that clause (viii) now read as follows :
'(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee, but not including jewellery.'
(The provisos and the two Explanations are not reproduced.)
9. When the WTO called the petitioner's representative and discussed the matter relating to giving effect to the directions of the Tribunal, it was disclosed to the petitioner's representative that the WTO intended to take into account the retrospective amendment in s. 5(1)(viii) of the W. T. Act and the petitioner would, therefore, not be entitled to claim any exemption. The petitioner's representative failed to convince the WTO that he was not entitled to take into consideration the retrospective amendment made in s. 5(1)(viii). Later, the petitioner through her chartered account-ant also informed the WTO in writing that his proposed action was illegal and without jurisdiction. Since the petitioner did not hear anything from the WTO in reply to the letter from her chartered accountant, the petitioner has approached this court under art. 226 of the Constitution of India seeking a direction that the WTO should give effect to the directions given by the Appellate Tribunal and thus work out the exemption claimed by the assessee.
10. The petitioner's case in this petition is that the amendment made by Act No. 32 of 1971 did not apply to the case of the petitioner whose assessment had become final. Alternatively, it was contended in the petition that if the amendment made retrospectively was intended to affect orders which had become final, the said amendment was ultra vires as violating art. 14 of the Constitution of India, inasmuch as it discriminates between two classes of assessees, viz., (1) assessees in whose cases assessments have become final but the period of four years for rectification under s. 35 of the W. T. Act or reassessment under s. 17(1)(b) of the W. T. Act had not expired, and (2) assessees in whose cases assessments have become final and the period of four years has also expired. One of the grounds raised in the petition was also that s. 32 of Act No. 32 of 1971 offended against arts. 19(1)(f) and 31(1) of the Constitution of India, since it puts unreasonable restrictions upon the petitioner's fundamental right to hold and acquire property and it also deprives the petitioner of her property without the authority of law.
11. We might make it clear at the outset that the learned counsel appearing on behalf of the petitioner has stated before us that he did not propose to canvass the invalidity of the provisions of s. 32 of Act No. 32 of 1971.
12. Mr. Mehta, appearing on behalf of the petitioner, has contended that the WTO did not have any jurisdiction to ignore the directions given by the Tribunal and the WTO was bound to give effect to the directions given by the Tribunal. According to the learned counsel, the scope of the proceedings before the WTO was restricted by the order made by the Tribunal and that the proceedings before the WTO did not require consideration of the issue, as to whether the petitioner was or was not entitled to exemption claimed by her under s. 5(1)(viii) of the W. T. Act. According to the learned counsel, the question as to whether the petitioner was entitled to exemption or not has already been decided by the Tribunal and what the WTO was required to do was to give effect to the directions of the Tribunal and he had, therefore, merely to decide whether any of the jewellery claimed by her to be exempted for the purposes of computation of net wealth was her personal jewellery or not. In other words, it is contended by the learned counsel that short of giving effect to the order of the Tribunal, the assessment in respect of the petition is otherwise complete, and he could not while giving effect to the order of the Tribunal consider the scope of the amendment made retrospectively in s. 5(1)(viii) of the W. T. Act. Reliance is placed by Mr. Mehta on a decision of this court in J. M. Shah v. J. M. Bhatia, AAC of Wealth-tax : 94ITR519(Bom) , in support of the proposition that where an assessment has been completed, the WTO could not give effect to the retrospective amendment made by Act No. 32 of 1971 in clause (viii) of s. 5(1) of the W. T. Act.
13. Now, it cannot be disputed that where a Tribunal has given certain directions to the WTO, the WTO while giving effect to the findings or the directions made by the Tribunal cannot ignore those directions and the scope of the proceedings before the WTO will be controlled and regulated by the directions on which he has to act. The present case, however, is not a case of a mere application of this principle. We have no doubt in this case that a direction was given by the Tribunal which requires the WTO to go into the matter as to which are the articles which are intended for the personal or household use of the assessee. There is also no doubt that the Tribunal has, following the decision of the Supreme Court in Arundhati's case : 77ITR505(SC) , held that the petitioner will be entitled to the exemption in respect of personal jewellery in view of the construction placed upon the provisions of s. 5(1)(viii) by the Supreme Court. What is, however, to be determined in this case is what is the effect of the amendment, which has been introduced by Act No. 32 of 1971. As already pointed out, the amendment made by Act No. 32 of 1971 is made after the decision of the Tribunal. It is obvious that the amendment is made with the express purpose of undoing the ratio of the Supreme Court's decision in Arundhati's case : 77ITR505(SC) . Parliament in its wisdom has chosen to give a retrospective effect to that amendment. The effect of the retrospective amendment made by s. 32 in s. 5(1)(viii) is that jewellery will stand excluded from the articles in respect of which exemption could be claimed under s. 5(1)(viii) with effect from 1st day of April, 1963. In other words, clause (viii) of s. 5(1) must now be so read that right from 1st of April, 1963, exemption could not be claimed in respect of jewellery, even though it may have been intended for personal use by the assessee. The question which we have, therefore, to decide is, what would be the effect of this retrospective legislation so far as the case of the petitioner is concerned
14. It is contented on behalf of the petitioner by Mr. Mehta in that context that the assessment became final and if the assessment had become final, the retrospective amendment could not be given effect to. At one stage, this contention was slightly modified and it was contended that the assessment order was final except for giving effect to the order of the Tribunal. The contention appears to be that in cases of assessment which has been completed before 10th of August, 1971, i.e., the day on which Act No. 32 of 1971 came into force, the retrospective amendment did not in any way create any infirmity in the assessments and that the amended provision could not be taken into account even while giving effect to the directions made by the Tribunal. We may at this stage make it clear that we are not, in this case, deciding the larger question as to whether assessments which had become final or completed and which cannot be said to be pending at any stage were in any way affected by or could be re-opened as a result of the retrospective amendment made in s. 5(1)(vii) of the W. T. Act. We are basing our decision in this petition on the nature of the proceedings which were pending before the WTO at the time when the WTO decided to take notice of the amended provisions of s. 5(1)(vii) of the W. T. Act.
15. When the Tribunal directed the WTO to ascertain which of the articles were intended for personal or household use of the assessee, it pre-supposed that the WTO had jurisdiction to grant exemption in respect of the jewellery. It is difficult to conceive how the WTO could have given effect to the directions of the Tribunal, if the assessment was closed and completed and had become final as contended for the assessee. It was obviously to overcome this difficulty that the argument in a slightly modified form was put before us that the assessment was final subject to giving effect to the directions given by the Tribunal. When the WTO is required to give effect to the findings or directions given by the AAC or the Tribunal, there is no time-limit prescribed under the provisions of the W. T. Act Indeed, express provision is made in s. 17(2) of the W. T. Act that the time limit prescribed in s. 17(1) for reopening the assessment where net wealth has escaped assessment will not apply in such a case. Sub- (2) of s. 17 reads as follows :
'17. (2) Nothing contained in this section limiting the time within which any proceeding for assessment or reassessment may be commenced, shall apply to an assessment or reassessment to be made on such person in consequence of or to give effect to any finding or any finding or direction contained in an order under section 23, 24, 25, 27 or 29.......'
16. The set of sections which are referred to in the context of giving effect to a finding or a direction are sections which deal with appeals, or revisional power of the Commissioner, or the orders made in reference under s. 27 to the High Court. It is difficult to appreciate how, except either by process of assessment or reassessment, effect can be given to the orders made by the appellate authorities or revisional authority or by the High Court in a reference, but the matter is taken beyond doubt by s. 17(2) by referring to proceedings consequent upon orders made under section 23, 24, 25, 27 or 29 as 'assessment or reassessment.' It is obvious that the consequence of an appeal, revision or an order in a reference would, in a given case, be that the assessment by the lower authorities would have to be modified or varied. Where it is necessary to give effect to the orders of the appellate or varied. Where it is necessary to give effect to the orders of the appellate authorities or the Tribunal, it is difficult to hold that any assessment has become final, as in the present case. The assessment made by the WTO was being subjected to scrutiny by the Tribunal, and had clearly, therefore, not become final even so far as the WTO was concerned. The Tribunal had also given an express direction that a factual inquiry had to be made as to which of the jewellery could be personal jewellery and which not. Ultimately, if the amendment in s. 5(1)(vii) had not come in, the finding which would be required to have been recorded by the WTO was as to in respect of which jewellery the petitioner was entitled to claim an exemption. This could only be done by taking recourse to the procedure prescribed for assessment. In the instant case, the assessment was, therefore, very much open when the matter came back to the WTO. It would not, therefore, be correct to say that the assessment had wholly become final.
17. The question which then arises is, once the assessment had not become final, the WTO could or could not have taken notice of amended provision. The WTO, who was functioning under the W. T. Act was bound to take notice of s. 5(1)(viii), which according to Parliament was deemed to be on the statute book from 1st April, 1963. It is difficult to see how he could have ignored the provisions which factually must be deemed to exist on every day after 1st April, 1963. The net result of the retrospective amendment is that the provision on the basis of which the petitioner had claimed exemption did not exist at all. The original provision must be taken as non-existent, and if any direction requiring the WTO to give effect to such a non-existent provision is given, it would clearly be ignoring the legislative intent and would be contrary to the principles governing the construction of retrospective legislation. Indeed, there was no other provision to which the WTO could turn for ascertaining whether the petitioner was entitled to any exemption. It is in this context that it was vehemently urged before us that the scope of the proceedings before the WTO would be restricted by the order of the Tribunal. As already pointed out, this position could not originally have been disputed, but then Parliament had intervened. A new provision has been made, the effect of which is, in substance, that the order of the Tribunal has been rendered nugatory or inoperative. The order of the Tribunal merely remained on paper but it was deprived of its legal validity as a result of the amendment made retrospectively in s. 5(1)(viii) of the W. T. Act. Therefore, the argument that the WTO having regard to the scope of the proceedings before him could not have gone beyond the directions given by the Tribunal cannot be accepted, in view of the retrospective amendment.
18. At one stage, it was sought to be contended that if a Tribunal had overlooked the provisions of law and given its decision which might be expressly contrary to a statutory provision, the WTO could not have ignored that decision on the ground that the Tribunal has overlooked a provision of law. On this analogy, it was contended that the WTO could also not give effect to the retrospective amendment and if he could not have questioned the order of the Tribunal which was contrary to law, he could also not bypass the order of the Tribunal in this case. In our view, the analogy is not apposite. We are dealing in this case not with an order which is erroneous because the Tribunal has erred in either not noticing or misconstruing the provisions of law. But we are concerned in this case with the effect or retrospective legislation on the assessment proceedings and if retrospective legislation has to be given effect to the consequence of retrospective legislation is that the order of the Tribunal itself loses its validity. The WTO is bound to give effect to the Parliamentary legislation which has undone the effect of the order of the Tribunal.
19. We may now refer to the decision in Shah's case : 94ITR519(Bom) on the basis of which it was contended that once assessment has been completed, effect could not be given to the amendment made in s. 5(1)(viii) of the W. T. Act. We have carefully gone through the decision in Shah's case : 94ITR519(Bom) to which one of us (Desai J.) was a party. If the ratio of Shah's case is correctly appreciated then it will appear that in that case the court was called upon to decide as to whether an assessment which was completed and against which no proceedings were pending at the date on which Act No. 32 of 1971 came into force could be rectified for the purpose of giving effect to the amended provisions in s. 5(1)(viii) of the Act. The facts in that case were that in respect of the assessment year 1969-70, the assessee was assessed to wealth-tax on the total wealth of Rs. 6,07,690 including jewellery and ornaments of the value of Rs. 4,12,942 by an assessment order dated 11th February, 1970. An appeal was preferred against that order by the assessee. Before the AAC of wealth-tax, it was contended that jewellery and ornaments intended for the personal use of the petitioner were exempt from wealth-tax by reason of the provisions of s. 5(1)(viii) of the Act, relying upon Arundhati's case : 77ITR505(SC) decided by the Supreme Court. In view of that decision, the AAC by an order dated 26th June, 1970, allowed the appeal of the assessee and excluded from the net wealth of the assessee, jewellery and ornaments of the value of Rs. 4,15,942. No further appeal was taken against that decision either by the assessee or by the department, and the order of the AAC had become final after the period provided for the appeal had expired. When the retrospective amendment brought in by Act No. 32 of 1971 was made, the AAC served a notice on 3rd February, 1972, to the effect that he proposed to rectify the wealth-tax assessment of the petitioner in respect of the jewellery and ornaments. Finally, the AAC rectified the assessment and withdrew the exemption granted to the petitioner in respect of jewellery and ornaments and this order of the AAC was challenged by a writ petition in this court. The contention raised before the Division Bench was that the AAC did not have the power to rectify 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 applies to assessments which were already completed was, in any event, a debatable question.' Mr. Justice Vimadalal who delivered the main judgment took the view that the first ground was concluded by the decision of the Supreme Court in M. K. Venkatachalam, ITO v. Bombay Dyeing and . : 34ITR143(SC) , where such an argument was rejected. Mr. Justice Vimadalal went on to consider the second ground and he made it clear that he did not 'propose to deal with or express any definite opinion with regard to the question before us, as to whether the amendment effected in s. 5(1)(viii) of the Act by Finance (No. 2) Act, 1971, could be the basis of rectification proceedings in regard to assessments which were completed by 10th August, 1971. 'Thereafter, Mr. Justice Vimadalal went on to point out that the submission of the counsel for the petitioner in the case that the expression 'completed assessment' meant completed by the WTO and that it did not have to be final, in the sense that further proceedings were barred, though appeared to be in consonance with the view taken by the Supreme Court in Habibullah's case : 44ITR809(SC) , it was contrary to the view taken by the same court in Bombay Dyeing Company's case : 34ITR143(SC) . It was pointed out thus : 'It was observed in Habibullah's case : 44ITR809(SC) that assessment orders were, subject to the provisions relating to appeals, revisions, reassessment and rectification, final; whereas in the Bombay Dyeing Company's case : 34ITR143(SC) the view taken was that the assessment orders being liable to be rectified under s. 35 of the Indian I. T. Act, 1922, 'the principle of the finality of the orders or the sanctity of the existing rights cannot be effectively invoked'.'
20. Thus, Mr. Justice Vimadalal pointed out that there was clear divergence of views on a point which arose in those cases, and directly arose in the case before him. The learned judge then observed that he was not called upon to express any opinion as to which of those views was correct. The learned judge then proceeded to observe : 94ITR519(Bom) :
'Suffice it to say, that I am not prepared to hold that a view contrary to that which the revenue authorities have taken in the present case is unarguable, as Mr. Joshi (counsel for the revenue) would have us to hold. In my opinion, it is a debatable point of law as to whether the amending provision applies to a completed assessment against which no further proceedings were pending at the date of enactment of the amending provision in the case before us. Following the view taken in Volkart Brothers' case : 82ITR50(SC) , already cited above, I must, therefore, hold that the Appellate Assistant Commissioner had no jurisdiction to rectify his original order dated the 26th of June 1970.'
21. In a separate but concurring judgment, my learned brother, Desai J., has observed as follows (p. 536) :
'After a perusal of all these cases, it is impossible to hold that the submissions made by Mr. Palkhivala are unarguable and must be deemed to be totally concluded by the Supreme Court against the assessee by reason of its decision in Bombay Dyeing Company's case : 34ITR143(SC) . In this view of the matter, it must be held that the Appellate Assistant Commissioner was not competent to exercise powers of rectification under section 35(1) of the Wealth-tax Act which he purported to do by his order dated 22nd February, 1972.'
22. The observations from the judgment extracted above will clearly indicate that the Division Bench in Shah's case : 94ITR519(Bom) was called upon to decide a limited question whether on the facts of that case the AAC could validly exercise his jurisdiction under s. 35 of the W. T. Act. The decision in our view does not go further than that. It does not lay down in general a propositions that even while the assessment is pending the provisions of the retrospective amendment made in s. 5(1)(viii) of the W. T. Act by Act No. 32 of 1971, cannot be given effect to. The decision in Shah's case : 94ITR519(Bom) , therefore, is not of any assistance to the petitioner.
23. In the view which we have taken, we must hold that the WTO was fully entitled to give effect to the amended provisions in s. 5(1)(viii) of the W. T. Act in preference to the directions given by the Tribunal in the case of the assessee. The petition must, therefore, fail and must be rejected with costs.