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Mrs. Freny Rashid Chenai Vs. Assistant Controller of Estate Duty - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberWrit Petition No. 4059 of 1969
Judge
Reported in[1973]90ITR31(AP)
ActsEstate Duty Act, 1953 - Sections 5, 53(3) and 61; Land Acquisition Act
AppellantMrs. Freny Rashid Chenai
RespondentAssistant Controller of Estate Duty
Appellant AdvocateAdv. General
Respondent AdvocateP. Rama Rao, Adv.
Excerpt:
direct taxation - compensation - sections 5, 53 (3) and 61 of estate duty act, 1953 and section 18 of land acquisition act - enhanced compensation was awarded by courts in respect of land - assistant controller of estate duty issued notice dated 14.11.1969 to petitioner requiring her to show why mistake apparent from record should not be rectified under section 61 of act and enhanced compensation included in principle value of estate - petitioner challenged legality and validity of notice - petitioner contended that notice from assistant controller of estate duty under section 61 of act for rectification of alleged mistake is without jurisdiction - further contended that enhanced compensation which became payable to legal heirs of deceased was not property of deceased which passed at time.....sriramulu, j.1. two parcels of land measuring 22 acres 24 guntas, and 8 acres 23 guntas, situated in moosapet village, belonging to one rashid shapoor chenai, were, during his lifetime, acquired for the synthetic drugs project by the andhra pradesh government by notifications dated june 19, 1961, and january 18, 1962, issued under the land acquisition act. awards fixing compensation for those lands were made by the special deputy collector on march 31, 1963. compensation was received by rashid shapoor chenai during his lifetime. later, two more parcels of land measuring 131 acres 10 guntas, and 224 acres 24 guntas situated at qutbillapur in medchal taluk, were acquired by the andhra pradesh government for hindustan machine tools, units i and ii, by notifications dated november 1, 1963,.....
Judgment:

Sriramulu, J.

1. Two parcels of land measuring 22 acres 24 guntas, and 8 acres 23 guntas, situated in Moosapet village, belonging to one Rashid Shapoor Chenai, were, during his lifetime, acquired for the synthetic drugs project by the Andhra Pradesh Government by notifications dated June 19, 1961, and January 18, 1962, issued under the Land Acquisition Act. Awards fixing compensation for those lands were made by the Special Deputy Collector on March 31, 1963. Compensation was received by Rashid Shapoor Chenai during his lifetime. Later, two more parcels of land measuring 131 acres 10 guntas, and 224 acres 24 guntas situated at Qutbillapur in Medchal Taluk, were acquired by the Andhra Pradesh Government for Hindustan Machine Tools, Units I and II, by notifications dated November 1, 1963, and February 1, 1964, issued by the Government under the Land Acquisition Act. Possession of those lands was taken by the Government on December 4, 1963, and between 13th and 15th March, 1964, respectively. Awards were made by the Special Deputy Collector in respect of those lands on March 12, 1965, and March 19, 1965. The compensation awarded by the Special Deputy Collector for the total extent of the land at Qutbillapur was Rs. 4,29,360.68.

2. Rashid Shapoor Chenai died on November 4, 1963. The petitioner, who is the widow of the deceased and the ' accountable person ' under the Estate Duty Act, filed under Section 53(3) of the Estate Duty Act (hereinafter called ' the Act. ') an account of the properties passed on 'the death of the deceased, Rashid Shapoor Chenai. The estate duty assessment was completed by the Assistant Controller of Estate Duty on March 29, 1966. With regard to the lands acquired during the lifetime of Rashid Shapoor Chenai and after, their value was taken at the figures of compensation awarded for them by the Special Deputy Collector and on that basis the estate duty assessments were made by the Assistant Controller of Estate Duty under Section 58 of the Act.

3. Aggrieved by the assessment made by the Assistant Controller of Estate Duty, the accountable person filed an appeal before the Appellate Controller of Estate Duty, but the appeal involved points other than the valuation of the above lands. The Appellate Controller disposed of the appeal on April 5, 1969. A further appeal against the assessment was filed by the accountable person before the Income-tax Appellate Tribunal. Before the Income-tax Appellate Tribunal, two points were raised, but those points did not concern the valuation of the above lands.

4. The accountable person did not accept the awards made by the Special Deputy Collector in respect of those lands and, under Section 18 of the Land Acquisition Act, requested the Special Deputy Collector to refer the question of determination of the amount of compensation to the civil court. The Special Deputy Collector, accordingly, referred the matter to the City Civil Court. Those O.Ps. are Nos. 364 of 1965 and 325 of 1965 in respect of lands acquired for H.M.T. and O.P. Nos. 29/64 and 30/64 in respect of the lands acquired for synthetic drugs project. The former two references were disposed of on October 20, 1967, and the compensation awarded by the Special Deputy Collector was enhanced by Rs. 20,45,000. The latter two references were disposed of on March 3, 1967, and the compensation awarded by the Special Deputy Collector was enhanced by Rs. 1,90,000. Government did not accept the decisions of the courts enhancing the compensation and filed appeals in this court which are now pending.

5. On receipt of information that enhanced compensation was awarded by the courts in respect of the above said lands, the Assistant Controller of Estate Duty issued notice dated November 14, 1969, to the petitioner, requiring her to show cause why the mistake apparent from the record should not be rectified under Section 61 of the Act and the enhanced compensation included in the principal value of the estate ?

6. In this writ petition, the petitioner challenges the legality and validity of that notice, on the following grounds :

1. the notice issued by the Assistant Controller of Estate Duty under Section 61 of the Act for rectification of the alleged mistake is withoutjurisdiction;

2. the enhanced compensation which became payable to the legal heirs of the deceased was not the property of the deceased which passed at the time of his death;

3. for the first time a right was created in favour of the legal heirs of the deceased by virtue of the orders of the courts passed long after the death of the deceased, to receive enhanced compensation. It is not open to the department to relate back this property to the time when the deceased died, because there was no legal right created in favour of the deceased or his legal heirs at the time of death of the deceased to receive the enhanced compensation as determined by the courts in the proceedings subsequently taken; and

4. when on the enhanced compensation awarded after the death of the deceased, estate duty is not leviable, under Section 5 of the Estate Duty Act, there was no mistake apparent from the record with could be rectified under Section 61 of the Act.

7. On these grounds, the petitioner seeks a writ of prohibition or direction against the respondent for a declaration to the effect that the impugned notice is invalid and illegal, and for a direction restraining the Assistant Controller of Estate Duty from taking proceedings in pursuance of that notice.

8. The learned Advocate-General, appearing for the petitioner, raised the following contentions : (1) rectification of a mistake, if any, should have been made not by the Assistant Controller of Estate Duty, but by the Appellate Controller or the Income-tax Appellate Tribunal, in the orders of which the assessment order had merged; (2) the accountable person had only a claim to get extra compensation and that v/as only an inchoate right which could not be called ' property '. Whether that claim amounted to a right to property and whether such a right is capable of sale in open market, is a highly debatable question, and a mistake which has to be discovered after such a lengthy discussion, argument and debate, cannot be said to be a mistake apparent from the record ; (3) a mistake which has to be determined with reference to the references made to the civil court by the Collector under the Land Acquisition Act, cannot be said to be a mistake apparent from the record. The land acquisition proceedings and the O.Ps. in the civil court made under Section 18 of the Land Acquisition Act, are not parts of the record and hence, a mistake discovered with reference to that record will not be a mistake apparent from the record in this case ; and (4) the extra compensation received by the legal heirs of the deceased belonged to them and not to the deceased and hence it was not property that passed on the death of the deceased within the meaning of Section 5 of the Act, and hence no property escaped assessment. Thus, there was no mistake at all which was apparent from the record and under the guise of rectification, the enhanced compensation could not be taken into account. The impugned notice was, therefore, illegal and without jurisdiction.

9. The learned counsel appearing for the revenue contended to the contra and supported the order of the Assistant Controller of Estate Duty.

10. In order to appreciate the contentions raised by the learned Advocate-General, it is necessary to refer to Section 61 of the Estate Duty Act, under which the impugned notice has been issued. Section 61 reads thus:

' At any time within five years from the date of any order passed by him or it, the Controller, the Appellate Controller or the Appellate Tribunal may, on his or its own motion, rectify any mistake apparent from the record and shall, within a like period, rectify any such mistake which has been brought to the notice of the Controller, the Appellate Controller, or the Appellate Tribunal, as the case may be, by the person accountable I Provided that no such rectification shall be made which has the effect of enhancing the estate duty payable, unless the person accountable has been given a reasonable opportunity of being heard in the matter.'

11. A reading of the above section makes it manifest that the above section gives power to (1) the Controller of Estate Duty, (2) The Appellate Controller of Estate Duty, and (3) the Income-tax Appellate Tribunal, to rectify any mistake apparent from the record in their respective orders, within five years from the date of their respective orders. The power of rectification could be exercised by the aforesaid officers or the authorities either suo motu or at the instance of the accountable person. If, however, the proposed rectification has the effect of enhancing the estate duty payable, the officer or the authority concerned cannot rectify the assessment order unless he or it has served a notice upon the accountable person . and has given him a reasonable opportunity of being heard. In the instant case before us, the estate duty assessment was completed on March 29, 1966, and the impugned notice for rectification of the alleged mistake apparent from the record was issued by the Assistant Controller of Estate Duty, under Section 61 of the Estate Duty Act, on November 14, 1969, i.e., within a period of five years from the date of the assessment order.

12. In the account of the property passing on the death of the deceased, submitted by her, the accountable person had shown the value of the property of 585 acres of dry land at Kukatpalli and Ramavaram villages, at Rs. 58,500. Awards in respect of those lands made by the Special Deputy Collector were brought to the notice of the Assistant Controller of Estate Duty and the assessing officer observed that:

' Obviously, there cannot be any justification to take anything less.The accountable person has also not objected to the inclusion of thisvalue...'

13. As per the awards made by the Special Deputy Collector, the net value of the lands that were acquired for H M.T. Units was Rs. 4,11,647. It is this value that was adopted by the Assistant Controller of Estate Duty as the value of those lands.

14. Since the compensation awarded by the Special Deputy Collector for those lands acquired by the Government was not objected to be taken as the value of the lands for estate duty purposes, the question of valuation of the lands was neither a ground of appeal in the first appeal before the Appellate Controller, nor in the second appeal before the Income-tax Appellate Tribunal. The appeals to the Appellate Controller and the Income-tax Appellate Tribunal against the assessment were filed on points other than the question of valuation of the above said lands. Hence the order of the Assistant Controller of Estate Duty regarding the valuation of the lands had become final and conclusive.

15. From a reading of Section 61 of the Estate Duty Act, it is clear that the authority which could rectify an order is the authority which passed the order, and not any higher authority. If any authority is required for that purpose, we find it in Abdul Rahiman Sait v. Income-tax Officer, Alleppey, [1958] 33 I.T.R. 106 (Ker.). That was a case arising under Section 35 of the Indian Income-tax Act, 1922, the language of which is similar to the language of Section 61 of the Estate Duty Act. The decision taken by the Assistant Controller of Estate Duty regarding the valuation of those lands had become final and conclusive, because that was not the subject-matter of appeal either before the Appellate Controller or before the Income-tax Appellate Tribunal. It is, therefore, evident that only one order has been passed with regard to the valuation of the lands in question, and that is the order of tie Assistant Controller of Estate Duty. The alleged mistake which is now sought to be rectified is in the valuation of the said lands. Since the alleged mistake has occurred in the order passed by the Assistant Controller of Estate Duty, which was not the subject-matter of appeal either before the Appellate Controller or before the Income-tax Appellate Tribunal, it was the Assistant Controller of Estate Duty alone that could rectify such a mistake.

16. The decision of the Calcutta High Court in Indra Co. Ltd. v. Income-tax Officer, : [1971]80ITR400(Cal) , to which our attention has been invited, does not help the accountable person. In that case, the loss that was claimed was not only the subject-matter before the Income-tax Officer but was also before the Appellate Assistant Commissioner in appeal. The computation of the loss as determined by the Appellate Assistant Commissioner was sought to be rectified on the ground that there was a mistake in the computation of such loss. In those circumstances, K. L. Roy J. has rightly observed that:

'... where the assessment order has been the subject of an appeal and the operative order is the order of the Appellate Assistant Commissioner, the Income-tax Officer will not have jurisdiction to rectify such an order, because Section 35 of the Act of 1922 does not empower him to rectify the order of the Appellate Assistant Commissioner.'

17. The fact which distinguishes the Calcutta case from the present case is that in the former, the subject-matter of assessment was also the subject-matter of appeal, and hence the learned judge observed that the subject-matter of the assessment merged in the order of the Appellate Assistant Commissioner. In the instant case, as we have stated above, the subject-matter of assessment, i.e., the valuation of lands, was not the subject-matter of appeal before the Appellate Controller, or the Income-tax Appellate Tribunal. Hence, that portion of the order of the Assistant Controller of Estate Duty regarding valuation of the lands did not merge in the order of the Appellate Controller or the Income-tax Appellate Tribunal. The mistake that was sought to be rectified by the Assistant Controller of Estate Duty in this case was a mistake that had occurred in the order passed by him, and not in the order passed by the Appellate Controller of Estate Duty or the Appellate Tribunal. Hence, the first contention raised by the learned Advocate-General fails and is rejected.

18. We will now proceed to consider as to what is a mistake apparent from the record which could be rectified under Section 61 of the Estate Duty Act. The mistakes that can be rectified under this section, are those which are 'apparent from the record' and not merely the arithmetical or clerical errors. There can be no doubt that a clerical or an arithmetical error would amount to a mistake apparent from the record. It is immaterial as to how the mistake occurred, or who was responsible for it. A mistake apparent from the record is a mistake that is manifest, plain or obvious, a mistake that can be realised without a debate or dessertation. A mistake which can be discovered by a process of elucidation or argument or a debate, cannot be considered to be a mistake apparent from the record. The scope of the expression ' mistake apparent from the record' is much wider than the expression ' mistake apparent on the face of the record '.

19. It is not merely an error of fact that can be rectified under this section, but also obvious mistakes of law. A mistake in valuation of a property included in the account can be rectified under Section 61 of the Act. There is nothing in the section which prevents rectification of a mistake in valuation apparent from the record, even if the valuation is a subject-matter of appeal under the Act.

20. In Asok Textiles case, : [1961]41ITR732(SC) it was observed that:

'The restrictive operation of the power of review under Order 47, Rule 1, Civil Procedure Code, is not applicable in the case of Section 35 of the Act...'

21. Since the language of Section 35 of the Indian Income-tax Act, 1922, is in pari materia with the language of Section 61 of the Estate Duty Act, it follows from the above ruling that the restrictive operation of the power of review under Order 47, Rule 1, of the Civil Procedure Code is not applicable to the cases of rectification of mistakes under the taxing statutes.

22. In Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar, : [1959]36ITR350(SC) the learned judges of the Supreme Court, dealing with the case of rectification of a mistake under Section 35 of the Indian Income-tax Act of 1922, observed that:

' The power under Section 35 is, no doubt, limited to rectification of mistakes which are apparent from the record. The mistake contemplated by this section is not one which is to be discovered as a result of an argument, but it is open to the Income-tax Officer to examine the record including the evidence, and if he discovers any mistake he is entitled to rectify the error, provided that if the result is enhancement of assessment or reducing the refund, then notice has to be given to the assassee and he should be allowed a reasonable opportunity of being heard.'

23. In T.S. Balaram, Income-tax Officer, Company Circle IV, Bombay v. Volkart Brothers, : [1971]82ITR50(SC) the learned judge, Hegde J., speaking for the Supreme Court, held that:

' A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may, conceivably, be two opinions.'

24. Thus, from the above discussion it follows that a mistake which could be rectified under Section 61 of the Estate Duty Act is one which is obvious and patent from the record and not one which could be discovered by a long-drawn process of reasoning and argument.

25. Since the language used in Section 61 of the Act is ' mistake apparent from the record ', the meaning of the word ' record ' has to be ascertained. The word 'record' in this connection has been judicially interpreted. In Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar, the learned judges of the Supreme Court interpreted the word ' record ' as follows :

' The words used in the section are ' apparent from the record ' and the record does not mean only the order of assessment, but it comprises all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under Section 35 of the Act to look into the whole evidence and the law applicable to ascertain whether there was an error. If he doubts the written down value of the previous year, it is open to him to check up the previous calculations and if he finds any mistake, it is open to him to make fresh calculations in accordance with the law applicable including the rules made thereunder'

26. Their Lordships further observed at page 358 that:

' A mistake contemplated by this section is not one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund then notice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard.'

27. Rejecting the argument that the record must be the assessment record of the relevant assessment year and not the assessment record of other years, the Supreme Court observed that :

' A fortiori if he discovered that the very basis of the different assessments was erroneous because of an initial mistake in determining the written down value could it be said that this would not be a mistake apparent from the record. And if in order to determine the correct written down value the Income-tax Officer makes correct calculations, can it be said that that is not rectifying a mistake apparent from the record but is de hors it.'

28. Thus the distinction, their Lordships observed, ' was a distinction without a difference '.

29. The next case which explains the meaning of the word ' record ' is Arvind N. Mafatlal v. Income-tax Officer, North Satara, [1957] 32 I.T.R. 350, 356 (Bom.). In order to appreciate the contentions raised therein, and the view of law expressed by the Bombay High Court in that case, we may have to know the facts.

30. Those facts are:

There was a firm named Mafatlal Gagalbhai & Sons. The firm consisted of four partners, one of whom was Navinchandra Mafatlal, who held a 5/16 share in the profits and losses of the firm. The firm was registered under the provisions of the Income-tax Act, The firm owned and possessed 40 shares of a private limited company, named Mafatlal, Apte and Kantilal & Company, and the registered office of the firm is at Sikerwadi in Phalton State. Although the firm owned 40 shares of the said company, those charges stood in the names of its partners. 10 shares of the said company nominally stood in the name of Navinchandra Mafatlal, although they really belonged to the firm. In Phalton State, the Income-tax Act was in force, and that Act was the Indian Income-tax Act, 1922, adopted verbatim. Navinchandra was a non-resident as regards Phalton State. The company made it huge profit of Rs. 1,09,168 for the year ending September 30, 1945. The company paid income-tax of Rs. 34,114 and super-tax of Rs. 6,823 and the surplus that remained was Rs. 68,228. The company did not declare the surplus as dividends amongst its shareholders. Phalton State merged with India and the Indian Income-tax Act, 1922, became applicable to it, but the Phalton State Income-tax Act, which was repealed, remained in force for certain purposes. On March 17/1951, the Income-tax Officer passed an order under Section 23A of the Indian Income-tax Act, 1922,.directing that the undistributed portion of the assessable income of the company of the previous year, ended on September 30, 1945, as computed for income-tax purposes for the assessment year 1946-47 and reduced by the amount of income-tax and super-tax payable by the company in respect thereof, shall be deemed to have been distributed as dividends amongst the shareholders as at the general body meeting held on March 11, 1946. The Income-tax Officer then issued a notice to Navinchandra under Section 22(2) of the Income-tax Act for assessing him to income-tax as a non-resident on interest and dividend deemed to have been received in Phalton State for the year ending December 31, 1946. The Income-tax Officer accepted the contention of Navinchandra that 10 shares of the aforesaid company, although nominally stood in his name, really belonged to the firm of which he was the partner. The Income-tax Officer then determined the total world income of Navinchandra at Rs. 19,75,328 which included Rs. 18 interest and Rs. 8,528 being the 5/16th share in the dividend deemed to have been distributed under Section 23A of the Indian Income-tax Act of 1922, from the profits of the company for the year ending September 30, 1945, received through the firm. The total income of Navinchandra in the Phalton State was thus determined at Rs. 8,546. The amount of Rs. 8,528 which was taken as the share of dividend of the company was presumably arrived at by the Income-tax Officer as 5/16 of the dividend on 40 shares held by the firm out of the total 100 shares of the company in respect of the net income of Rs. 68,228, which was deemed to have been distributed as dividend under Section 23A of the Act.

31. On April 13, 1954, the Income-tax Officer served a notice on Navinchandra intimating that the dividends deemed to have been distributed under Section 23A of the Act in respect of the shares of the company held by Navinchandra had been taken at Rs. 8,528 net for the assessment year 1947-48 under the Phalton State law without being grossed up, though credit for the tax deemed'to have been paid by them had been given credit and as there was a mistake apparent from the record, the Income-tax Officer intended to rectify the same under Section 35 of the Indian Income-tax Act, 1922.

32. On behalf of Navinchandra, one of the contentions raised was that there was no mistake apparent from the record which could be rectified under Section 35 of the Income-tax Act. All the objections raised on behalf of Navinchandra were overruled and a sum of Rs. 3,876 being the tax deemed to have been paid on behalf of Navinchandra was added and the total world income of Navinchandra was determined at Rs. 19,79,204. The legal heirs of Navinchandra who had by that time died filed a writ petition in the Bombay High Court with a prayer that the order of rectification should be quashed.

33. In the High Court, it was contended on behalf of the assessee that if in ascertaining whether there was an error apparent from the record, the Income-tax Officer has not only to look at the record of the assessee but also to look at the record of the company, that is to say, he had to traverse beyond the record of the assessee, it could not be said that the error fell within Section 35 of the Act. It was further urged that as the evidence has to be considered in deciding whether an error was committed, it ceased to be an error apparent from the record.

34. Dealing with those contentions, the Bombay High Court held that:

' It is sufficient to observe that there is no warrant for holding that in ascertaining whether there is an error apparent from the record, the officer can look at the order of assessment alone and nothing else. All proceedings which constitute evidence on which the assessment order is passed must be regarded as the record for the purpose of Section 35. We are also unable to hold that the Income-tax Officer is prohibited from looking at the evidence to ascertain whether an error has been committed.'

35. The court further observed that :

' The jurisdiction of the Income-tax Officer under Section 35 of the Act is only to rectify a mistake which is ' apparent from the record ' and is not restricted to rectification of mistakes which are clearly clerical or arithmetical. The expression ' apparent from the record ' should not be equated with the expression ' apparent on the face of the record ': The mistake to be rectified should, however, be a mistake ' patent on the record and not a mistake which may be discovered by a process of elucidation, argument or debate. '

36. As held by the Supreme Court in Sidhramappa Andannappa Manvi v. Commissioner of Income-tax, [1952] 21 I.T.R. 333 (Bom.), the court further held that, in ascertaining whether there was an error apparent from the record, the Income-tax Officer must not confine himself to the order of assessment of the assessee alone. All proceedings which constitute evidence on which the assessment order is based must be regarded as record for the purposes of Section 35. The Income-tax Officer is not prohibited from looking at the evidence in ascertaining whether an error has been committed.

37. However, on facts, the court held that the benefit of credit of tax under Section 18(5) and the corresponding grossing up under Section 16(2) were available only to the, registered shareholder and not to the real owner of the shares. Viewed thus, the High Court held that there was no mistake apparent from the record which could be rectified under Section 35. However, we are not concerned with the result of that writ proceeding.

38. The above decision of the Bombay High Court was upheld by the Supreme Court in Income-tax Officer, North Satara, v. Arvind N. Mafatlal, : [1962]45ITR271(SC) .

39. In Lala Rajeshwar Pershad v. Income-tax Officer, 'A' Ward, Ambala Cantt., [1959] 36 I.T.R. 492 (Punj.), Grover J. (as he then was) of the Punjab High Court quoted with approval the decisions of the Bombay High Court in Arvind N. Mafatlal v. Income-tax Officer, [1957] 32 I.T.R. 350 (Bom.) and Sidhramappa Andannappa Manvi v. Commissioner of Income-tax.

40. It may also be mentioned here that in several cases the Supreme Court and the Full Bench of a High Court held that the firm's assessment order does not form part of the record of its partners' personal assessment, and, consequently, a partner's assessment cannot be rectified under Section 35 apart from Section 155(1) of the Act, if on completion of the firm's assessment it is found that the partner's share of profit has been taken at a wrong figure. Those decisions are found in Income-tax Officer v. S.K. Habibullah, : [1962]44ITR809(SC) and Ram Bhagat v. Commissioner of Income-tax, [1966) Cl I.T.R. 146 (Punj.) [F.B.] and Ors cases.

41. Mr. Palkhivala, in his book, Law and Practice of Income-tax, at page 803, observed that it was difficult to reconcile the above decisions with the decision that the assessment order of a partner of a firm, which was refused registration, can be rectified under this section after the firm is granted registration as a result of appeal and an appropriate order is passed in the firm's case. (See V.S. Arulanandam v. Income-tax Officer, [1961] 43 I.T.R. 511 (Mad.))

42. In Mahendra Mills Ltd. v. P.B. Desai, Appellate Assistant Commissioner, : [1971]79ITR52(Guj) , a Division Bench of the Gujarat High Court held that ' . . . . the evidence on which the assessment was based became a part of the record as contemplated by Section 35 of the Act.'

43. Thus, from the aforesaid discussion, it emerges that for ascertaining a mistake which could be rectified under Section 35 of the Income-tax Act, the Income-tax Officer can look not only at the assessment order of the relevant assessment year, but also the assessments of the assessee made in other years, and also into all proceedings which constitute evidence and material on which the assessment order is based. The expression ' apparent from the record ' cannot be equated to the expression 'mistake apparent on the face of the record '.

44. For rectifying a mistake under Section 61 of the Estate Duty Act, similar to Section 35 of the Indian Income-tax Act, 1922, it must be a mistake and not a mere change of opinion. In Ethel Rodrigues v. Assistant Controller of Estate Duty, [1963] 49 I.T.R. (E.D.) 128 (Mys.), Hegde J. (as he then was), speaking for the Mysore High Court, held that:

' Where the Controller has made his own valuation of the estate of a deceased person under Section 36 of the Estate Duty Act, 1953, he has no jurisdiction to rectify the assessment under Section 61 on the ground that the estate has been taken at an enhanced value in the probate proceedings. By taking the enhanced value put upon the estate in the probate proceedings he cannot be said to rectify any mistake apparent from the record of the estate duty assessment but he would be changing his opinion about the valuation of the estate because some other authority has valued the estate differently. For the purpose of Section 61, the only record that the assessing authority can look into is the record relating to the assessment of estate duty and not any other record such as the record in the probate proceedings which is not relevant.

For the purpose of enhancing the value of an estate on the basis of the value taken in the probate proceedings, the Controller has to invoke the provisions of Section 59 and proceed to reassess and for such a reassessment the bar provided in Section 73A will operate.'

45. It is clear from the above decision that only a mistake in the assessment order could be rectified under Section 61 of the Estate Duty Act, but not a decision on account of the change of opinion on the part of the assessing officer.

46. It would be a mistake if it is ascertainable from the assessment record of the assessee and the evidence and material on which the assessment order is based. But, it would be a mere change of opinion, if other record, unconnected with the assessment of the assessee, had to be looked into for the purposes of ascertaining whether there was escapement of any property from assessment.

47. ' Mistake ' means a state of mind that is not in accord with the facts. While a mistake is generally regarded as a mental condition, state of mind or belief, it is also defined as an act which would not have been done, or an omission which would not have occurred but for ignorance, forgetfulness, inadvertance, mental 'incompetence, surprise, misplaced confidence, or imposition. (See Corpus Juris Secundum, volume LVIII, page 830).

48. Coming to the facts of this case, we will have to ascertain whether (i) there is a mistake in the assessment order, or a mere change of opinion on the part of the assessing officer, and (ii) whether that mistake is obvious and patent from the record, or it has to be discovered by elucidation, argument, debate or by a long-drawn argument, and whether that mistake has been discovered from the record of the assessee.

49. If there is a mistake apparent from the record, then the assessing officer would have jurisdiction to rectify it under Section 61 of the Estate Duty Act.

50. The Assistant Controller of Estate Duty, in the instant case, merely accepted the value of the lands of the deceased that were acquired by the Government under the Land Acquisition Act, which was determined by the Special Deputy Collector in his awards made in respect thereof. The accountable person had no objection to the Assistant Controller of Estate , Duty adopting the figures of compensation awarded by the Special Deputy Collector in his awards in respect of these lands ; that is to say, the Assistant Controller of Estate Duty did not estimate the market value of the lands on the date of death of the deceased, but merely accepted the figures of compensation awarded by the Special Deputy Collector in respect of those lands. If the Assistant Controller of Estate Duty had not accepted the values of the properties as shown in the awards, or the returns filed by the accountable person but had estimated their values, then he would have no jurisdiction to further correct those values with reference to the awards passed by the civil court, on references made to it. In such a case, it would have been a change of opinion, and not a mistake apparent from the record.

51. The valuation of the lands was based on the award, and that award by reason of the references made to the civil court, stood modified. The fact that the award passed by the Special Deputy Collector was modified by the civil court on a reference made to it under Section 18 of the Land Acquisition Act, forms part of the record, from which the mistake discovered by the assessing officer is apparent. Awards were thus materials or pieces of evidence on which the assessment order was based. The Assistant Controller of Estate Duty had, therefore, jurisdiction to rectify such a mistake under Section 61 of the Estate Duty Act.

52. The next question that may have to be considered is whether the mistake in this case has been discovered by a long-drawn argument or debate, or is one which is obvious and patent from the record. In this connection, the learned Advocate-General, appearing for the petitioner, relied upon the decision in T.S. Balaram, Income-tax Officer v. Volkart Brothers, approving the decision of the Bombay High Court in Volkart Brothers v. Income-tax Officer, [1967] 65 I.T.R. 179 (Bom.), wherein their Lordships have held that:

' A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions. A decision on a debatable point of law is not a mistake apparent from the record ...'

53. Applying these principles to the facts of this case, we find that, for discovering the mistake in valuation, the Assistant Controller of Estate Duty had not taken recourse to a long-drawn reasoning, or something which is de hors the record. On the basis of the award the Assistant Controller of Estate Duty adopted the values of the properties included in the return. That award stood modified by the civil court. The proceeding before the civil court modifying the award of the Special Deputy Collector in respect of those lands, should also be considered as part of the record. He has taken into account the modified award. In adopting that figure, neither the assessing officer had to investigate into the facts, nor had he applied any argument or adopted a long-drawn reasoning. We are, therefore, of the opinion that there was a mistake apparent from the record in this case which could be rectified under Section 61 of the Act.

54. Incidentally, we may mention that the compensation that was awarded by the Special Deputy Collector in respect of Qutbullahpur lands was enhanced by the civil court by Rs. 20,45,000 and the compensation for Moosapet lands, by Rs. 1,90,000, Obviously, these figures show that the values adopted by the Assistant Controller of Estate Duty were not their correct market values on the date of acquisition of the lands, or on the date of the death of the deceased. No reasonable person could have come to a different conclusion on the basis of those figures.

55. The last argument that was addressed by the learned Advocate-General was that the right to receive 'extra compensation' was, at best, a claim and an inchoate right and was not ' property ' to which Section 5 of the Estate Duty Act was applicable and when it was not ' property ' which passed on the death of the deceased and the charging Section 5 of the Act was not attracted, there was no mistake apparent from the record which could be rectified under Section 61 of the Act. In this connection, the learned Advocate-General relied upon a decision of this court in Khan Bahadur Ahmed Alladin & Sons v. Commissioner of Income-tax, : [1969]74ITR651(AP) . We have elaborately discussed this question in the connected Writ Petition No. 54 of 1970 Mrs. Khorshed Shapoor Chenai v. Assistant Controller of Estate Duty : [1973]90ITR47(AP) . For the reasons given therein, which we may briefly state here, we hold that the decision relied upon by the learned Advocate-General does not render any assistance to him in this case.

56. By the nature of acquisition proceedings under the Land Acquisition Act, the owner of the lands acquired by the Government gets a right to receive compensation for those lands at their market value on the date of acquisition. The right of the owner, whose lands have been acquired by the Government, springs directly from the acquisition of the lands by the Government., It is an indivisible right. There are no two rights, one to receive the compensation and the other to receive extra compensation. The legal heir, i.e., the accountable person in this case, has not received compensation in her own individual right but has received the compensation in respect of the lands belonging to the deceased and in her capacity as the legal heir of the deceased, whose lands have been acquired. We, therefore, hold, for the elaborate reasons given in our order in Writ Petition No. 54 of 1970, that the right to receive the compensation for the lands acquired by the Government was a valuable right which could be sold in open market. That is ' property ' which passed on the death of the deceased. Section 5 of the Estate Duty Act was, therefore, attracted and, in view of the large discrepancy between the award made by the Special Deputy Collector and the civil court, there was a mistake apparent from the record which the assessing officer had jurisdiction to rectify under Section 61 of the Act. The impugned notice is, therefore, valid and legal. The writ petition fails and is dismissed with costs. Advocate's fee Rs. 100.


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