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Mannalal Soorana Vs. Wealth-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)4ITD131(Delhi)
AppellantMannalal Soorana
RespondentWealth-tax Officer
Excerpt:
1. the assessee's appeals relating to the assessment years 1973-74 to 1975-76 against the orders of the commissioner, jaipur, were disposed of by the tribunal vide its order dated 16-11-1981 in wt appeal nos.527 to 529 (jp.) of 1980. by this order, the order(s) of the commissioner (appeals) was sustained upholding the penalties levied under section 18(1)(c) of the wealth-tax act, 1957 ('the act'), for each of the three assessment years. the assessee has now moved a miscellaneous application under section 254(2) of the 1961 act stating that there are certain mistakes apparent from the record in the above order, inasmuch as some of the facts mentioned in the tribunal's order are not borne out from the record and also certain submissions made during the course of the hearing of the appeals.....
Judgment:
1. The assessee's appeals relating to the assessment years 1973-74 to 1975-76 against the orders of the Commissioner, Jaipur, were disposed of by the Tribunal vide its order dated 16-11-1981 in WT Appeal Nos.

527 to 529 (Jp.) of 1980. By this order, the order(s) of the Commissioner (Appeals) was sustained upholding the penalties levied under Section 18(1)(c) of the Wealth-tax Act, 1957 ('the Act'), for each of the three assessment years. The assessee has now moved a miscellaneous application under Section 254(2) of the 1961 Act stating that there are certain mistakes apparent from the record in the above order, inasmuch as some of the facts mentioned in the Tribunal's order are not borne out from the record and also certain submissions made during the course of the hearing of the appeals have not been incorporated in the order passed by the Tribunal. It has also been stated that the quantum appeals against the assessments which were decided by the Tribunal in favour of the assessee were not considered by the Tribunal which were material for determination of the issue. It has, therefore, been urged that the correct facts be recorded, all the submissions made by the assessee should be considered and the order of the Tribunal in quantum appeals also should be considered along with the authorities relied therein.

2. The assessee has in para 3 of the miscellaneous application pointed out that the following facts recorded in para 5 of the Tribunal's order do not emerge out of the assessment orders, penalty orders or orders of the Commissioner (Appeals) or other material on record of the Tribunal: It appears that as a result of subsequent enquiries made by the department it came to light that transaction made in the account of Shri Motichand Dhandia were not genuine. The department also came in possession of the material that the assessee had also concealed particulars of other wealth for the assessment years 1963-64 and 1965-66 as well as the assessment years 1966-67 and 1967-68. The department had issued notices under Section 17 of the WT Act for the assessment years 1963-64 and 1965-66 for re-assessing the net.

wealth of these years. The assessee appears to have challenged the proceedings under Section 17 of the WT Act for the assessment years 1963-64 and 1965-77 in wrii petition before the Hon'ble High Court of Judicature for Rajasthan.

3. It may be pointed out that the above facts incorporated in para 5 of the order of the Tribunal were recorded taking into consideration the submissions made by the learned departmental representatives which were not controverted and the paper book filed by the assessee as well as by the revenue. Even in the miscellaneous application it has not been stated that the above facts recorded in para 5 of the Tribunal's order were not correct. The only submission made is that these facts are not borne out from the assessment orders, penalty orders, etc. The submissions made by the learned departmental'reprcseritative as well as the assessee's counsels at the time of hearing of the appeals are as much part of the records as any other document. Since the above facts were the results of the submissions made by the departmental representative as well as the paper book, we do not find that there is any mistake in recording those facts. This contention of the assessee, therefore, deserves to be rejected. The other submissions are that certain arguments have not been incorporated. These are mentioned in sub-paras (i), (ii), (iii) and (iv) of para 4 of the miscellaneous application. The Tribunal did not consider it necessary to go into the contentions mentioned therein as the Tribunal had otherwise held that the assessee had concealed the particulars of the assets on the basis of which penalty was imposed by the WTO under Section 18(1) (c).

4. The only contention of the assessee which we consider as very material for the purpose of determination of the issue and which was not considered by the Tribunal at the time of passing the order is that the orders of the Tribunal dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7,8,9 & 10 (Jp.) of 1978-79 relating to the assessment years 1972-73 to 1974-75 were not considered. These orders were not considered by the Tribunal as copies of these orders were not available with the Tribunal as the same were not filed by the assessee. According to Shri Ranka, since these orders in quantum appeal were material, these should have been considered by the Tribunal and, according to him, this is a mistake apparent from the record and these orders should be considered now. Shri Swarup, the learned departmental representative, maintained that there was no mistake apparent from records and it was tantamount to review, which could not be equated with mistakes apparent from records. We agree that review is not permissible under Section 35 but the point for consideration is whether it would be review or an apparent mistake. We shall discuss the same in the subsequent paragraphs.

5. In our opinion, as we have said earlier, the orders of the Tribunal in quantum appeals with reference to which penalty has been imposed by the WTO under Section 18(1)(c) are material. Therefore, these deserve to be considered. In view of these facts, a finding has to be recorded with reference to these facis. The conclusion of the Tribunal are contained in paras 9 to 11 of its order dated 16-11-1981 sustaining the orders of the Commissioner (Appeals) upholding the penalties levied by the WTO. In view of the consideration of the order of the Tribunal in quantum appeals dated 17-7-1978, referred to supra, paras 9 to 12 of the order of the Tribunal will be substituted as under: 9. The assessee further contended that there was no concealment during the impugned years. Certain additions were made by the Wealth-tax Officer for the assessment year 1967-68. The same were deleted by the AAC. No second appeal was preferred by the revenue against the order of the AAC. The revenue was satisfied with the finding of the AAC. Thus the addition made by the ITO was non-existent. However, addition of Rs. 85,919 was made in terms of the settlement order dated 24-3-1975. This impugned amount came on surface during the assessment year 1967-68. This amount was not hidden and was very well known to the assessing authorities in the course of assessment proceedings for the assessment years 1973-74 to 1975-76. It was also stated that while making the assessment order dated 9-8-1979 for the assessment year 1972-73 in para 5, the WTO made the following observations: It is further noticed that in the assessment year 1972-73 an amount of Rs. 85,919 was included in the total wealth of the assessee under the head additional wealth as per settlement order of the CIT dated 24-3-1975. This point was discussed with the assessee's representative during the hearing of the case. The assessee did not put up any objection when I proposed the addition of Rs. 85,919 this year also under the same head.

It was submitted that he initiated penalty proceedings under Section 18(1)(c) for the assessment year 1972-73 but on furnishing the reply dated 18-9-1979, he dropped the penalty proceedings. It was submitted that for the assessment years 1973-74 to 1975-76, addition of Rs. 85,919 was made on the basis of the assessment order for the assessment year 1972-73 and penalty proceedings under Section 18(1)(c) were initiated for these years also and similar reply as for the assessment year 1972-73 was also given for these assessment years. However, the WTO for no valid reasons imposed penalty for these years while no penalty was levied for the assessment year 1972-73 under similar circumstances. According to Shri Ranka, the learned counsel of the assessee, the revenue knew the impugned wealth and there was no furnishing of inaccurate particulars.

Another contention made was that the impugned amount having been assessed in the income-tax assessment proceedings for the assessment year 1967-68, and the wealth-tax assessment proceedings for the assessment years 1967-68 to 1972-73 could not be said to be concealed. For the same default, penalty could not be imposed from year to year and the default if any was in the assessment year 1967-68 and not during the assessment years 1973-74 to 1975-76.

Alternatively, if any amount of penalty was sustained for the assessment year 1973-74, no penalty could be sustained for the assessment years 1974-75 and 1975-76. Lastly, in the ratio of the decision of the Supreme Court reported in the case of Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864, Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 314, no penalty was exigible as the liability on account of income-tax, wealth-tax had to be allowed and after allowing that liability, the assessee was not left with any wealth.

It was also stated that the decision of the Delhi High Court reported in CWT v. Raj Paul Chawla [1979] 117 ITR 574 was not considered. Further the decision of the Madras High Court in the case of CWT v. G.D. Naidu [1965] 58 ITR 301 and of CWT v. Banarshi Prasad Kedia [1970] 77 ITR 159 (Cal.) referred to in the order of the Tribunal in quantum appeals were also not considered.

10. We have given a careful consideration to the rival submissions.

We shall first consider the effect of th'e order of the Tribunal dated 17-7-1978 in quantum appeals. Tn quantum appeal, the dispute was as to whether the provisions of Section 2(m)(iii)(b) of the WT Act, 1957 with regard to outstanding liability were applicable. In other words, whether the income-tax liability was a debt owed and outstanding for a period of more than 12 months and, therefore, is not deductible while computing the net wealth of the assessee. The Appellate Tribunal in the said order has held that the debts outstanding were not outstanding for a period of more than 12 months and, therefore, the same were to be allowed as a deduction and consequently, the assessee had no wealth to the extent of the liabilities outstanding. Relying upon the decision of the Hon'ble Madras High Court in the case of Shri G.D. Naidu [1965] 58 ITR 301, the contention of Shri N.M. Ranka was that the inclusion of the amount of Rs. 85,919 in the income for the assessment year 1967-68 was the result of a settlement arrived at between the department and the assessee. It was not within the scope of the Income-tax Act. It was nothing more than an Executive act by which the Commissioner included the amount in the income of the assessee. The liability arising out of such a settlment, according to Shri Ranka was not a liability under the Income-tax Act or, the Wealth-tax Act, but it was a liability which could be enforced under Civil Law only and not under the IT Act, etc., and that being so, the provisions of sub-Clause (b) of Clause (iii) of Sub-section (m) of Section 2 of the WT Act were not applicable as in the case of G.D. Naidu and this contention has been accepted by the Tribunal in the quantum appeal.

He further submitted that no regular order of assessment order was passed by the ITO bringing the amount of Rs. 85,919 to tax under the Income-tax Act. It was at the stage of proceedings before the Tribunal that this amount was surrended by the assessee in terms of settlement and the Tribunal passed orders to include the same in the income of the assessee. What Shri Ranka submitted was that the procedure adopted was not prescribed under the Income-tax Act, inasmuch as the Appellate Tribunal had no power to enhance the assessment and it was a result of the settlement arrived at by the assessee with the CIT that the amount of Rs. 85,919 was included in the assessment by the Tribunal at the stage of appeal before it and the ITO merely gave effect to the order of the Tribunal on 30-4-1976 while passing order under Section 253 of the IT Act. When this finding has been given by the Tribunal in the quantum appeal that the liability was not under the Income-tax Act, but as a result of settlement, the provisions of sub-Clause (b) of Clause (3) of Section 2(m) of the WT Act were not at all attracted and there was no question of applying the limitation of the demand being outstanding for more than 12 months. It was a debt like any other debt which could be carried forward indefinitely till it was actually paid. In view of the above position, the provisions of Section 2(m)(iii)(b) are not applicable to the facts of the case and the liability which is a debt owed has to be treated like any other liability and not as income-tax liability which could not be allowed as a deduction if it was outstanding for more than 12 months. That being so, even though the liability was outstanding for more than 12 months it was still payable by the assessee and wealth to that extent had to be reduced. Shri Ranka at page 49 of the Paper Book had given the liability at Rs. 80,606 against the inclusion of 85,909 leaving a small difference of Rs. 5,313. Shri Ranka then pointed out that the assessee was under the bona fide belief that it had no taxable wealth taking into consideration the liabilities thereon and taxes already paid at Rs. 12,500 on 9-8-1973, Rs. 12,5,00 on 6-11-1973 and Rs. 62,500 from 17-12-1973 to 7-5-1974 and the small amount of Rs. 5,313 could not be visualised by the assessee and, therefore, no penalty was exigible. In view of the fact that the Appellate Tribunal has held in the quantum appeal that the amount of liability was not under the income-tax but as a result of settlement which was not a liability under the Income-tax Act but like any other liability which could be carried forward indefinitely we hold that the assessee's wealth to the extent of liability had depleted. The other point argued by Shri Swarup, the learned departmental representative was that computation of liability at Rs. 80,606 was not correct inasmuch as Shri Ranka had computed the tax liability for amount of Rs. 85,919 at the highest level. According to him, the liability should have been taken at the lowest slab or alternatively at the average rate. In our opinion, when concealed income is detected, it is added to the income returned by the assessee and the highest slab is applicable to such income. In fact, such a situation was visualised under the scheme of imposing penalties. The major portion of liability under the Income-tax Act is for title assessment year 1967-68 on account of the income-tax payable and the penalty thereon. The penalty under Section 271(1)(c) of the Income-tax Act as it stood at the relevant time could be levied on the difference between the returned income and the assessed income. By this process the penalty was calculated on the tax on concealed income as the highest slab. In this view of the matter, we are of the opinion that the calculation made by Shri Ranka at Rs. 80,606 cannot be said to be erroneous. If liability of Rs. 80.606 as worked out by Shri Ranka is taken into consideration, the amount of the assets which was liable to tax would be at Rs. 5,313 only which, in our opinion, could be left out bona fide as the assessee could entertain such a belief that after allowing the liability which was then not quantified and payments already made there was no taxable wealth. In view of these observations, we are of the opinion that no penalty was exigible for any of the three assessment years. We, therefore, allow the assessee's appeals for all three years.

11. So far as the other contentions made on behalf of the assessee are concerned as enumerated above, we do not consider it necessary to go into the same. Our earlier findings in our order dated 16-11-1981 on the applicability of the provisions of Section 2(m)(iii)(b) were altogether on different assumptions and, therefore, the same will not hold good in the present case.

6. Paras 9 to 12 of our order dated 16-11-1981 will, therefore, stand substituted as above.

1. I have carefully gone through the order dated 6-2-1982, passed by the learned Accountant Member on the assessee's application made under Section 35(1)(e) of the Wealth-tax Act, 1957 [Section 254(2) of the 1961 Act wrongly mentioned by the Accountant Member] for rectification of the Tribunal's order dated 16-11-1981. As I respectfully differ from the view taken by the learned Accountant Member, I record my separate order giving brief reasons in support of my viewpoint. Though the assessee has stated several mistakes in the application arising in the Tribunal's order dated 16-11-1981, but the Accountant Member has discussed only one mistake and I will, therefore, confine my discussion only to the mistake being pointed, out by the Accountant Member. I refrain myself from dilating on the other mistakes, as it is implied in the opening sentence of para 4 of the order of the Accountant Member that there is no other mistake apparent from record in the order dated 16-11-1981, and as I fully agree with his such a conclusion except the one, which has been discussed by him in the order dated 6-2-1982. From perusal of paragraph Nos. 4 & 5 of the order dated 6-2-1982, it is clear that the only mistake, according to the Accountant Member, is the omission to consider the Tribunal's earlier order dated 17-7-1978, passed in the quantum appeal of the assessee himself for the assessment year 1972-73 being WT Appeal No. 7 (Jp.) of 1978-79, decided with other appeals of Mannalal Nirmal Kumar Soorana. So, the question for consideration is whether non-consideration of the Tribunal's order dated 17-7-1978 passed in the quantum appeal of the assessee for the assessment year 1972-73 constitutes a mistake apparent from record within the meaning of Section 35(1).

2. Before answering this question, I would like to state the submissions of the revenue, which have not been incorporated in detail in the order dated 6-2-1982 by the learned Accountant Member. The assessee's application was vehemently opposed by Shri Swaroop, learned senior departmental representative. He urges that there is no mistake apparent from record in the order dated 16-11-1981 and that what the assessee wants by the miscellaneous petition is the review of the order dated 16-11-1981, which is not within the competence of the Tribunal.

He submits that the legal position relating to rectification is well settled and that rectification powers are quite distinct from the power of review. He says that under Section 35(1), only mistakes apparent from record can be rectified and the issues involving serious debates and long drawn reason-ing process are not covered thereunder. The submission is that under the garb of rectification, no Tribunal/Court can exercise the jurisdiction, which is not vested therein, by the statute. His argument is that a conclusion arrived at by the Tribunal after considering the factual and legal submissions of an assessee may be erroneous, still the Tribunal cannot exercise jurisdiction under Section 35(1) to rectify its judgment. The jurisdiction under Section 35(1), Shri Swaroop says, is limited and that can be exercised only to rectify a mistake apparent from record, but not to correct an error of judgment. There cannot be any dispute regarding the legal position as set out by Shri Swaroop. So, the question arising out of the assessee's application has to be considered in this legal background.

3. In para 4 of his order dated 6-2-1982, the Accountant Member adverting to the order dated 17-7-1978, observes: These orders were not considered by the Tribunal, as copies of these orders were not available with the Tribunal as the same were not filed by the assessee.

The assessee has voiced this grievance in para 7 of his application.

Can there be any mistake on the part of the Tribunal in not considering a material, which was not before it, at the time of hearing the appeal My answer of this question is in negative. When the order dated 17-7-1978 was not filed before the Tribunal, the latter could not have considered the same and non-consideration of an order, which was not filed before the Tribunal at the time of hearing the appeal, does not constitute a mistake apparent from the record. Section 35(1) does not enable either the assessee or the revenue to make improvement in the case by producing fresh material at subsequent stage. The assessee expected the Tribunal to do what is impossible. The Tribunal can consider only that material, which was filed before it by the parties and there is no duty of the Tribunal to collect evidence for and on behalf of the parties. The assessee states in para 11 of his application that as a judicial propriety, the Tribunal should not have taken a decision contrary to the earlier decision and in case the earlier decision was not readily available, old record should have been called for or a copy should have been demanded. I do not agree with this submission. This controversy arising in the case of the assessee in the instant year might not have arisen only in the case of the assessee in the earlier years, but in the case of other assessees also.

If such case of the assessee is accepted, then the duty of the Tribunal will not end only by demanding the previous records of the assessee, but the records of the other assessees also will have to be demanded, which, in my view, is not only impracticable, but an impossibility. The Tribunal can demand fresh evidence only in that case where it feels that real controversy cannot be decided without that, but the order dated 17-7-1978 does not fall in that category. Two main questions were there in the appeal of the assessee. The first question was whether there was concealment on the part of the assessee and whether the wealth of the assessee was depleted to the extent of income-tax liability and penalty pertaining to the assessment year 1967-68 and wealth-tax liability and penalty pertaining to the assessment years 1967-68 to 1972-73. On the first question, the Tribunal gave its finding in the beginning of para 9 on pages 14 and 15 as follows: Whether the net asset was at Rs. 5,330 or at Rs. 28,000 as worked out by the learned departmental representative, the fact remains that the assessee has not disclosed even the depleted asset. Then the assessee has capitalised the amount in his books of accounts for the assessment year 1976-77. This fact in itself proves that the assessee was in possession of the wealth and the assessee was bound to show in the wealth-tax returns for the three assessment years the above asset, but he knowingly did not show he same in the net wealth, if at all the department could lay its hands thereon. We have no hesitation in holding that the conduct of the assessee in not disclosing the asset, even the net asset, after taking into consideration the tax levied is contumacious and he has deliberately held back this asset from the department while filing the returns of wealth for these years, and the WTO had rightly invoked the provisions of Section 18(1)(c) of the Wealth-tax Act for all the three assessment years.

On the second question, the Tribunal considering Section 2(m)(iii)(b), on page 17 found as follows: At best this liability could be carried forward for a one year from the valuation date relevant to the assessment year 1967-68 and not thereafter much less the assessment years 1973-74 to 1975-76. If the liability is more than one year old with reference to the valuation date, it is automatically allowed as a deduction in the year of payment.

4. Shri Swaroop argues that the finding on the second question was given by the Tribunal considering the decision of the Hon'ble Supreme Court reported in Ahmed Ibrahim Sahigra Dhoraji's case (supra) and other authorities and that in the case of Ahmed Ibrahim (supra), the Hon'ble Supreme Court also considered its earlier decision given in the case of Kesoram Industries (supra). He, therefore, says that the assessee cannot argue that there was any omission to consider the case of Kesoram Industries (supra). He also argues that misappreciation of such authorities is not a mistake apparent from record.

5. The Tribunal experienced no difficulty in answering both the questions and, therefore, the assessee was not directed to produce any fresh matrial. If the assessee considered the order dated 17-7-1978 as material evidence, then he would have filed the same before the Tribunal and would have argued the viewpoint taken by the Tribunal at the stage. In the order dated 17-7-1978, the Tribunal observed in para 15 as follows: Since the settlement was not the result of the application of any provision of the Income-tax and Wealth-tax Act, it was not an income-tax and wealth-tax liability within the meaning of Section 2(m)(iii).

Taking this view, the Tribunal further held in the order dated 17-7-1978 that the case was not covered by the mischief of Section 2(m)(iii)(b). It is this finding that weighed with the learned Accountant Member and being influenced by that he has reversed the earlier finding given on page 17 of the order dated 16-11-1981 as reproduced above. The plea that the settlement not being a result of the application of any provision of the Income-tax/Wealth-tax Act, there was no income-tax/wealth-tax liability within the meaning of Section 2(m)(iii) and, therefore, the case did not fall within the mischief of Section 2(m)(iii)(b), was not raised before the Tribunal at the time of hearing the appeal. Such a plea having not been raised before the Tribunal, I am of the considered view that under Section 35(1), this plea cannot be considered and decision dated 16-11-1981 cannot be altered on the basis of this plea. Moreover, there is no mistake apparent from record in not considering this plea, as it was not raised before the Tribunal at the time of hearing the appeal.

6. Shri Ranka, learned counsel for the assessee, argues that the judicial propriety demands that the Tribunal should not have differed from its earlier order. When the order dated 17-7-1978 was not before the Tribunal and was not and could not be considered at all, the question of differing from that does not arise. Shri Swaroop argues that it happens day in and day out that the Tribunal takes a view different from the earlier orders, particularly when the earlier order was not considered, because it was not filed and because the case was argued from a different angle at a subsequent stage. He says that the order of the Tribunal cannot be equated with the orders of the Courts, which exercise suberintending powers under the Constitution of India over the Tribunals and subordinate courts. The two orders--the orders of the Tribunal and the orders of the constitutional Courts--are different in that the former is not legally binding on the Tribunal, but the latter is legally binding on the Tribunals and the subordinate Courts. This position is legally sound and, therefore, it is clear that there is no mislake of law in not giving a decision similar to the one as was given in the order dated 17-7-1978. It is merely a convention that the Tribunal should follow its earlier decision and such a convention can be complied with only when an earlier decision is filed before the Tribunal. When the earlier order was not filed and a different view was taken, then it is not a case of not following of or differing from the earlier order. In the instant case, the assessee at the most, can argue that there is a breach of convention, though it is not, because the earlier order was not filed before the Tribunal at the time of hearing the appeal, still, however, breach of convention cannot be said to be a mistake of law rectifiable under Section 35(1). There may be a mistake of fact or a mistake of law for the purposes of Section 35(1). Certainly, there is no mistake of fact in not taking the view consistent to the one taken in the order dated 17-7-1978. Whether the allowability of income tax/wealth-tax liabilities and penalties is hit by the mischief of Section 2(m)(iii)(b)--it is a pure question of law and any mistake on this issue cannot be a mistake of fact. So, there is neither a mistake of fact, nor a mistake of law that can be rectified under Section 35(1).

7. In my view, the jurisdictional facts should be interpreted very rigidly and not in the lighter vein. Jurisdiction not vested by the statute cannot be usurped by any authority and before exercising jurisdiction, one has to ensure whether the jurisdiction is really vested in. The fact giving rise to jurisdiction cannot be considered in wider amplitude, as transgression of jurisdiction limit is very serious matter. Alteration of the judgment under Section 35(1) has a far reaching repercussions and, in my view, the Tribunal should be loath to alter its order and such power may be exercised only when it has a legal jurisdiction and when it becomes absolutely necessary. The underlying principle of the convention that the Tribunal should follow its earlier decisions, is based on the theory that if the Tribunal frequently differs, then it will create uncertainty in the mind of the litigant public. Shri Ranka wants to persuade the Tribunal to alter the decision dated 16-11-1981 and bring it in the line of the earlier order dated 17-7-1978, so that the uncertainty about the law may be removed.

But, he has forgotten that alternation of the order dated 16-11-1978 is equally hazardous as it also tends to create uncertainty in the mind of the litigant public and spoil the judicial system. I, therefore, do not see any good logic in the submissions of Shri Ranka and I am not impressed by his post-judgment harangues.

8. Considering the entirety of the circumstances and the materials, I am of the view that non-consideration of the order dated 17-7-1978 is not a mistake apparent from record and the decision dated 16-11-1981 cannot be altered simply because the Tribunal, in the order dated 17-7-1978, took the view that settlement did not give rise to any income-tax, wealth-tax liability and, therefore, the provisions of Section 2(m)(iii)(b) were not attracted in the case of the assessee.

1. There is difference of opinion between the Members, The matter is, therefore, being referred to the Hon'ble President, Tribunal, for reference to Third Member. In the leading order a reference is made to the Tribunal's order dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7, 8, 9 & 10 (Jp.) of 1978-79 relating to the assessment years 1972-73 to 1974-75. This reference has inadvertantly been made instead of order dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 relating to the assessment years 1973-74 to 1975-76 in the case of the assessee himself. The order dated 17-7-1978 in quantum appeal in WT Appeal No. 7 (Jp.) of 1978-79 which is also in the case of the assessee for the assessment year 1972-73 became relevant as the quantum appeals for the assessment years 1973-74 to 1975-76 were decided by the Tribunal following its earlier order in WT Appeal No. 7 (Jp.) of 1978-79 dated 17-7-1978. The reference to the order dated 17-7-1978 in WT Appeal No. 7 (Jp.) of 1978-79 has, therefore, to be taken as WT Appeal No. 425 to 427 (Jp.) of 1979 relating to the assessment year, 1973-74 to 1975-76. Change in number of WT Appeal will not alter the position on merits as it is the order dated 17-7-1978 which has been followed in the order dated 30-8-1980. For the purpose of penalties either under Section 271(1)(c) of the 1961 Act, or under Section 18(1)(c) of the Wealth-tax Act, quantum orders are very material. These are the foundations on which the superstructure for penalties is to be raised. If the base falls, the superstructure is bound to fall. It is in this context that these orders are relevant for determining the appeals for concealment of wealth under Section 18(1)(c). There was mention of negative wealth for the assessment years 1974-75 and 1975-76 and negligible wealth for the assessment year 1973-74 after taking into consideration the orders of the Tribunal dated 30-8-1980. These orders could not be considered as copies thereof were not filed though the same were mentioned. It is in this context that non-consideration of these orders is considered by me to be a mistake apparent from record rectifiable under Section 35. With these observations I refer the following point to the Hon'ble President for being referred to the third Member for all the three assessment years: Whether on the facts and in the circumstances of the case, non-consideration of Tribunal's order dated 30-8-1980 in WTA Nos.

425 to 427 (Jp.)/ 1979 relating to assessment years 1973-74 to 1975-76 read with Tribunal's order dated 17-7-1978 in WTA No. 7 (Jp.)/1978-79 relating to assessment year 1902-03 again in the case of the assessee in the quantum appeals is a mistake apparent from record so as to attract the provisions of Section 35(1)(c) of the Wealth-tax Act, 1957 1. While stating the point of difference, the learned Accountant Member has stated certain new facts which do not appear in his order dated 6-2-1982. As in my view, this is the stage only to state the point of difference in view of the provisions of Section 24(11) of the Act, read with Section 255(4) and (5) of the 1961 Act, I have not applied my mind to the new facts and the reasoning being stated by my brother. 1 am of the view that both the Members have become functus officio after passing the respective orders dated 6-2-1982 and 15-2-1982 and as such no fresh order can be written at this stage. Application of mind to the new facts being stated by my brother, will necessitate a fresh order, which in my opinion cannot be written at this stage. In my opinion, the question that arises for decision by a Third Member on the basis of the orders dated 6-2-1982 and 15-2-1982 is as follows: Whether on the facts and in the circumstances of the case, as stated in the Tribunal's order dated 16-11-1981, orders dated 6-2-1982 of the Accountant Member and the order dated 15-2-1982 of the Judicial Member non-consideration of the Tribunal's order dated 17-7-1978 passed in WT Appeal No. 7 (Jp.) of 1978-79 decided with other appeals, constituted a mistake apparent from record under Section 35(1)(e) and whether the Tribunal's order dated 16-11-1981 deserves to be altered; and the same is referred to the President for decision by a Third Member.

1. On a difference of opinion between the learned members who heard the Misc. Appeal No. 140 (Jp.) of 1980 originally, the case has been referred to me by the President, Tribunal under Section 24(11) of the Wealth-tax Act, 1957, read with Section 255(4) of the Income-tax Act, 1961. The point on which the learned members have differed has been stated as under by the learned Accountant Member: Whether, on the facts and in the circumstances of the case, non-consideration of Tribunal's order dated 30-8-1980 in WTA Nos.

225 to 4/7 (Jp.)/1979 relating to the assessment years 1973-74 to 1975-76 read with Tribunal's order dated 17-7-1978 in WTA No. 7 (Jp.) 1978-79 relating to assessment year 1972-73 again in the case of the assessee in the quantum appeals is a mistake apparent from record so as to attract the provisions of Section 35(1)(e) of the Wealth-tkx Act, 1957 According to the learned Judicial Member, the point of difference between the members is as under ; Whether, on the facts and in the circumstances of the case, as stated in the Tribunal's order dated 16-11-1981 order dated 6-2-1982 of the Accountant Member and the order dated 15-2-1982 of the Judicial Member, non-consideration of the Tribunal's order dated 17-7-1978 passed in WTA No. 7 (Jp.)/1978-79 decided with other appeals, constitutes a mistake apparent from the record under Section 35(1)(e) of the WT Act, 1957 and whether the Tribunal's order dated 16-11-1981 deserved to the altered 2. The facts may now be stated, for the assessment years 1973-74, 1974-75 and 1975-76 for which the valuation dates ended on Diwali 1972, Diwali, 1973 and Diwali 1974, respectively, the assessee, an individual, filed returns of net wealth on 21-5-1973, 21-6-1974 and 25-6-1975, declaring net wealth of Rs. (--) 2,14,288, Rs. 4,43,432 and Rs. 2,04,958, respectively. A revised return for the assessment year 1973-74 was filed on 15-12-1973 declaring net wealth of Rs. 35,771, no revised return was filed for the assessment year 1974-75 and a revised return was filed for the assessment year 1975-76 on 15-7-1975 declaring net wealth of Rs. (--)2,25,126. In any of these returns the assessee did not disclose that a sum of Rs. 85,919 which came to be assessed as his additional wealth in these and other years in terms of the settlement order of the Commissioner, Jaipur, dated 24-3-1975, was the assessee's wealth liable to be included in the returns filed. It is necessary to give the details of the sum of Rs. 85,919 and the manner in which it came to be included as the wealth of the assessee in different years, as this is the amount on which penalties under Section 18(1)(c) were levied, then on appeal were confirmed by the Commissioner (Appeals) and the Tribunal and then on the assessee's miscellaneous application a difference of opinion has arisen between the two learned members.

3. In the assessment year 1967-68 in the case of the assessee, the ITO had made an addition of Rs. 65,919 on the plea of disproved purchases in the account of Motichand Dhandia. He made another addition of Rs. 35,000 on the ground that the nature and source of this credit in the books of the assessee in the account of Motichand Dhandia was not satisfactorily proved. A sum of Rs. 10,000 was included in the income of the assessee as credit in the account of Ladu Singh Pipara was not satisfactorily proved. Without going into the details of the evidence produced by the assessee before the AAC, it will be enough to state that the additions of Rs. 65,969 and Rs. 35,000 were deleted by the AAC by his order dated 28-3-1974 in Appeal No. 138 of 1972-73 but out of the addition of Rs. 10,000, a sum of Rs. 4,000 was sustained. (The date 28-3-1979 mentioned in para 5 of the order of the Tribunal dated 16-11-1981 does not seem to be correct). The revenue did not prefer any appeal to the Tribunal, though the assessee had preferred an appeal on some other point which was registered as IT Appeal No. 275 (Jp.) of 1974-75. The result of that appeal is immaterial for these proceedings.

Thereafter, certain discussions took place between the assessee and the Commissioner regarding the settlement of the assessee's income-tax and wealth-tax liability and the assessee moved a petition dated 26-9-1974 to the Commissioner, Jaipur, wherein it was, inter alia, stated as under: Sub: Request for an amicable settlement of income-tax and wealth-tax in the case of Shri Mannalal Surana.

As per discussion regarding settlement in the case mentioned above, I hereby offer the following specific terms of settlement which may kindly be accepted. If for some reasons the terms are to be modified, I may be given a personal hearing for the same.

As far as cash credits in the names of Shri Motichand Dhandia, his son Rasiklal Parekh, Shri Urnraolal Jain and Shri Ladoo Singh and the purchases from Shri Motichand Dhandia are concerned, the position as accepted by the learned Appellate Assistant Commissioner in appeals for various years may kindly be accepted.

4. The terms and conditions on which the compromise petition dated 26-9-1974 of the assessee were settled are contained in a memorandum dated 24-3-1905, which, inter alia, contains the fallowings: 2. As against the additions of Rs. 65.969 and Rs. 35,000 on account of purchases made from and cash credits appearing in the account of Shri Motichand, an addition of Rs. 85.119, being the peak of the credits in the account of Shri M.C. Dhandia, shall be sustained and allowed to be capitalised.

5. An addition of Rs. 800 on account of unexplained cash credits in the account of Shri Ladu Singh Piparia (after giving credit for rotation of the peak of Rs. 85,119 referred to above) shall be sustained and allowed to be capitalised. The minimum statutory penalty under Section 271(1)(e) shall be levied for this year.

The terms and conditions on the settlement petition of the assessee are recorded by the Commissioner, Jaipur for the income-tax assessment years 1957-58 to 1971-72 and wealth-tax assessment years 1963-64, 1965-66 to 1970-71. For the wealth-tax assessment years 1966-67 and 1967-68, it was agreed that the assessee will file voluntarily revised returns declaring additional wealth of Rs. 7,89,000 for the assessment year 1966-67 and Rs. 7,89,000+Rs. 85,919 for the assessment year 1967-68. The compromise also records: No penalty or prosecution proceedings will be initiated for the assessment year 1966-67 as this is purely voluntary and by way of compromise. For the assessment year 1967-68 the assessee will be liable to penalty at 20 per cent of the wealth-tax sought to be evaded regarding the additional wealth of Rs. 85,919 only.

Assessee also undertakes to file revised wealth-tax returns for the assessment years 1968-69 and onwards declaring additional wealth as under:Assessment year 1968-69 Rs. 1,09,919 (85,919+24,000) 1969-70 Rs. 1,33,919(1,09,919 + 24,000) As the additional wealth is being declared by the assessee voluntarily, the provisions of Section 18(2A) will apply and penalty of only Rs. 1,000 per year will be levied by the Wealth-tax Officer.

It may be clarified that the sum of Rs. 24,000 on account of unrecorded cost of construction in the bungalow known as 'Green House', Ashok Marg, Jaipur was conceded in each of the aforesaid three years and it is that amount, in addition to Rs. 85,919 which is mentioned in each year.

5. The wealth-tax assessment for the assessment year 1971-72 was made on 30-4-1976 on net wealth of Rs. 9,92,740 and the sum of Rs. 85,919 was included in the assessment as additional wealth in view of the order of the Commissioner dated 24-3-1975 on the settlement petition of the assessee. For that year, penalty under Section 18(1)(c) of Rs. 1,000 only was levied.

6. The wealth-tax assessment for the assessment year 1972-73 was made on 9-8-1977 on net wealth of Rs. 18,03,427. Para 5 of the assessment order reads as under: 5. It is further noticed that in the assessment year 1971-72 an amount of Rs. 85,919 was included in the total wealth of the assessee under the head 'Additional wealth' as per settlement order of the CIT dated 24-3-1975. This point was discussed with the assessee's representative during the hearing of the case. The assessee did not put up any objection when I proposed the addition of Rs. 85,919 this year also under the same head.

Though penalty proceedings under Section 18(1)(c) were initiated for that year but after considering the assessee's reply dated 18-9-1979 (pages 5 and 6) of the Paper Book filed before the Jaipur Bench originally, the penalty proceedings were dropped.

7. The wealth-tax assessment for the assessment years 1973-74, 1974-75 and 1975-76 came to be made on 21-2-1979 on net wealth of Rs. 16,22,500, Rs. 11,79,600 and Rs. 9,36,400 respectively. Rs. 85,919 was treated as the assessee's additional wealth in each year and the identical reasons given in para 8 in each year's assessment order reads as under: 8. It is seen that during the assessment year 1972-73 an amount of Rs. 85,919 was included in the wealth of the assessee by way of additional wealth as per settlement order of the Commissioner of Income-tax dated 24-3-1975. The said amount was accounted for in the books of account during the assessment year 1976-77 and, therefore, this year also the said amount of Rs. 85,919 will ' be included in the wealth of the assessee.

There were appeals to the AAC/Commissioner (Appeals) and after their orders, the WTO determined the following amounts of net wealth vide his orders given below:Assessment year Net wealth after orders of Date of order the CWT(A)/AAC of the WTO1973-74 1,51,500 12-10-19771974-75 (-)1,46,768 8-8-19801975-76 (-)3,78,085 8-8-1980 These orders are at pages 29, 34 and 39 of the Paper Book filed before the Jaipur Bench when the appeals for these years against penalties were heard. The order of the Commissioner (Appeals) for the assessment year 1973-74 is dated 31-8-1979 and the order of the AAC for the assessment years 1974-75 and 1975-76 is dated 3-9-1979 and these dates are mentioned in the WTO's orders for the three different years. In these orders the Commissioner (Appeals)/AAC had held that income-tax and wealth-tax liabilities amounting to Rs. 16,15,000, Rs. 13,51,203 and Rs. 14,40,204 which arose as a result of the settlement order dated 24-3-1975 of the Commissioner, for the assessment years 1973-74, 1974-75 and 1975-76 should be allowed as deductions from the net wealth in the respective years.

8. Against the aforesaid orders of the first appellate authority the revenue had filed appeals to the Tribunal which were registered as WT appeals Nos. 425, 426 and 427 (Jp.) of 1979 and wherein the common ground of appeal taken was that the Commissioner (Appeals)/AAC has erred in directing the WTO to allow as deduction the outstanding income-tax and wealth-tax liabilities on the respective valuation dates pertaining to earlier years and which were net existing on the valuation dates but arising out of the settlement order passed on 24-3-1975. These appeals were disposed of by the Jabalpur Bench of the Tribunal (camp at Jaipur) on 30-8-1980 and the appeals of the revenue were dismissed. In dismissing the revenue's appeals, the Tribunal followed the order of the Jaipur Bench dated 17-7-1978 in WT Appeal no.

7 (Jp.) of 1978-79 pertaining to the assessment year 1972-73 in the assessee's own case and WT Appeal Nos. 8, 9, and 10 (Jp.) of 1978-79 pertaining to the assessment years 1972-73, 1973-74 and 1974-75 in the case of Mannala Nirmal Kumar Surana, Jaipur. It may be stated that these four appeals were filed by the reveune and all the four appeals were dismissed by the Tribunal. The order of the Tri bunal in WT Appeal Nos. 425, 426 and 427 (Jp.) of 1979 dated 30-8-1980, which had followed the Jaipur Bench of the Tribunal's own order dated 17-7-1978 in the assessee's own case for the assessment year 1972-73 was not placed before the Tribunal by either party when the appeals against the penalties under Section 18(1)(c) for the three years under consideration came to be heard and decided on 16-11-1981 in WT Appeal Nos. 527 to 529 (Jp.) of 1981.

9. At the time of completing the wealth-tax assessments the WTO had initiated penalty proceedings under Section 18(1)(c) for all the three years under consideration. In response to the show cause notices the assessee filed identical replies for all the three years on 1-1-1981.

The part of the reply pertaining to the sum of Rs. 85,919 reads as under: That as regards the additional wealth taken as per the settlement amounting to Rs. 85,919, it is submitted that our client was contesting and disowning the said sum of Rs. 85,919 and it was only during the course of the settlement that the said amount was accepted and since settlement order was after the filing of the return and this fact was very much there on the record at the time the assessment was completed and it was only on this account this addition was made but the said capitalisation was made during the assessment year 1970-71 (sic) and not during the assessment year under reference. It is only the consequential addition after the settlement was arrived and, therefore, again this cannot be taken as wealth concealed by our client during the year under reference.

According to the WTO, the assessee did not furnish any explanation as to why penalties should not be levied in respect of claim for liabilities amounting to Rs. 16,15,000, Rs. 13,51,203 and Rs. 14,40,204 for the assessment years 1973-74, 1974-75 and 1975-76 respectively. The WTO considered the assessee's reply on various points and observed as under in respect of the sum of Rs. 85,919: Regarding additional wealth of Rs. 85,919, the assessee has contended as above that since it was as a result of settlement arrived at after filing the return, its non-inclusion did not amount to concealment. It may be mentioned that the settlement covers only the assessment up to 1970-71. The assessment under consideration is not covered by the settlement. The addition of Rs. 85,919 was necessary because a similar addition was made for the assessment year 1971-72. The assessee has himself declared this amount in assessment year 1976-77 The assessee cannot, deny the fact that in any case it was a part of his wealth which he had neither declared in the original return nor any time after the settlement. As such, I hold that the assessee deliberately concealed the wealth of Rs. 85,919.

The WTO finally held that the assessee had concealed its wealth and had also furnished inaccurate particulars of its assets and debt. The WTO, therefore, levied penalties under Section 18(1)(c) of Rs. 17,27,071, Rs. 14,73,675 and Rs. 15,73,635 for the assessment years 1973-74, 1974-75 and 1975-76, respectively.

10. Against these penalties levied by the WTO, the assessee filed appeals to the Commissioner (Appeals) who confirmed penalty under Section 18(1)(c) of only Rs. 85,919 in each year. His reasons given in para 11 (IV) read as under: (IV) Additional wealth due to settlement - The settlement had covered the assessments upto 1971-72 assessment and the amount of wealth determined by the Commissioner of Income-tax at Rs 85,919 as per the order of 24-3-1975. This was brought to tax for 1972-73 assessment and actually for 1976-77 assessment the appellant had himself declared it as part of his wealth. In other words, the appellant had been concealing certain income and wealth which he wanted to disclose and arrived at the settlement with the department. Hence the motive to conceal is more than clearly established. The plea of the appellant that the settlement was only to save litigation and to buy peace, is only a 'face-saving' device.

No doubt the declaration by the appellant himself for 1975-76 assessment establishes his bona fides, but equally was his lack of bona fide for non-declaration of the same for the assessment years 1973-74 and 1974-75.

To refer to the date of the settlement order of the Commissioner of Income-tax, viz., 24-3-1975 and to argue that the responsibility for disclosure or otherwise of the said wealth could be only after 24-3-1975 is untenable. The malignant disease of concealment had been there even earlier though and the existence of the same came to the surface and was quantified by the Commissioner's order.

Therefore I would agree with the Wealth-tax Officer that there was a concealment of the wealth to the extent indicated in the penalty order under this item for the three assessment years 1973-74 to 1975-76 for which the appellant is liable to a penalty of a sum equal to the wealth concealed.

At this stage the reasons given by the Commissioner (Appeals) in para 11(111) of his order for deleting penalties in respect of claim for income-tax and wealth-tax liabilities may also be reproduced: (III) Liability on account settlement disallowed - The Wealth-tax Officer has proceeded on the ground that such a liability is not admissible but as per the decision of the Income-tax Appellate Tribunal in WTA Nos. 425 to 427 (Jp.)/1979 dated 30-8-1980 for the impugned assessment years, the tax liabilities have been allowed and the departmental appeals are dismissed. As rightly pointed out by the learned representative even though the decision of the Hon'ble Tribunal was referred to in the explanation to the penalty notice, the Wealth-tax Officer had totally ignored the same, while passing the penalty order. The impugned penalty order is dated 28-3-1981 and the decision of the Tribunal is dated 30-8-1980, in the fitness of things and with due respect to the Hon'ble Tribunal, the Wealth-tax Officer should have stated reasons why he was unable to proceed on the basis of the said decision. As at the moment, the decision of the Tribunal is binding on all concerned authorities, the tax liabilities claimed by the appellant are admissible and to say that the appellant had furnished inaccurate particulars and thus guilty of concealment is totally untenable. This stand of the Wealth-tax Officer is, therefore, rejected.

11. Aggrieved, the assessee came in appeal to the Tribunal. The learned counsel for the assessee reiterated the submission made before the lower authorities and submitted that penalties sustained by the Commissioner (Appeals) in different years should be cancelled. He then submitted that from the figure of Rs. 85,919 liabilities to the extent of Rs. 80,606 (details given in para 6 of the order dated 16-11-1981) should be reduced and if that was done it would be noticed that hardly any wealth (out of Rs. 85,919) formed a part of the net wealth of the assessee. He next pointed out that for the assessment years 1974-75 and 1975-76, the assessee had been taxed on negative wealth and it could not be held that he was guilty of any concealment of an asset. So far as the assessment year 1973-74 is concerned, the argument was that after excluding liabilities only a small partion (out of Rs. 85,919) would form a part of the net wealth and considering the entirety of the circumstances of the case, no penalty was required to be levied.

Reliance was placed on various judgments of the Supreme Court and the High Courts. For the submission that outstanding income-tax and wealth-tax liabilities were to be reduced from the net wealth assessed, reliance was placed on the judgments in Kesoram Industries' case (supra), H.H. Setu Parvati Bayi's case (supra), Ahmed Ibrahim Sahigra's case (supra), V.C. Handi v. WTO [1980] 122 ITR 506 (Kar.) ard Raj Paul Chawla's case (supra). It was also argued that the default, if any, was technical or venial and in view of the judgments in CIT v. Anwar Ali [1970] 76 1TR 696 (SC), Hindustan Steel Ltd. v. State of Orissa [1972] 83 ITR 26 (SC), CIT v. Khoday Eswarsa & Sons [1972] 83 ITR 369 (SC), CIT v. N.A. Mohamed Haneef [1972] 83 ITR 215 (SC) and CIT v. Goswami Smt. Chandralata Bahuji [1980] 125 ITR 700 (Raj.), no penalty was required to be sustained.

12. The learned departmental representative, on the other hand, submitted that wealth of Rs. 85,919 always existed with the assessee, it was detected by the department and the settlement with the Commissioner, dated 24-3-1975 did not create any new wealth which was not already in existence and which was not disclosed by the assessee in the returns for the three years under consideration. He also referred to notices issued under Section 17 of the Act, for the assessment years 1963-64 and 1965-66. He made the point that when the wealth of Rs. 85,919 was known even in the assessment year 1967-68 there was no reason why it was not shown by the assessee in these three years. He also disputed the calculation of the assessee in so far as the claim for liabilities to the extent of Rs. 80,606 was concerned. According to him, the amount of liability on the sum of Rs. 85,919 would be much less. He also stated that the assessee was in the habit of concealment of income or wealth because even under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, he had made disclosure of Rs. 13,10,000 pertaining to the assessment years 1954-55 to 1975-76. In reply the learned counsel for the assessee submitted that material which was not relevant to these proceedings should not be considered.

He took objection to the declaration under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, being considered.

13. The Tribunal considered the rival submissions and by its order dated 16-11-1981 confirmed the penalties of Rs. 85,919 for each of the three years under consideration. Paras 9 to 12 of this order read as under: 9. We have given a careful consideration to the rival submissions.

We would first deal with Shri Ranka's contentions whether the asset owned by the assessee had really depleted and the assessee was not required to show the same in the net wealth. According to the working by the learned counsel for the assessee himself, the assessee still had net wealth of Rs. 5,313. Even this wealth has not been disclosed by the assessee. It, therefore, cannot be said that the assessee had disclosed the assets after taking into consideration the taxes levied. According to Shri Swarup, the learned Departmental Representative, the wealth after taking into consideration the income-tax and wealth-tax, etc., levied was around Rs. 28,000 and therefore, there was clear concealment in omitting this asset in the returns of net wealth filed. Whether the net asset was at Rs. 5,330 or at Rs. 28,000 as worked out by the learned Departmental Representative, the fact remains that the assessee has not disclosed even the depleted asset. Then the assessee has capitalised the amount in his books of account for the assessment year 1976-77. This fact in itself proves that the assessee was in possession of the wealth and the assessee was bound to show in the wealth-tax returns for the three assessment years the above asset, but he knowingly did not show the same leaving it for the Department to take a chance to include the same in the net wealth, if at all the Department could lay its hands thereon. We have no hesitation in holding that the conduct of the assessee in not disclosing the asset, even the net asset, after taking into consideration the tax levied is contumacious and he has deliberately held back this asset from the Department while filing the returns of wealth for these years, and the WTO had rightly invoked the provisions of Section 18(1)(c) of the Wealth-tax Act for all the three assessment years.

We are also in agreement with the learned Departmental Representative that the wealth of the assessee after taking into consideration the subsequent disclosure made in 1975 was not negative for the assessment years 1974-75 and 1975-76, while for the assessment year 1973-74 his wealth even after assessment was made was above the taxable limit without taking into consideration the disclosure of 1975--Even without taking into consideration the disclosure made in the year 1975. We would analyse whether the asset of Rs. 85,919 had really depleted and to what extent. We would consider this position under the provisions of Wealth-tax Act itself, ft is a common ground between the parties that this amount was subjected to income-tax for the assessment year 1967-68 after order of settlement dt. 24-3-1975 by the CIT. The assessment order for the assessment year 1967-68 including therein the settled amount of Rs. 85,919 was passed by the TTO on 30-4-1976. Penalty order under Section 271(1)(c) with reference to this amount was made by the ITO on 24-3-1975. The learned counsel of the assessee has relied upon the decision of the Supreme Court in the case of Ahmed Ibrahim Sahigra Dhoraji 129 ITR 314 contending that the wealth shall be gross wealth minus taxes and penalties thereon. In our opinion, this decision does not come to the rescue of the assessee. In this case the Supreme Court held that liability to pay income-tax under the Voluntary Disclosure Scheme was deductible as a debt owed on the valuation date within the meaning of Section 2(m) of the Wealth tax Act. In this case the Voluntary Disclosure was made by the assessee under Section 68 of the Finance Act, 1965. The income concealed in this disclosure was for the assessment years 1959-60 to 1964-65. The income disclosed was sought to be taxed by the revenue under the Wealth-tax Act for different assessment years from 1959-60 to 1964-65. The tax paid with reference to this wealth under the Finance Act, 1965 was not allowed by the WTO as a debt owed on the valuation dates relevant to these assessment years, viz., 1959-60 to 1964-65. The WTO held that since in the balance-sheets on the respective valuation dates the assessee had not shown the liability to pay income-tax, the deduction of the amount claimed could not be allowed in any of the assessment years and accordingly the orders of assessments were passed by him after disallowing the claims made by the assessee. The Hon'ble Supreme Court held that the amount declared under Section 68 of the Finance Act, 1965 had the liability to pay income-tax imbedded in it on the valuation dates but only the ascertainment of that liability was postponed to a future date. The Supreme Court, therefore, held that income-tax paid under the Finance Act, 1965 with reference to the concealed income for earlier assessments was allowable as a deduction on the valuation dates relevant to those assessment years. Considered from this angle the income-tax levied for the assessment year 1967-68, penalty levied thereon for that year, wealth-tax levied for that year as also the penalty under Section 18(1)(c) of the weath-tax levied for that year would be a debt owned for computing the net wealth of the assessee on the valuation date relevant to the assessment year 1967-68 and not for the assessment years 1973-74, 1974-75 and 1975-76. In the ratio of the decision of the Supreme Court referred to supra, the deduction will be admissible only with reference to the assessment year for which the asset existed irrespective of the fact whether the tax was paid or not. It is an admitted fact that on the valuation date relevant to the assessment year 1967-68 the amount of income-tax and the penalty under Section 271(1)(c) of the Income-tax Act, the amount of wealth-tax and penalty under Section 18(1)(c) of the Wealth-tax Act with reference to the amount of Rs. 85,919 was not paid. This liability was created by the order of the ITO on 30-4-1976 and 24-3-1975. It was, therefore, only a liability to be allowed on the valuation date relevant to the assessment year 1967-68. For subsequent assessment years the liability could not be allowed as a deduction in computing the net wealth of an assessee if it was outstanding for a period of more than 12 months on the valuation dates in view of the provisions contained in Section 2(m)(iii)(b) of the Wealth-tax Act, 1957. At best this liability could be carried forward for one year from the valuation date relevant to the assessment year 1967-68 and not thereafter much less the assessment years 1973-74 to 1975-76. If the liability is more than one year old with reference to the valuation date, it is automatically allowed as a deduction in the year of payment. We are not aware when this liability was actually paid. Since this amount was capitalised in the year 1976-77, it appears that this amount was never paid upto the assessment year 1975-76 and, therefore, no liability was admissible for the assessment years 1973-74 to 1975-76 and the assessee should have shown the entire asset of Rs. 85,919 in his net wealth for these years. The actual dates of payment for the remaining liabilities under the Wealth-tax Act on account of levy of wealth-tax and penalties levied under Section 18(1)(c) for the assessment years 1967-68 to 1972-73 are not available. These have also not been furnished on behalf of the assessee. Even if it has already been paid, it would not affect the asset in question, but will reduce the cash or bank balance. No. deduction on account of these liabilities, therefore, can be given. In our opinion, in view of the provisions contained in Section 2(m), the assessee was bound of show the entire asset in the returns of net wealth for the three assessment years under appeal without claiming any deduction on account of liabilities as the same were not admissible in view of the clear provisions of law. The whole asset or even the depleted asset whatever it is, which we have held it is not, the assessee has failed to show the same in the returns filed by him. It is, therefore, a clear case of concealing the particulars of the asset lor the assessment years 1973-74 and 1974-75 and furnishing inaccurate particulars of the same asset for the assessment year 1975-76, inasmuch as though in the settlement order this asset was agreed to be included in the net wealth of the assessee still the assessee did not show the same in the return filed by him though the same was filed after the settlement order by the Commissioner.

10. We shall also consider this contention made on behalf of the assessee in the ratio of the decision of the Karnataka High Court in the cash of Shri V.C. Handi 122 ITR 506. In this case the assessee claimed in the assessment for the assessment year 1974-75 income-tax and wealth-tax liabilities for the assessment years 1966-67 to 1974-75. As the tax for these years was actually ascertained on 21-6-1975, their Lordships of the Karnataka High Court have held in 122 ITR 506 that the liability becomes deductible on the valuation date relevant to the assessment years for which income or wealth is assessed. Even in the ratio of this decision, we would say that the liability was at all not in existence on the valuation dates relevant to the assessment years 1973-74 to 1975-76. The relevant valuation dates for these years were Diwali 1972, Diwali 1973 and Diwali 1974 respectively while the order of assessment for the assessment year 1967-68 was made on 30-4-1976 and penalty under Section 271(1)(c) for the same assessment year with reference to the same asset was levied on 24-3-1975, i.e., much after the relevant valuation dates. No liability had, therefore, arisen at all which could be said to be outstanding on the valuation date. Whether in the ratio of the decision of the Supreme Court in Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 315 (SC) or of the Karnataka High Court in the case of Shri V.C. Handi liabilities, on account of income-tax and wealth-tax were not admissible as deduction for the assessment years 1973-74 to 1975-76 and the assessee should have shown the value of the entire asset of the value of Rs. 85,919 in the returns filed for these assessment years. He has failed to do so. In the wealth-tax order the WTO had disallowed certain liabilities on account of income-tax and wealth-tax. These liabilities appear to have been allowed as deduction by the Commissioner of Wealth-tax (Appeals) for the assessment year 1973-74 and the Appellate Assistant Commissioner for the assessment years 1974-75 and 1975-76. In the orders of the WTO these liabilities are also on account of settlement order of the Commissioner dated 24-3-1975. It appears that the CWT (Appeals) and the AAC of Wealth-tax have allowed these liabilities as deduction for these years. The orders of these authorities have not been filed in the Paper-book. We are not aware as to for what reasons these liabilities have been allowed as deduction while computing the net wealth for the three assessment years under appeal. We are not in a position to comment on the deductions allowed. We have, however, discussed earlier that deductions on account of income-tax and wealth-tax liabilities of the assessment years up to 1972-73 with reference to the assets of Rs. 85,919 are not admissible as a debts owed within the meaning of Section 2(m)(iii)(b) of the Wealth-tax Act.

11. We are also not in agreement with the learned counsel of the asses-see that no penalty can be levied where the net wealth assessed is a loss. He has referred to the decision of the M.P. High Court in 129 ITR 423. In this case the a.ssessee had returned loss of Rs. 2 lakhs. The ITO computed income at Rs. 50,000. The IAC imposed penalty treating entire sum of Rs. 2,50,000 as concealed income. Then Lordships of the MP High Court held that the definition of income in Section 2(24) of the Income-tax Act is an inclusive definition and it covers even such income which are not income in the natural sense of the word. Even in the broadest connotation, 'income' refers to monetary return 'coming in' and is conceptually contradictory to 'loss'. Their Lordships of the MP High Court, therefore, held that the income which was determined by the ITO under Section 144 was a sum of Rs. 50,000 and it was this income which was concealed by the asses see and, therefore, the Tribunal was right in holding that the concealed income was Rs. 50,000 only and not Rs. 2,50,000. This penalty levied by the IAC keeping in view Clause (iii) of Section 271(1)(c) of the Income-tax Act, which says that in the cases referred to in Clause (c) in addition to any tax payable by him a sum which shall not be less than, but which shall not exceed twice the amount of income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.

While interpreting the law, their Lordships of the MP High Court held that income referred to in Clause (in) of Section 271(1)(c) refers to income which was determined by the ITO and not the loss.

We would consider as to how far ratio of this decision is applicable to the wealth-tax proceedings. The relevant section under the Wealth-tax Act is 18(1)(c). The relevant provisions read as under: 18(1). If the WTO ... in the course of any proceedings under this Act is satisfied that any person-- c. has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts ; he or it may, by order in writing, direct that such person shall pay by way of penalty-- iii. in the cases referred to in Clause (c) in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount representing the value of any assets in respect of which the particulars have been concealed or any assets or debts in respect of which inaccurate particulars have been furnished.' We have held earlier that the assessee has not at all furnished particulars of the asset amounting to Rs. 85,919 in the wealth-tax returns for the three assessment years under appeal. He has also furnished inaccurate particulars of debt owed inasmuch as such debts were not admissiable within the meaning of Section 2(m) of the Wealth-tax Act in the ratio of the decision of the Supreme Court in the case of Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 314, and of the Karnataka High Court in the case of V.C. Handi [1980] 122 ITR 506. In our view it is immaterial on the face of the language of Section 18(1)(c) whether the net wealth assessed is negative figure or not so long as the asset has not been disclosed. The ratio of the decision of the MP High Court in 129 ITR 423, in our opinion, is, therefore, not applicable to the facts of this case. Now we shall consider the assesee's argument that where no tax is payable, there cannot be any evasion of tax and, therefore, there was no question of levying any penalty.

The learned counsel of the assessee for this proposition had relied upon the decision of the Madras High Court in the case of Murugan Timber Depot 113 ITR 99. In this case it was held by their Lordships of the Madras High Court that the language of Clause (iii) of Section 271(1)(c) of the Income-tax Act is such that there could be no case in which penalty could be levied where no tax is payable by the assessee since the quantification of penalty is totally dependent upon the tax payable by the assessee. We would hold that the ratio of this decision is also not applicable to the facts of the present case. The penalty in this case related to the assessment year 1964-65 when the penalty imposable under Section 271(1)(c) was to be computed with reference to the tax levied. When the tax levied was nil, naturally there was no question of imposing any penalty under Section 271(1)(c). Under the Wealth-tax Act as we have said earlier, the penalty has to be computed with reference to the value of the assets concealed or the debt owed in respect of which inaccurate particulars have been furnished by the assessee. The language of Section 18(1)(c) of the Wealth-tax Act is altogether different from the provisions of Section 271(1)(c) of the Income-tax Act at the relevant time. We have already held that the assessee had contumacious conduct and guilty mind in not showing the asset in the net wealth returns for the three assessment years. He had deliberately held back the same from the Income-tax Department. Even in the settlement petition made by him, he failed to disclose the same knowing it fully well that he was the owner of that asset. In our opinion, the other judicial pronouncements relied upon on behalf of the assessee also do not help him. In view of the facts and in the circumstances of the case, as discussed above, we have no hesitation in sustaining the order of the CIT (Appeals) in sustaining the penalties under Section 18(1)(c) for all the assessment years.

14. Thereafter the assessee moved an application dated 29-12-1981 under Section 35(1)(e) submitting that there were certain mistakes in the order of the Tribunal dated 16-11-1981 which were required to be rectified and the said order was also required to be amended accordingly. In para 3 of this application certain observations made by the Tribunal in para 5 were stated to be not emerging out of the assessment orders, penalty orders, orders of the Commissioner (Appeals) and other material on the record of the Tribunal. In para 4 of this application a grievance was made that certain submissions made by the learned counsel for the assessee were not incorporated in para 6 of the order of the Tribunal. In para 4 of the said application it was stated that innumerable submissions of he learned departmental representative were recorded in para 7 of the order of the Tribunal though the same were not borne out of the assessment orders, penalty orders, orders of the Commissioner (Appeals) and material on record of the Tribunal. In para 5 of the application it was submitted that in para 8 of the order of the Tribunal certain objections raised by the learned counsel for the assessee against the submission by the learned departmental representative based on nonexistent facts and irrelevant material were not recorded. Para 6 of the said application is incorporated below: 6. That while making observations in para 9 of the order of the Tribunal the Hon'ble Tribunal has made many glaring and patent mistakes of facts and of law. Some of the mistakes are detailed hereunder: i. Returns for the assessment years 1973-74 and 1974-75 having been filed on 21-5-1973 and 21-6-1974, prior to the date of settlement order, i.e., 24-3-1975, the gross amount of Rs. 85,919 after deducting taxes and penalties for the assessment year 1967-68 and onwards could not have been shown while filing the returns of wealth for the said assessment years.

ii. The factum of subsequent disclosure made in 1975 under the Voluntary Disclosure of Income & Wealth Ordinance, 1975, cannot be considered because of the immunity granted under the Act as well as on account of the returns of wealth having been filed for the assessment years 1973-74 to 1975-76 on dates earlier to the declaration under Section 3(1) of the said Act. The following sentences deserve to be deleted: 'We are also in agreement with the learned departmental representative that the wealth of the assessee after taking into consideration the subsequent disclosure made in 1975 was not negative for the assessment years 1974-75 and 1975-76, while for the assessment year 1973-74 his wealth even after assessment was made was above the taxable limit without taking into consideration the disclosure of 1975.' iii. That pointed attention of the learned Tribunal was drawn to the decision of the Supreme Court reported in Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, wherein the Hon'ble Supreme Court has held that liability to income-tax was a present liability though the tax became payable after it was quantified in accordance with the ascertainable data, and that such amount was a debt owed within the meaning of Section 2(m) on the valuation date and was as such deductible in computing the net wealth. For ready reference we draw again the attention of the Hon'ble Tribunal towards the discussion contained in pages 775 to 784. We are reproducing hereunder the summary contained on page 784: 'To summarise: A debt is a present obligation to pay an ascertainable sum of money, whether the amount is pavable in praesenti or infuturo ; debitum in praesenti, solvendum infuturo.

But a sum payable upon a contingency does rot become a debt until the said contingency has happened. A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act; if the Finance Act has not yet been passed, it is the rate proposed in the Finance Act pending before the Parliament or the rate in force in the preceding year, whichever is more favourable for the assessee. All the ingredients of a 'debt' are present. It is a present liability of an ascertainable amount.

Looking from a practical standpoint also, there cannot possibly be any difficulty in ascertaining the liability. As the actual assessment will invariably be made subsequent to the close of the accounting year, the rate would certainly be available to the authorities concerned for the purpose of quantification.

Following the said decision of the Supreme Court, which is binding on the Hon'ble Tribunal, the Hon'ble Tribunal should have at least reduced income-tax at Rs. 63,494 from the gross wealth of Rs. 85,919.' iv. That pointed attention of the Hon'ble Tribunal was drawn to the decision of Supreme Court reported in H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864, holding that the liability to pay wealth-tax becomes crystallized on the valuation date and not on the 1st day of the assessment, though the tax is levied and becomes payable in the relevant assessment year. The wealth-tax liability of an assessee on the valuation date for the assessment year beginning on the 1st of April following is a debt owed within the meaning of Section 2(m) of the Act and should be deducted from the estimated value of the assets as on the valuation date. Following the said decision of the Supreme Court which is binding on the Hon'ble Tribunal, the Hon'ble Tribunal should have at least reduced wealth-tax for the assessment years 1967-68 to 1972-73 from the gross wealth of Rs. 85,919.

15. In para 7 of the application, it was submitted that there were innumerable decisions of the Jaipur Bench of the Tribunal wherein the Tribunal had allowed income-tax, wealth-tax and penalties on account of settlement under Section 2(m) during the assessment years earlier to the date of settlement order and till the amount was actually paid.

Reference was made, inter alia, to the order of the Tribunal dated 17-7-1978 in the case of Mannalal Nirmal Kumar Soorana (HUF). In the case of the assessee also, it was stated, the Tribunal had allowed the tax liability on account of settlement for the various years under Section 2(m). Copy of the order of the Tribunal dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 pertaining to the assessment years 1973-74 to 1975-76 was furnished. This order was based on the order of the Tribunal dated 17-7-1978 in WT Appeal No. 7 (Jp.) of 1978-79 in the case of Mannalal Nirmal Kumar Soorana referred to above. The observations of the Tribunal in para 9 of its order that, 'we are not aware when the liability was actually paid' were referred to and the submission made was that at the time of hearing or thereafter this information was not demanded and such information could be supplied as and when demanded. In para 9 of the application, it was submitted that the finding given by the Tribunal that no deduction on account of tax liabilities and penalties could be given was in conflict with the decision of the Tribunal in the case of the assessee, as well as other similar cases, and contrary to the decisions of the Supreme Court in Parvati Bayi's case (supra), Kesoram Industries' case (supra) and Ahmed Ibrahim's case (supra). In para 10 of the application the mistake pointed out was that the Tribunal had misconstrued the decisions in Ahmed Ibrahim's case (supra), V.C. Handi's case (supra) and Raj Paul Ghawla's case (supra). Reference was made to the following observations of the Tribunal in para 10 of its order at page 20: In the wealth-tax order the WTO had disallowed certain liabilities on account of income-tax and wealth-tax. These liabilities appear to have been allowed as deduction by the Commissioner of Wealth-tax (Appeals) for the assessment year 1973-74 and the Appellate Assistant Commissioner for the assessment years 1974-75 and 1975-76.... The orders of these authorities have not been filed in the paper-book.

It was then submitted that the said orders were available with the Tribunal in quantum appeals and were not required to be placed in the paper book. The submission made was that as a judicial propriety the Tribunal should not have taken a contrary decision to the decision taken by it in the case of the assessee while deciding the quantum appeals and in case the earlier decision was not readily available, old records should have been called for or a copy should have been demanded. It was finally submitted that in not following its own order in the quantum appeals while allowing the tax liabilities as a debt under Section 2(m), and in not following the decisions of the Supreme Court in Kesoram Industries' case (supra), Parvati Bayi's case (supra) and Ahmed Ibrahim's case (supra), the Tribunal had committed a mistake apparent from the record which was required to be rectified. It was also submitted that the Tribunal had committed a mistake apparent from the record in considering extraneous facts, circumstances, submissions and contentions which were not borne out from the record of the Tribunal. Thus, it was pleaded, that it was a fit case for rectification of the said order and amendment thereof accordingly.

16. After hearing the learned representatives of both the parties the learned Accountant Member passed his order dated 6-2-1982. He first dealt with the criticism levelled in para 3 of the application against certain observations made in para 5 of the original order of the Tribunal and rejected the criticism so made. He then dealt with para 4 of the application, wherein para 6 of the original order of the Tribunal was criticised and rejected that criticism also. He, however, held that the orders of the Tribunal dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7, 8,9 and 10 (Jp.) of 1978-79 relating to the assessment years 1972-73 to 1974-75 with reference to which penalties had been imposed under Section 18(1)(c) were required to be considered and findings of fact had to be recorded with reference to the facts.

After consideration of the aforesaid orders, the learned Accountant Member formed an opinion that there was a mistake apparent from the record and on consideration of the quantum orders in the case of the assessee for these years, no penalties were required to be levied. He expressed an opinion that the following paragraphs 9 to 12 should be substituted for the original paras 9 to 12 of the earlier order of the Tribunal: 9. The assessee further contended that there was no concealment during the impugned years. Certain additions were made by the Wealth-tax Officer for the assessment' year 1967-68. The same were deleted by the AAC. No second appeal was preferred by the revenue against the order of the AAC. The revenue was satisfied with the finding of the AAC. Thus, the addition made by the ITO was non-existent. However, addition of Rs. 85,919 was made in terms of the settlement order dated 24-3-1975. This impugned amount came on surface during the assessment year 1967-68. This amount was not hidden and was very well known to the assessing authorities in the course of assessment proceedings for the assessment years 1973-74 to 1975-76. It was also stated that while making the assessment order dated 9-8-1979 for the assessment year 1972-73 in para 5, the WTO made the following observations: It is further noticed that in the assessment year 1972-73 an amount of Rs. 85,919 was included in the total wealth of the assessee under the head additional wealth as per settlement order of the CWT dated 24-3-1975. This point was discussed with the assessee's representative during the hearing of the case. The assessee did not put on any objection when I proposed the addition of Rs. 85,919 this year also under the same head.

It was submitted that he initiated penalty proceedings under Section 18(1)(c) of the Act for the assessment year 1972-73 but on furnishing the reply dated 18-9-1979, he dropped the penalty proceedings. It was submitted that for the assessment years 1973-74 to 1975-76, addition of Rs. 85,919 was made on the basis of the assessment order for the assessment year 1972-73 and penalty proceedings under Section 18(1)(c) were initiated for these years also and similar reply as for the assessment year 1972-73 was also given for these assessment years. However, the WTO for no valid reasons imposed penalty for these years while no penalty was levied for the assessment year 1972-73 under similar circumstances.

According to Shri Ranka, the learned counsel of the assessee, the revenue knew the impugned wealth and there was no furnishing of inaccurate particulars. Another contention made was that the impugned amount having been assessed in the income-tax assessment proceedings for the assessment year 1967-68, and the wealth-tax assessment proceedings for the assessment years 1967-68 to 1972-73 could not be said to be concealed. For the same default, penalty could not be imposed from year to year and the default if any was in the assessment year 1967-68 and not during the assessment years 1973-74 to 1975-76. Alternatively, if any amount of penalty was sustained for the assessment year 1973-74, no penalty could be sustained for assessment years 1974-75 and 1975-76. Lastly in the ratio of the decisions of the Supreme Court reported in Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864 (SC), Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 314 (SC), no penalty was exigible as the liability on account of income-tax, wealth-tax had to be allowed and after allowing that liability, the assessee was not left with any wealth. It was also stated that the decision of the Delhi High Court reported in CWT v. Raj Paul Chaw la [1979] 117 ITR 574 was not considered. Further the decision of the Madras High Court in the case of CWT v. G.D. Naidu [1965] 58 ITR 301 and of CWT v. Banarashi PrasadKedia [1970] 77 ITR 159 referred to in the order of the Appellate Tribunal in quantum appeals were also not considered.

10. We have given a careful consideration to the rival submissions.

We shall first consider the effect of the order of the Appellate Tribunal dated 17-7-1978 in quantum appeals. In quantum appeals, the dispute was as to whether the provisions of Section 2(m)(iii)(b) of the WT Act, 1957 with regard to outstanding liability were applicable. In other words, whether the income-tax liability was a debt owed and outstanding for a period of more than 12 months and, therefore, is not deductible while computing the net wealth of the assessee. The Appellate Tribunal in the said order has held that the debts outstanding were not outstanding for a period of more than 12 months and, therefore, the same were to be allowed as a deduction and consequently, the assessee had no wealth to the extent of the liabilities outstanding. Relying upon the decision of the Hon'ble Madras High Court in the case of Shri G.D. Naidu 58 ITR 301, the contention of Shri N.M. Ranka was that the inclusion of the amount of Rs. 85,919 in the income for the assessment year 1967-68 was the result of a settlement arrived at between the department and the assessee. It was not within the scope of the Income-tax Act. It was nothing more than an executive act by which the Commissioner included the amount in the income of the assessee. The liability arising out of such a settlement, according to Shri Ranka, was not a liability under the Income-tax Act or Wealth-tax Act, but it was a liability which could be enforced under civil law only and not under the IT Act, etc., and that being so, the provisions of Sub-clause (b) of Clause (hi) of Sub-section (to) of Section 2 of the WT Act were not applicable as in the case of G.D. Naidu and this contention has been accepted by the Tribunal in the quantum appeal. He further submitted that no regular order of assessment order was passed by the ITO bringing the amount of Rs. 85,919 to tax under the Income-tax Act. It was at the stage of proceedings before the Appellate Tribunal that this amount was surrendered by the assessee in terms of settlement and the Appellate Tribunal passed orders to include the same in income of the assessee. What Shri Ranka submitted was that the procedure adopted was not prescribed under the Income-tax Act inasmuch as, the Appellate Tribunal had no power to enhance the assessment and it was as a result of the settlement arrived at by the assessee with the CIT that the amount of Rs. 85,919 was included in the assessment by the Tribunal a t the stage of appeal before it and the ITO merely gave effect to the order of the Tribunal on 30-4-1976 while passing order under Section 253 of the IT Act. When this finding has been given by the Tribunal in the quantum appeal that the liability was not under the Tnccme-fax Act but as a result of settlement, the provisions of Sub-clause (b) of Clause (3) of Section 2(w) of the WT Act were not at all attracted and there was no question of applying the limitation of the demand being outstanding for more than 12 months. It was a debt like any other debt which could be carried forward indefinitely till it was actually paid. In view of the above position, the provisions of Section 2(m)(iii)(b) are not applicable to the facts of the case and the liability which is a debt owed has to be treated like any other liability and not as income-tax liability which could not be allowed as a deduction if it was outstanding for more than 12 months. That being so, even though the liability was outstanding for more than 12 months it was still payable by the asses-see and wealth to that extent had to be reduced. Shri Ranka at page 49 of the paper book had given the liability at Rs. 80,606 against the inclusion of Rs. 85,919 leaving a small difference of Rs. 5,313. Shri Ranka then pointed out that the assessee was under the bonafide belief that it had no taxable wealth taking into consideration the liabilities thereon and taxes already paid at Rs. 12,500 on 9-8-1973, Rs. 12,500 on 6-11-1973, and Rs. 62,500 from 17-12-1973 to 7-5-1974 and the small amount of Rs. 5,313 could not be visualised by the assessee and, therefore, no penalty was exigible. In view of the fact that the Appellate Tribunal has held in the quantum appeal that the amount of liability was not under the Income-tax Act but as a result of settlement which was not a liability under the Income-tax Act but like any other liability which could be carried forward indefinitely, we hold that the assessee's wealth to the extent of liability had depleted. The other point argued by Shri Swarup, the learned departmental representative, was that computation of liability at Rs. 80,606 was not correct inasmuch as Shri Ranka had computed the tax liability for amount of Rs. 85,919 at the highest level. According to him, the liability should have been taken at the lowest slab or alternatively at the average rate. In our opinion, when concealed income is detected, it is added to the income returned by the assessee and the highest slab is applicable to such income. In fact, such a situation was visualised under the scheme of imposing penalties. The major portion of liability under the Income-tax Act is for the assessment year 1967-68 on account of the income-tax payable and the penalty thereon. The penalty under Section 271(1)(c) of the Income-tax Act as it stood at the relevant time could be levied in the difference between the returned income and the assessed income. By this process the penalty was calculated on the tax on concealed income as the highest slab. In this view of the matter, we are of the opinion that the calculation made by Shri Ranka at Rs. 80,606 cannot be said to be erroneous. If liability of Rs. 80,606 as worked out by Shri Ranka is taken into consideration the amount of the assets which was liable to tax would be at Rs. 5,313 only which, in our opinion, could be left out bonafide as the assessee could entertain such a belief that after allowing the liability which was then not quantified and payments already made there was no taxable wealth. In view of these observations, we are of the opinion that no penalty was exigible for any of the three assessment years. We, therefore, allow the assessee's appeals for all three years.

11. So far as the other contentions made on behalf of the assessee are concerned as enumerated above, we do not consider it necessary go to into the same. Our earlier findings in our order dated 16-11-1981 on the applicability of the provisions of Section 2(m)(iii)(b) were altogether on different assumptions and, therefore, the same will not hold good in the present case.

12. Paras 9 to 12 of our order dated 16-11-1981 will, therefore, stand substituted as above.

According to the learned Accountant Member the Misc. Application filed by the assessee should be partly allowed.

17. The learned Judicial Member did not agree with the view of the learned Accountant Member. According to the learned Judicial Member the learned Accountant Member had rejected all the other contentions raised in the Misc. Application and he agreed with that opinion of the Accountant Member and so the only question for consideration was whether non-consideration of the Tribunal's order dated 17-7-1978 passed in the quantum appeals of the assessee for the assessment year 1972-73 constituted a mistake apparent from the record within the meaning of Section 35(1). The learned Judicial Member observed that the learned Accountant Member had not considered the revenue's submission that by this application the assessee wanted a review of the earlier order of the Tribunal in the garb of an alleged mistake apparent from the record but such review of the earlier order could not be done under Section 35(1). According to the learned Judicial Member, when the order dated 17-7-1978 in the case of the assessee for the assessment year 1972-73, was not filed before the Tribunal, the non-consideration of that order was not a mistake apparent from the record which could be rectified under Section 35(1). He observed that there were two main questions before the Tribunal when the appeals came to be heard originally. The first question was whether there was concealment on the part of the assessee and whetherthe wealth of the assessee was depleted tothe extent of income-tax liability and penalty pertaining to the assessment year 1967-68 and wealth-tax liability and penalty pertaining to the assessment years 1967-68 to 1972-73. This question was answered against the assessee in para 9 on pages 14 and 15 of the original order. The second question was whether liability under Section 2(m)(iii)(b) should be allowed. This point was also decided against the assessee and he gave an extract from page 17 of the earlier order. The [learned Judicial Member then referred to the following observations of the Tribunal in the order dated 17-7-1978: Since the settlement was not the result of the application of any provision of the Income-tax and Wealth-tax Act, it was not an income-tax and wealth-tax liability within the meaning of Section 2(m)(iii).

The finding of the Tribunal in that case was that the case was not covered by the mischief of Section 2(m)(iii)(b). According to the learned Judicial Member, this finding weighed with the learned Accountant Member but as the point whether the liabilities in these cases fell within the meaning of Section 2(m)(iii) or not was neither argued nor decided by the Tribunal, there was no mistake apparent from the record which was required to be rectified. According to the learned Judicial Member, the assumption of jurisdiction for purposes of Section 35(1) in a case of this nature would not be justified. The learned Judicial Member held that considering the entirety of the circumstances and the materials, non-consideration of the order dated 17-7-1978 was not a mistake apparent from the record and the decision dated 16-11-1981 could not be altered because the Tribunal in the order dated 17-7-1978 took the view that settlement did not give rise to any income-tax/wealth-tax liability and, therefore, the provisions of Section 2(m)(iii)(b) were not attracted in the case of the assessee.

The opinion of the learned Judicial Member was that the application of the assessee should be dismissed. The order of the learned Judicial Member is dated 15-2-1982.

18. When the aforesaid order dated 15-2-1982 was placed before the Accountant Member, he observed that he had inadvertently referred to the order dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7, 8, 9 and 10 (Jp.) of 1978-79 whereas the actual orders to be referred were dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 relating to quantum appeals in the case of the assessee for the assessment years 1973-74 to 1975-76 in respect of which the miscellaneous application pertaining to penalty appeals for these very years had been filed. He, however, observed that the reference to the order dated 30-8-1980. in which the order dated 17-7-1978 was followed would not make any change because if the foundation for levying the penalties fell, the superstructure in actually levying the penalties was bound to fall. He then passed his order dated 19-2-1982, mentioning the point of difference between the learned Members which is contained in para 1 of this order. The learned Judicial Member was of the opinion that after writing orders dated 6-2-1982 (by learned Accountant Member) and order dated 15-2-1982 (by learned Judicial Member) both the Members were functus officio and the learned Accountant Member could not j introduce the order dated 30-8-1980 in place of order dated 17-7-1978 as it will require application of mind to new facts. By his order dated 19-2-1982, the learned Judicial Member formulated the point of difference between the two learned Members which also is mentioned in para 1 of this order.

19. The learned departmental representative first took a preliminary objection to the effect that the reference to the learned President and by the learned President to a Third Member, was incompetent as the two learned members had not stated their difference on any point. He submitted that in view of the provisions of Section 24(11), read with Section 255(4) of the 1961 Act, no difference on any point as such had been stated by the two learned Members. According to him, difference on a point first postulates a common point of difference, and there being no difference on a common point, no reference could be made to the learned President. He then submitted that the powers of the Third Member were limited to the question and the point of disagreement.

According to him, the Third Member could not enlarge the controversy.

In other words, the submission made by the learned departmental representative was that the Third Member could not re-frame the point of difference and then answer it. He then submitted that when two learned Members give contrary judgments, each passing an order on behalf of the Court and delivering separate judgments, without stating the point of difference between them, then each judgment is a judgment of the court. Thereafter, a judgment confirming decree of the lower court becomes the judgment of the Court. He also submitted that the order dated 30-8-1980 of the Tribunal could not be corrected in place of the order of the Tribunal dated 17-7-1978 in the manner done by the learned Accountant Member and therefore in the point of difference referred by the learned Accountant Member the mention of the order dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 should be considered to be extraneous. On the powers of the Third Member he referred to the judgments in Jan Mohammed v. CIT [1953] 23 ITR 15 (All.) and Hanutram Chandanmul v. CIT [1953] 23 ITR 505 (Pat.). He also referred to Section 98 of the Code of Civil Procedure but himself clarified that under this section the power to refer could only be exercised if there was a difference of opinion on a point of law. He conceded that in the Tribunal, the two learned Members could even differ on a point of fact. Without prejudice to this argument, his further argument on the preliminary objection was that when the two learned Members had given different opinions, the opinion of the Third Member will be another opinion and thus the final order of the court will contain two opinions. According to him, in such a situation the provisions of Section 24 of the Act could not be activated, particularly in view of the judgment in T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC). He thus submitted that there being no common point of difference between the two learned Members, no opinion need be expressed by the Third Member.

20. The learned counsel for the assessee submitted that it was not the requirement of law under Section 24(11) read with Section 255(4) of the 1961 Act, that the two members should sit together to state a point of difference in a language which had the approval of both the learned members. He referred to the words '. . . They should state the point or points on which they differ. . .' used in Section 255(4) of the 1961 Act, which are equally applicable to proceedings under the Act, and submitted that no agreement between the two learned Members, while stating the point of difference was necessary. He further submitted that the section [Section 24(11) read with Section 255(4) of the 1961 Act] was a machinery section and it had to be interpreted and applied in a manner that the machinery provided by the law becomes workable and a hiatus is not created in the disposal of appeal. Therefore, he submitted, that the substance of the matter had to be examined and not the form. He also pointed out that under the law no form was prescribed in which, on a difference of opinion, the question was to be formed.

According to him, the difference of opinion could even be stated in a narrative form. He then compared the two questions framed by the two learned Members and submitted that the form may be different, the substance of the point of difference was the same. He also made the submission that there was no prohibition regarding preface to a question on difference of opinion. He conceded that in the preface, it was not possible to incorporate fresh facts and new material. He, however, criticised the observations of the learned Judicial Member in his order dated 19-2-1982 stating that 'I am of the view that both the members have become functus officio after passing the respective orders. . . '. He submitted that the Third Member could reframe the point of difference and could determine the substance of the matter in an intelligible manner. He compared the language of Section 255(4) of the 1961 Act which uses the words'. . . they shall. . .' with the language of Section 98 of the Code of Civil Procedure which uses the words '.... They may state the point of law. . .'. He submitted that there was a basic difference in these two sections--one in the 1961 Act, and the other in the Code of Civil Procedure. He pointed out that in income-tax or wealth-tax proceedings, there was no decree of a lower court which was to be confirmed and thus reference to Section 98 of the Code of Civil Procedure was not relevant. He further submitted that the Income-tax Act was a Code by itself for substantive law and for procedure and unless otherwise provided the provisions of another law were not required to be considered. He submitted that the judgments in Jan Mohammed (supra) and Hanutram Chandanmul (supra) were distinguishable on facts. He vehemently argued that the learned departmental representative was not correct in his submission that there cannot be a difference of opinion between two members while deciding appeals under Section 24 of the Act or Section 254 of the IT Act, in view of the Supreme Court judgment in the case of Volkart Brothers (supra).

21. Tn reply, the learned departmental representative submitted that it should not be left to the Third Member to formulate the point of difference because formalities provided for stating the point of difference and then referring the same to the learned President, Tribunal, had to be strictly complied with. He submitted that as there were no rules framed for purposes of making a reference to the President, in a case of difference of opinion between the Members, the provisions of Section 98 of the Code of Civil Procedure may be applied, 22. I have very carefully considered the rival submissions on the preliminary objection raised by the learned departmental representative. I cannot accept the objection raised by the learned departmental representative that the learned President, Tribunal, himself had no jurisdiction in this case to accept the reference on the point of difference between the two learned Members. The language of Section 255(4) of the 1961 Act read with Section 24(11) leaves no doubt that if the members of a Bench differ in opinion on any point, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points by one or more of the other members of the Tribunal, and such point or points shall be decided according to the opinion of the majority of the Members of the Tribunal. The Income-tax Act and the Wealth-tax Act are separate enactments for hearing and disposal of appeals under these enactments. Section 98 of the Code of Civil Procedure has no application to a point of difference arising under the Income-tax Act or the Wealth-tax Act, and it is, therefore, not necessary to refer that section. After holding that the point of difference was rightly referred by the learned Members to the learned President, Tribunal, I must hold that the reference of this case by the President to me (as Third Member) is not without jurisdiction. I may at this stage refer to the two authorities cited by the learned departmental representative. In the case of ' Jan Mohammed (supra), the members differed on the point whether a bus registered in the name of the assessee's wife could be presumed to belong to the assessee. The point was, therefore, referred to a Third Member who held that no such presumption could legally be drawn. The Third Member, thereafter, formulated a new point for himself and held, relying on Section 16(3)(a)(iii) of the 1922 Act, that the bus must have been purchased from the assets transferred directly, or indirectly to the wife by the assessee. On a reference, it was held that the Third Member was competent to decide only the point referred to him and he could not himself formulate a new point on which he could base his decision.

There is no dispute about the proposition of law laid down in this judgment. But 1 do not propose to formulate a new point in this case and then answer an altogether different point. The point of difference, though couched in a different language by each learned Member, is clear and the point is whether non-consideration of the Tribunal's order in the quantum appeals constitute a mistake apparent from the record under Section 35(1)(e) of the Act. The judgment in Hanutram Chandanmul (supra) is distinguishable on facts because in that case when the two Members differed on the point of making a trading addition, the Third Member suggested an altogether different figure and on those facts it was held that the opinion of the Third Member was not legally valid. No such point is involved in this case. I agree with the learned counsel for the assessee that the judgment in Volkart Brothers' case (supra), in the context in which it has been referred, is not relevant. Thus, I do not accept the preliminary objection of the learned departmental representative that for lack of jurisdiction I should refrain from answering the point of difference in this case.

23. I will now examine whether there is any difference between the point of difference between the two members, though the wording of the point of difference used by both the learned members is different.

According to both the learned Members, the point of difference is whether non-consideration of the order of the Tribunal in quantum appeals, constitutes a mistake apparent from the record and, if so, whether the order of the Tribunal dated 16-11-1981 deserved to be altered. Both the learned members have referred to the order of the Tribunal dated 17-7-1978 in WT Appeal No. 7 (Jp.) of 1978-79 for the assessment year 1972-73 in the assessee's own case. In his application the assessee had referred to the quantum orders for the years under consideration and had also referred to the order for the assessment year 1972-73, and when the learned Accountant Member passed his order dated 6-2-1982 his intention could really be to refer to the orders in WT Appeal Nos. 425 to 427 (Jp.) of 1979 pertaining to the three years under consideration, though that order was based on the order dated 17-7-1978 for the assessment year 1972-73. This intention could certainly be clarified by him to bring out the correct fact as to which order was not considered by the Tribunal, while passing the order dated 16-11-1981. It will be too technical to say that if the order dated 30-8-1980 is not mentioned in the order dated 6-2-1982, that order should not be considered at all, because the point of difference for purposes of Section 35(1)(e) is regarding the non-consideration of the order of the Tribunal in quantum appeals. The order in quantum appeals for the assessment years 1973-74 to 1975-76 is dated 30-8-1980 and thus this order has to be necessarily considered. It is of course an admitted fact that a copy of this order was not filed by either party before the Tribunal, when the original appeals came to be decided against the assessee on 16-11-1981.

24. The learned counsel for the assessee submitted that the basic document, even for purposes of levy of penalty, was the assessment order because it was in that order that the WTO recorded his satisfaction for initiation of penalty proceedings under Section 18(1)(c). In each of the three assessment years under consideration, the WTO has stated 'penalty proceedings under Section 18(1)(c) have been initiated'. He submitted that when there were appeals against the orders of assessment, the assessment orders got merged in the orders of the appellate authority and, thus, the order of the Tribunal in the quantum appeals for these three years formed a part of the record for purposes of Section 35(1)(e) and, thus, the order of the Tribunal in the quantum appeals could not be ignored. He referred to the following observations of the learned Judicial Member in para 3 of his order dated 15-2-1982: Can there be any mistake on the part of the Tribunal in not considering a material which was not before it, at the time of hearing the appeal My answer to this question is in the negative.

He submitted that the learned Judicial Member erred in observing that the order of the Tribunal was 'a material which was not before it', because the order of the Tribunal in quantum appeals was an integrated part of the proceedings and formed a part of the record. He then submitted that 'the record' mentioned under Section 35(1) should be relating to the assessee's own case, but 'the record' should not be construed to be the record of the Tribunal only. He referred to the judgment in ITO v. Ashok Textiles Ltd. [1961] 41 ITR 732 (SC), wherein it has been held that the ITO had power under Section 35 of the 1922 Act to examine the record and if he discovered that he had made a mistake he could rectify the error and the error which could be corrected might be an error of fact or of law. The restrictive operation of the power of review under Order XLVII, Rule 1, Code of Civil Procedure, was not applicable in the case of Section 35 of the 1922 Act. He then referred to the judgment in ITO v. ITAT [1965] 58 ITR 634 (All.), wherein it has been held that where, in a judgment or order of the Tribunal, an error has crept in, not as a result of the fault of the assessee but attributable entirely to the Tribunal in having lost sight of a material fact at the time of writing its order or judgment, which fact was duly brought to its notice by the assessee, there would be an error apparent from the record which could be rectified under Section 35 of the 1922 Act. He then referred to the judgment in Maharana Mills (P.) Ltd. v. ITO [1959] 36 ITR 350 (SC), wherein it has been held that 'The record' contemplated by Section 35 of the 1922 Act, does not mean only the order of assessment but it comprises all proceedings on which the assessment order is based and the ITO is entitled for purpose of exercising his jurisdiction under Section 35 to look into the whole evidence and the law applicable to ascertain whether there was an error. He further referred to the judgment in Mahendra Mills Ltd. v. P.B. Desai AAC [1975] 99 ITR 135 (SC), wherein it has been held that the Tribunal's decision was equally, with the officer's finding with regard to the closing stock for 1959-60, relevant to and part of the 'record of appeal' within the contemplation of Section 35 and not extraneous to it and the AAC could legitimately look into it for the purpose of correcting the mistake in regard to the opening stock for 1960-61. He further referred to the judgment in Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.) wherein it has been held that it has been settled by the decisions of the Gujarat High Court in CWT v. Raipur Mfg. Co. Ltd. [1964] 52 ITR 482 and of the Supreme Court in Kesoram's case (supra), that provision for taxation was a 'debt owed' within the meaning of Section 2(m) and was, therefore, deductible in computing the net wealth of the assessee. Therefore, there was clearly an error of law apparent on the fact of the record in the assessment orders in question. He then referred to the judgment in Blue Star Engineering Co. (Bombay) (P.) Ltd. v. CIT [1969] 73 ITR 283 (Bom.) wherein at page 300 it has been observed that the word 'amend' with reference to legal documents means correct an error and the expression 'amend the order' would mean correct the error in the order. He also referred to the judgment in Musammat Jamna Kaur v. Lal Bahadur 1949-50, Vol. XI, FCR 662 at 666, wherein it has been held that whether the error occurred by reason of the counsel's mistake or it crept in by reason of an oversight on the part of the court was not a circumstance which could affect the exercise of jurisdiction of the court to review its decision. He then submitted that the difference between the terms 'recall', 'amend' and 'rectify' was a matter of words only. According to him the order of the learned Accountant Member was an order recalling a part of the earlier order of the Tribunal. He submitted that the order of the Tribunal dated 16-11-1981 was obtained in utter ignorance of important material in the shape of appellate orders in WT Appeal Nos. 425 to 427 (Jp.) of 1979 in quantum appeals relating to the three years under consideration and, therefore, there was a valid justification for recalling the earlier order. He referred to pages 16 and 17 of the Tribunal order dated 16-11-1981 wherein it has been observed as under: Considered from this angle the income-tax levied for the assessment year 1967-68, penalty levied thereon for that year, wealth-tax levied for that year as also the penalty under Section 18(1)(e) of the Wealth-tax Act levied, for that year would be a debt owed for computing the net wealth of the assessee on the valuation date relevant to the assessment year 1967-68 and not for the assessment years 1973-74, 1974-75 and 1975-76.

He referred to the order of the Commissioner dated 24-3-1975 on a compromise petition of the assessee and submitted that when the order of the Commissioner himself was dated 24-3-1975 liabilities as a result of that order could only arise after that date and it could not thus be said that the liabilities arising as a result of the settlement were outstanding for more than 12 months on the relevant valuation dates. He also referred to last few lines of para 10 of the order dated 16-11-1981 which reads as under and submitted that the position stated therein was not quite correct: We have, however, discussed earlier that deductions on account of income-tax and wealth-tax liabilities of the assessment years up to 1972-73 with reference to the asset of Rs. 85,919 are not admissible as a debt owed within the meaning of Section 2(m)(iii)(b) of the Wealth-tax Act.

He referred to the judgment in Dhirajlal Girdharilal v. C77'[1954] 26 ITR 736 (SC) and submitted that irrelevant material had been considered and the relevant material bad not been considered. He submitted that the agreement dated 24-3-1975 was before the Bench. The liability of a sum of Rs. 85,919 arose after the settlement dated 24-3-1975. This fact is mentioned in the penalty orders and the Commissioner (Appeals) in his order dated 27-6-1981 had himself referred to the order dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 for the assessment years 1973-74 to 1975-76 and had taken note of the fact that these appeals filed by the revenue had been dismissed. He submitted that the learned Accountant Member was right in taking into consideration the fact: (1) that the order of the Tribunal in quantum appeals as a result of which the penalties were imposed was essential material and also deserved to be considered ; (2) that Rs. 85,919 was added in terms of settlement order ever since the assessment year 1967-68 and this amount was not hidden from the income-tax authorities and was known to them while proceeding with the assessments for the assessment years 1973-1974 to 1975-76 ; and (3) the very amount of Rs. 85,919 was added in the assessment year 1972-73 and was described in the same terms pursuant to the order dated 24-3-1975 assessed by the Commissioner and on a similar explanation filed for the three years under consideration penalty proceedings for the assessment year 1972-73 were dropped. He thus submitted that the learned Accountant Member was justified in passing an order of rectification under Section 35(1)(e).

25. He submitted that the learned Judicial Member was not correct in holding that: (1) there was no mistake in not considering the material which was not before the Tribunal ; (2) there was no mistake of law in not following an order similar to the one given in the quantum appeals ; and (3) whether income-tax and wealth-tax liabilities and penalties were allowable deduction under Section 2(m) or not was a question of law and this could not be rectified under Section 35. Regarding point No. (2), taken by the learned Judicial Member, he submitted that this was in respect of liabilities and the order of the Tribunal contained a finding which was relevant to the penalty orders because it was a point connected with the computation of net wealth. He referred to the judgment in Ahmed Ibrahim's case (supra) and submitted that the point No. (3) referred to above, taken by the learned Judicial Member ceased to be a question of law in view of this judgment.

26. He then referred to the judgment in L. Hirday Narain v. ITO [1970] 78 ITR 26 (SC), wherein it has been held that the power to rectify the order of assessment conferred on the ITO by Section 35 is to ensure that injustice to the assessee or to the revenue may be avoided. It is implicit in the nature of the power and its entrustment to the authority invested with quasi-judicial functions under the Act, that to do justice it shall be exercised when a mistake apparent from the record is brought to his notice by a person concerned with or interested in the proceeding. That power is not discretionary and the ITO cannot, if the conditions for its exercise were shown to exist, decline to exercise it. He referred to the judgment in CIT v.Smt.Satnam Malik [1979] 120 ITR 309 (Raj.), wherein it had been observed that the Tribunal being the final fact-finding body should have arrived at its own conclusion of facts after due and proper consideration of the entire material for and against the assessee. In that case the Tribunal based its conclusion solely on the explanation furnished by the assessee during the penalty proceedings without taking into consideration the finding reached by it in the quantum appeals. He also referred to the judgment in CIT v. Chandi Prasad Khetan [1979] 120 ITR 314 (Raj.) for the submission that the order of the Tribunal in the quantum appeals was relevant material. For all these reasons, he submitted that there was no restriction on the power of the Tribunal in passing an order under Section 35(1)(e), provided substantial justice was denied to a party.

27. The learned departmental representative relied on the order of the learned Judicial Member. He submitted that the words 'the record' mentioned in Section 35(1) refer to the record which was before the Tribunal only. He submitted that if all the record which was not even before the Tribunal was considerd to be 'the record' or purposes of Section 35(1) it will open floodgates of litigation. According to the learned departmental representative, there was no mistake apparent from the record in the order of the Tribunal dated 16-11-1981 which was required to be corrected. According to him, the judgment in ITAT's case (supra) supported the revenue. He did not advance any arguments on the other judgments cited by the learned counsel for the assessee because, according, to him, nothing turned on the order of the Tribunal in quantum appeals as penalty proceedings were entirely different and various contentions had to be independently considered in penalty proceedings. He also submitted that the learned Judicial Member had not given any finding on merits and, therefore, the revenue was yet to be heard on the merits of the penalties by a Bench. He finally submitted that if the rectification under Section 35(1)(e) was to be allowed, then the position would be that the appeals had to be heard right from the beginning. According to him, a peculiar situation had occurred in this case wherein an opportunity of being heard was not allowed to the revenue because the learned Judicial Member had not given a finding on merits and, the merits of the penalties could not be gone into in the hearing before me.

28. The learned counsel for the assessee, in reply submitted that no further hearing was required to be given in this case which had been referred to the Third Member under Section 24(11) of the 1957 Act, read with Section 255(4) of the 1961 Act. He reiterated the submission that the order of the Tribunal in the quantum appeals was a part of the record and, therefore, the order of the learned Accountant Member should be confirmed.

29. I have carefully considered the rival submissions. I am inclined to agree with the order of the learned Accountant Member. According to the learned Judicial Member, there is no mistake either of fact or of law in the order of the Tribunal dated 16-11-1981 which is required to be corrected under Section 35(1)(e). He has expressed the opinion that the Tribunal would not have the jurisdiction to pass an order under Section 35(1)(e) because there is no mistake apparent from the record and non-consideration of the earlier order of the Tribunal dated 17-7-1978 in the assessee's own case does not constitute a mistake apparent from the record. There is a fallacy in the argument of the learned Judicial Member in stating that there is either no mistake of fact or of law. At the time when the appeal originally was filed, the assessee had filed a paper book and on pages 22 to 25 are given the facts pertaining to the income-tax assessment year 1967-68. It is stated therein that the ITO, Jaipur, completed the assessment for that year on 29-3-1972 on a total income of Rs. 5,79,516. He had added Rs. 65,969 on the plea of disproved purchases in the account of Motichand Dhandia. He had added a sum of Rs. 35,000 on the plea of disproved cash credit in the account of Shri Motichand Dhandia. He included a sum of Rs. 10,000 as disproved cash credit in the account of Ladu Singh Piparia. The assessee filed an appeal to the AAC, who decided the appeal on 28-3-1974 and deleted the addition of Rs. 1,00,969 and out of the sum of Rs. 10,000 in the account of Ladu Singh Piparia, an addition of Rs. 4,000 was sustained.

The revenue did not file an appeal to the Tribunal against the deletion of the addition of Rs. 1,00,969. The wealth-tax returns for the assessment years 1973-74 and 1974-75 were filed on 21-5-1973 and 21-6-1974 respectively and a revised return for the assessment year 1973-74 was filed on 15-12-1973. The order of the Commissioner on the compromise petition of the assessee is dated 24-3-1975 and it is only in this order that the sum of Rs. 85,919 was agreed to be assessed as the assessee's income as well as the wealth for the assessment year 1967-68. The concealment of an asset could be said to have taken place only when the returns for these two years were filed. When the return for the assessment year 1973-74 was filed there was no material on record to even suggest that Rs. 85,919 was an asset of the assessee for that year, the return for the assessment year 1974-75 was filed after the order of the AAC dated 28-3-1974 in the income-tax assessment for the year 1967-68 was accepted. Thus, it could not be said that there was any concealment of any asset in that return also. The judgment of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1 is an authority for the proposition that the commission of a wrongful act can be said to have taken place when the wrongful act was committed or in other words, the returns were filed. Though the settlement had taken place on 24-3-1975, the actual position was that the appeal, which was pending before the Tribunal for that year was disposed of on 31-3-1976 in terms of the settlement order and the ITO gave effect to that order on 30-4-1976 determining the total income at Rs. 1,38,167 as against the income returned at Rs. 49,985. Thus, before the Tribunal's order there was no legally valid order wherein the income of Rs. 85,919 was accepted by the assessee as his income for the assessment year 1967-68.

Before passing order of the Tribunal it could not be said that there was any concealment of an asset in the return filed either on 25-6-1975 or on 15-7-1975. There was, thus, apparently a mistake of law committed by the Tribunal while passing the earlier order on 16-11-1981. The non-consideration of the order of the Tribunal in the assessee's own case dated 17-7-1978 in IT Appeal No. 7 (Jp.) of 1978-79 pertaining to the assessment year 1972-73, which was later on followed in WT Appeal Nos. 425 to 427 (Jp.) of 1979 pertaining to the assessment years 1973-74 to 1975-76 was a mistake apparent from the record because the order of the Tribunal in the quantum appeals which was brought to the notice of the Tribunal and which was specifically mentioned in the order of the Commissioner, was required to be considered for purposes of considering whether penalty under Section 18(1)(c) was leviable in this case or not. The fact that the Tribunal's order in the quantum appeals constitutes 'the record' is supported by the authorities in Ashok Textiles" case (supra), ITAT's case (supra), Blue Star's case (supra), Mahendra Mills' case (supra), Pershuram Pottery's case (supra), Chandi Prasad's case (supra), Maharana Mills (P.) Ltd.'s case (supra) and Mussammat Jamna Kaur's case (supra). In Kesoram Industries" case (supra) the Supreme Court has held that income-tax other than that falling under Clause (iii) of Section 2(m) payable on the valuation date is a debt owed by the assessee and hence is deductible from the total wealth of the assessee while determining the net wealth for the purpose of levying wealth-tax. In the light of this judgment and the judgment of the Supreme Court in Ahmed Ibrahim's case (supra) the conclusion is irresistible that the tax liabilities other than those falling under Section 2(m)(iii) had to be allowed for purposes of determining the net wealth of the assessee. This is what precisely had been held by the Tribunal in the quantum appeals and the non-consideration thereof definitely gave rise to a mistake apparent from the record. On the theory of merger also, the assessment order read with the order of the Tribunal is required to be considered for purposes of considering the levy of penalty under Section 18(1)(c) for any tear. This is certainly a mistake apparent from the record. It may be clarified that the assessee is not introducing any fresh material on record because the decision of the Tribunal in the quantum appeals was noted by the Tribunal and the order in the quantum appeals was specifically mentioned in the order of the Commissioner but what had happened was that the actual order bearing WT Appeal Nos. 425 to 427 (Jp.) of 1979 dated 30-8-1980 was not placed on record.

30. I may refer to the judgment in ITAT's case (supra), wherein it has been held that if the Tribunal had lost sight of a material fact at the time of writing its order, which fact was duly brought to its notice by the assessee, there would be an error from the record which can be rectified under Section 35 of the 1922 Act. In the judgment in Hirday Narain's case (supra) the Supreme Court has held that the power to rectify the order of assessment conferred on the ITO by Section 35 is to ensure that injustice to the assessee or to the revenue may be avoided. It is implicit in the nature of the power and its entrustment to the authority invested with quasi-judicial functions under the Act, that to do justice it shall be exercised when a mistake apparent from the record is brought to his notice by a person concerned with or interested in the proceedings. That power is not discretionary and the ITO cannot, if the conditions for its exercise were shown to exist, decline to exercise it. The position at the stage of the Tribunal would be the same. I, therefore, do not even for a moment hesitate in coming to the conclusion that the learned Accountant Member was right in holding that there was a mistake apparent from the record and in rectifying the earlier order of the Tribunal under Section 35(1)(e).

31. The learned Accountant Member was correct in holding that the order of the Tribunal in quantum appeals with reference to which the penalty was imposed was essential material and ought to have been considered.

He was also right in coming to the conclusion that the sum of Rs. 85,919 was added in terms of settlement order of the Commissioner dated 24-3-1975 and as this amount after the settlement had come to the surface ever since the assessment year 1967-68, it could not be said that this asset was concealed in the assessment years 1973-74 to 1975-76. It may be stated that the very same amount of Rs. 85,919 was added as the wealth of the assessee for the assessment year 1972-73 and when the assessee gave similar explanations as for the three years under consideration no penalty was levied for the assessment year 1972-73. It may also be stated that for the assessment years 1974-75 and 1975-76 the final wealth assessed is a negative figure and it is only in the assessment year 1973-74 that the net wealth assessed is Rs. 1,51,500, on which the wealth-tax would work out to about Rs. 1,550. It could never be the intention of the assessee that for saving a paltry sum of wealth-tax the assessee would face penalties of Rs. 85,919 for each of the three years under consideration. I would even go to the extent of saying that even the Commissioner himself could not have contemplated that on an amount of Rs. 85,919 which was agreed to be taxed as income for the assessment year 1967-68, tax would be levied for the assessment year 1967-68 (according to the assessee, the tax on this figure worked out to Rs. 63,474) and in addition to certain penalties agreed to be imposed for the assessment years 1967-68 to 1972-73, there would be further penalties of Rs. 85,919 for each of the three years under consideration. Considered from any angle, I am in entire agreement with the order of the learned Accountant Member.

32. The learned departmental representative had raised a point that the learned Judicial Member had not heard the revenue on merits and, therefore, a fresh hearing should be given by the Bench. I am afraid, there is no provision in the Act for giving such a hearing after the case has been referred to the Third Member and the Third Member had expressed an opinion.

33. The case will go back to the Jaipur Bench of the Tribunal, which originally heard these appeals, for deciding the appeals, according to the majority view.


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