Skip to content


Padmavati Jaykrishna Vs. Commissioner of Wealth-tax, Gujarat Iii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberWealth-tax Reference No. 2 of 1973
Judge
Reported in[1976]105ITR115(Guj)
ActsWealth Tax Act, 1957 - Sections 5(1), 29, 32, 35 and 35(1); Finance Act, 1971 - Sections 32
AppellantPadmavati Jaykrishna
RespondentCommissioner of Wealth-tax, Gujarat Iii
Appellant Advocate J.M. Thakore, Adv.
Respondent Advocate K.H. Kaji, Adv.
Cases ReferredT. S. Rajam v. Controller of Estate Duty
Excerpt:
direct taxation - section 35 of wealth tax act, 1957 - question about powers of tribunal under section 35 - extent of income-tax officer's power under section 35 to rectify mistakes apparent from record must be determined - scope and effect of expression 'mistake apparent from record' to be ascertained - at time when income-tax officer applied his mind to question of rectifying alleged mistake there can be no doubt that he had to read principal act as containing inserted proviso as from 01.04.1962 - order prima facie valid cannot be treated as patently invalid and wrong by virtue of retrospective operation of amendment act - but if fiction inserted by proviso as forming part of section 18a(5) then order is inconsistent with proviso - income-tax officer justified in exercising his power.....b.k. mehta j.1. this reference raises a shorts but interesting question about the powers of the tribunal under section 35 of the wealth-tax act. though the question is a short one its application has always posed problems before courts. shortly stated, the facts leading to this reference are as under : the relevant assessment year was 1963-64 and the valuation date was december 31, 1962. the return was filed by the assessee, who is the applicant before us on 19th (sic) 1963. the assessee claimed exemption in respect of the jewellery on the ground that they were articles meant for personal use of the assessee and, therefore, not liable to be included within the net wealth of the assessee under section 5(1)(viii) of the wealth-tax act before its amendment. the assessee has filed a list.....
Judgment:

B.K. Mehta J.

1. This reference raises a shorts but interesting question about the powers of the Tribunal under section 35 of the Wealth-tax Act. Though the question is a short one its application has always posed problems before courts. Shortly stated, the facts leading to this reference are as under :

The relevant assessment year was 1963-64 and the valuation date was December 31, 1962. The return was filed by the assessee, who is the applicant before us on 19th (sic) 1963. The assessee claimed exemption in respect of the jewellery on the ground that they were articles meant for personal use of the assessee and, therefore, not liable to be included within the net wealth of the assessee under section 5(1)(viii) of the Wealth-tax Act before its amendment. The assessee has filed a list along with her return where two categories of jewellery were broadly mentioned; one category dealing with ornaments studded with precious stones, and the second category of golden ornaments simpliciter. The Wealth-tax Officer did not grant exemption in view of the disallowance made by him in the preceding year. The order of assessment was made in respect of the previous assessments and held that the articles in question should not be treated as articles of personal uses and they were, therefore, taxable. He, however, for the assessment year increased the value of the said articles, viz., jewellery, by 20 per cent. and brought it to Rs. 71,532. The assessee being aggrieved with the said order of the Wealth-tax Officer carried the matter before the Appellate Assistant Commissioner, contending, inter alia, that under section 5(1)(iii) of the Wealth-tax Act, jewellery and ornaments should be held to be exempt in view of the decision of the Gujarat High Court in Arundhati Balkrishna's case. The Appellate Assistant Commissioner accepted this contention of the assessee and by his order of June 22, 1968, allowed the exemption claimed by the assessee in respect of the articles meant for personal use, viz., jewellery in question for the said assessment year. The revenue, therefore, carried the matter in appeal before the Tribunal. It was contended on behalf of the revenue that the Appellate Assistant Commissioner was in error in holding that the entire value of jewellery and ornaments was exempt under section 5(1)(viii). By the time the Tribunal was called upon to decides this question, the decision of this court in Arundhati Balkrishna was confirmed by the decision of the Supreme Court which is reported in : [1970]77ITR505(SC) . The Tribunal, therefore, by its order confirmed the order of the Appellate Assistant Commissioner. However, by the Finance (No. 2) Act of 1971, there was an amendment made in the Wealth-tax Act and section 5(1)(viii) has been amended by the addition of words at the end of that clause, 'but not including jewellery', with the result that jewellery was taken out from the exempted category of wealth. This amendment has been put on the statute book with retrospective effect and it has been made effective by Parliament from April 1, 1963. The Wealth-tax Officer, therefore, pursuant to this amendment made an application to the Tribunal urging the Tribunal to exercise its powers of rectification under section 35 of the Wealth-tax Act, as in the submission of the Wealth-tax Officer there was a mistake apparent from the record of the case, inasmuch as the Tribunal confirmed the order of the Appellate Assistant Commissioner exempting the entire value of jewellery from the net wealth. In the course of hearing of that application, it was contended on behalf of the assessee that there was no error apparent from the record of the case which would justify the Tribunal in exercising its rectification powers under the said section 35. The Tribunal was of the opinion that its order exempting jewellery and gold ornaments, which expression has been used loosely, should not be allowed to stand in view of the retrospectivity of the amendment sought to be made in section 5(1)(viii) by the Finance (No. 2) Act of 1971; however, since the other question as to whether the articles in question amounted to jewellery or not was not decided, the appeal should be posted for further hearing on this point. The courses whether the Tribunal could post the matter for further hearing was justified by the Tribunal as, in its opinion, if a main error is rectified in a rectification proceeding and certain consequential orders are to be passed to put the matter completely straight, it is always necessary for the the Tribunal to hear the matter fully, and if necessary, to determine such issues. In that view of the matter, therefore, the Tribunal allowed the miscellaneous application by its order dated July 3, 1972, on the lines indicated above, and directed that the appeal should be posted for fresh hearing in due course on the aspect of the question, whether the articles in question amounted to jewellery or not. At the instance of the assessee, therefore, the following question has been referred to us for our opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was an error apparent from the record in granting exemption in respect of jewellery while disposing of the appeal on October 16, 1970 ?'

2. At the time of hearing of this reference, the learned Advocate-General appearing on behalf of the assessee, contended that the Tribunal was clearly wrong in holding that there was in error apparent from the record in granting exemption in respect of jewellery while disposing of the appeal of the Wealth-tax Officer by its order of October 16, 1970. It was strenuously urged by the learned Advocate-General that having regard to the set-up of the amending section 32 of the Finance (No. 2) Act of 1971 whereby section 5(1)(viii) was sought to be amended, three serious question arise. Firstly, whether this amendment could affect any completed assessment. In the submission of the learned Advocate-General, inasmuch as the amending section 32 by which section 5(1)(vii) is amended with effect from April 1, 1963, by addition of words, 'but not including jewellery' at the end of the said clause, and also by adding two provisos and two Explanations with effect from April 1, 1972, Parliament was prescribing two different dates for effectuating the amendment in the same clause and, therefore, the second important question which arises is, what is the extent of this retrospectivity. He also contended that Parliament by giving an inclusive definition of the term 'jewellery' in the Explanation 1 to the said clause 5(1) (vii) which has been brought into effect from April 1, 1972, a third difficult question arises as to what articles should be treated as jewellery for purposes of the said sub-clause. He, therefore, urged that in view of these three difficult and serious questions which had arisen as a result of the amendment sought to be made by section 32 of the Finance (No. 2) Act of 1971 in section 5(1)(viii) of the Wealth-tax Act, it cannot be said that the error is so apparent from the record of the case merely from the fact of the retrospectivity being given to the amendment of the main clause by adding words, 'not including jewellery' with effect from April 1, 1963, so as to justify the Tribunal to take resort to its rectification powers under section 35 of the Wealth-tax Act. In support of his contention, the learned Advocate-General relied on the decision of the Bombay High Court in J. M. Shah v. J. M. Bhatia Appellate Assistant Commissioner of Wealth-tax.

3. On behalf of the revenue the contentions urged by the learned Advocate-General were sought to be repelled by contending that there is no such thing as final assessment under the taxation law and all the assessments are subject to the rights of revision, appeal and rectification and till the period prescribed for revision or rectification of the assessment orders has not expired, the orders do not become final in the literal sense of the term. According to the learned advocate on behalf of the revenue, the relevant fact which the Tribunal has to consider before exercising its rectification powers in merely to look at the state of law as obtainable on the date of the order sought to be rectified. In the submission of the learned advocate on behalf of the revenue, if the state of law as on the date of the order sought to be rectified is clear and obvious, and if the order is contrary to such state of law, the authority concerned musts exercises its rectification powers as envisaged under section 35 of the Wealth-tax Act. In the instant case, it was urged on behalf of the revenue that, by the Finance (No. 2) Act of 1971, section 5(1)(viii) of the Wealth-tax Act was amended with effect from April 1, 1963, so as to remove the articles of jewellery for personal use from the exempted category of wealth, and if that state of law, as on the date on which the Tribunal made the order, or for that matter on the date on which the Wealth-tax Officer assessed the assessee, was clear and obvious, there cannot be any escape from the conclusion that the order of the Appellate Assistant Commissioner as confirmed by the Tribunal excluding the entire valuation of the jewellery from the net wealth of the assessee was clearly against law and that error was apparent from the record of the case, which ought to have induced the authority concerned to exercise his powers of rectification to put the record straight. In the submission of the learned advocate for the revenue, there are no questions here as are sought to be raised and no doubt whatsoever on that count that the retrospective amendment would divest the rights under the completed assessments, as those assessments were admittedly subject to the power of rectification under section 35 of the Wealth-tax Act. That power of rectification being an in-built provision in the Wealth-tax Act itself, there was no question for making a provision, as is sought to be urged on behalf of the assessee, by Parliament in the amending Act itself. The learned advocate for the revenue relied heavily on the decision of the Supreme Court in support of his contentions in M. K. Venkatachalam, Income-tax Officer v. Bombay Dyeing and ., and a number of other decision in that line.

4. What is a mistake apparent from the record of a case, which would justify the authorities mentioned in section 35 to exercises the power of rectification, is one which will always depend on the facts and circumstances of the cases. Mr. Kaji, the learned advocate on behalf of the revenue, in this connection drew our attention to the decision of the Supreme Court in K. M. Shanmugam, Proprietor, K.M.S. Transport, Tanjore v. S.R.V.S. (P.) Ltd., where the court considered for the purposes of issuance of a writ under article 226 of the Constitution of India as to what is a meaning of an error of law apparent on the face of the record. The court referred to the propositions laid down in Hari Vishnu Kamath v. Ahmed Ishaque, while adverting to the scope of a writ of certiorari. One of the propositions laid down in Hari Vishnu Kamath's case for issuance of a writ of certiorari is that an error in the decision or determination itself is a manifest error apparent on the face of the proceeding so as to guide the courts for issuance of a writ of certiorari. Mr. Justice K. Subba Rao, as he then was, speaking for the court, quoted with approval the observation of Mr. Justice Das Gupta in Sathyanarayan Laxminarayan Hegde v. Mallikarjun Bhavanappa Tirumale and observed as under :

'The question whether the said errors are errors of law or fact cannot be posited on a priori reasoning, but falls to be decided in each case. We do not, therefore, propose to define with any precision the concept of 'error of law apparent on the face of the record', but it should be left, as it has always been done, to be decided in each case. 'It is no doubt true, as contended by the learned Advocate-General, that the jurisdiction of the taxing authorities either under section 154 of the Income-tax Act of 1961 or section 35 of the Wealth-tax Act, cannot be equated with the jurisdiction of the High Court or the Supreme Court in the matter of issuance of writs on the ground of error apparent on the record of the case. We do not propose to decide this question, whether the error apparent on the record for purposes of exercising extraordinary jurisdiction of this court in the matter of issuance of a writ is the same and co-extensive with that of the taxing authorities while exercising their power of rectification under section 154 of the Income-tax Act of 1961 or section 35 of the Wealth-tax Act. What we have to consider is whether, in the facts and circumstances of this case, it can be said without any hesitation or manner of doubt that there is a mistake apparent from the record of the case, which can induce the wealth-tax authorities to exercise their rectification power. In order to answer this question, we may shortly refer to the provision of the Wealth-tax Act at it stood prior to the amendment and the amending section in the Finance (No. 2) Act of 1971 for purposes of the amendment. section 5(1)(vii) of the Wealth-tax Act as it stood before its amendment read as under :

'5. (1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee....

(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee. 'By Finance (No. 2) Act of 1971, with retrospective effect from April 1, 1963, after clauses (viii) the words, 'but not including jewellery' were added. It also added two provisos and two Explanations which have been made prospectively effective from April 1, 1972. The said clause (viii), therefore, after the amendment by Finance (No. 2) Act of 1971, reads as under :

'(viii) furniture, household utensils, wearing apparel, provisions and other articles intended for the personal or household use of the assessee but not including jewellery.'

5. The effect of the amendment, in so far as it excluded jewellery from the purview of the exemption with effect from April 1, 1963, is to supersede the decision of the Supreme Court in Commissioner of Wealth-tax v. Arundhati Balkrishna and neutralize its effect. The Finance (No. 2) Act of 1971 also simultaneously deleted clause (xv) which provided exemption to jewellery belonging to the assessee subject to a maximum of Rs. 25,000 with effect from April 1, 1963, and altogether a new clause was substituted in its place. The said Act also added two provisos and two Explanations to clause (viii) and these provisos and Explanations have been brought into effect prospectively from April 1, 1972.

6. The assessee before us in respect of the assessment year 1963-64 filed a lists along with her return classifying broadly two categories of jewellery, in respect of which she claimed exemption under clause (viii) of section 5(1) as it stood before its amendment on the ground that those articles were meant for personal use. The two broad categories which she had mentioned in the list appended to her return were in respect of gold ornaments studded with precious stones and gold ornaments simpliciter. The Wealth-tax Officer, as stated above, did not grant exemption as prayed for by the assessee as in his opinion the articles in question could not be said to be articles for personal uses and, therefore, by his order of May 10, 1965, added the value of the said articles in the net wealth of the assessee. By the time the matter was heard by the Appellate Assistant Commissioner, this court rendered the decision in Arundhati Balkrishna's case, whereby it held that all the articles of jewellery meant for personal use were entitled to exemption under section 5(1)(viii). The Appellate Assistant Commissioner, therefore, following the decision of this court in Arundhati Balkrishna's case upheld the claim of the assessee and granted exemption in respect of the said articles of jewellery from the liability of being included in the net wealth. In the appeal filed by the Wealth-tax Officer, the Tribunal also upheld the order of the Appellate Assistant Commissioner as by that time the decision of this court in Arundhati Balkrishna's case was confirmed by the Supreme Court. This order of the Tribunal confirming the order of the Appellate Assistant Commissioner was made on October 26, 1970. The Finance (No. 2) Act of 1971 received the assent of the President on August 10, 1971. The said Finance (No. 2) Act of 1971 introduced two amendments stated above in section 5(1)(viii) by section 32 thereof. By the first amendment, which has been brought into effect from April 1, 1963, the jewellery has been sought to be taken out from the exempted category of wealth. By the second amendment, in section 5(1)(viii) by Explanation 1 Parliament gave an enlarged definition to the term 'jewellery' for purposes of the said clauses so as to include ornaments made of gold, silver, platinum or any other precious metal or alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone and whether or not worked or sewn into any wearing apparel and also precious or semi-precious stones, whether or not set in any furniture, utensils or other articles or worked or sewn into any wearing apparel. The Wealth-tax Officer, therefore, moved the Tribunal by this miscellaneous application in wealth-tax assessment of Rs. 6,468.59 of the assessee and prayed that the Tribunal should exercise its rectification power under section 35 of the Wealth-tax Act in view of the amendment made by the Finance (No. 2) Act of 1971, inasmuch as it deleted the articles of jewellery from the exempted category of wealth. It should be recalled at this stage that the enlarged meaning, which was sought to be given to the word, 'jewellery' for purposes of section 5(1)(viii) by adding Explanation 1 to the said clause came into effect from April 1, 1972. The net result, therefore, which emerged from this set of amendments was that the articles of jewellery were excluded from the exempted category of wealth with effect from April 1, 1963, while for purposes of the said clause an enlarged meaning to the term 'jewellery' which was sought to be given by the amendment was introduced by Explanation 1 made effective from April 1, 1972. It is in the light of the amendments which have been put on the statute book on different dates, that we have to examine this question.

7. A short but pointed submission of Mr. Kaji on behalf of the revenue is that the Tribunal was perfectly justified in exercising its rectification power as it was under obligation to look to the state of law as it prevailed on the date of the assessment order. This position admittedly was that the articles of jewellery were not entitled to be excluded from the net wealth. If that was the position of law available on the date of the assessment, and that was admittedly the position, so runs the argument on behalf of the revenue, then the Tribunal must exercise its rectification power, as the assessment order was clearly and apparently contrary to the state of law. If the assessment order is contrary to the position of law as available on that date, may be on account of the retrospectivity given to the amending section, it cannot be said that when the taxing authorities exercised the rectification power, they were trying to disturb the finality of the order, provided the rectification sought to be made was within the prescribed period of limitation under law. It was urged on behalf of the revenue that by a deeming fiction of amendment in the main part of section 5(1)(viii) has been made effective from April 1, 1963, and Wealth-tax Officer and for the matter the Tribunal also cannot read the law in any other manner and cannot consider that the order of assessment was perfectly legal and justified according to law as it then stood. It was strenuously urged on behalf of the revenue that there is no doubt in this matter and whatever debate sought to be raised by the assessee is on the flimsy and trivial grounds that the assessments have been completed and, therefore, they could not be disturbed unless there is an appropriate provision to that effect in the amending Act.

8. In our opinion, that contentions urged on behalf of the assessee must clearly prevail. The reasons for our opinion are obvious. Having regard to the entire set-up of the amending section, 32 of the Finance (No. 2) Act of 1971, and having regard to the fact that two different dates have been prescribed for the amendment sought to be introduced in section 5(1)(viii), one retrospectively and another prospectively, serious and substantial questions arise which, to say the least, were highly debatable and which could not be resolved without involved reasoning and examination and scrutiny of the matter.

9. It is no doubt true that as far as section 5(1)(viii) was concerned, jewellery was excluded from the exempted lists of wealth with effect from April 1, 1963. That is what has been sought to be done by section 32 of the Finance (No. 2) Act of 1971, by inserting words, 'but not including jewellery' after the words, 'articles intended for the personal of household uses of the assessee' with effect from April 1, 1963. However, by section 32(a)(iii) the provisos and Explanations have been sought to be inserted at the end of section 5(1)(viii) from April 1, 1972. By the new Explanation 1 sought to be added to that clauses parliament has given for purposes of the said clause (viii) the meaning of 'jewellery' as including ornaments made of gold, silver or platinum or any other precious metals or alloys containing one or more of such precious metals whether or not containing any precious or semi-precious stone and whether or not worked or sewn into any wearing apparel, and also precious or semi-precious stones whether or not sets in any furniture, utensils or other articles or worked or sewn into any wearing apparel. The question, therefore, arises as to what is the rational basis for providing two different dates by the two amendments sought to be made in the same clause. Is the enlarged meaning of jewellery going to be operative retrospectively or prospectively On the plain reading of the amendment by which the said Explanation is sought to be inserted in section 5(1)(viii), it appears that the enlarged meaning is to come into force prospectively with effect from April 1, 1972. As the said Explanation gives an inclusive definition, it is reasonable, therefore, that the enlarged meaning of the term 'jewellery' for the purpose of the said clause should be effective from April 1, 1972. If that is so, what would be the meaning of the term 'jewellery' for assessments from April 1, 1963 The question of retrospectivity is, therefore, a highly debatable question and it cannot be resolved without making a serious and studied attempt of the different amendments sought to be inserted in section 5(1)(viii). Would the term 'jewellery' for purposes of assessments from April 1, 1963, onwards include or not the ornaments made of precious metal containing any precious or semi-precious stones, or would the term 'jewellery' mean only jewels pure and simple In other words, the substantial question which would arise on the amendment sought to be made effective from different dates is as to what is a legislative intent in giving an enlarged definition, which includes also the articles which were admittedly jewellery and which is to be effective from April 1, 1972. Does it mean that for assessments for the year 1963-64 onwards up to 1971-72, only those articles which are purely jewels are to be included in the term 'jewellery' or ornaments made of precious metals whether containing precious or semi-precious stones or not are also to be included in the term 'jewellery'. As rightly contended by the learned Advocate-General on behalf of the assessee, this involves the question of the extent of the retrospectivity of the two amendments. This question, therefore, which is capable of serious debate on either side, cannot be said to be by any stretch of imagination to be a mistake apparent from the record of the case. It is a well-settled position of law that in order to be a mistake apparent from the record of the case, it must be an error apparent, obvious and glaring. It is no doubt true that for rectification of an error, which is said to be an error from the record, a mere complexity of the problem or that some genuine argument is necessary to discover the same may not themselves be sufficient to ousts the jurisdiction of the taxing authorities to rectify such a mistake (T. S. Rajam v. Controller of Estate Duty). None the less it should be one which could be discerned with some precision after a judicial probe into the assessment records without long drawn process of reasoning and on which no two reasonable contrary opinions are conceivable so that the court's conscience can be satisfied that the Tribunal has exercised its jurisdiction rightly, as held by the Supreme Court in T. S. Balaram, Income-tax Officer v. Volkart Brothers, where the court was concerned in a rectification proceeding under section 154 of the Income-tax, 1961, in the matter of assessment of the firm. The Income-tax Officer in that case purported to rectify the assessment by applying the provision of section 17(1) of the Indian Income-tax Act, 1922, on the ground that there was a mistake apparent from the record, inasmuch as the firm had not been charged at the maximum rate of tax. The High Court of Bombay, which was moved by the assessee-firm and its partners under article 226 of the Constitution, held that original assessments were prima facie in accordance with law and at any rate no obvious or patent mistake in the order of assessment was found, and, therefore, the order of rectification was bad. Mr. Justice Hegde, as he then was, in the appeal preferred on behalf of the revenue, speaking for the court, observed :

'From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions. As seen earlier, the High Court of Bombay opined that the original assessments were in accordance with law though in our opinion the High Court was not justified in going into that question.'

10. It cannot, therefore, be said here, as sought to be urged on behalf of the revenue, that there is no scope of any doubt on the question of retrospectivity of the amendments, one of which has been made effective retrospectively and another which has been applied prospectively, Mr. Kaji, the learned advocate on behalf of the revenue, made a strenuous effort to persuade us that in view of the decision of the Supreme Court in Bombay Dyeing and .'s case, there is no scope of any debate here in view of the position laid down succinctly therein. The court was concerned in that case with the assessment for assessment year 1952-53, where the assessee was given a credit by the Income-tax Officer of Rs. 50,063 being the amount of interests at 2 per cent. on tax paid in advance under section 18A(5) of the Indian Income-tax Act, 1922. Pursuant to the Income-tax (Amendment) Act, 1953, a proviso was inserted by section 13 thereof to section 18A(5) with the result that an assessee was entitled to get a credit of interest not on the whole of the tax paid in advance but only on the difference between the tax so paid and on the amount of tax determined on the basis of regular assessment. This amending section was brought on the statute book with retrospective effect from April 1, 1952, by a deeming fiction in the proviso. The assessee after the amendment of the said section was only entitled to a sum of Rs. 21,157 as interests in the aforesaid case. The Income-tax Officer purporting to act under section 35 of the Indian Income-tax Act, 1922, rectified the mistake in the order of assessment and demanded payment of the sum of Rs. 29,446. The assessee moved the High Court of Bombay which issued a writ of prohibition against the taxing authorities on the ground that there was no mistake apparent from the record as the order of assessment was valid in the light of the law as it stood on the date of the order. On appeal to the Supreme Court, it was held that the effect of the provision of section 13 of the amendment Act would be deemed to have come into force on April 1, 1952, and, therefore for all intents and purposes, the amendment to section 18A must be deemed to have been included in the principal Act as from that date and the proviso should be deemed to be part of section 18A as on the date of passing of the order. Consequently, therefore, the assessment order was held to be inconsistent with the proviso to section 18A and held to suffer from a mistake apparent from the record which justified the Income-tax Officer in exercising his power under section 35. Mr. Justice Gajendragadkar, as he then was, negativing the contention urged on behalf of the assessee that the retrospective operation of the relevant provision is not intended to affect completed assessments, observed at page 147 :

'The argument for the respondent is that the assessee had obtained a right under the order passed by the Income-tax Officer to claim credit for the specified amount under section 18A(5) and the said right cannot be taken away by the retrospective operation of section 13 of the amendment Act. The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opinion, this argument does not really held the respondent's cases because the order passed by the Income-tax Officer under section 18A(5) cannot be said to be final in the literal sense of the word. This order was not continued to be liable to be modified under section 3 of the Act.'

11. The court then proceeded to consider what is a mistake apparent from the record and after considering the relevant provisions contained in the amending Act came to the following conclusion :

'It is in the light of this position that the extent of the Income-tax Officer's power under section 35 to rectify mistakes apparent from the record must be determined; and, in doing so, the scopes and effect of the expression 'mistake apparent from the record' has to be ascertained. At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1962. If that be the true position then the order which he made giving credit to the respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectified. Prima facie, it may appear somewhat strange that an order which was good and valid when it was made should be treated as patently invalid and wrong by virtue of the retrospective operation of the Amendment Act. But such a result is necessarily involved in the legal fiction about the retrospective operation of the Amendment Act. If, as a result of the said fiction, we must read the subsequently inserted proviso as forming part of section 18A(5) of the principals Act as from April 1, 1952, the conclusion is inescapable that the order in question is inconsistent with the provisions of the said proviso and must be deemed to suffer from a mistake apparent from the record. That is why we think that the Income-tax Officer was justified in the present case in exercising his power under section 35 and rectifying the said mistakes.'

12. We do not agree with Mr. Kaji, the learned advocate on behalf of the revenue, that this decision of the Supreme Court will answer all the questions they may arise while considering the jurisdiction of the taxing authorities purporting to exercise rectification power when the extent of the retrospectivity of the amendment has to be considered so as to allow them to disturb the completed assessment. As stated above, it would depend always on the facts of each case to find out what is the position of law available on the date of the order of assessment bearing in mind the retrospective operation of the Amending Act. As discussed above, the position which emerges as a result of the two amendment sought to be made in section 5(1)(viii) by section 32(a) (i) and (ii) of the Finance (No. 2) Act of 1971 does not appear to be clear and apparent so as to rule out the possibility of any debate. The Supreme Court in Bombay Dyeing and .'s case was concerned with a case where the retrospectivity of the Amending Act was clear and apparent and the court, therefore, took the deeming fiction to all its logical conclusions and held that, having regard to the position of law as available on the date of the order of assessment, there was no escape from the conclusion that credit given by the Income-tax Officer to the assessee was clearly contrary to the provision of law as amended. In the present case before us the question of extent of the retrospectivity arises from the meaning of 'jewellery' as sought to be enlarged and given in Explanation 1 which has been made effective prospectively from April 1, 1972, and it is highly debatable. Mr. Kaji, therefore, urged that at the time of passing consequential orders the Tribunal can certainly look into this aspect of the question as to the meaning of the term 'jewellery' and decide according to correct legal principles. We are not inclined to agree with Mr. Kaji that what the Tribunal would be required to do in this case, after its order of January 3, 1972, directing the reopening and rehearing of the appeal afresh, would be merely to pass consequential orders and directions. We do not think that it can be said by any stretch of imagination that when the Tribunal will decide what articles claimed by the assessee as jewellery are jewellery or not and what articles should be included in the net wealth of the assessee for purposes of the assessment year in question or subsequent years and what articles should be brought into the net wealth in assessment years after April 1, 1972, the Tribunal would be merely making consequential orders. The learned Advocate-General was, therefore, perfectly justified when he urged that the question of extent of retrospectivity may assume importance from the incidental question of the meaning of the term 'jewellery' in debate and discussion. It may be that after scrutinising the relevant provisions of the Wealth-tax Act as amended from time to time and after hearing the arguments on both the sides, the Tribunal may accept and prefer one view or the other, but that decision of the Tribunal would be on the merits. The Tribunal is, therefore, not justified, as rightly contended by the learned Advocate-General, in exercising its rectification power on the ground that because jewellery has been excluded from the list of the exempted wealth by the amendment sought to be made by section 32(a)(ii) of the Finance (No. 2) Act of 1971 with effect from April 1, 1963, the assessment completed for the assessment year 1963-64 could be disturbed and rectified. It will virtually amount to reopening and reassessing the assessee concerned.

13. A number of decisions have been cited by Mr. Kaji in supports of his contentions referred to hereinabove. He has relied on the decisions in Commissioner of Income-tax v. Maharaja Pratapsingh Bahadur of Gidhaur, Income-tax Officer, Alwaye v. Ashok Textiles Ltd., and S. A. L. Narayan Row v. Ishwarlal Bhagwandas (at page 163), where the decision of the Supreme Court in Bombay Dyeing and .'s case has been considered. We do not think it necessary to go into these decisions for the simple reason that the main decision which Mr. Kaji has relied is that of the Supreme Court in Bombay Dyeing and .'s case. That decision, as we have stated above, is a decision where the court was concerned with the retrospective date of the operation of the amending Act, which was apparent and clear. The cases with which we are concerned here in the present reference is one where, having regard to the entire set-up of the amending section and the purpose for which the amendment is sought to be made in section 5(1)(viii), we do not think the decision of the Supreme Court in Bombay Dyeing and .'s case can take the case of revenue any further. The learned Advocate-General has drawn our attention to the recent decision of the Bombay High Court in J. M. Shah v. J. M. Bhatia, where the court was concerned with the very proviso which is involved in this reference. As a result of the amendment made in section 5(1)(viii) by the Finance (No. 2) Act of 1971, the Appellate Assistant Commissioner, Bombay, passed an order of rectification under section 35 of the Wealth-tax Act, 1957, on February 22, 1972, withdrawing the exemption granted to the petitioner in respect of jewellery and ornaments and including an amount of Rs. 4,15,942, being the value of the jewellery and ornaments, in the net wealth of the petitioner. The petitioner moved the High Court of Bombay for appropriate writs, orders and directions, challenging the rectification order for purposes of quashing it. On behalf of the petitioner-assessee in that case, one of the contentions urged by the learned counsel for the assessee was that, had the Appellate Assistant Commissioner the power to rectify, in view of the fact that there was no error apparent on the face of the record, because the question as to whether the amending Act applied to assessments which were already completed, was in any event a debatable question. Mr. Justice Vimadalal, who delivered the leading judgment, after reviewing the entire case law on the point of rectification power contained in section 35 of the 1922 Act and also considering the decision of the Supreme Court in Bombay Dyeing and .'s case, which was pressed into service by the revenue, felt that the counsel for the revenue had to debate before the Bench for several hours in order to convince the Bench that the question as to whether a completed assessment was intended to be disturbed since the amendment in question was clear and unequivocal and not debatable at all. Mr. Justice Vimadalal, referring to the decision of Mr. Justice Hegde in T. S. Balaram v. Volkart Brothers, found that a mistake apparent on the record must not be something which can be established by a long drawn process of reasoning on points on which there may conceivably be two opinions and held that the power of rectification under section 35 of the Act could not be invoked in the case before them and, therefore, the rectification order passed by the Appellate Assistant Commissioner was quashed. Mr. Justice S. K. Desai in his concurring judgment observed as under :

'Mr. Joshi then argued that in the instant case also the mistake is one which must properly he regarded as glaring and obvious in view of the clear decision of the Supreme Court in Bombay Dyeing Company's case. If as indicated in the main judgment, that decision had stood alone, then, perhaps, it would have been impossible to demur to Mr. Joshi's submission in this regard. As indicated in the main judgment this is not the position. The observations in Bombay Dyeing Company's case have to be considered along with the observations and approach of the Supreme Court in the following cases, viz., Habibullah's case, Atmala Nagaraj's case, Ahmedabad Manufacturing and Calico Printing Company's case, T. S. Devinatha Nadar's case and finally K. S. Rashid's case. After a perusal of all these cases, it is impossible to hold that the submissions made by Mr. Palkhivala are unarguable and musts be deemed to be totally concluded by the Supreme Court against the assessee by reason of its decision in Bombay Dyeing Company's case. In this view of the matter, it must be held that the Appellate Assistant Commissioner was not competent to exercises powers of rectification under section 35(1) of the Wealth-tax Act which he purported to do by his order dated February 22, 1972.'

14. Mr. Kaji on behalf of the revenue made a grievance that the time taken in debate the court cannot decide one way or the other about the two contrary views of the question. In the submission of Mr.Kaji it depends on the patience of the court, its clarity and its comprehension of the problem. Mr. Kaji may be right in this submission, but what has weighed with the Division Bench, Mr. Justice Vimadalal observed, about the time taken in debate, which, according to him, justified that there was a debatable question, was that ultimately one may agree that the jewellery claimed by the assessee as exempted from the liability under the Wealth-tax Act was in fact and law liable to pay tax. But the pertinent question in whether that conclusion can be reached from the record of the case as it stood either on the date of the assessment or on the date of the order of the Tribunal in the present case. If the question as to the retrospectivity of the amendments raised a serious debate, can that question be resolved by resorting to the power of rectification under section 35 That is the question which arises in the present reference, and on the answer to that question, the validity or otherwise of the rectification order of the Tribunal depends. Mr. Kaji, therefore, lastly submitted to us that this doubt is also resolved by the judgment of this court in Wealth-tax Reference No. 23 of 1971 in Commissioner of Wealth-tax v. Jayantilal Amratlal, where this very Division Bench has held that the amendment of the main clause, viz., section 5(1)(viii) in so far as jewellery articles were removed from the category of exempted wealth was effective from April 1, 1963, and the enlarged meaning sought to be given by the definition in Explanation 1 which has been brought into force from April 1, 1972, so as to rope in golden ornaments is merely by way of greater caution and the enlarged meaning sought to be given by the inclusive definition does not take away the natural import of the term 'jewellery', which also includes golden ornaments, whether studded with precious or semi-precious stones or not. This decision of the Division Bench has been rendered on December 13, 1973, and the Tribunal, when it exercised its rectification power under section 35 on July 3, 1972, had not the assistance and benefit of this judgment. It is no doubt true that when a section is interpreted by court, what is done in fact is the exposition of law and that exposition would be effective as if it was there all along since the inception of the section. We are afraid we cannot agree with the submission of Mr. Kaji that by the decision of this court in Commissioner of Wealth-tax v. Jayantilal Amratlal the question which arose before the Tribunal on the day on which it was seeking to exercises its rectification power, there was no scope for debate. Again what the Tribunal has done by its order passed on July 3, 1972, is that directions have been given to reopen the appeal and hear the question afresh for purposes of determining what articles would be jewellery and what articles would not be jewellery. As stated by us above, this cannot be a consequential order which the Tribunal was seeking to pass after ascertaining the main error from the record of the case. In that view of the matter, therefore, we do not think that the Tribunal was justified in exercising its rectification power under section 35 and directing that the appeal should be reopened and the question of exemption of articles of jewellery be determined with reference to the meaning of the term 'jewellery' given in the relevant clause, viz., clause (viii) of section 5(1). In the ultimate analysis, as observed in T. S. Rajam v. Controller of Estate Duty :

'It is difficult to axiomatise and lay down dictas for the discovery of a mistake from official records. It is inherently indefinite in scope and mostly subjective, the dividing line being thin and undiscernible. In the ultimate analysis the conclusion a well-equipped and trained judicial mind will reach after scrutinising the record will govern and his finding whether it is a mistake or not has to be accepted.'

15. The learned Advocate-General, therefore, emphasised that two trained judicial minds of the Bombay High Court have taken the view that this is a debatable question which cannot be said to be a 'mistake apparent from the record of the case'. Apart from that decision of the Division Bench of the Bombay High Court, as we have indicated above, the amending section raised serious and debatable questions which cannot be resolved by merely having regard to what was the position of law available on the date of the order of the assessment or on the date of the order of the Tribunal. The entire scheme of the amending section is to be considered and having regard to the previous history of the judicial decisions on this point which required Parliament to amend, and having regard to the set up of the section, and having regard especially to the two different dates on which the two amendments have been brought on the statute book, we cannot agree with the learned advocate for the revenue that this could be said to be a 'mistake apparent on the record of the case'. In that view of the matter, therefore, we have to answer the question referred to us by the Tribunal in the negative and against the revenue. The Commissioner of Wealth-tax shall pay costs of this reference to the assessee.

16. Mr. Kaji, the learned advocate on behalf of the revenue, at this stage made a request to us for a certificate of leave to go to the Supreme Court in appeal from this judgment under section 29 of the Wealth-tax Act. Having regard to the substantial question of law which has arisen in this reference and also having regard to the fact that it will have effect on many proceedings of assessment, which have been sought to be rectified under section 35 of the Wealth-tax Act, we think that this is a fit case for appeal to the Supreme Court. The certificate asked for is accordingly granted.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //