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Commissioner of Wealth-tax, Tamil Nadu Vs. B.M. Ramalingam - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 63 of 1977 (Reference No. 58 of 1977)
Judge
Reported in(1982)30CTR(Mad)179
ActsWealth Tax Act, 1957 - Sections 5(1), 16, 23, 23(1), 24, 24(2), 27(3), 30(2), 31, 33, 35, 35(1) and 35(5);
AppellantCommissioner of Wealth-tax, Tamil Nadu
RespondentB.M. Ramalingam
Appellant AdvocateJ. Jayaraman, Adv.
Respondent AdvocateN.C. Ananthachari, Adv.
Cases ReferredVedantham Raghaviah v. Third Addl.
Excerpt:
wealth tax act (xxvii of 1957), section 5(1)(iii), 24 and 35 (i)(b)--rectification proceedings due to change of law retrospectively--power of appellate assistant commissioner under section 5(1) (b)--appeal by appellate commissioner against the order adverse to the department to the tribunal-- whether maintainable.;the assessees assets included certain items of jewellery. the wealth tax officer included those items in the assessment as part of the assessee's taxable net wealth. the appellate assistant commissioner before whom the appeal was pending passed and order deleting the value of the jewels from the computation of the assessee's net wealth following the supreme court's decision. subsequently, the retrospective amendment of section 5(1) (iii) came, neutralising the supreme court's.....1. this reference has been sent by the income-tax appellate tribunal. the reference raises a question of law under the w.t. act., 1957. the tax under this act is fastened on the net wealth of a taxpayer. net wealth on any given calculation date is the excess of the taxpayer's assets over his debts. in the computation of the net wealth, certain assets are, under the terms of the statute, to be excluded from reckoning. section 5(1) of the act contains a list of such exempted assets. under clause (viii) of this provisions, the "wearing apparel" of an assessee stands excluded from his taxable assets. the supreme court held, in case which came before them, that items of an assessee's jewellery must be brought within the term wearing appear, and thus qualify for exemption under s. 5(1)(viii)......
Judgment:
1. This reference has been sent by the Income-tax Appellate Tribunal. The reference raises a question of law under the W.T. Act., 1957. The tax under this Act is fastened on the net wealth of a taxpayer. Net wealth on any given calculation date is the excess of the taxpayer's assets over his debts. In the computation of the net wealth, certain assets are, under the terms of the statute, to be excluded from reckoning. Section 5(1) of the Act contains a list of such exempted assets. Under clause (viii) of this provisions, the "wearing apparel" of an assessee stands excluded from his taxable assets. The Supreme Court held, in case which came before them, that items of an assessee's jewellery must be brought within the term wearing appear, and thus qualify for exemption under s. 5(1)(viii). This decision was rendered on February 28, 1970. It is found reported in CWT v. Arundhati Balkrishna . Parliament, however, did not accept this decision as reflecting its idea of what a wearing apparel is. Hence, it introduced an amendment in s. 5(1)(viii), which made the provision read differently, and as follows:

"Wearing apparel......... but not including jewellery."

2. This amendment was made by the Finance (Nos. 2) Act, of 1971. But the amendment was expressly made to have retrospective effect from April 1, 1963. In practical terms in relation to wealth-tax assessments from the assessment year 1963-64 onwards, the jewellery owned by a tax payer would not be exempt from wealth-tax, but, must be assessed as part of the net wealth of its owner.

3. This is the history of s. 5(1)(viii) of the W.T. Act. this legislative history has significance in the present case. The WTO made an assessment in this case on November 25, 1969. The assessment was for the assessment year 1969-70. The assessee's assets included certain items of jewellery. The WTO included those items in the assessment as part of the assessee's taxable net wealth. He apparently did not accept the view that jewellery is a wearing apparel. The assessee questioned hies decision in appeal. By the time the AAC heard the appeal, the Supreme Court's decision had come. Following that decision, the AAC deleted the value of the jewels from the computation of the assessee's net wealth. This the Assistant Commissioner did by his order dated January 18, 1971. Subsequently, the retrospective amendment of s. 5(1)(viii) came, neutralising the Supreme Court's decision. This meant that the decision of the AAC in this case, based on the Supreme Court's judgment, was wrong. The correct law which ought to have been applied was the section as amended retrospectively, which expressly excluded jewellery from the ambit of the exemption. This law applied to the assessment year 1969-70 as well, which was the assessment year in question before the AAC. The order passed by the AAC was, therefore, palbably wrong when viewed in the light of the retrospective amendment to this section.

4. The W.T. Act contains provisions for rectifying apparent errors in orders passed by the various wealth-tax authorities. These provisions are contained in s. 35 of the Act. The AAC in this case realised that his order exempting the assessee's jewellery from the assessment under appeal turned out to be an error when looked at in the light of the subsequent, but retrospective, amendment of s. 5(1)(viii). He accordingly, set in motion proceedings for rectifying this error in his order.

5. Section 35 of the Act lays down a special procedure for carrying out a rectification of errors in an order passed by the AAC, or for that matter by the WTO. Section 35(5) enacted that the AAC, or the WTO, as the case may be, should pass a distinctive order for carrying out the rectification. The whole idea behind a rectification is that the error in the order should be corrected or rectified. But for the provision of s. 35(5), a mistake might be corrected by any of the familiar ways of carrying our corrections, such, for instance, as striking out the offending word, figure, sentence or paragraph from the order in question and carrying out the necessary correction in the very text of the order. Or, again, a correction may be made by appending a corrigendum or a table of errata to the order that is sought to be rectified. Section 35(5), however, insists that a distinct order of rectification should be passed, even though the purpose in view is the rectification of a mistake which has occurred in what may be called the "present" order.

6. Another important point of procedure laid down by s. 35 so that where the effect of contemplated rectification of error is the enhancement of the wealth-tax already levied or the reduction of a refund already granted, the AAC, or other authority concerned, must give to the assessee an opportunity to put forward his objections, if any.

7. The AAC, in this case, was bound by these formalisms of procedure. Hence, in the condition s created by the retrospective amendment of s. 5(1)(viii) subsequent to the passing of his appellate order dated January 18, 1971, the AAC issued a notice to the assessee under s. 35 of the Act proposing to rectify the error, which he said he had committed when he had ordered the deletion of the value of the jewellery from the assessment. The assessee replied to the notice saying that this was not a case of an error of the kind which the AAC had power to rectify under s. 35. He contended that it was not an error apparent from the record, which kind of error alone was covered by s.

35. The AAC considered the assessee's contention and agreed with it.

8. The record before us in this case contains a proceeding in writing signed and issued by the AAC bearing the date December 24, 1973. Copies of this proceeding were served on the assessee, on the WTO and on the CWT. This price of writing is, inform, a communication addressed by the AAC to the assessee. The material part of the communication concluded thus:

"Proceedings initiated under section 35 are hereby dropped."

9. As aforesaid, a copy of this communication, or memorandum, or proceeding describe it as what you will, was also communicated to the CWT. The Commissioner did not accept as correct, the kind of disposal which the AAC had given to the proceeding initiated under s. 35. Treating the AAC's communication as an order, the CWT instructed the WTO to file an appeal to the Appellate Tribunal. The WTO did so. When the Tribunal took up the matter for hearing after notice, a preliminary objection was raised on behalf of the respondent assessee to the effect that the Department's appeal did not lie. The Tribunal upheld this preliminary objection and dismissed the appeal in limine. But, at the request of the CWT, the Tribunal referred the issue as to the maintainability of the appeal for the opinion of this court, formulating the question of law thus:

"Whether, on the facts and in the circumstances of the case, the appeal preferred by the Department against the order of the Appellate Assistant Commissioner dated on December 24, 1973 dropping the proceedings which he had initiated under section 35(1)(b) of the Wealth-tax Act, was not competent ?"

10. Before proceeding to examine the arguments addressed from either side of the Bar before us on the above question of law, we may observe that the Tribunal's view as to the non-maintainability of the Department's appeal was based on the language of two sections in the W.T. Act, namely, s. 24, which provides for an appeal to the Tribunal, an appeal vides for the rectification of errors. According to the Tribunal, an appeal lies to the Tribunal from an appellate order passed by the AAC only if the order were passed under s. 23. In the opinion of the Tribunal, an order passed by the AAC under s. 35 is a separate proceeding and it cannot be regarded as an appellate order passed by him under s. 23 of the Act. The Tribunal even doubted whether the AAC's communication "dropping" the proceedings initiated by him under s. 35 can at all be given the status of an "order".

11. It may be mentioned that before us, this line of reasoning of the tribunal was adopted by Mr. Ananthachari, the assessee's learned counsel as counsel, Mr. Jayaraman, prefaced his argument by submitting that the issue in this case ought to be examined from the larger perspective of the true function of the rectification power and the true scope of the appellate jurisdiction, and not from a stained construction being put upon the presence or absence of certain words in the statute. He hastened to explain, however, that his approach to construction he was urging, did not overlook the language of the sections concerned, but gave them the meaning they carried under the general scheme and structure of the W.T. Act. He sought to illustrate his point by reference to certain decided cases, although he admitted that none of them was direct decision on the question before us.

12. In a matter of this kind, we think it necessary to clear the ground first about the use of precedents. Wealth=tax is generally treated as a direct tax just like income-tax, estate duty, gift-tax, company surtax, expenditure-tax and the like. The levy of those direct taxes is by Parliamentary enactments. Income-tax being the earliest direct tax in the field and the income-tax law being the first born enactment in what may be called this joint family of direct taxes, had long ago set the pattern for all the subsequent direct tax enactments. The taxable object or the taxable event, may be different under every fiscal measures, but a high degree of resemblance in the provisions, especially, in the stricter of the machinery provisions, may be discerned in all the Direct Taxes Acts, Hence we find Parliament undertaking common featured amendments in the different tax laws by passing omnibus amending legislations called Direct Taxes (Amendment) Act. It is no wonder that courts too, while construing any given set of provisions in any given Direct Tax Act should be found oftentimes taking a leaf out of comparable provisions in the other direct tax enactments and also adopting judicial pronouncements rendered thereunder. But courts have seldom overlooked the individuality of taxing measures in the particular fiscal statute before them. There always exists a discriminate judicial caution not to regard two direct tax enactments as in pari materia in all respects. For where there are individual variations in the operative provisions, courts of construction cannot, and do not, ignore them. Thus, a comparative study of the different direct tax statutes and the case-law beating on them, although unavoidable in one sense, has its own limitation. It is only from this point of view that we have approached the question of statutory construction which is involved in the issue before us as to the maintainability of the departmental appeal in the present case.

13. The board scheme of appeals under the W.T. Act is clear enough from the relevant provisions. The WTO is the authority charged with the duty of making assessments. In most cases, the assessment that he makes is an assessment under s. 16 of the Act. In the accepted jargon, this is called a "regular" assessment. Section 23 provides for an appeal to be taken by the assessee against an order of assessment. The same s. 23 lays down what manner of disposal the AAC can give to the appeal against an assessment. Section 24 of the Act provides for an appeal against the order passed by the AAC under s. 23. In the very nature of the appellate process, an order passed by the AAC might either confirm or reduce an assessment. If is confirms the assessment, or as sometimes happens, enhances the assessment, the assessee would be aggrieved. Hence, s. 24 of the Act confers a right of appeal both to the assessee and to the Department, depending on the nature of the order. It is in this statutory milieu of assessment and appeal that the provisions regarding rectification of mistakes will have to be considered.

14. Mr. Jayaraman's argument for the Revenue was that the process of rectification of an error in an appellate order is not to be looked at in isolation as the exercise of a distinct and separate power, but must be viewed as a necessary adjunct of the appellate power itself. He proceeded to submit that where this process results in an actual rectification, what we have, in substance, is a rectified appellate order. The Act may impose the formality of the AAC having to pass a separate order of rectification. But once this rectification order is passed, it has got to be read into the appellate order. It is no use when read alone and in insulation. Learned counsel proceeded to submit that what applies to a process resulting in a rectification. In the one case, he said, the appellate order become rectified, in the other case, it does not get rectified. Before the AAC there are two parties to an appeal, the assessee and the assessing authority. The rectification or non-rectification of an appellate order might find one or other of these parties aggrieved. They would be aggrieved by the act of rectification or refusal to rectify as the case may be. But in both cases the act or omission impinges only on the parent order passed by the AAC in appeal. In this sense, therefore, Mr. Jayaraman argued that every order passed by the AAC under s. 35 is really an order passed under s. 23 of the Act which is the section which empowers him to pass orders in appeal. Mr. Jayaraman urged that where the AAC actually makes a rectification order under s. 35(5) of the Act, then that order is procedural an order under that provision, but it is in substance, an order in appeal. Learned counsel pointed out that where the AAC ought to have rectified a mistake, but decides that he will not rectify the mistake, them s. 35(5) does not require him to pass a separate order. But if under the law, the AAC ought to have made the rectification, but signifies his decision not to do so, the party aggrieved, be it the Department or the assessee cannot be in a worse position, but can certainly appeal against this decision to the Tribunal because it is really a decision of the AAC impinging on his appellate order. In these events, according to Mr. Jayaraman, the present order of the AAC refusing to rectify the mistake must be held to be an appealable order under s. 24 of the Act.

15. We are inclined to agree with Mr. Jayaraman's broad approach to the issue as to the maintainability of the appeal. We find that his contentions are based on a wholesome construction of the relevant provisions of the W.T. Act. Section 24(2) of the Act provided as we have already indicated, for a departmental appeal to the Appellate Tribunal, It enacts that the Commissioner, if he is not satisfied as to the correctness of any order which had been passed by an AAC under s. 23, may direct the WTO to appeal to the Appellate Tribunal against such order. The appeal has to be filed before the expiry of 60 days of the date on which the order of the AAC is communicated to the Commissioner. In the present case as earlier mentioned, the AAC originally passed an order dated January 18, 1971 in appeal deleting the value of jewellery from the assessee's against that order if the Commissioner felt dissatisfied with the correctness of that order. Since, however, the order of the AAC merely gave effect to the law laid down by the Supreme Court, the Commissioner could not by any means, express any dissatisfaction as to the correctness of the appellate order passed by the Assistant Commissioner. The position, however, changed, the moment the retrospective amendment of s. 5(1)(viii) was passed by Parliament laying down a different law to be observed by the taxing authorities, different from the laid down by the Supreme Court. This amendment rendered the appellate order dated January 18, 1971, an incorrect order. The proceedings which were started by the AAC under s. 35 were initiated only for the rectification of this error in his appellate order, Section 35 provided, inter alia, that an AAC may amend any order passed by him under s. 23 with a view to rectifying any mistake apparent from the record. The purport of this provision is that while the record may make apparent a mistake, the mistake, as such, is in the appellate order. The mistake is not in the record. Therefore, a rectification is not a rectification of the record, but a rectification of the appellate order. When the mistake is rectified thus, it is the appellate order which in amended. After rectification, the order in appeal is the order as amended. But before and after rectification, there is no change in the character of the appellate order. As it merges, so it continues to remain only an appellate order, that is to say, an order passed by the AAC under s. 23 of the Act. In the present case, although the AAC realised that there was mistake in his order under s. 23, he did not pursue the proceeding initiated by him under s. 35 to its ultimate culmination, namely, amendment of the order passed by him in appeal. However, for the purpose of finding out the real impact of the proceedings under s. 35, we would, however, like to make an assumption and imagine that the AAC did, in fact go the whole hog with the proceedings initiated by him under s. 35 and actually made an order of rectification. The question is what would be the character of his order of rectification. We have, no doubt whatever, that the order of rectification, if made by the AAC in his appellate order, would partake of the character of an appellate order, for it is by way of an amendment of the appellate order, and not independent of it. In the present case, the AAC, if he were so minded, would have revered his earlier order dated January 18, 1971, since subsequent to the amendment of s. 5(1)(viii) which applied to the present case, he ought to have confirmed the assessment made by the WTO in which the value of the jewellery had been included as part of the assessee's taxable net wealth. If the AAC had made such an amendment, we have no doubt whatever that the order carrying such an amendment would be the one and only appellate order in the field superseding and obliterating the order dated January 18, 1971, in which event, the amended order, being the only appellate order existing, would be susceptible to appeal under s. 24 of the Act.

16. Mr. Ananthachari, the assessee's learned counsel, however pointed out that s. 35(5) of the Act expressly provided that where an amendment falls to be made by way of rectification of an error under s. 35(1) then the AAC has got to pass an order of rectification in writing. Learned counsel submitted that this express provision contemplating, as it does, a distinct and separate order in itself, must be held necessarily to contemplate a separate and distinct subject for further proceedings, if any, in respect of that order. But, he proceeded to point out that since s. 24 of the Act, which provides for an appeal to the Tribunal, makes no mention whatever of an order under s. 35 as an appealable order, it must be held that Parliament did not envisage any appeal whatever against an order of rectification passed by the AAC.

17. The argument of Mr. Ananthachari might very well appeal to those who see the statute on the surface to get at the meaning of the words employed by it. If one were to by the express language of s. 24 of the Act to find out if there is any mention in that section of an order passed under s. 35(5), one would have to agree with Mr. Ananthachari that the answer must be in the negative. This, However, is quite a wrong approach to the inquiry as to whether an appeal lies or is maintainable against an order of the kind passed in the present case, or even with an actual order of rectification passed by the AAC. The question in such cases is not whether the order is covered by s. 35, for there is no doubt it is. The question, rather, is, whether it is excluded by s. 24 from being an appealable order passed by the AAC under section 23. The question, in other words is, whether an order passed under s. 35 can also be regarded as an order passed under s. 23 of the Act. In this case, the assessee carried the assessment in appeal before the AAC by objecting to the inclusion of his jewellery in his taxable net wealth. As the law then stood, the AAC was right in ordering the exemption of the jewellery in question. But, as it turned out, under a subsequent retrospective change in the law, jewellery could not be excluded from the charge. This meant that the disposal earlier given by the AAC was against the law. It is only after the retrospective amendment and when actually the AAC set in motion the provisions of s. 35, that the earlier appellate order once again became a question at large. In that situation, the AAC might well have concluded the proceedings by rectifying his earlier order in appeal to make it agree with the statutory amendment. In such an event, the order ought properly to be regarded as on passed in the appeal filed by the assessee. It is none the less an order passed in the assessee's appeal, for the proceeding having been taken under s. 35. As we indicated earlier, proceedings under s. 35 do not hang in mid-air. They originate as well as culminate only in the parent proceedings of which they from an inextricable corrigendum.

18. Mr. Ananthachari then submitted that what we have in the present case, is not an order of rectification, but its very opposite, namely, an order refusing to rectify. According to learned counsel, this makes for a real difference in the position. We do not, however, agree with this argument. In the view we hold, that the rectification of an error is not an independent exercise of power, but it only impinges on the exercise of the appellate jurisdiction and gets fused into the original appellate order, it does not matter whether the proceeding taken by the AAC under s. 35 does or does not end up in an order of rectification. In either event, the proceeding passed by the AAC is necessarily and order passed in the exercise of his appellate jurisdiction, for he has no other jurisdiction to exercise and accordingly any order he passes under s. 35 must be regarded as an order passed under s. 23 of the Act.

19. Mr. Ananthachari pointed out that whereas s. 35(5) requires the AAC to pass a separate order in writing whenever he decide to rectify a mistake and carry out an amendment in the original appellate order, there is no such provision in s. 35 which contemplates a distinct order to be made by the AAC in cases where he having initiated proceedings for rectification, nevertheless does not ultimately decide to pass an order either of rectification or amendment, This contention is, no doubt well founded on the language of s. 35. But this only shows that where the AAC either refuses to pass an order under s. 35 or as in the present case, drops the proceedings which he has suo motu initiated under s. 35, we are not hindered in out discussion by the presence of any specific provision in that section. If s. 35 has no sub-section dealing with an order refusing to make a rectification that only serves to remover, out of the way, any obsessive reliance on the draftsmanship of s. 35 while construing the ambit of ss. 23 and 24. With s. 35 making no distinct provision for an order refusing to made a rectification, the position, in out view, is a fortiori. Such an order must necessarily from part of the appellate decision making, in the same way as a positive order of rectification forms part of the appellate order.

20. Mr. Ananthachari made a submission as to how we must view the proceeding drawn up by the AAC on December 24, 1973. As earlier mentioned, that proceedings in from, was couched as a communication by the AAC addressed to the assessee. The contention of Mr. Ananthachari is that a mere letter of this kind cannot be upgraded and given the status, in law, of an order much less an order, under s. 23 of the Act. Learned counsel said that what the AAC wrote was nothing more than an intimation by him that the assessee may rest assured that the proceeding under s. 35 will not be pursued. Dropping the action under s. 35 in this manner, according to Mr. Ananthachari can by no means be regarded as an order, strictly so called.

21. We do not accept the argument of counsel as valid. His view tends to rob the proceedings of their legal character, and reduces them to the level of an informal correspondence. The argument overlooks that by this writing, the AAC had actually terminated a legal proceeding which he had earlier started on its course. We have already made a reference to the concluding words of the communication addressed by the AAC. He concluded that he had decided to drop the proceedings under s. 35. The question is whether this is an order. There is no definition of expression "order" in the I.T. Act. This only shows that Parliament did not intend to exclude from reckoning anything which might fairly be regarded as an order. Under they Civil Procedure Coded, an order is defined as the "formal expression" of the "decision" of a court, other than a decree. The ideal behind this definition is simple. A decision must always originate in the mind of the presiding judge. A decision is a decision even if no outward expression is given to it. An "order" only gives expression to what is in the judge's mind already as a decision. This formal expression is necessary both as a matter of record and as a matter of communication. So, when the AAC wrote that he was dropping the proceedings, he was only giving a formal expression of his decision to drop the proceedings. Therefore, this communication must be regarded as an order in the truest sense of the expression.

22. We have earlier observed that there are no direct authorities on the subject which we have been asked to consider in this case. There are, however, some cases which had arisen under the I.T. Act. Both sides have cited decision bearing on the nature of the rectificatory orders, and on the amenability of such orders as fit subjects of appeal before the Tribunal. Mr. Jayaraman relied on an observation in a judgment of a Bench of this court in Vedantham Raghaviah v. Third Addl. ITO[1963] 49 ITR 314 at p. 320, viz:

"Once an order of rectification is passed, the assessment itself is modified and what remains is not the order of rectification, but only the assessment as rectified."

23. Borrowing the words of this judgment for the present purpose learned counsel submitted that once the AAC passed an order of rectification, then what we have on hand is the appellate order as rectified.

24. To similar effect is a decision of the Supreme Court in S. Sankappa v. ITO [1968] 68 ITR 760. The learned judges there observed that when proceeding are taken for the rectification of an assessment, either under s. 35(1) or under. 35(5) of the Indian I.T. Act, 1922, those proceedings must be hold to be proceedings for assessment. The learned judges explained that while proceeding under those provision s what the ITO does is to correct errors in, or rectify the orders of assessment made by him, and this being so, orders making such corrections or rectifications must be regarded as part of the proceedings for assessment. The learned standing counsel would only substitute the expression "Appellate Assistant Commissioner of Wealth-tax" and "appellate order" in the place of the "Income-tax Officer" and "order of assessment" occurring in this enunciation of law by the Superman Court. We accept the validity of the standing counsel's submissions. The position adumbrated by the Supreme Court under the I.T. Act must be held to apply in the context of the scheme and structure of the W.T. Act as well, a brief summary of which we have earlier given.

25. Learned standing counsel then referred to the decision of the Supreme Court in Mela Ram and Sons. v. CIT [1956] 29 ITR 607, as an authority for the position that any given order passed exercise of statutory powers may at one and the same time, fall under two different provisions of the statute, The case before the Supreme court arose under the Indian I.T. Act, 1922. In the case the assessee preferred an appeal against an order of assessment to the AAC, but it was filed after the expiry of the period of limitation. Under s. 30(2) of that act an appeal will have to be presented within 30 days of the order of assessment, but a proviso to that subsection powers an AAC to admit an appeal beyond the said period if he is satisfied that the assessee was prevented by sufficient cause from filing the appeal within time. The appeal filed by the assessee out of time in that case was rejected in limine by the AAC as time-barred. The assessee then sought to prefer a further appeal to the Tribunal against the order of the AAC rejecting his appeal as time barred. The question which the Supreme Court had to consider in that case, was whether the assess's appeal to the Appellate Tribunal was maintainable. Before the Supreme Court, the Department urged that where the AAC dismisses an appeal as time barred or refuses to condone the delay in the filing of the appeal, he acts only under s. 30(2) of the Act of 1922. Reliance was placed by the Department on the language of s. 33 of the Act, under which only orders passed by the AAC under s. 31 of the Act could be taken in appeal to the Tribunal, Since, in the Departments submission, an order dismissing an appeal in limine as time barred can be put only under s. 30(2) and not under s. 31, it was urged that a further appeal did not lie to the Tribunal in that case. The Supreme Court, however, held that an appeal was maintainable. The learned judges accepted the first submission of the Department that the dismissal by the AAC of a time barred appeal, after refusing to condone the delay, might properly fall to be considered as an order under s. 30(2) of the Act. Nevertheless, the Supreme Court proceeded to hold that such an order must be treated as an order falling under s. 31 of the Act as well, and hence appealable to the Tribunal under the right of appeal provided under s. 33 of the Act.

26. Drawing his inspiraiton from this judgment, Mr. Jayaraman argued that although an order of rectification passed by the AAC was under s. 35(5) of the W.T. Act, that does not mean that that order cannot also be regarded as an order by the AAC in appeal under s. 23 of that Act. He said that for certain purposes of compliance with the provision of s. 35 the order must be regarded as an order passed under that section, but for the purpose of finding out whether a further appeal lay to the Tribunal, its substantial character as an order passed in appeal cannot be gainsaid. Arguing a broader proposition, Mr. Jayaraman submitted that it is not impossible, under the provision s of direct tax statutes for an order to come within the two different provisions of the same Act. If it does come under a section providing for a further appeal, the appeal cannot be regarded as not maintainable by reference to another section which says nothing about its appealability.

27. Referring to the decision in Mela Ram and Sons v. CIT , Mr Ananthachari submitted that the question in the present case has no bearing whatever to the issue which arose before the Supreme Court in that case. Learned counsel pointed out that the Supreme Court in that case had not to deal with the effect of a rectification order subsequent to the passing by the AAC of an order in appeal. He pointed out that the question which the Supreme Court had to decide was, whether the rejection or dismissal of an appeal in limine could be regarded as an order passed by him in appeal under s. 31 of the Indian I.T. Act of 1922.

28. We realise that the decision of the Supreme Court directly arose under a different fact situation and under different provisions of the I.T. Act. But there is considerable force in the argument addressed by the learned standing counsel for the Department that it is not necessary that any order passed by a taxing authority should be a captive of one particular provision alone in the statute. What was in question in the Mela Ram's case , was the

appealability of an order falling under more than in statutory provision in the same Act. The Supreme Court said that the order in question truly comes under a provision which gives a right of appeal, than such a right cannot be defeated by out pointing to another section under which no appeal is provided against that order. The decision of the Supreme Court may not be regarded as a direct authority of the position under the W.T. Act. But we can certainly derive support for the position in the present case that even though, in one sense, an order of rectification is a separate proceeding some the rectification can only impinge on the parent order, whatever, applies to the parent order in appeal must ipso jure also apply to the rectification order as well.

29. Mr. Ananthachari submitted that there was internal evidence in the legislative history of the W.T. Act itself, which tends to rule out an appeal to the Tribunal against an order of rectification passed by the AAC. Learned counsel pointed out that s. 23 of the Act, as it originall, stood, only conferred a right of appeal to any person objecting to the amount of net wealth determined or the amount of wealth-tax determined as payable by him or denying his liability to be assessed at all under the Act. Learned counsel added that there was no express provision under s. 23(1) in its original form for enabling an assessee to appeal against an order of rectification passed by the WTO. However, Parliament subsequently introduced clause (h) in s. 23(1) under which a right of appeal was conferred on the assessee for "objecting to any order of Valuation Officer under section 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under the said section."

30. The significant inference which Mr. Ananthachari asks us to draw from the introduction of this clause in the provisions relating to right of appeal, is that when Parliament thought fit to expressly confer a right of appeal in respect of orders which could be passed under s. 35 by the WTO, opportunity at the same time was not taken by Parliament to make a similar provision by way of amendment to s. 24, expressly mentioning orders which are appealable to the Appellate Tribunal. By comparing and contrasting the amended provision of s. 23, on the one hand, with the unamended provision of s. 24, on the other, what the learned counsel sought to urge was that the intention of Parliament, as inferred from the historical evolution of the provisions, was that while there is a right of appeal against an order of rectification passed by the WTO to the AAC, no such right of appeal has been granted either to the assessee or to the Department where the rectification is made by the AAC in his order in appeal.

31. This argument of Mr. Ananthachari is certainly borne out by the relevant provisions, namely, s. 23 and s. 24 of the W.T. Act and also the legislative history behind them. Nevertheless, the inference as to legislative intention drawn by Mr. Ananthachari does not appear to us to be a legitimate one. Merely because Parliament had made an express provision be said that such an express provision was in law necessary for enabling the assessee to file an appeal against such an order.

32. We have earlier referred to the decision of the Supreme Court in s. Sankappa v. ITO , according to which, if we may be

pardoned for employing out own paraphrase, the order of rectification does not stand in mid-air, but must always be regarded as part and parcel of the assessment itself. If this were the position, an express provision for an appeal to be taken from the order of rectification is absolutely superfluous. Even without an express provision for that purpose, cannot an appeal lie on the basis that the order of rectification is, in substance, an order of assessment The answer must be certainly in the affirmative. There is a sense in which Parliament when making an amendment as being absolutely necessary might have been moved into making it on the basis of a misconception or misunderstanding of the existing state of the law. It was observed by Lord Radcliffe in IRC v. Dowdall O'Mahoney & Co. Ltd. [1952] 33 TC 259 (HL), that the beliefs or assumptions of those who frame Acts of Parliament cannot make the law. That principle also applies to the present discussion. If, even without an express provision of an appeal as in s. 23(1)(h) of the W.T. Act, it is competent for an assessee to file an appeal against an order of rectification passed by the WTO rectifying his assessment, then the fact that there was such an express provision loses its significance altogether as an aid to the construction of s. 24 of the Act which does not contain a similar provision as respects orders of rectification passed by the AAC over his appellate orders.

33. We may refer, in conclusion, to two other decisions of this court. They may be of interest to the present discussion, although they do not really help in the present decision. One is CWT v. Kamala Ganapathi Subramaniam [1981] 127 ITR 175 (Mad). In that case, as in the present one, the AAC in the first instance, allowed an appeal holding that jewellary must be exempt under s. 5(1)(viii) of the W.T. Act, following the decision in CWT v. Arundhati Balkrishna . But

subsequently, in consequence of the retrospective amendment of s. 5(1)(viii) he started proceedings under s. 35 of the Act, but as in the present case, so too in that case, those proceedings were dropped subsequently. The Department filed an appeal against the order of the AAC in and any by which he had dropped the proceedings under s. 35. The Tribunal entertained that appeal and then went into the merits of that appeal. Ultimately, the matter came before this court in reference. The court decided that the AAC ought properly to have proceeded to rectify his earlier assessment having regard to the retrospective amendment carried out to s. 5(1)(viii) of the Act. It may be observed that in that case no question whatever was raised before the Tribunal as to the maintainability of the departmental appeal against the order passes by the AAC dropping the proceedings under s. 35 of the Act. This case is, therefore, of interest only in the limited sense as to what the Tribunal ought to do after we answer the reference with our opinion.

34. Our attention was also drawn to an unreported decision of a Bench of this court in T.C.P. No. 264, 265 and 266 of 1977 disposed of on February 3, 1978 (CWT v. V. Thayarammal) [since reported in [1983] 139 ITR 1072 (Mad)]. That case arose under s. 27(3) of the W.T. Act, 1957 on a petition filed by the CWT for an order directing the Tribunal to state a case on a question similar to the one before us in the present case, raising the issue of maintainability of an appeal to the Tribunal against an order passed by the AAC dropping the proceeding under s. 35 of the W.T. Act. The learned judges, however, held that there was no "referable question of law" and, in that view dismissed that application. The content as well as the range of the discussion in the foregoing paragraphs of this judgment would not, we fear, lend weight to the view that the question which has arisen in this case, as in the other case dismissed by the Bench in T.C.P. Nos. 264 to 266 of 1977 [CWT v. V. Thayaramnmnal [1983] 139 ITR 1072 (Mad)], is not a question of law. It is not however necessary for us to comment on the manner of disposal of T.C.P. nos. 264 to 266 of 1977. Suffice it for our present purpose to say that we do not regard the said disposal as a binding precedent. We have had on hand a reference made by the Tribunal. The question too had been dealt with by both sides in full-fledged argument. Hence it would be too late in the day for us to hold that no referable question of law at all is involved in the present case.

35. For all the above reasons we hold that the appeal filed by the Department before the Appellate Tribunal against the order of the AAC dated December 24, 1973, was perfectly maintainable. The Tribunal was in error in holding that the appeal did not lie. The result is that the question of law is answered in favour of the Department. The implication of this answer of ours is, that the order passed by the Tribunal is no longer there. The appeal of the Department is again at large, and the Tribunal has to rehear the appeal and decide it on merits. A reference to the last paragraph of the judgment in CWT v. Kamala Ganapathi Subramaniam [1981] 127 ITR 175 (Mad), gives an indication of the manner in which the Tribunal will have to proceed in a case of this kind.

36. The reference is answered in favour of the Department on the above terms. The assessee will pay the costs of this reference. Counsel's fee Rs. 500.


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