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PETITIONER: J.M. BHATIA, APPELLATE ASSISTANT COMMISSIONER OF WEALTH TAX&

       Vs.

RESPONDENT: J.M. SHAH

DATE OF JUDGMENT19/09/1985

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. MUKHARJI, SABYASACHI (J)

CITATION:  1986 AIR  268            1985 SCR  Supl. (2) 872  1985 SCC  (4) 655        1985 SCALE  (2)845

ACT:      Wealth Tax  Act 1957, s. 5(1)(viii) and 35 - Assessment order passed  under s.  5(1)(viii) -  No appeal  preferred - Assessment Order  - Whether  final - Whether it is liable to be modified or rectified under s. 35.

HEADNOTE:      The respondent-assessee  was assessed  for  wealth  tax purposes on  the total wealth of Rs. 6,07,690 which included jewellery and ornaments of the value of Rs. 4,15,942 for the assessment year  1969-70. In an appeal preferred by him, the Assistant Appellate  Commissioner by  his order  dated  26th June 1970  excluded from  her net  wealth, the  value of the aforesaid jewellery  and ornaments  on the  ground that they were intended  for personal  use of  the assessee  under  s. 5(1)(viii) of the Wealth Tax Act 1957. No further appeal was filed against that decision of the AAC by either side.      On August 10, 1971, the Act was amended retrospectively with effect  from April  1, 1983 and under s. 5(1)(viii) the words, "but  not including  jewellery" were added at the end of that  clause and  these words  were deemed  to have  been inserted right  from April  1, 1963. In view of this amended provision the  AAC served  a  notice  on  the  respondent  - assessee and  passed an order dated 22nd February 1972 under s. 35  of the  Act rectifying  the original order dated 26th June 1970  whereby he withdrew the exemption already granted to her  in respect  of the  jewellery and  ornaments on  the ground that his predecessor had committed a mistake apparent on the  face of  the record  in excluding the said jewellery and ornaments.      The assessee-respondent  challenged the  said order  by filing a  writ petition in the High Court on the ground that since the original assessment had been completed long before the Amending  Act was passed and had also become final as no appeal was  preferred  against  that  by  either  side,  the amending Act  could  not  reach  or  affect  such  completed assessment and in any event the 873 question  whether   the  Amending   Act  covered   completed assessment or  not was  a debatable  question and therefore, the AAC had no power to rectify his predecessor’s order. The High Court  set aside  the impugned order of the AAC holding

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that the  question  whether  the  Amending  Act  applied  to assessments  which  were  already  completed  was  a  highly debatable question  and that  it was  not a case of an error apparent on the face of the record which entitled the AAC to rectify his predecessor’s order.      Allowing the appeal by the appellant-Revenue, ^      HELD: 1.  This is  not a  case where  the resort to the rectification power  was required to be made by reference to any provision  in the Amending Act but de horse the Original section, namely 35(7) of the Wealth Tax Act. The AAC’s order dated June  26, 1970  had not  become final  in the  literal sense of  the word  notwithstanding the  fact that no appeal had been  preferred against that order or that the requisite period for  appeal was allowed to expire. The said order was and continued  to be liable to be modified under s. 35(7) of the Act  and in  this view of the matter the assessee herein also would  not be  in a position to invoke the principle of finality of  orders or  the sanctity  of the existing rights which are  said to  have been  acquired  by  her  under  the initial order. [877 F-H]      In the  instant case, the proceedings for rectification of original  order dated  26th June  1970 were undertaken by the AAC  in January  1972. It  was well within four years of period of  limitation available to him under s. 35 of Wealth Tax Act.  Therefore, the  rectification order  passed by the AAC is restored. [877 E-F]      M.K. Venkatachalam, Income-tax Officer v. Bombay Dyeing and Manufacturing Co. Ltd. 34 ITR 143 followed.      Income-tax Officer,  V Circle,  Madras &  Anr. v.  S.K. Habibullah 44 ITR 809 distinguished.      Commissioner of  Wealth-tax v.  Arundhati Balkrishna 77 I.T.R. 505,  Volkart Brothers  v. Income  Tax Officer 82 ITR 50, Delhi  Cloth and  General Mills  Co. Ltd.  v. Income Tax Commissioner AIR 1927 PC 242 and Colonial Sugar Refining Co. v. Irving [1905] A.C. 369 referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION : Civil Appeal No. 680 of 1974.      From the  Judgment and  Order dated  12.12.1973 of  the Bombay High Court in Misc. Petition No. 285 of 1972. 874      S.C.  Manchanda,   Dr.  Gauri   Shankar  and   Miss  A. Subhashini for the Appellants.      P.H. Parekh and Miss Divya Bhalla for the Respondent.      The Judgment of the Court was delivered by      TULZAPURKAR,  J.   This  appeal   seeks  to  raise  the following question of law for our determination:           Did  the   Appellate  Assistant   Commissioner  of           Wealth-tax  have   the  power   to   rectify   his           predecessor’s order dated June 26, 1970 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  a  debatable           question? The High  Court certified  the question  to  be  of  general public importance  which required  a decision  of this Court but in  our view  on the facts of the case it is unnecessary to decide  that question  as the appeal could be disposed of briefly on  the basis  that the assessment in question could not be  regarded as  having become  final  or  complete  and

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therefore the  postulate being  absent the question does not arise.      The facts  which are  said to give rise to the question raised in  the appeal  are these.  For the  assessment  year 1969-70 the  respondent-assessee was assessed for wealth-tax purposes on the total wealth of Rs. 6,07,690, which included jewellery and  ornaments of  the value of Rs. 4,15,942 by an assessment order  made by the Wealth Tax Officer on February 11, 1970.  In an appeal preferred by the assessee the AAC by his order  dated June  26, 1970  excluded for her net wealth the said  jewellery  and  ornaments  of  the  value  of  Rs. 4,15,942 on  the ground that they were intended for personal use of  the assessee  under s.5(1)  (viii) of the Wealth Tax Act 1957.  In doing so the AAC followed the decision of this Court in Commissioner of Wealth-tax v. Arundhati Balkrishna, 77 I.T.R.  505. No  further appeal  was filed  against  that decision of  the A.A.C.  by either  side and  in a sense the order became final as the period provided for appeal against it was allowed to expire. Section 5(1) (viii) of the Wealth- tax Act was amended by the Finance (no. 2) Act of 1971 which received the  assent of the President on August 10, 1971 but it was  brought retrospectively  into effect  from April  1, 1963. By s. 32 of the 875 Amending Act  in s.5(1)  (viii) the words "but not including jewellery "  were added  at the end of that clause and these words, as  stated earlier  were deemed to have been inserted right from  April 1, 1963. In view of this amended provision the assessee was served with a notice dated January 25, 1972 by the  A.A.C. whereby he proposed to rectify her wealth-tax assessment under s. 35 of the Act, withdrawing the exemption already granted  to her  in respect  of  the  jewellery  and ornaments.  The   assessee  appeared  and  objected  to  the proposed rectification  but the AAC held that his predeessor has committed  a mistake  apparent on the fact of the record is excluding  the said  jewellery and  ornaments and he was, therefore, entitled  to rectify  the  order  passed  by  his predecessor and  actually  passed  the  rectification  order against the  assessee on  February 22,  1972.  The  assessee challenged the  said order  by filing a writ petition in the High Court.      The counsel  for the assessee contended before the High Court that the AAC had no power to rectify his predecessor’s order dated June 26, 1970 in view of the fact that there was no error  apparent on the face of the record because (a) the original assessment when made was in accordance with law and (b) the  question as  to whether the Amending Act applied to assessments which  were already completed was, in any event, a  debatable  question.  At  the  hearing  counsel  for  the assessee conceded  that so  far  as  the  first  ground  was concerned the  matter was  concluded by  a decision  of this Court in  M.K. Venkatachalam,  Income-tax Officer  v. Bombay Dyeing and  Manufacturing Co.  Ltd., (34)  I.T.R.  143,  and therefore, he  did  not  press  that  ground.  He,  however, strenuously urged  that since  the original  assessment  had been completed  long before  the Amending Act was passed and since the  same had  become final  as  no  appeal  had  been preferred against  the order  dated June  26, 1970 by either side the  Amending  Act  could  not  reach  or  affect  such completed assessment  and in  any event the question whether the Amending  Act covered  completed assessments  or not was debatable question  and, therefore,  the AAC had no power to rectify his predecessor’s order.      As regards  the first  ground the  High Court  took the view that  the matter  had been  concluded by  this  Court’s

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decision in  Bombay Dyeing  and Manufacturing  Co.  ’s  case (Supra). But  as regards  the second  ground, though  it was pointed out  by Mr.  Joshi, counsel  for the  Revenue to the High Court  that even  that aspect had been concluded by the same decision  the learned  Judges felt that the point could not be  said to have been finally concluded by that decision because of this Court ’s subsequent 876 decision in  Income-tax Officer,  V Circle, Madras & Anr. v. S.K. Habibullah  44 I.T.R.  809, and  the observations  made therein and  in fact  one of  the learned Judges who decided the matter  expressed the  view that  "if that  decision (in Bombay Dyeing’s  case had  stood alone  I  might  have  been disposed to  record the  question that arises in the present case as  concluded by  the Supreme  Court (by reason of that decision) and  to decide  this petition  in  favour  of  Mr. Joshi. "The  Court further  felt that  the  question  as  to whether the  retrospectivity given by the Amending Act would cover cases  of completed  assessment was itself a debatable question and following the decision of this Court in Volkart Brothers v.  Income Tax  Officer 82 I.T.R. 50, the Court did not express any opinion on that point but took the view that since it was a debatable question it could not be said to be an error  apparent on the face of the record and, therefore, the AAC’s  order was  liable to  be quashed. The High Court, therefore, set  aside the  impugned order of the AAC whereby the  rectification   had  been  effected.  The  Revenue  has challenged this  view of  the High  Court before  us in this appeal.      It is  clear that the ground which was urged before the High Court  and which seemed to find favour with it was that the question whether the Amending Act applied to assessments which were already completed was a highly debatable question and therefore, it was not a case of an error apparent on the face of  the record  which entitled  the AAC  to rectify his predecessor’s order  but the  question thus raised would, in our view,  arise only  if it  is really  a case of completed assessment in  the literal  sense of  the word.  It  may  be pointed out  that this very aspect of the matter was pressed in service  in the Bombay Dyeing case (supra) and this Court while negativing  the contention has taken the view that the assessment order that had been initially passed in that case (which was  under s.  18A(5) of  the Income  Tax Act,  1922) could not  be said to have become final in the literal sense of the  word and  in that behalf this Court pointed out that irrespective of  the question  whether any  appeal had  been preferred or not against it that initial order was liable to be modified  or  rectified  under  s.  35  of  the  Act  and therefore, could  not  be  said  to  have  become  final  or complete and  as such  the contention raised would not be of much assistance  to the  assessee. After  referring  to  the decision of  the Privy  Council in  Delhi Cloth  and General Mills Co.  Ltd. v.  Income Tax  Commissioner, A.I.R. 1927 PC 242, as  also to  the Board’s  decision  in  Colonial  Sugar Refining Co.  v. Irving,  [1905] A.C.  369, this  Court with reference to the precise argument observed thus: 877           "The same  argument was  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 help  the  respondent’s  case  because  the           order passed  by  the  Income  Tax  Officer  under           section 18A(5)  cannot be  said to be final in the

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         literal sense  of the  word. This  order  was  and           continued  to  be  Liable  to  be  modified  under           section 35 of the Act. What the Income-tax Officer           has purported  to do in the present case is not to           revive his order in the light of the retrospective           amendment made  by section 13 of the Amendment Act           alone but  to exercise  his power under section 35           of the  Act; and so the question which falls to be           considered in the present appeal centres round the           construction of  the expression  ’mistake apparent           from the  record’ used  in section 35. That is why           we think that the principle of the finality of the           orders or  the sanctity  of  the  existing  rights           cannot be effectively invoked by the respondent in           the present case."      We feel  the aforesaid  observations apply  with  equal force to  the facts  of the present case. The AAC’s original order whereby  the jewellery and ornaments had been excluded from the computation of the total wealth of the assessee had been passed  on June  26, 1970. After the amendment had come into force  with retrospective  effect  from  April  1,1963, proceedings for  rectification were undertaken by the AAC in January 1972.  It was  well within  four years  of period of limitation available  to him  under section 35 of the Wealth Tax Act.  This is  not  a  case  where  the  resort  to  the rectification power  was required to be made by reference to any provision  in the Amending Act but de horse the Amending Act power  was sought  to be  exercised under  the  original section, namely  35(7) of  the Wealth Tax Act. If that be so following the  observations quoted  above, it  must be  held that the  AAC’s order  dated   June 26,  1970 had not become final in  the literal sense of the word nothwithstanding the fact that no appeal had been preferred against that order or that the  requisite period for appeal was allowed to expire. The said order was and continued to be liable to be modified under s. 35(7) of the Act and in this view of the matter the assessee herein  also would  not be  in a position to invoke the principle  of finality  of orders or the sanctity of the existing right  which are said to have acquired by her under the initial order. 878      If, therefore,  the order  which has been rectified had not received  a finality  the contention  that the  amending provision  would   not  be  available  for  the  purpose  of effecting rectification  on the  ground that  there  was  no error apparent  on the  face of  the  record  would  not  be available to the assessee and therefore though that question was the  basis on  which the  certificate was  issued by the High Court  for preferring  this appeal  to this Court we do not think  it is  necessary to  decide that question and the appeal is capable of being allowed on this short ground.      We would, however, like to observe that in Habibullah’s case (supra)  the Court was really concerned with the aspect of retrospectivity  of the  provisions contained  in the new sub-section (6)  of  s.  35  of  the  Income-tax  Act,  1922 inserted by  s. 19  of the  Income-tax (Amendment) Act, 1953 (25  of   1953)  and   the  question  of  giving  a  greater retrospective operation  than intended  by its  language was considered by  the Court  in the  context  of  the  peculiar provisions contained  in  the  amending  enactment.  Such  a question does not arise in the instant case.      The result  is that  the  appeal  is  allowed  and  the rectification order passed by the AAC is restored. No Costs. M.L.A.    Appeal allowed. 879

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