J.M. BHATIA, APPELLATE ASSISTANT COMMISSIONER OF WEALTH TAX & ORS.versusJ.M. SHAH

    872


                     J.M. BllATIA, APPELLATE ASSISTANT
                     COMMISSIONER OF WEALTH TAX & ORS.
                                     v.
                                 J.M. SHAH

                             SEPTEMllER 19, 1985
B
             [V .o. TULZAPllRKAR AND SABYASACHI MUKllARJI, JJ. J

          Wealth Tax Act 1957, S• 5(l)(viii) and 35 - Assessment
    order passed under s. 5(l)(viii) - No appeal preferred - Assess-
    ment Order - Whether final - Whether it is liable to be modified
    or rectified under s. 35.
c
           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
    assesSlllellt year 1969-70. In an appeal preferred by him, the
    Assistant Appellate Comaissioner by his order dated 26th June
    1970 excluded from her net wealth, the value of the aforesaid
D   jewellery and ornaments on the ground that they were intended for
    personal us-. of the assessee under s. 5(l)(vi11) 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 amende<i retrospectively
E   with effect from April 1, 1983 and under s. 5(l)(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 a:Jd passed an order
    dated 22nd February 1972 under s. 35 of the Act rectifying the
F   original order dated 26th June 1970 whereby he withdrew the
    ezemption already granted to her in respect of the jewellery and
    ornaments on the ground that his predecessor had coamitted a
    mistake apparent on the face of the record in excluding the said
    jewellery and ornaments.

G         The assessee-respo;,.ient challenge«! 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 vas
    preferred against that by either side, the amending Act could not
    reach or. affect such completed asseFoment and in any event the
H
                      J.M. BHATIA v. J.M. SllAll                   873


question whether the Amending Act covered compl.oted assessment or       A
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 that the question whether the
Anpndlng 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          B·
to rectify his predecessor's order.

      All.owing the appeal by the appellant-Revenue,

         HELD: l. This is not a case where the resort to the
rectification power was required to be made by reference to any          c
provision in the Amending Act but de horse the original section,
118111ely 35(7) of the Wealth Tax Act. The AAC's vrder dated June
26, 1970 had not become final in the literal sense of the wrd
notwithstanding the fact th&t 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         D
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 uno!P.r
the initial order. [877 F-H)

        In the instant case, the proceedings for rectification of        E
  original order dated 26th June 1970 were undertaken by the AAC in
  January 1972. It was well within four years of period of limita-
  tion available to him under s. 35 of Wealth Tax Act. Therefore,
. the rectifir.ation order passed by the AAC is restored. [877 E-F)

       ll.Jt. Venkatachalaw, Inc:  tax Officer Vo &Dbay Dyeing and
                                                                         F
llpgpfact:uriQ& Co. Ltd. 34 ITR 143 followed.

       h""    tax Officer,. V Circle,     Madras   &   Anr.   v.   S.L
ffaM!m!Jah 44 ITR 809 distinguished.

       <'...Ussioner of Wealth-tax v. Aruodbati Balkrialma 77            G
I.T.B.. 505, Vollart Brothers v. Incme Tax Officer 82 ITR 50,
Delb1 Cloth and GeDeral llillB Co, Ltd. v. 1 - Tax Co-fpl._.-
AIB. 1927 PC 242 and Colonial Sagar Refining Co. V• Irving (1905)
.i.e. 369 referred to.
       CIVIL APPELLATE JURISDICTION : Civil Appeal No. 680 of 1974.      H

       From the Judgment and Order dated 12.12.1973 of the Boi-nbay
 High Court in Misc. Petition No. 285 of 1972.
    874           SUPREME COURT REPORTS            [1985] SUPP.2 s.c.R.


A         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
B
          TULZAPllWR, J. This appeal seeks to raise the following
    question of law for our determination:

               Did the Appellate Assistant Colllllissioner of Wealth-tax
               have the power to rectify his predecessor• s order
               dated June 26, 1970 in view of the fact.that there was
c              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 debat-
               able question?

    The High Court certified the question to be of gerieral public
    importance which required a decision of this Court but in our
D   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 therefore the postulate being absent
    the question does not arise.

E        The facts which are said to give rise to the question raised
    in the appeal are these. For the assessmen-. year 1969-70 the
    respondent-assessee was assessed for wealth-tax purposea on the
    total wealth of Rs. 6,07 ,690, which included jewellery and orna-
    ments 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 prefer-
F   red 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 fn Commissioner of Wealth-tax v. Arundhati
G   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 senae 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
H   retrospectively into effect from April l, 1963. By s. 32 of the
            J.M. BHATIA v. J.M. SHAH [TULZAPURKAR, J.]         875


Amending Act in s.5(1) (viii) the words "but not including jewel-      A
lery" 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 unde~ s. 35 of
the Act, withdrawing the exemption already granted to her in           B
respect of the jewellery and ornaments. The assessee appeared and
objected to the proposed rectification but tbe AAC held that his
predeessor has cOlllllitted 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 predeces-
sor and actually passed the rectification order againat the            c
assessee on February 22, 1972. The assessee challanged the said
order by filing a writ petition in the High Court.

     The counsel for the assessee contended before the High Court
that the MC had no power to rec.tify his predecessor's order
dated June 26, 1970 in view of. the fact that there was no error       D
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 H.lt. Veakatacbaln, lncome-ta><             E
Officer v. llcnbay Dyeinf, 8lld llaDufacturiDg 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 prefer~ed against the
order dated June 26, 1970 by either side the Amending Act could            F
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 Coµrt took the view             G
that the matter had been concluded by this Court 's decision in
llcnbay Dyeing 8lld llaDufacturiDg 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                H
concluded by that decision because of this Court's subsequent
    876           SUPREME COURT REPORTS           [1985] SUPP.2 s.c.R.

A   decision in Income-1:ax Officer, V Circle, Madras & Anr. v. S.K.
    llabibullah 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
B   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. Iucoae Tax Officer 82 I. T.R. 50, the Court
    did not express any opinion on that point but .took the view that
c   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.
D        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 deba.table 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'
E   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
F   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
G   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
    Delbi Cloth and General Hills Co. Ltd. v. Iucoae Tax Calllda-
    siooer, 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
H   Court with reference to the precise argument observed· thus:
                   J.H.   i   '�:r.LA.
                                         -   ..
                                                  SHAii   [TULZAPURKAR, J •]   877



                  "The same argw11ent was put in another fom by contend­
                                                                                     A
                  ing that the finality of the order passed by the
                  Income-tax Officer cannot be impaired by the retros­
                  pective operation of the relavant provision. In our
                  opinion this argument does not really help the respon­
                  dent's case because the order . passed by the Income
                  Tax Officer under section 18A(5) cannot be said to be
                                                                                     Jl
                  final in the literal sense of the word. 'Ibis order was
                  and  continued to be liable to be modified under
                  section 35 of the Act. What the lncome-tax Officer has
                  purported to do in the present case is not to revive
                  his order in the light of the retrospective amend::nent
                  made by section 13 of the Amendment Act alone but to
                                                                                     c
                  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
                  sect.ion 35. That is why we think that the principle of
                  the finality of the orders or the sanctity of the
                                                                                     D
                  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 computa­
          tion of the total wealth of the assessee had been passed on June
                                                                                     E
          26, 1970. Aft�r the amendment had come into force with retros­
          pective effeet from April ]., 1 %3, 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 Ta>r. Act. This i8 nut a case where the resort to
          the rectification power was required to be made by reference to
                                                                                     F
          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 r of the Wealth Tax Act. If that be so following the
          observations quoted above, it must be held that the AA.C's order
          dated June 26, l970 had not become final in the literal sense of
          the word nothwithstanding the fact that no appeal had been
                                                                                     G
          preferred against that order or that the requisite period for
          appeal was allowed to expi re. The said order was and continued to
          be li;ible to be moditied under s. 35(7) of the A.ct and in this
          view of the md.Lter the assessee herein also Would not be in a
          position to invoke thll principle o( finality of or de rs or the
    ""!>--sanctity of the cx.is t ing right which are said to h<lve aciplired hy
                                                                                     H
•
       her under. the initial order.
    878           SUPREME COURT REPORTS           [1985] SUPP.2 s.c.R.


          If, therefore, the order which has been rectified had not
     received a finality the contentio~ that the amending provision
A
     would not be available for the purpose of ef fectin~ 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 deciµe that question and the
B
    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 retros-
    petivity 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
c   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
D
    rectification order passed by the AAC is restored. No Costs.




                                                        Appeal allowed.