PADMAVATI JAYKRISHNA Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) THIS reference raises a short but interesting question about the powers of the Tribunal under S. 35 of the WT 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 31st Dec., 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 S. 5 (1)(viii) of the WT 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 WTO did not grant exemption in view of the disallowance made by him in the preceding year.

(2.) THE order of assessment was made on 19th May, 1965. The WTO followed the orders made in respect of the previous assessments and held that the articles in question should not be treated as articles of personal use 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.

(3.) 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 an error apparent from the record in granting exemption in respect of jewellery while disposing of the appeal of the WTO by its order of 16th Oct., 1970. It was strenuously urged by the learned Advocate General that having regard to the set up of the amending S. 32 of the Finance (No. 2) Act of 1971 whereby S. 5(1)(viii) was sought to be amended, three serious questions arise. Firstly, whether this amendment could affect any completed assessment. In the submission of the learned Advocate General, inasmuch as the amending S. 32 by which S. 5(1)(viii) is amended w.e.f. the 1st day of April, 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 w.e.f. 1st April, 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 cl. 5(1)(viii) which has been brought into effect from the 1st day of April, 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 S. 32 of the Finance (No. 2) Act of 1971 in S. 5(1)(viii) of the WT 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" w.e.f. 1st April, 1963, so as to justify the Tribunal to take resort to its rectification powers under S. 35 of the WT Act. In support of his contention, the learned Advocate General relied on the decision of the Bombay High Court in J. M. Shah vs. J. M. Bhatia, AAC of Wealth tax (1974) 94 ITR 519 (Bom). 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 right 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 is 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 must exercise its rectification powers as envisaged under S. 35 of the WT Act. In the instant case, it was urged on behalf of the Revenue that, by the Finance (No. 2) Act of 1971, S. 5(1)(viii) of the WT Act was amended w.e.f. the 1st day of April, 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 WTO assessed the assessee, was clear and obvious, there cannot be any escape from the conclusion that the order of the AAC 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 S. 35 of the WT Act. That power of rectification being an in built provision in the WT 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, ITO vs. Bombay Dyeing and Manufacturing Co. Ltd. (1958) 34 ITR 143 (SC) and a number of other decisions in that line.