T S RAJAM Vs. CONTROLLER OF ESTATE-DUTY

JUDGEMENT

(1.) THE propriety and legality of the exercise of jurisdiction by the revenue under section 62 of the Estate Duty Act, 1953, is challenged in these proceedings. THE relevant facts are as follows T. V. Sundaram Iyengar, hereinafter referred to as the deceased, died on April 28, 1955. His son, T. S. Rajam, hereinafter referred to as the accountable person, filed the necessary returns. THE Assistant Controller of Estate Duty, Madurai, originally assessed the estate of the deceased on February 28, 1957, determining the principal value of the estate at Rs. 3, 84, 066. Subsequently, by his order dated July 31, 1959, the Assistant Controller rectified the earlier assessment under section 62 of the Act and revised the principal value of the estate at Rs. 6, 12, 879. THE main item of dispute in this tax case relates to the 1, 000 shares which the deceased held in Messrs. T. V. Sundaram Iyengar and Sons (Private) Limited. THE deceased sold these 1, 000 shares to his sons and grandsons on December 6, 1954, for a sum and consideration of Rs. 1, 00, 000. THE Assistant Controller was of the view that the sale was a disposition in favour of relatives within the meaning of section 27 of the Act and was also of the view that the estate has to be re-evaluated taking into consideration the value of the shares as on the date of death of the deceased on the ground that such property should be deemed to have passed on the death of the deceased under section 27 read with section 9 of the Act. In the course of such exercise of jurisdiction apparently under section 62 on the ground that there has been an omission in the valuation of these shares resulting in a mistake apparent from the record as a result of such valuation, the Assistant Controller considered that the fair value of the shares as on the date of sale should be taken to be Rs. 310 per share and as the full consideration in money's worth has not been received by the deceased, the estate has to be re-valued so as to bring in such omission which has not been included in the estate as being exigible to tax. THE accountable person thereupon preferred an appeal to the Central Board of Revenue under section 63 of the Act against the order dated July 31, 1951, passed by the Assistant Controller, and contended that there was no mistake apparent from the record, nor a mistake in the valuation of any property or any omission of property in the assessment and that the provisions of section 27 read with section 9 of the Act were not applicable to the sale of 1, 000 shares by the deceased on December 6, 1954. THE Board held, after examining the position independently by themselves, that the deceased had sold 1, 000 shares to his sons and grandsons within a period of two years before the date of death at the face value of Rs. 100 per share. THE Board also found that all the shares have to be evaluated at Rs. 258 as on the date of death of the deceased. THE Board was of the view that there had been no significant change either in the position of the company or in the value of shares between the date of sale, namely, December 6, 1954, and the date of death, namely April 28, 1955. It would be equitable to take the fair market value of these shares each at Rs. 258 as on December 6, 1954. THEy finally concluded that, as these shares were sold to relatives for a consideration which was only partial and not full, the difference between the market value of the shares and the face value should be considered as a gift within the meaning of section 9 of the Estate Duty Act read with section 27. This property not having been returned by the accountable person and thus having escaped the attention of the original officer who assessed the estate, the Board was of the view that the rectification was permissible under section 62 of the Estate Duty Act. Ultimately, the Board held that a sum of Rs. 1, 58, 000 has to be added on to the estate on the ground that it was mistakenly omitted to be added by the first officer who took up the assessment proceedings. On application made by the accountable person on May 9, 1960, to refer a case to this court, the Central Board of Revenue referred the following two questions for our decision "1. Whether, on the facts and circumstances of the case, the rectification of the original assessment under section 62 of the Act was valid in law ?.2. Whether, on the facts and circumstances of the case, the inclusion of the sum of Rs. 1, 58, 000 as property deemed to pass on the death of the deceased under section 9 read with section 27 of the Act was in accordance with the law ?" *When the subject came up before this court on an earlier occasion, it was held that the statement of the case was not sufficient to enable it to dispose of one of the questions referred therein. THErefore, the Board was directed to submit a further statement of the case"Whether the statement in ground No. 17 in the memorandum of appeal to the Board of Revenue was correct ?" *A supplementary statement of the case was submitted by the Central Board of Direct Taxes, New Delhi, and the Board, while reiterating the position stated earlier, has restated the case and observed"In view of the statement made by the Assistant Controller in the assessment order, ....... it may be taken that the account containing the sale of the 1, 000 shares had been seen by him before completion of the assessmentTHE records do not show that the Assistant Controller was informed before making the original assessment on 28th February, 1957, that the sale of 1, 000 shares of T. V. S. Iyengar & Sons Ltd. by the deceased was effected at less than market value of the shares as at the time of sale on December 6, 1954.

(2.) THE records also do not show that the Assistant Controller had at any time on or before 28th February, 1957, considered the applicability of sections 9 and 27 of the Estate Duty Act, 1953, in respect of the sale of these 1, 000 shares."On ground No. 17, the finding of the Board is that" THE fact of sale of 1, 000 shares of T. V. S. Iyengar & Sons Ltd. was known to the Assistant Controller before the assessment dated 28th February, 1957, was completed but the fact that these sales were effected at less than their market value was not before the Assistant Controller who did not consider the applicability or otherwise of sections 9 and 27 of the Estate Duty Act to these sales before making the original assessment." THE case once again, after the re-statement of the case by the Board, which we are constrained to say is still incomplete, has been placed before us for rendering our answers on the two questions as originally framed. Though hesitantly, it was mentioned by Mr. Swaminathan, learned counsel for the applicant, that the sanction of the Board was not obtained by the officer before he initiated proceedings to rectify the records under section 62 of the Act, it was not pressed before us, as apparently such sanction was indeed obtainedWe may, at the outset, note the history of the legislation and the scheme of the Estate Duty Act, 1953"Rectification of mistakes relating to valuation for estate duty.---(1) If, after the determination of the estate duty payable in respect of any estate, it appears to the Controller that, by reason of any mistake apparent from the record or of any mistake in the valuation of any property in any case other than a case in which the valuation has been the subject-matter of an appeal under this Act or of the omission of any property, the estate duty paid thereon is either in excess of or less than the actual duty payable, he may, either on his own motion or on the application of the person accountable and after obtaining the previous approval of the Board, at any time within three years from the date on which the estate duty was first determined---(a) refund the excess duty paid, or, as the case may be(b) determine the additional duty payable on the propertyProvided that where the person accountable had fraudulently underestimated the value of any property or omitted any property, the period shall be six yearsProvided further that no order shall be made under this sub-section unless the person accountable has been given an opportunity of being heard(2) Nothing contained in sub-section (1) shall render any person accountable to whom a certificate that the estate duty has been paid is granted liable for any additional duty in excess of the assets of the deceased which are still in his possession, unless the person accountable had fraudulently attempted to evade any part of the estate duty in the first instance." *Thus, the section vests in the Controller jurisdiction to rectify (a) any mistake apparent from the record, (b) any mistake in the valuation of any property in any case other than a case in which the valuation has been the subject of an appeal under the Act and (c) any omission of any property.

(3.) THE test also may break, for what is complex to one judicial mind may be clear and obvious to another it depends upon the equipment of a particular judge. In the ultimate analysis the said concept is comprised of many imponderables : it is not capable of precise definition, as no objective criterion can be laid down, the apparent nature of the error, to a large extent, being dependent upon the subjective element. So too, in some cases, the boundary between error of law and error of fact is rather thin.... 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. "On a fair conspectus of the ratio of the various decisions of this court and the Supreme Court, it is now clear that for a rectification of an error which is said to be apparent from the face of the record, the mere complexity of the problem or that genuine argument is necessary to discover the same may not by themselves be sufficient to oust the jurisdiction of a tribunal to rectify such a mistake. If, however, it could be discerned with some precision after a fair probe into the assessment records and a reasonable and probable conclusion can be arrived at, that the court's conscience has been shaken, in that there appears an error on record which has to be certainly corrected, then it would appear that the jurisdiction of the tribunal vesting with power to rectify such mistakes arises. As has been repeatedly pointed out, it is very difficult to state where the jurisdiction begins and where it ends. One thing, however, emerges from the discussion above. THE essence of rectification is to bring the order which was expressed and intended to be in pursuance of the existing law, into harmony with such law. It pre-supposes a particular state of affairs and it requires proof that by such a mistake the final order fails to give proper effect of the law and its functions. Once the tribunal or authority is able to predicate with certainty as to in what manner and how the order suffers by a mistake apparent on its record supported by irrefragable evidence, then it would indeed enable them to bring the order complained against or impugned against in conformity with law and the facts in the recordHaving thus found the circumstances under which a mistake within the meaning of section 62 of the Act can be rectified, we shall now consider the range of such mistake, which could come within the mischief of the same. We have already grouped them under three heads. Mistake which is apparent is obvious. A mistake as to valuation may be apparent or may be latent an omission may be wanton or accidental. In the latter two cases of mistakes, there is scope for such a mistake to be a lurking one both the accountable person and the revenue might have applied initially their minds and the issue might have escaped their attention. Even then it would be a lurking one which can be corrected. Even so, in the case of an omission, no question of application of mind by either arises. It is implicit in the fasciculus of sections of which section 62 forms part, that even an improper valuation or an omission to properly evaluate may be viewed as a rectifiable mistake.