COMMISSIONER OF WEALTH TAX Vs. LALCHAND SINGHAI

JUDGEMENT

(1.) THIS is a reference made by the Wealth-tax Appellate Tribunal at the instance of the CWT, referring for our answer the following questions of law :

(2.) WHETHER, the Appellate Tribunal was right in holding that a debatable point of law was involved and consequently no proceedings for rectification could lie ?

(3.) IT would be seen that on 22nd March, 1971, when the AAC allowed the exemption in respect of jewellery intended for personal use, the words "but not including jewellery" were not in Section 5(1)(viii) and the order passed was correct in law as it was in line with the decision of the Supreme Court in Arundhati Balkrishna's case [1970] 77 ITR 505. But the Finance (No. 2) Act of 1971, which inserted the words "but not including jewellery" in Section 5(1)(viii) with retrospective effect, creates a fiction as a result of which these words are deemed to exist from 1st April, 1963. The inevitable consequence of giving effect to this fiction is that the assessee was not entitled to an exemption in the assessment year 1965-66, in respect of jewellery under Section 5(1)(viii). Further, because of this fiction it has also to be held that no such exemption could have been allowed by the AAC by his order dated 13th February, 1975, and this was an apparent error in that order which he was justified in rectifying under Section 35. A question of this nature came up before the Supreme Court in M. K. Vcnkatachalam, ITO v. Bombay Dyeing and Mfg. Co. Ltd. [1958] 34 ITR 143 (SC). In that case the Supreme Court considered the power of rectification under Section 35 of the Indian I.T. Act, 1922, to correct an assessment which was made on 9th October, 1952, for the assessment year 1952-53, but which was said to have become apparently erroneous because of insertion of a proviso to Section 18A(5) by the Indian I.T. (Amend.) Act, 1953, retrospectively from 1st April, 1952. The Supreme Court held that as a result of the fiction created by the amending Act which made the addition of the proviso applicable to the assessment year 1952-53, the error in the assessment order became apparent and the ITO was justified in rectifying the error.