1989 (1) TMI 13 - HC - Wealth-tax

Summary

Issues:
Interpretation of section 35 of the Wealth-tax Act, 1957 regarding penalties imposed for default in filing returns on time.

Detailed Analysis:
The judgment pertains to the interpretation of section 35 of the Wealth-tax Act, 1957, concerning penalties imposed on a wealth-tax assessee for not filing returns on time. The Tribunal had imposed penalties for the assessment years 1966-67 to 1969-70, treating the default as a continuing offense both before and after April 1, 1969. The Tribunal relied on its decision in the case of T. K. Roy, which was later challenged in court and not upheld (Reference: [1973] 115 ITR 746). After this decision, the assessee sought to reduce the penalties under section 18(1)(a) of the Act in line with the court's decision in T. K. Roy v. C WT [1978] 115 ITR 746. The petitions were filed within the limitation period mentioned in section 35(7) of the Act.

The first ground raised by the Tribunal was that the assessee did not challenge the Tribunal's order before any forum, making it final. However, the petitioner argued that the precedent cited by the Tribunal did not apply in this case as it pertained to a different scenario. The court agreed with this submission. The second ground was that the Tribunal believed the mistake in applying an erroneous interpretation of the law was not apparent from the record, which is a prerequisite for rectification under section 35.

Regarding the second ground, the petitioner contended that the mistake was apparent from the record as the court's decision in T. K. Roy was part of the record. The petitioner argued that rectification under section 35 should not be equated with the provisions of the Civil Procedure Code. Citing the case of ITO v. Asok Textiles Ltd. [1961] 41 ITR 732 (SC), the petitioner emphasized that rectification under section 35 should be considered independently.

The court acknowledged that a subsequent event, such as a court decision, could be considered while exercising powers under section 35. Referring to cases like CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC) and Venkatachalam (M. K.), ITO v. Bombay Dyeing and Mfg. Co. Ltd. [1958] 34 ITR 143 (SC), the court established that rectification could be based on glaring mistakes of law or fact. Consequently, the court held that the assessee rightly approached the Tribunal to rectify the penalties in line with the court's decision in T. K. Roy [1978] 115 ITR 746.

In conclusion, the court allowed the petition and directed the Tribunal to rectify the orders imposing penalties in accordance with the law laid down in T. K. Roy [1978] 115 ITR 746.