2015 (4) TMI 446 - HC - Wealth-tax

Rectification under section 35(1)(e) of the Wealth Tax Act, 1957 - Enhancement in value of property - Classification of office premises - Held that - Power of the Tribunal to rectify mistakes is only to correct an error apparent on record and not to correct an error which is to be established by a long drawn out process of reasoning or where there could be two possible views. Although one of the grounds in the appeal before the Tribunal did relate to application of sub-clause (3) of section 2(ea)(i) of the Act, the same was not urged before the Tribunal during the hearing. This is evident from the fact that the Rectification Application also does not state that the above issue was urged at the hearing. Therefore, the decision was taken by the Tribunal in its order dated 28.05.2008 on the basis of the submissions made before it on merits. This application as allowed by impugned order is in fact review the order dated 28.01.2008. Moreover the impugned order has while allowing the application held whether the office premises is in a commercial building or not would have to be determined by the sanction granted by the local authority. - Tribunal could not have exercised jurisdiction to rectify the order dated 28.05.2008, as it seeks to refer, and rely upon the sanction granted by the local authority, which was clearly not a part of the record. - Decided in favour of assessee.

Summary

Issues:
1. Rectification under section 35(1)(e) of the Wealth Tax Act, 1957
2. Applicability of sub-clause (3) or sub-clause (5) of section 2(ea)(i) of the Act

Analysis:
1. The case involved a writ petition challenging an order of the Income Tax Appellate Tribunal allowing rectification under section 35(1)(e) of the Wealth Tax Act, 1957. The petitioner owned an office premises in Mumbai, half of which was used for its own purpose and the other half was let out. The Assessing Officer determined the property value for wealth tax purposes differently than the petitioner, resulting in a higher valuation and raised demand. The CIT (Appeals) initially ruled in favor of the petitioner, but the Revenue challenged it before the Tribunal, which upheld the CIT (Appeals) decision. Subsequently, the Revenue filed a rectification application, contending a different sub-clause of the Act applied, leading to the Tribunal's impugned order in favor of the Revenue. The petitioner challenged this order, arguing it was beyond rectification jurisdiction and relied on a decision of the Gujarat High Court for support.

2. The key issue revolved around the applicability of sub-clause (3) or sub-clause (5) of section 2(ea)(i) of the Act. The petitioner contended that the Tribunal's order allowing rectification was without jurisdiction as the issue was debatable. The petitioner argued that the Tribunal's reliance on the building's commercial status determined by the local authority was beyond the scope of rectification jurisdiction. The Revenue, on the other hand, supported the impugned order, stating that the Tribunal had not considered the sub-clause issue during the appeal hearing, and the error apparent on record was the non-consideration of this submission. The High Court, after considering the submissions, held that rectification was only for correcting an error apparent on record, not for establishing errors through lengthy reasoning. Since the sub-clause issue was not raised during the hearing, the Tribunal's decision was based on the submissions made before it on merits. The High Court concluded that the Tribunal exceeded its jurisdiction by relying on factors like the building's commercial status determined by the local authority, which were not part of the record, and hence set aside the impugned order.

In conclusion, the High Court allowed the petition, emphasizing the limited scope of rectification jurisdiction and the need for errors to be apparent on record for rectification orders to be valid.