1977 (11) TMI 81 - AT - Wealth-tax

Summary

Issues:
- Appeal against order of AAC upholding the rejection of application filed under section 35 of the Wealth Tax Act, 1957.
- Discrepancy in the status declared by the assessee in income tax and wealth tax returns.
- Whether the status declared by the assessee as 'individual' instead of 'HUF' in wealth tax returns was a mistake apparent from the records justifying rectification under section 35.
- Interpretation of the provisions of section 35 of the Wealth Tax Act, 1957 regarding rectification of mistakes apparent from the records.

Analysis:
The appeal was directed against the order of the AAC which upheld the decision of the WTO rejecting the assessee's application filed under section 35 of the Wealth Tax Act, 1957. The assessee had consistently filed income tax returns as an individual but declared the status of Hindu Undivided Family (HUF) in wealth tax returns for several years. The WTO, however, assessed the assessee as an individual for those years without discussing the status issue. The assessee later sought rectification under section 35, contending that the status discrepancy was a mistake apparent from the records. The WTO rejected the application, stating that the status issue was debatable and required thorough investigation, not falling under section 35 provisions.

The assessee appealed to the AAC, arguing that the status discrepancy was a mistake apparent from the records as the WTO did not discuss the status issue in the assessments. The AAC upheld the WTO's decision, stating that the status issue was debatable and not a clear mistake. The assessee then appealed against the assessment order for a specific year. During the appeal before the ITAT, the assessee's counsel emphasized that the status declared as 'individual' was a clear mistake as the assessee consistently claimed HUF status in wealth tax returns accepted by the WTO. The department's representative argued that the status was assigned after considering income tax records, not a mistake.

After considering the arguments, the ITAT found merit in the assessee's contention. It noted that the principles of estoppel and res judicata did not apply to income tax and wealth tax proceedings. The ITAT observed that the status declared as 'HUF' in wealth tax returns, accepted by the WTO, being changed to 'individual' without discussion was a clear mistake apparent from the records. Additionally, the acceptance of HUF status by the WTO in a subsequent year supported the assessee's case. Consequently, the ITAT allowed the appeal, setting aside the previous orders and directing rectification of the status discrepancy under section 35 of the Wealth Tax Act, 1957.

In conclusion, the ITAT's decision highlighted the importance of consistency in status declaration across tax returns and emphasized that discrepancies between income tax and wealth tax statuses could be rectified under section 35 if they were mistakes apparent from the records. The judgment clarified the application of section 35 in rectifying such discrepancies, ultimately ruling in favor of the assessee and allowing the appeal.