1973 (12) TMI 3 - HC - Wealth-tax

This is a petition under article 226 of the Constitution seeking a writ in the nature of certiorari to quash and set aside an order of rectification of a wealth-tax assessment passed by the Appellate Assistant Commissioner of Wealth-tax on the 22nd of February, 1972, pursuant to the amendment effected in section 5(1)(viii) of the Wealth-tax Act, 1957, by the Finance (No. 2) Act, 1971 (Act No. 32 of 1971) as well as for a writ in the nature of prohibition and/or mandamus restraining the respondents from taking any further steps or proceedings for recovery of the tax on jewellery and ornaments in enforcement of the said rectification order dated 22nd February, 1972

Issues Involved:
1. Power of rectification under Section 35 of the Wealth-tax Act.
2. Retrospective application of amendments to completed assessments.
3. Interpretation of "mistake apparent from the record."

Detailed Analysis:

1. Power of Rectification under Section 35 of the Wealth-tax Act

The petitioner challenged the rectification order passed by the Appellate Assistant Commissioner of Wealth-tax on February 22, 1972, which included the value of jewellery and ornaments in the net wealth of the petitioner. The original assessment for the year 1969-70 had excluded this value based on Section 5(1)(viii) of the Wealth-tax Act as interpreted by the Supreme Court in Commissioner of Wealth-tax v. Arundhati Balkrishna. The rectification was initiated following an amendment to Section 5(1)(viii) by the Finance (No. 2) Act, 1971, which excluded jewellery from the exemption and was deemed to have been inserted with effect from April 1, 1963.

2. Retrospective Application of Amendments to Completed Assessments

The court examined whether the Appellate Assistant Commissioner had the power to rectify an assessment that was completed before the amendment came into effect. The amendment in question added the words "but not including jewellery" to Section 5(1)(viii) and was deemed to have been inserted from April 1, 1963. The petitioner argued that the original assessment was in accordance with the law as it stood then, and the retrospective amendment could not justify a rectification. The court referred to the Supreme Court's decision in M. K. Venkatachalam, Income-tax Officer v. Bombay Dyeing and Manufacturing Co. Ltd., which allowed rectification based on retrospective amendments but noted that the question of whether the amendment applied to completed assessments was debatable.

3. Interpretation of "Mistake Apparent from the Record"

The court emphasized that for a rectification to be valid under Section 35, the mistake must be "apparent from the record," meaning it must be obvious and not subject to debate. The Supreme Court in T. S. Balaram, Income-tax Officer v. Volkart Brothers held that a mistake apparent on the record must be an obvious and patent mistake, not something that requires a long-drawn process of reasoning. The court found that the question of whether the amendment applied to completed assessments was debatable, thus not qualifying as a "mistake apparent from the record."

Conclusion:

The court held that the Appellate Assistant Commissioner had no jurisdiction to rectify the original order dated June 26, 1970, as the issue was debatable and not a mistake apparent from the record. Consequently, the rectification order dated February 22, 1972, was quashed, and the respondents were restrained from taking any further steps to enforce the rectification order.

Separate Judgment:

Judge S. K. Desai concurred, emphasizing that the power of rectification under Section 35 is limited to glaring, obvious, or self-evident mistakes, which was not the case here. The complexity and debatable nature of the issue precluded it from being a mistake apparent from the record.

Final Orders:

1. A writ in the nature of certiorari quashing the rectification order dated February 22, 1972.
2. A writ in the nature of mandamus restraining the respondents from enforcing the rectification order.
3. No order as to costs due to the test case nature of the petition.
4. Certificate granted under Article 133(a) and (b) of the Constitution for appeal to the Supreme Court, recognizing the substantial question of law involved.

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