9911796707
TMI Blog1982 (12) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... he quantum appeals against the assessments which were decided by the Tribunal in favour of the assessee were not considered by the Tribunal which were material for determination of the issue. It has, therefore, been urged that the correct facts be recorded, all the submissions made by the assessee should be considered and the order of the Tribunal in quantum appeals also should be considered along with the authorities relied therein. 2. The assessee has in para 3 of the miscellaneous application pointed out that the following facts recorded in para 5 of the Tribunal's order do not emerge out of the assessment orders, penalty orders or orders of the Commissioner (Appeals) or other material on record of the Tribunal : " It appears that as a result of subsequent enquiries made by the department it came to light that transaction made in the account of Shri Motichand Dhandia were not genuine. The department also came in possession of the material that the assessee had also concealed particulars of other wealth for the assessment years 1963-64 and 1965-66 as well as the assessment years 1966-67 and 1967-68. The department had issued notices under section 17 of the WT Act for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal and, according to him, this is a mistake apparent from the record and these orders should be considered now. Shri Swarup, the learned departmental representative, maintained that there was no mistake apparent from records and it was tantamount to review, which could not be equated with mistakes apparent from records. We agree that review is not permissible under section 35 but the point for consideration is whether it would be review or an apparent mistake. We shall discuss the same in the subsequent paragraphs. 5. In our opinion, as we have said earlier, the orders of the Tribunal in quantum appeals with reference to which penalty has been imposed by the WTO under section 18(1)(c) are material. Therefore, these deserve to be considered. In view of these facts, a finding has to be recorded with reference to these facts. The conclusion of the Tribunal are contained in paras 9 to 11 of its order dated16-11-1981sustaining the orders of the Commissioner (Appeals) upholding the penalties levied by the WTO. In view of the consideration of the order of the Tribunal in quantum appeals dated17-7-1978, referred to supra, paras 9 to 12 of the order of the Tribunal will be subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 1967-68 to 1972-73 could not be said to be concealed. For the same default, penalty could not be imposed from year to year and the default if any was in the assessment year 1967-68 and not during the assessment years 1973-74 to 1975-76. Alternatively, if any amount of penalty was sustained for the assessment year 1973-74, no penalty could be sustained for the assessment years 1974-75 and 1975-76. Lastly, in the ratio of the decision of the Supreme Court reported in the case of Kesoram Industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767, H.H. Sen Parvati Bayi v. CWT [1968] 69 ITR 864, Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 314, no penalty was exigible as the liability on account of income-tax, wealth-tax had to be allowed and after allowing that liability, the assessee was not left with any wealth. It was also stated that the decision of theDelhiHigh Court reported in CWT v. Raj Paul Chawla [1979] 117 ITR 574 was not considered. Further the decision of the Madras High Court in the case of CWT v. G.D. Naidu [1965] 58 ITR 301 and of CWT v. Banarshi Prasad Kedia [1970] 77 ITR 159 (Cal.) referred to in the order of the Tribunal in quantum appeals were also not consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the CIT that the amount of Rs. 85,919 was included in the assessment by the Tribunal at the stage of appeal before it and the ITO merely gave effect to the order of the Tribunal on 30-4-1976 while passing order under section 253 of the IT Act. When this finding has been given by the Tribunal in the quantum appeal that the liability was not under the Income-tax Act, but as a result of settlement, the provisions of sub-clause (b) of clause (3) of section 2(m) of the WT Act were not at all attracted and there was no question of applying the limitation of the demand being outstanding for more than 12 months. It was a debt like any other debt which could be carried forward indefinitely till it was actually paid. In view of the above position, the provisions of section 2(m)(iii)(b) are not applicable to the facts of the case and the liability which is a debt owed has to be treated like any other liability and not as income-tax liability which could not be allowed as a deduction if it was outstanding for more than 12 months. That being so, even though the liability was outstanding for more than 12 months it was still payable by the assessee and wealth to that extent had to be reduced. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made there was no taxable wealth. In view of these observations, we are of the opinion that no penalty was exigible for any of the three assessment years. We, therefore, allow the assessee's appeals for all three years. 11. So far as the other contentions made on behalf of the assessee are concerned as enumerated above, we do not consider it necessary to go into the same. Our earlier findings in our order dated 16-11-1981 on the applicability of the provisions of section 2(m)(iii)(b) were altogether on different assumptions and, therefore, the same will not hold good in the present case. " 6. Paras9 to 12of our order dated16-11-1981will, therefore, stand substituted as above. 7. In the result the miscellaneous application is partly allowed. Per Shri Om Prakash, Judicial Member --I have carefully gone through the order dated 6-2-1982, passed by the learned Accountant Member on the assessee's application made under section 35(1)(e) of the Wealth-tax Act, 1957 [section 254(2) of the 1961 Act wrongly mentioned by the Accountant Member] for rectification of the Tribunal's order dated 16-11-1981. As I respectfully differ from the view taken by the learned Accountant Member, I re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s argument is that a conclusion arrived at by the Tribunal after considering the factual and legal submissions of an assessee may be erroneous, still the Tribunal cannot exercise jurisdiction under section 35(1) to rectify its judgment. The jurisdiction under section 35(1), Shri Swaroop says, is limited and that can be exercised only to rectify a mistake apparent from record, but not to correct an error of judgment. There cannot be any dispute regarding the legal position as set out by Shri Swaroop. So, the question arising out of the assessee's application has to be considered in this legal background. 3. In para 4 of his order dated6-2-1982, the Accountant Member adverting to the order dated17-7-1978, observes : "These orders were not considered by the Tribunal, as copies of these orders were not available with the Tribunal as the same were not filed by the assesses." The assessee has voiced this grievance in para 7 of his application. Can there be any mistake on the part of the Tribunal in not considering a material, which was not before it, at the time of hearing the appeal ? My answer of this question is in negative. When the order dated17-7-1978was not filed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf proves that the assessee was in possession of the wealth and the assessee was bound to show in the wealth-tax returns for the three assessment years the above asset, but he knowingly did not show he same in the net wealth, if at all the department could lay its hands thereon. We have no hesitation in holding that the conduct of the assessee in not disclosing the asset, even the not asset, after taking into consideration the tax levied is contumacious and he has deliberately held back this asset from the department while filing the returns of wealth for these years, and the WTO had rightly invoked the provisions of section 18(1)(c) of the Wealth-tax Act for all the three assessment years." On the second question, the Tribunal considering section 2(m)(iii)(b), on page 17 found as follows : "At best this liability could be carried forward for a one year from the valuation date relevant to the assessment year 1967-68 and not thereafter much less the assessment years 1973-74 to 1975-76. If the liability is more than one year old with reference to the valuation date, it is automatically allowed as a deduction in the year of payment." 4. Shri Swaroop argues that the finding on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the order dated17-7-1978was not before the Tribunal and was not and could not be considered at all, the question of differing from that does not arise. Shri Swaroop argues that it happens day in and day out that the Tribunal takes a view different from the earlier orders, particularly when the earlier order was not considered, because it was not filed and because the case was argued from a different angle at a subsequent stage. He says that the order of the Tribunal cannot be equated with the orders of the Courts, which exercise superintending powers under the Constitution of India over the Tribunals and subordinate courts. The two orders--the orders of the Tribunal and the orders of the constitutional Courts--are different in that the former is not legally binding on the Tribunal, but the latter is legally binding on the Tribunals and the subordinate Courts. This position is legally sound and, therefore, it is clear that there is no mistake of law in not giving a decision similar to the one as was given in the order dated17-7-1978. It is merely a convention that the Tribunal should follow its earlier decision and such a convention can be complied with only when an earlier decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot impressed by his post-judgment harangues. 8. Considering the entirety of the circumstances and the materials, I am of the view that non-consideration of the order dated 17-7-1978 is not a mistake apparent from record and the decision dated 16-11-1981 cannot be altered simply because the Tribunal, in the order dated 17-7-1978, took the view that settlement did not give rise to any income-tax, wealth-tax liability and, therefore, the provisions of section 2(m)(iii)(b) were not attracted in the case of the assessee. 9. I, therefore, dismiss the application of the assessee. Per Shri Ram Rattan, Accountant Member --There is difference of opinion between the Members. The matter is, therefore, being referred to the Hon'ble President, Tribunal, for reference to Third Member. In the leading order a reference is made to the Tribunal's order dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7, 8, 9 10 (Jp.) of 1978-79 relating to the assessment years 1972-73 to 1974-75. This reference has inadvertantly been made instead of order dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 relating to the assessment years 1973-74 to 1975-76 in the case of the assessee himself. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted6-2-1982. As in my view, this is the stage only to state the point of difference in view of the provisions of section 24(11) of the Act, read with section 255(4) and (5) of the 1961 Act, I have not applied my mind to the new facts and the reasoning being stated by my brother. I am of the view that both the Members have become functus officio after passing the respective orders dated6-2-1982 and15-2-1982 and as such no fresh order can be written at this stage. Application of mind to the new facts being stated by my brother, will necessitate a fresh order, which in my opinion cannot be written at this stage. In my opinion, the question that arises for decision by a Third Member on the basis of the orders dated6-2-1982 and15-2-1982 is as follows : Whether on the facts and in the circumstances of the case, as stated in the Tribunal's order dated 16-11-1981, orders dated 6-2-1982 of the Accountant Member and the order dated 15-2-1982 of the Judicial Member non-consideration of the Tribunal's order dated 17-7-1978 passed in WT Appeal No. 7 (Jp.) of 1978-79 decided with other appeals, constituted a mistake apparent from record under section 35(1)(e) and whether the Tribunal's order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed as his additional wealth in these and other years in terms of the settlement order of the Commissioner, Jaipur, dated24-3-1975, was the assessee's wealth liable to be included in the returns filed. It is necessary to give the details of the sum of Rs. 85,919 and the manner in which it came to be included as the wealth of the assessee in different years, as this is the amount on which penalties under section 18(1)(c) were levied, then on appeal were confirmed by the Commissioner (Appeals) and the Tribunal and then on the assessee's miscellaneous application a difference of opinion has arisen between the two learned members. 3. In the assessment year 1967-68 in the case of the assessee, the ITO had made an addition of Rs. 65,919 on the plea of disproved purchases in the account of Motichand Dhandia. He made another addition of Rs. 35,000 on the ground that the nature and source of this credit in the books of the assessee in the account of Motichand Dhandia was not satisfactorily proved. A sum of Rs. 10,000 was included in the income of the assessee as credit in the account of Ladu Singh Pipara was not satisfactorily proved. Without going into the details of the evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed to be capitalised. The minimum statutory penalty under section 271(1)(c) shall be levied for this year. " The terms and conditions on the settlement petition of the assessee are recorded by the Commissioner, Jaipur for the income-tax assessment years 1957-58 to 1971-72 and wealth-tax assessment years 1963-64, 1965-66 to 1970-71. For the wealth-tax assessment years 1966-67 and 1967-68, it was agreed that the assessee will file voluntarily revised returns declaring additional wealth of Rs. 7,89,000 for the assessment year 1966-67 and Rs. 7,89,000 + Rs. 85,919 for the assessment year 1967-68. The compromise also records : " No penalty or prosecution proceedings will be initiated for the assessment year 1966-67 as this is purely voluntary and by way of compromise. For the assessment year 1967-68 the assessee will be liable to penalty at 20 per cent of the wealth-tax sought to be evaded regarding the additional wealth of Rs. 85,919 only. " It is further recorded as under : " Assessee also undertakes to file revised wealth-tax returns for the assessment years 1968-69 and onwards declaring additional wealth as under : Assessment year 1968-69 Rs. 1,09,919 ( 85,919+24,000) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for in the books of account during the assessment year 1976-77 and, therefore, this year also the said amount of Rs. 85,919 will be included in the wealth of the assessee. " There were appeals to the AAC/Commissioner (Appeals) and after their orders, the WTO determined the following amounts of net wealth vide his orders given below : Assessment year Net wealth after orders of Date of order the CWT(A)IAAC of the WTO Rs. 1973-74 1,51,50012-10-1977 1974-75 (--)1,46,7688- 8-1980 1975-76 (--)3,78,0858- 8-1980 These orders are at pages 29, 34 and 39 of the Paper Book filed before the Jaipur Bench when the appeals for these years against penalties were heard. The order of the Commissioner (Appeals) for the assessment year 1973-74 is dated31-8-1979and the order of the AAC for the assessment years 1974-75 and 1975-76 is dated3-9-1979and these dates are mentioned in the WTO's orders for the three different years. In these orders the Commissioner (Appeals)/AAC had held that income-tax and wealth-tax liabilities amounting to Rs. 16,15,000, Rs. 13,51,203 and Rs. 14,40,204 which arose as a result of the settlement order dated 24-3-1975 of the Commissioner, for the assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since settlement order was after the filing of the return and this fact was very much there on the record at the time the assessment was completed and it was only on this account this addition was made but the said capitalisation was made during the assessment year 1970-71 (sic) and not during the assessment year under reference. It is only the consequential addition after the settlement was arrived and, therefore, again this cannot be taken as wealth concealed by our client during the year under reference. " According to the WTO, the assessee did not furnish any explanation as to why penalties should not be levied in respect of claim for liabilities amounting to Rs. 16,15,000, Rs. 13,51,203 and Rs. 14,40,204 for the assessment years 1973-74, 1974-75 and 1975-76 respectively. The WTO considered the assessee's reply on various points and observed as under in respect of the sum of Rs. 85,919 : " Regarding additional wealth of Rs. 85,919, the assessee has contended as above that since it was as a result of settlement arrived at after filing the return, its non-inclusion did not amount to concealment. It may be mentioned that the settlement covers only the assessment up to 1970-71. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Wealth-tax Officer that there was a concealment of the wealth to the extent indicated in the penalty order under this item for the three assessment years 1973-74 to 1975-76 for which the appellant is liable to a penalty of a sum equal to the wealth concealed. " At this stage the reasons given by the Commissioner (Appeals) in para 11(III) of his order for deleting penalties in respect of claim for income-tax and wealth-tax liabilities may also be reproduced : " (III) Liability on account settlement disallowed--The Wealth-tax Officer has proceeded on the ground that such a liability is not admissible but as per the decision of the Income-tax Appellate Tribunal in WTA Nos. 425 to 427 (Jp.)/1979 dated 30-8-1980 for the impugned assessment years, the tax liabilities have been allowed and the departmental appeals are dismissed. As rightly pointed out by the learned representative even though the decision of the Hon'ble Tribunal was referred to in the explanation to the penalty notice, the Wealth-tax Officer had totally ignored the same, while passing the penalty order. The impugned penalty order is dated 28-3-1981 and the decision of the Tribunal is dated 30-8-1980, in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental representative, on the other hand, submitted that wealth of Rs. 85,919 always existed with the assessee, it was detected by the department and the settlement with the Commissioner, dated 24-3-1975 did not create any new wealth which was not already in existence and which was not disclosed by the assessee in the returns for the three years under consideration. He also referred to notices issued under section 17 of the Act, for the assessment years 1963-64 and 1965-66. He made the point that when the wealth of Rs. 85,919 was known even in the assessment year 1967-68 there was no reason why it was not shown by the assessee in these three years. He also disputed the calculation of the assessee in so far as the claim for liabilities to the extent of Rs. 80,606 was concerned. According to him, the amount of liability on the sum of Rs. 85,919 would be much less. He also stated that the assessee was in the habit of concealment of income or wealth because even under the Voluntary Disclosure of Income and Wealth Ordinance, 1975, he had made disclosure of Rs. 13,10,000 pertaining to the assessment years 1954-55 to 1975-76. In reply the learned counsel for the assessee submitted that m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wealth of the assessee after taking into consideration the subsequent disclosure made in 1975 was not negative for the assessment years 1974-75 and 1975-76, while for the assessment year 1973-74 his wealth even after assessment was made was above the taxable limit without taking into consideration the disclosure of 1975--Even without taking into consideration the disclosure made in the year 1975. We would analyse whether the asset of Rs. 85,919 had really depleted and to what extent. We would consider this position under the provisions of Wealth-tax Act itself. It is a common ground between the parties that this amount was subjected to income-tax for the assessment year 1967-68 after order of settlement dt.24-3-1975by the CIT. The assessment order for the assessment year 1967-68 including therein the settled amount of Rs. 85,919 was passed by the ITO on30-4-1976. Penalty order under section 271(1)(c) with reference to this amount was made by the ITO on24-3-1975. The learned counsel of the assessee has relied upon the decision of the Supreme Court in the case of Ahmed Ibrahim Sahigra Dhoraji 129 ITR 314 contending that the wealth shall be gross wealth minus taxes and penalties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-68 the amount of income-tax and the penalty under section 271(1)(c) of the Income-tax Act, the amount of wealth-tax and penalty under section 18(1)(c) of the Wealth-tax Act with reference to the amount of Rs. 85,919 was not paid. This liability was created by the order of the ITO on30-4-1976and24-3-1975. It was, therefore, only a liability to be allowed on the valuation date relevant to the assessment year 1967-68. For subsequent assessment years the liability could not be allowed as a deduction in computing the net wealth of an assessee if it was outstanding for a period of more than 12 months on the valuation dates in view of the provisions contained in section 2(m)(iii)(b) of the Wealth-tax Act, 1957. At best this liability could be carried forward for one year from the valuation date relevant to the assessment year 1967-68 and not thereafter much less the assessment years 1973-74 to 1975-76. If the liability is more than one year old with reference to the valuation date, it is automatically allowed as a deduction in the year of payment. We are not aware when this liability was actually paid. Since this amount was capitalised in the year 1976-77, it appears that this amount wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years 1973-74 to 1975-76. The relevant valuation dates for these years were Diwali 1972, Diwali 1973 and Diwali 1974 respectively while the order of assessment for the assessment year 1967-68 was made on 30-4-1976 and penalty under section 271(1)(c) for the same assessment year with reference to the same asset was levied on 24-3-1975, i.e,, much after the relevant valuation dates. No liability had, therefore, arisen at all which could be said to be outstanding on the valuation date. Whether in the ratio of the decision of the Supreme Court in Ahmed Ibrahim Sahigra Dhoraji v. CWT [1981] 129 ITR 315 (SC) or of the Karnataka High Court in the case of Shri V.C. Handi liabilities, on account of income-tax and wealth-tax were not admissible as deduction for the assessment years 1973-74 to 1975-76 and the assessee should have shown the value of the entire asset of the value of Rs. 85,919 in the returns filed for these assessment years. He has failed to do so. In the wealth-tax order the WTO had disallowed certain liabilities on account of income-tax and wealth-tax. These liabilities appear to have been allowed as deduction by the Commissioner of Wealth-tax (Appeals) for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreting the law, their Lordships of the MP High Court held that income referred to in clause (iii) of section 271(1)(c) refers to income which was determined by the ITO and not the loss. We would consider as to how far ratio of this decision is applicable to the wealth-tax proceedings. The relevant section under the Wealth-tax Act is 18(1)(c). The relevant provisions read as under : '18(1). If the WTO.... in the course of any proceedings under this Act is satisfied that any person-- a. b. c. has concealed the particulars of any assets or furnished inaccurate particulars of any assets or debts ; he or it may, by order in writing, direct that such person shall pay by way of penalty-- i. ii. iii. in the cases referred to in clause (c) in addition to any wealth-tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount representing the value of any assets in respect of which the particulars have been concealed or any assets or debts in respect of which inaccurate particulars have been furnished.' We have held earlier that the assessee has not at all furnished particulars of the asset amounting to Rs. 85,919 in the wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Department. Even in the settlement petition made by him, he failed to disclose the same knowing it fully well that he was the owner of that asset. In our opinion, the other judicial pronouncements relied upon on behalf of the assessee also do not help him. In view of the facts and in the circumstances of the case, as discussed above, we have no hesitation in sustaining the order of the CIT (Appeals) in sustaining the penalties under section 18(1)(c) for all the assessment years. 12. In the result all the three appeals are dismissed. " 14. Thereafter the assessee moved an application dated29-12-1981under section 35(1)(e) submitting that there were certain mistakes in the order of the Tribunal dated16-11-1981which were required to be rectified and the said order was also required to be amended accordingly. In para 3 of this application certain observations made by the Tribunal in para 5 were stated to be not emerging out of the assessment orders, penalty orders, orders of the Commissioner (Appeals) and other material on the record of the Tribunal. In para 4 of this application a grievance was made that certain submissions made by the learned counsel for the assessee were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the tax became payable after it was quantified in accordance with the ascertainable data, and that such amount was a debt owed within the meaning of section 2(m) on the valuation date and was as such deductible in computing the net wealth. For ready reference we draw again the attention of the Hon'ble Tribunal towards the discussion contained in pages 775 to 784. We are reproducing hereunder the summary contained on page 784 : 'To summarise : A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti or in futuro ; debitum in praesenti, solvendum in futuro. But a sum payable upon a contingency does not become a debt until the said contingency has happened. A liability to pay income-tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act ; if the Finance Act has not yet been passed, it is the rate proposed in the Finance Act pending before the Parliament or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Tribunal dated17-7-1978in WT Appeal No. 7 (Jp.) of 1978-79 in the case of Mannalal Nirmal Kumar Soorana referred to above. The observations of the Tribunal in para 9 of its order that, 'we are not aware when the liability was actually paid' were referred to and the submission made was that at the time of hearing or thereafter this information was not demanded and such information could be supplied as and when demanded. In para 9 of the application, it was submitted that the finding given by the Tribunal that no deduction on account of tax liabilities and penalties could be given was in conflict with the decision of the Tribunal in the case of the assessee, as well as other similar cases, and contrary to the decisions of the Supreme Court in Parvati Bayi's case, Kesoram Industries' case and Ahmed Ibrahim's case. In para 10 of the application the mistake pointed out was that the Tribunal had misconstrued the decisions in Ahmed Ibrahim's case, V.C. Handi's case and Raj Paul Chawla's case. Reference was made to the following observations of the Tribunal in para 10 of its order at page 20 : " In the wealth-tax order the WTO had disallowed certain liabilities on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders, the learned Accountant Member formed an opinion that there was a mistake apparent from the record and on consideration of the quantum orders in the case of the assessee for these years, no penalties were required to be levied. He expressed an opinion that the following paragraphs 9 to 12 should be substituted for the original paras 9 to 12 of the earlier order of the Tribunal : " 9. The assessee further contended that there was no concealment during the impugned years. Certain additions were made by the Wealth-tax Officer for the assessment year 1967-68. The same were deleted by the AAC. No second appeal was preferred by the revenue against the order of the AAC. The revenue was satisfied with the finding of the AAC. Thus, the addition made by the ITO was non-existent. However, addition of Rs. 85,919 was made in terms of the settlement order dated24-3-1975. This impugned amount came on surface during the assessment year 1967-68. This amount was not hidden and was very well known to the assessing authorities in the course of assessment proceedings for the assessment years 1973-74 to 1975-76. It was also stated that while making the assessment order dated 9-8-1979 for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lth. It was also stated that the decision of theDelhiHigh Court reported in CWT v. Roj Paul Chawla [1979] 117 ITR 574 was not considered. Further the decision of the Madras High Court in the case of CWT v. G. D. Naidu [ 1965] 58 ITR 301 and of CWT v. Banarashi Prasad Kedia [1970] 77 ITR 159 referred to in the order of the Appellate Tribunal in quantum appeals were also not considered. 10. We have given a careful consideration to the rival submissions. We shall first consider the effect of the order of the Appellate Tribunal dated17-7-1978in quantum appeals. In quantum appeals, the dispute was as to whether the provisions of section 2(m)(iii)(b) of the WT Act, 1957 with regard to outstanding liability were applicable. In other words, whether the income-tax liability was a debt owed and outstanding for a period of more than 12 months and, therefore, is not deductible while computing the net wealth of the assessee. The Appellate Tribunal in the said order has held that the debts outstanding were not outstanding for a period of more than 12 months and therefore, the same were to be allowed as a deduction and consequently, the assessee had no wealth to the extent of the liabilities ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the facts of the case and the liability which is a debt owed has to be treated like any other liability and not as income-tax liability which could not be allowed as a deduction if it was outstanding for more than 12 months. That being so, even though the liability was outstanding for more than 12 months it was still payable by the assessee and wealth to that extent had to be reduced. Shri Ranka at page 49 of the paper book had given the liability at Rs. 80,606 against the inclusion of Rs. 85,919 leaving a small difference of Rs. 5,313. Shri Ranka then pointed out that the assessee was under the bonafide belief that it had no taxable wealth taking into consideration the liabilities thereon and taxes already paid at Rs. 12,500 on 9-8-1973, Rs. 12,500 on 6-11-1973, and Rs. 62,500 from 17-12-1973 to 7-5-1974 and the small amount of Rs. 5,313 could not be visualised by the assessee and, therefore, no penalty was exigible. In view of the fact that the Appellate Tribunal has held in the quantum appeal that the amount of liability was not under the Income-tax Act but as a result of settlement which was not a liability under the Income-tax Act but like any other liability which cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. 17. The learned Judicial Member did not agree with the view of the learned Accountant Member. According to the learned Judicial Member the learned Accountant Member had rejected all the other contentions raised in the Misc. Application and he agreed with that opinion of the Accountant Member and so the only question for consideration was whether non-consideration of the Tribunal's order dated 17-7-1978 passed in the quantum appeals of the assessee for the assessment year 1972-73 constituted a mistake apparent from the record within the meaning of section 35(1). The learned Judicial Member observed that the learned Accountant Member had not considered the revenue's submission that by this application the assessee wanted a review of the earlier order of the Tribunal in the garb of an alleged mistake apparent from the record but such review of the earlier order could not be done under section 35(1). According to the learned Judicial Member, when the order dated 17-7-1978 in the case of the assessee for the assessment year 1972-73, was not filed before the Tribunal, the non-consideration of that order was not a mistake apparent from the record which could be rectified under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant Member, he observed that he had inadvertently referred to the order dated 17-7-1978 in quantum appeals in WT Appeal Nos. 7, 8, 9 and 10 (Jp.) of 1978-79 whereas the actual orders to be referred were dated 30-8-1980 in WT Appeal Nos. 425 to 427 (Jp.) of 1979 relating to quantum appeals in the case of the assessee for the assessment years 1973-74 to 1975-76 in respect of which the miscellaneous application pertaining to penalty appeals for these very years had been filed. He, however, observed that the reference to the order dated30-8-1980, in which the order dated17-7-1978was followed would not make any change because if the foundation for levying the penalties fell, the superstructure in actually levying the penalties was bound to fall. He then passed his order dated19-2-1982, mentioning the point of difference between the learned Members which is contained in para 1 of this order. The learned Judicial Member was of the opinion that after writing orders dated 6-2-1982 (by learned Accountant Member) and order dated 15-2-1982 (by learned Judicial Member) both the Members were functus officio and the learned Accountant Member could not introduce the order dated 30-8-1980 in pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal, the two learned Members could even differ on a point of fact. Without prejudice to this argument, his further argument on the preliminary objection was that when the two learned Members had given different opinions, the opinion of the Third Member will be another opinion and thus the final order of the court will contain two opinions. According to him, in such a situation the provisions of section 24 of the Act could not be activated, particularly in view of the judgment in T.S. Balaram, ITO v. Volkart Brothers [1971] 82 ITR 50 (SC). He thus submitted that there being no common point of difference between the two learned Members, no opinion need be expressed by the Third Member. 20. The learned counsel for the assessee submitted that it was not the requirement of law under section 24(11) read with section 255(4) of the 1961 Act, that the two members should sit together to state a point of difference in a language which had the approval of both the learned members. He referred to the words '...They should state the point or points on which they differ....' used in section 255(4) of the 1961 Act, which are equally applicable to proceedings under the Act, and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect in his submission that there cannot be a difference of opinion between two members while deciding appeals under section 24 of the Act or section 254 of the IT Act, in view of the Supreme Court judgment in the case of Volkart Brothers. 21. In reply, the learned departmental representative submitted that it should not be left to the Third Member to formulate the point of difference because formalities provided for stating the point of difference and then referring the same to the learned President, Tribunal, had to be strictly complied with. He submitted that as there were no rules framed for purposes of making a reference to the President, in a case of difference of opinion between the Members, the provisions of section 98 of the Code of Civil Procedure may be applied. 22. I have very carefully considered the rival submissions on the preliminary objection raised by the learned departmental representative. I cannot accept the objection raised by the learned departmental representative that the learned President, Tribunal, himself had no jurisdiction in this case to accept the reference on the point of difference between the two learned Members. The language of section 255(4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of making a trading addition, the Third Member suggested an altogether different figure and on those facts it was held that the opinion of the Third Member was not legally valid. No such point is involved in this case. I agree with the learned counsel for the assessee that the judgment in Volkart Brothers' case, in the context in which it has been referred, is not relevant. Thus, I do not accept the preliminary objection of the learned departmental representative that for lack of jurisdiction I should refrain from answering the point of difference in this case. 23. I will now examine whether there is any difference between the point of difference between the two members, though the wording of the point of difference used by both the learned members is different. According to both the learned Members, the point of difference is whether non-consideration of the order of the Tribunal in quantum appeals, constitutes a mistake apparent from the record and, if so, whether the order of the Tribunal dated16-11-1981deserved to be altered. Both the learned members have referred to the order of the Tribunal dated 17-7-1978 in WT Appeal No. 7 (Jp.) of 1978-79 for the assessment year 1972- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the negative." He submitted that the learned Judicial Member erred in observing that the order of the Tribunal was 'a material which was not before it', because the order of the Tribunal in quantum appeals was an integrated part of the proceedings and formed a part of the record. He then submitted that 'the record' mentioned under section 35(1) should be relating to the assessee's own case, but 'the record' should not be construed to be the record of the Tribunal only. He referred to the judgment in ITO v. Ashok Textiles Ltd. [1961] 41 ITR 732 (SC), wherein it has been held that the ITO had power under section 35 of the 1922 Act to examine the record and if he discovered that he had made a mistake he could rectify the error and the error which could be corrected might be an error of fact or of law. The restrictive operation of the power of review under Order XLVII, Rule 1, Code of Civil Procedure, was not applicable in the case of section 35 of the 1922 Act. He then referred to the judgment in ITO v. ITAT [1965] 58 ITR 634 (All.), wherein it has been held that where, in a judgment or order of the Tribunal, an error has crept in, not as a result of the fault of the assessee bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt was not a circumstance which could affect the exercise of jurisdiction of the court to review its decision. He then submitted that the difference between the terms 'recall', 'amend' and 'rectify' was a matter of words only. According to him the order of the learned Accountant Member was an order recalling a part of the earlier order of the Tribunal. He submitted that the order of the Tribunal dated 16-11-1981 was obtained in utter ignorance of important material in the shape of appellate orders in WT Appeal Nos. 425 to 427 (Jp.) of 1979 in quantum appeals relating to the three years under consideration and, therefore, there was a valid justification for recalling the earlier order. He referred to pages 16 and 17 of the Tribunal order dated16-11-1981wherein it has been observed as under : "Considered from this angle the income-tax levied for the assessment year 1967-68, penalty levied thereon for that year, wealth-tax levied for that year as also the penalty under section 18(1)(c) of the Wealth-tax Act levied, for that year would be a debt owed for computing the net wealth of the assessee on the valuation date relevant to the assessment year 1967-68 and not for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 1972-73 were dropped. He thus submitted that the learned Accountant Member was justified in passing an order of rectification under section 35(1)(e). 25. He submitted that the learned Judicial Member was not correct in holding that : (1) there was no mistake in not considering the material which was not before the Tribunal ; (2) there was no mistake of law in not following an order similar to the one given in the quantum appeals ; and (3) whether income-tax and wealth-tax liabilities, and penalties were allowable deduction under section 2(m) or not was a question of law and this could not be rectified under section 35. Regarding point No. (2), taken by the learned Judicial Member, he submitted that this was in respect of liabilities and the order of the Tribunal contained a finding which was relevant to the penalty orders because it was a point connected with the computation of net wealth. He referred to the judgment in Ahmed Ibrahim's case and submitted that the point No. (3) referred to above, taken by the learned Judicial Member ceased to be a question of law in view of this judgment. 26. He then referred to the judgment in L. Hirday Narain v. ITO [1970] 78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely different and various contentions had to be independently considered in penalty proceedings. He also submitted that the learned Judicial Member had not given any finding on merits and, therefore, the revenue was yet to be heard on the merits of the penalties by a Bench. He finally submitted that if the rectification under section 35(1)(e) was to be allowed, then the position would be that the appeals had to be heard right from the beginning. According to him, a peculiar situation had occurred in this case wherein in opportunity of being heard was not allowed to the revenue because the learned Judicial Member had not given a finding on merits and, the merits of the penalties could not be gone into in the hearing before me. 28. The learned counsel for the assessee, in reply submitted that no further hearing was required to be given in this case which had been referred to the Third Member under section 24(11) of the 1957 Act, read with section 255(4) of the 1961 Act. He reiterated the submission that the order of the Tribunal in the quantum appeals was a part of the record and, therefore, the order of the learned Accountant Member should be confirmed. 29. I have carefully con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for that year, the return for the assessment year 1974-75 was filed after the order of the AAC dated 28-3-1974 in the income-tax assessment for the year 1967-68 was accepted. Thus, it could not be said that there was any concealment of any asset in that return also. The judgment of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1 is an authority for the proposition that the commission of a wrongful act can be said to have taken place when the wrongful act was committed or in other words, the returns were filed. Though the settlement had taken place on24-3-1975, the actual position was that the appeal, which was pending before the Tribunal for that year was disposed of on31-3-1976in terms of the settlement order and the ITO gave effect to that order on30-4-1976determining the total income at Rs. 1,38,167 as against the income returned at Rs. 49,985. Thus, before the Tribunal's order there was no legally valid order wherein the income of Rs. 85,919 was accepted by the assessee as his income for the assessment year 1967-68. Before passing order of the Tribunal it could not be said that there was any concealment of an asset in the return filed either on25-6-1975or on15-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he actual order bearing WT Appeal Nos. 425 to 427 (Jp.) of 1979 dated 30-8-1980 was not placed on record. 30. I may refer to the judgment in ITAT's case, wherein it has been held that if the Tribunal had lost sight of a material fact at the time of writing its order, which fact was duly brought to its notice, by the assessee, there would be an error from the record which can be rectified under section 35 of the 1922 Act. In the judgment in Hirday Narain's case the Supreme Court has held that the power to rectify the order of assessment conferred on the ITO by section 35 is to ensure that injustice to the assessee or to the revenue may be avoided. It is implicit in the nature of the power and its entrustment to the authority invested with quasi-judicial functions under the Act, that to do justice it shall be exercised when a mistake apparent from the record is brought to his notice by a person concerned with or interested in the proceedings. That power is not discretionary and the ITO cannot, if the conditions for its exercise were shown to exist, decline to exercise it. The position at the stage of the Tribunal would be the same. I, therefore, do not even for a moment hesitate in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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