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TMI Blog2003 (2) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 14-2-2003 - Judge(s) : B. SUDERSHAN REDDY., C. V. RAMULU JUDGMENT The judgment of the court was delivered by B. SUDERSHAN REDDY J. -The question referred to us by the Income-tax Appellate Tribunal, Hyderabad, in this reference reads as follows : "Whether, in the facts and circumstances of the case, the Tribunal was correct in coming to the conclusion that the conditions precedent for assuming jurisdiction under section 25(2) of the Wealth-tax Act are not satisfied in the case?" The facts giving rise to the question are briefly these : The assessee was an individual and the respective valuation dates are March 31, 1982, March 31, 1983 and March 31, 1984. The assessee submitted wealth-tax returns disclosing negative wealth. He claimed exemption in respect of the value of annuity policies on the basis of the Appellate Assistant Commissioner's order dated January 3, 1983 for the assessment years 1976-77 and 1977-78 in his own case. As on the respective valuation dates, the assessee was stated to have held annuities of the value of Rs. 38,09,898, Rs. 39,09,562 and Rs. 36,89,575. The simple claim of the assessee was that the said amounts are not includible in his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, in a case where the amount of premium or other payment is payable during a period of less than ten years, the amount that is not includible in the net wealth of the assessee is only that sum that bears to the value of the right or interest of the assessee in the policy the same proportion as the number of such years bears to ten. The assessee, thus, would be entitled to only one tenth of the total value of the policies but not the total value of the policies as such. The Commissioner accordingly concluded that the Wealth-tax Officer's orders were erroneous and prejudicial to the interests of the Revenue and accordingly set aside the orders of assessment and directed the Wealth-tax Officer to recompute the net wealth of the assessee by treating the annuity policies as "assets" within the meaning of section 2(e)(2)(ii) of the Act and allow exemption under section 5(l)(vi) of the Act to the extent specified therein. Consequential directions were issued requiring the Wealth-tax Officer to issue demand notices for additional demands raised for the said years. The assessee preferred appeals against the orders of the Commissioner of Wealth-tax passed under section 25(2) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f being heard, and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment." A plain reading of the provision makes it abundantly clear that it confers suo motu jurisdiction upon the Commissioner to call for and examine the records of any proceeding under this Act and if he considers that any order passed therein is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard, pass appropriate orders. The Commissioner, in the present case, had purported to act in exercise of this power on the ground that the order of the Wealth-tax Officer was, in his view, erroneous and prejudicial to the interests of the Revenue. The Tribunal did not endorse the view of the Commissioner. The question is whether the view expressed by the Tribunal is based on a correct understanding of the enabling provisions of section 25(2) of the Act and the nature of the order passed by the Commissioner. The Madras High Court in Venkatakri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conception or application of the law. Such a mistaken or false conception or application of the law to the facts of a cause as will furnish ground for a review of the proceedings upon a writ of error. A mistake of law, or false or irregular application of it, such as vitiates the proceedings and warrants the reversal of the judgment. An act involving a departure from truth or accuracy ; a mistake ; an inaccuracy ; as, an error in calculation". "Prejudice", according to Black's Law Dictionary is nothing but "a leaning towards one side of a cause for some reason other than a conviction of its justice". In our considered opinion, an erroneous order resulting in prejudice to the interests of the Revenue need not be a motivated or mala fide one. Decisions / orders of subordinate authorities which are erroneous mean not only when erroneous in point of law but erroneous in any sense and if that error results in causing prejudice to the interests of the Revenue it is susceptible to be corrected by the Commissioner in exercise of his jurisdiction under sub-section (2) of section 25 of the Act. In Malabar Industrial Co. Ltd. v. CIT [1992] 198 ITR 611 the Kerala High Court observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racterized the interpretation placed by the Madras High Court as "too narrow to merit acceptance" and held : "if due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue". We need say nothing further in the matter. In the instant case, the Commissioner noted that the Wealth-tax Officer passed the order which was erroneous in so far as it is prejudicial to the interests of the Revenue and "the present exercise is only to remedy that definite error on the part of the Wealth-tax Officer and to retrieve the loss of revenue caused on account of the error". The Commissioner came to the definite conclusion that on account of the erroneous order of the Wealth-tax Officer, the Revenue lost tax lawfully payable by the assessee, and the same has resulted in causing prejudice to the interests of the Revenue. The Commissioner found that in this case the premium was paid in a lump sum at a time and as such the amount of the value of interest or right in policy which is exempt, is only one tenth of the total value of the policy but not the total value of the policy as such. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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