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TMI Blog1981 (8) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... It is found reported in CWT v. Arundhati Balkrishna [1970] 77 ITR 505 (SC). Parliament, however, did not accept this decision as reflecting its idea of what a wearing apparel is. Hence, it introduced an amendment in s. 5(1)(viii), which made the provision read differently, and as follows: " Wearing apparel ......... but not including jewellery." This amendment was made by the Finance (No. 2) Act of 1971. But the amendment was expressly made to have retrospective effect from April 1, 1963. In practical terms in relation to wealth-tax assessments from the assessment year 1963-64 onwards, the jewellery owned by a taxpayer would not be exempt from wealth-tax, but, must be assessed as part of the net wealth of its owner. This is the history of s. 5(1)(viii) of the W.T. Act. This legislative history has significance in the present case. The WTO made an assessment in this case on 25th November, 1969. The assessment was for the assessment year 1969-70. The assessee's assets included certain items of jewellery. The WTO included those items in the assessment as part of the assessee's taxable net wealth. He apparently did not accept the view that jewellery is a wearing apparel. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch had occurred in what may be called the " parent " order. Another important point of, procedure laid down by s. 35 is that where the effect of a contemplated rectification of error is the enhancement of the wealth-tax already levied or the reduction of a refund already granted, the AAC, or other authority concerned, must give to the assessee an opportunity to put forward his objections, if any. The AAC, in this case, was bound by these formalisms of procedure. Hence, in the conditions created by the retrospective amendment of s. 5(1)(viii) subsequent to the passing of his appellate order dated January 18, 1971, the AAC issued a notice to the assessee under s. 35 of the Act proposing to rectify the error, which he said he had committed when he had ordered the deletion of the value of the jewellery from the assessment. The assessee replied to the notice saying that this was not a case of an error of the kind which the AAC had power to rectify under s. 35. He contended that it was not an error apparent from the record, which kind of error alone was covered by s. 35. The AAC considered the assessee's contention and agreed with it. The record before us in this case contains a proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der ". It may be mentioned that before us, this line of reasoning of the Tribunal was adopted by Mr. Ananthachari, the assessee's learned counsel as, the crux of his argument. For the Department, their learned standing counsel, Mr. Jayaraman, prefaced his argument by submitting that the issue in this case ought to be examined from the larger perspective of the true function of the rectification power and the true scope of the appellate jurisdiction, and not from a strained construction being put upon the presence or absence of certain words in the statute. He hastened to explain, however, that this approach to construction he was urging, did not overlook the language of the sections concerned, but gave them the meaning they carried under the general scheme and structure of the W.T. Act.. He sought to illustrate his point by reference to certain decided cases, although he admitted that none-of them was a direct decision on the question before us. In a matter of this kind, we think it necessary to clear the ground first about the use of precedents. Wealth-tax is generally treated as direct tax just like income-tax, estate duty, gift-tax, company surtax, expenditure-tax and the like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AAC might either confirm or reduce an assessment. If it reduces an assessment, the Department may feel aggrieved. If it confirms the assessment, or as sometimes happens, enhances the assessment, the assessee would be aggrieved. Hence, s. 24 of the Act confers a right of appeal both to the assessee and to the Department, depending on the nature of the order. It is in this statutory milieu of assessment and appeal that the provisions regarding rectification of mistakes will have to be considered. Mr. Jayaraman's argument for the Revenue was that the process of rectification of an error in an appellate order is not to be looked at in isolation as the exercise of a distinct and separate power, but must be viewed as a necessary adjunct of the appellate power itself. He proceeded to submit that where this process results in an actual rectification, what we have, in substance, is a rectified appellate order. The Act may impose the formality of the AAC having to pass a separate order of rectification. But once this rectification order is passed, it has got to be read into the appellate order. It is no use when read alone and in insolation. Learned counsel proceeded to submit that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is communicated to the Commissioner. In the present case, as earlier mentioned, the AAC originally passed an order dated January 18, 1971 in appeal deleting the value of jewellery from the assessee's taxable not wealth. The Department had every right to file an appeal against that order if the Commissioner felt dissatisfied with the correctness of that order. Since, however, the order of the AAC merely gave effect to the law laid down by the Supreme Court, the Commissioner could not by any means, express any dissatisfaction as to the correctness of the appellate order passed by the Assistant Commissioner. The position, however, changed, the moment the retrospective amendment of s. 5(1)(viii) was passed by Parliament laying down a different law to be observed by the taxing authorities, different from that laid down by the Supreme Court. This amendment rendered the appellate order dated January 18, 1971, an incorrect order. The proceedings which were started by the AAC under s. 35 were initiated only for the rectification of this error in his appellate order. Section 35 provides, inter alia, that an AAC may amend any order passed by him under s. 23 with a view to rectifying any mista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of rectification of an error under s. 35(1) then the AAC has got to pass an order of rectification in writing. Learned counsel submitted that this express provision contemplating, as it does, a distinct and separate order in itself, must be held necessarily to contemplate separate and distinct subject for further proceedings, if any, in respect of that order. But, he proceeded to point out that since s. 24 of the Act, which provides for an appeal to the Tribunal, makes no mention whatever of an order under s. 35 as an appealable order, it must be held that Parliament did not envisage any appeal whatever against an order: of rectification passed by the AAC. The argument of Mr. Ananthachari might very well appeal to those who see the statute on the surface to get at the meaning of the words employed by it. If one were to go by the express language of s. 24 of the Act to find out if there is any mention in that section of an order passed under s. 35(5), one would have to agree with Mr. Ananthachari that the answer must be in the negative. This, however, is quite a wrong approach to the inquiry as to whether an appeal lies or is maintainable against an order of the kind passed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for he has no other jurisdiction to exercise and accordingly any order he passes under s. 35 must be regarded as an order passed under s. 23 of the Act. Mr. Ananthachari pointed out that whereas s. 35(5) requires the AAC to pass a separate order in writing whenever he decides to rectify a mistake and carry out an amendment in the original appellate order, there is no such provision in s. 35 which contemplates a distinct order to be made by the AAC in cases where he having initiated proceedings for rectification, nevertheless does not ultimately decide to pass an order either of rectification or amendment. This contention is, no doubt, well founded on the language of s. 35. But this only shows that where the AAC either refuses to pass an order under s. 35 or as in the present case, drops the proceedings which he has suo motu initiated under s. 35, we are not hindered in our discussion by the presence of any specific provision in that section. If s. 35 has no sub-section dealing with an order refusing to make a rectification, that only serves to remove, out of the way, any obsessive reliance on the draftsmanship of s. 35 while construing the ambit of ss. 23 and 24. With s. 35 makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be regarded as an order in the truest sense of the expression. We have earlier observed that there are no direct authorities on the subject which we have been asked to consider in this case. There are, however, some cases which had arisen under the I.T. Act. Both sides have cited decisions bearing on the nature of the rectificatory orders, and on the amenability of such orders as fit subjects of appeal before the Tribunal. Mr. Jayaraman relied on an observation in a judgment of a Bench of this court in Vedantham Raghaviah v. Third Addl. ITO [1963] 49 ITR 314 at p. 320, viz: " Once an order of rectification is passed, the assessment itself is modified and what remains is not the order of rectification, but only the assessment as rectified. Borrowing, the words of this judgment for the present purposes learned counsel submitted that once the AAC passed an order of rectification then what we have on hand is the appellate order as rectified. To similar effect is a decision of the Supreme Court in S. Sankappa v. ITO [1968] 68 ITR 760. The learned judges there observed that when proceedings are taken for the rectification of an assessment, either under s.35(1) or under s. 35(5) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 33 of the Act, under which, only orders passed by the AAC under s. 31 of the Act could be taken in appeal to the Tribunal. Since, in the Department's submission, an order dismissing an appeal in limine as time-barred can be put only under s. 30(2) and not under s. 31, it was urged that a further appeal did not lie to the Tribunal in that case. The Supreme Court, however, held that an appeal was maintainable. The learned judges accepted the first submission of the Department that the dismissal by the AAC of a time-barred appeal, after refusing to condone the delay, might properly fall to be considered as an order under s. 30(2) of the Act. Nevertheless, the Supreme Court proceeded to hold that such an order must be treated as an order falling under s. 31 of the Act as well, and hence appealable to the Tribunal under the right of appeal provided under s. 33 of the Act. Drawing his inspiration from this judgment, Mr. Jayaraman argued that although an order of rectification passed by the AAC was under s. 35(5) of the W.T. Act, that does not mean that that order cannot also be regarded as an order by the AAC in, appeal under s. 23 of that Act. He said that for certain purposes of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge on the parent order, whatever applies to the parent order in appeal must ipso jure also apply to the rectification order as well. Mr. Ananthachari submitted that there was internal evidence in the legislative history of the W.T. Act itself, which tends to rule out an appeal to the Tribunal against an order of rectification passed by the AAC. Learned counsel pointed out that s. 23 of the Act, as it originally stood, only conferred a right of appeal to any person objecting to the amount of net wealth determined or the amount of wealth-tax determined as payable by him or denying his liability to be assessed at all under the Act. Learned counsel added that there was no express provision under s. 23(1) in its original form for enabling an assessee to appeal against an order of rectification passed by the WTO. However, Parliament subsequently introduced cl. (h) in s. 23(1) under which a right of appeal was conferred on the assessee for " objecting to any order of the Valuation Officer under section 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under the said section ". The significant inference which Mr. Ananthachari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r misunderstanding of the existing state of the law. It was observed by Lord Radcliffe in IRC v. Dowdall O'Mahoney & Co. Ltd. [1952] 33 TC 259 (HL), that the beliefs or assumptions of those who frame Acts of Parliament cannot make the law. That principle also applies to the present discussion. If, even without an express provision for an appeal as in s. 23(1)(h) of the W.T. Act, it is competent for an assessee to file an appeal against an order of rectification passed by the WTO rectifying his assessment, then the fact that there was such an express provision loses its significance altogether as an aid to the construction of s. 24 of the Act which does not contain a similar provision as respects orders of rectification passed by the AAC over his appellate orders. We may refer, in conclusion, to two other decisions of this court. They may be of interest to the present discussion, although they do not really help in the present decision. One is CWT v. Kamala Ganapathi Subramaniam [1981] 127 ITR 175 (Mad). In that case, as in the present one, the AAC in the first instance, allowed an appeal holding that jewellery must be exempt under s. 5(1)(viii) of the W.T. Act, following the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard the said disposal as a binding precedent. We have had on hand a reference made by the Tribunal. The question too had been dealt with by both sides in full-fledged argument. Hence it would be too late in the day for us to hold that no referable question of law at all is involved in the present case. For all the above reasons we hold that the appeal filed by the Department before the Appellate Tribunal against the order of the AAC dated December 24, 1973, was perfectly maintainable. The Tribunal was in error in holding that the appeal did not lie. The result is that the question of law is answered in favour of the Department. The implication of this answer of ours is, that the order passed by the Tribunal is no longer there. The appeal of the Department is again at large, and the Tribunal has to re-hear the appeal and decide it on merits. A reference to the last paragraph of the judgment in CWT v. Kamala Ganapathi Subramaniam [1981] 127 ITR 175 (Mad), gives an indication of the manner in which the Tribunal will have to proceed in a case of this kind. The reference is answered in favour of the Department on: the above terms. The assessee will pay the costs of this reference. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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