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TMI Blog1981 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal was right in holding that debatable point of law was involved and consequently no proceedings for rectification could lie ? 3. Whether, the Appellate Tribunal was justified in law in cancelling the Appellate Assistant Commissioner's order which was passed u/s. 35 on the basis of retrospective amendments to section 5(1)(viii) with effect from January 1, 1963, by the Finance (No. 2) Act, 1971 ? " The assessee is an HUF. The relevant assessment year is 1965-66, the valuation date being 31st March, 1965. The assessment of the assessee under the W.T. Act was done by the WTO on 30th July, 1969. In computing the net wealth, the WTO added a sum of Rs. 1 lakh as the estimated value of jewellery belonging to the assessee's family. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides an exemption in respect of certain assets. Clause (viii) of s. 5(1) as originally enacted granted exemption in respect of " furniture, household utensils, wearing apparel, provisions and other articles intended for personal or household use of the assessee ". In the case of Arundhati Balkrishna [1970] 77 ITR 505,(SC), the Supreme Court held that jewellery intended for personal use of the assessee came within the scope of s. 5(1)(viii) being articles intended for personal use. To counteract the effect of this decision, cl. (viii) was amended by Finance (No. 2) Act of 1971. The Act added the words " but not including jewellery " in cl. (viii) with retrospective effect from 1St April, 1963. Another amendment introduced was the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist from 1St April, 1963. The inevitable consequence of giving effect to this fiction is that the assessee was not entitled to an exemption in the assessment year 1965-66, in respect of jewellery under s. 5(1)(viii). Further, because of this fiction it has also to be held that no such exemption could have been allowed by the AAC by his order dated 13th February, 1975, and this was an apparent error in that order which he was justified in rectifying under s. 35. A question of this nature came up before the Supreme Court in M. K. Venkatachalam, ITO v. Bombay Dyeing and Mfg. Co. Ltd. [1958] 34 ITR 143 (SC). In that case the Supreme Court considered the power of rectification under s. 35 of the Indian I.T. Act, 1922, to correct an assessment wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our opinion, does not disclose any such conflict. Clause (5) of s. 35 of the Indian I.T. Act, 1922, which was added by the I.T. (Amend.) Act, 1953, was made operative from 1St April, 1952, and hence was held to be not applicable to the assessments made before that date. It was on this view that the Supreme Court held that the ITO had no jurisdiction under the said clause to rectify the assessment of a partner consequent on the assessment of the firm, in case where the firm's assessment was completed before I St April, 1952. A comparison of Bombay Dyeing and Mfg. Co. Ltd.'s case [1958] 34 ITR 143 (SC), with Habibullah's case [1962] 44 ITR 809 (SC), will go to show that in the former case the provision retrospectively added became applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cover only precious stones and precious stones in mountings, i. e., ornaments containing precious stones. In our opinion, there can be no debate or doubt that the word " jewellery " covered precious stones and ornaments containing precious stones before 1St April, 1972. The doubt could only be whether the word " jewellery " would also cover before that date ornaments not containing precious stones. The AAC, therefore, could rectify the assessment made by his order dated 22nd March, 1971, to the extent precious stones and ornaments containing precious stones were excluded under s. 5(1)(viii) by that order. Learned counsel for the assessee relied upon the decision of the Gujarat High Court in Padmavati Jaykrishna v. CWT [1976] 105 ITR 115. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the WTO, which is annex. A to the statement of case, also shows that the ornaments included diamonds and pearls, etc. It cannot, therefore, be said that from the record of the case it was not possible to find out whether the exemption of the value of Rs. 57,500 granted by the AAC by his order dated 22nd March, 1971, was in respect of precious stones and ornaments containing precious stones or in respect of other ornaments. The matter, however, will have to be examined by the Tribunal afresh from this angle. For the reasons given above, we answer the questions referred as follows: 1. The Tribunal was not right in law in holding that the AAC was not justified in taking up rectification proceedings under s. 35. 2. The Tribunal was not ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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