TMI Blog1972 (6) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... t the figure computed on the basis of the return submitted by the assessee or is it to be taken at the figure determined on assessment, where the assessment has taken place after the relevant valuation date but before the computation of net wealth in the wealth-tax assessment ? What would be the quantum of the liability, where the assessment to income-tax, wealth-tax or gift-tax is rectified by the revenue authorities under section 35 of the Indian Income-tax Act, 1922, or section 154 of the Income-tax Act, 1961, before the assessment to wealth-tax is finalised ? Would the amount of the tax as rectified be deductible in computing the net wealth or the amount of the tax originally assessed or computed on the basis of the return ? So also, where assessment to income-tax, wealth-tax or gift-tax is reopened and fresh assessment is made under section 34 of the Indian Income-tax Act, 1922, or section 147 of the Income-tax Act, 1961, before the final completion of the wealth-tax assessed, what would be the amount of the tax deductible ? Would it be the amount of tax as reassessed or as originally assessed or according to the return ? These three different aspects of the question arose for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g before Parliament or the rate in force in the preceding year, whichever is more favourable to the assessee. All the ingredients of a 'debt' are present. It is a present liability of an ascertainable amount." The liability for income-tax is thus a present liability on the last day of the accounting year and is a " debt " owed by the assessee on the relevant valuation date, though it may not have been quantified by assessment and may be payable at a future date. So also, as held by the Supreme Court in H. H. Setu Parvati Bayi v. Commissioner of Wealth-tax the liability for wealth-tax becomes crystallized on the valuation date and not on the first day of the assessment year, though the tax may be quantified by assessment and may become payable after the commencement of the assessment year and, therefore, wealth-tax liability of an assessee on the relevant valuation date for the assessment year beginning on April 1 is a " debt " owed by the assessee which is liable to be deducted in computing the net wealth of the assessee. The same position obtains a fortiori in regard to liability for gift-tax. It attaches as soon as the gift is made, though its quantification by assessment would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities may also in a given case decline to accept the amount of the provision made by the assessee in his balance-sheet or the amount of tax calculated on the basis of the return as a proper estimate of the liability ; they may find that it is an over-estimate and rejecting it, they may make their own estimates of the value of the liability. But, where the assessment of the liability for income-tax, wealth-tax or gift-tax is made and the quantum of the liability is ascertained before the wealth-tax assessment is completed, the precise value of the liability ascertained in accordance with the procedure prescribed by law would be known and there would be no need for making an estimate. The assessment made in accordance with the provisions of the relevant statute would quantify the liability, the quantum of the liability should be determined by the process of assessment and once the quantum of the liability is ascertained in the manner contemplated by law, it must displace any attempt at estimation. Then, what is stated by the assessee as his estimation of the liability either by making a provision in the balance-sheet or filing a return would become immaterial because what was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, to be quantified and for the purpose of quantification of the liability, a machinery of assessment is provided by each relevant statute. What the revenue claims to be contingencies are nothing but incidents in the process of assessment. The machinery of assessment provided by each relevant statute contemplates filing of a return by an assessee and the return may be accepted by the revenue authorities without demur or the revenue authorities may make further inquiry and find that the total income or net wealth or taxable gift of the assessee is more than what is shown in the return and the tax liability of the assessee is higher than what it would be if the return were accepted as correct. These are all steps in the process of assessment culminating in the quantification of the tax liability. The process of assessment is after all nothing but a process of quantification of tax liability and nothing that is done or may be done in the process of quantification of tax liability can be regarded as a contingency. When assessment is made in accordance with the provisions of the relevant statute the liability to tax which existed in praesenti on the relevant valuation date is quant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot there. The liability was always there, namely, the liability to pay tax on total income or net wealth or taxable gift in accordance with the provisions of the relevant statute. That liability was not properly quantified because of non-disclosure of primary material facts by the assessee or because of some other reason and this wrong quantification is sought to be corrected by reopening the assessment and making fresh assessment. The correct quantification made on reassessment is still quantification of the same liability which existed in praesenti on the relevant valuation date. The amount of tax determined on reassessment must, therefore, be deducted in computing the net wealth of the assessee, where the reassessment has taken place before the wealth-tax assessment is finally concluded. It was contended, on behalf of the assessee, in the course of the arguments that even if the assessment of the liability for income-tax, wealth-tax or gift-tax is made or rectified or reopened after the wealth-tax assessment is closed, it would be competent to the assessee as well as the revenue to apply for rectification of the wealth-tax assessment for the purpose of correcting the amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the assessment year 1961-62 was determined to be Rs. 39,692 by an order of assessment dated 23rd March, 1962, but the notice of demand was issued on 11th April, 1962. The assessee preferred appeals against both these orders of assessment, one on 9th May, 1961, and the other on 9th May, 1962, and claimed in these appeals that the amount of the tax assessed for each assessment year was not payable by him. Now in the assessment of the assessee to wealth-tax for the assessment year 1961-62, the assessee claimed that the sum of Rs. 22,679 representing wealth-tax liability for the assessment year 1960-61 was deductible since it was a debt owed by the assessee on the relevant valuation date, namely, 31st March, 1961. Similar claim for deduction of Rs. 39,692 representing wealth-tax liability for the assessment year 1961-62 was made in the assessment of the assessee to wealth-tax for the assessment year 1962-63. The revenue conceded that each of the two sums of Rs. 22,679 and Rs. 39,692 claimed by the assessee as a deduction represented a debt owed by the assessee on the relevant valuation date, but contended that neither of these two debts was deductible since they fell within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revision or other proceeding as not being payable by him." If the amount of tax claimed as deduction falls within the description given in this clause, it would not be deductible though it is a debt owed by the assessee on the relevant valuation date. There are two requirements of this clause one is that the amount of tax payable in consequence of any order passed under or in pursuance of any of the fiscal statutes there specified including the Wealth-tax Act, 1957, must be outstanding on the relevant valuation date and the other is that it must be claimed by the assessee in appeal, revision or other proceeding as not being payable by him. On a plain reading of the clause, it is obvious that to satisfy the second requirement, it is not necessary that the appeal, revision or other proceeding should have been filed before the relevant valuation date ; it may be filed even after the relevant valuation date. What is required is that the assessee must dispute the amount of tax claimed from him by filing an appeal, revision or other legal proceeding and not that the appeal, revision or other legal proceeding should be instituted before any particular point of time. If the legislative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lth-tax Officer on assessment represents the amount of wealth-tax payable by the assessee, but this determination does not say when the amount of wealth-tax so determined shall be payable. That is done by sections 30 and 31 which occur in Chapter VII headed " Payment and recovery of wealth-tax ". Section 30 provides that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Wealth-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. That is followed by section 31 which, as its marginal note shows, provides when the amount of wealth-tax shall be payable. That section has several sub-sections of which only three are material for our purpose, namely, sub-sections (1), (2) and (3). Sub-section (1) provides that any amount specified as payable in a notice of demand under section 30 shall be paid within thirty-five days of the service of the notice at the place and to the person mentioned in the notice ; and sub-section (2) then goes on to say that if the amount specified in any notice of demand under section 30 is not paid within the period limited under sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 220 of the Income-tax Act, 1961. Now the scheme of the Wealth-tax Act is in material respects identical with that of the Income-tax Act so far as charge, assessment and levy of tax are concerned and what the Judicial Committee of the Privy Council has said in regard to payability of the amount of income-tax must apply equally in regard to payability of the amount of the wealth-tax. It must, therefore, be held that the amount of wealth-tax determined by the order of assessment does not become payable by the assessee until the notice of demand is issued under section 30 of the Wealth-tax Act. Now in the present case it was common ground between the parties that the notice of demand for wealth-tax for the assessment year 1960-61 was issued on 11th April, 1961, that is, after the relevant valuation date, namely, 31st March, 1961, and the notice of demand for wealth-tax for the assessment year 1961-62 was issued on 11th April, 1962, that is, after the relevant valuation date, namely, 31st March, 1962, and the amount of wealth-tax did not, therefore, become payable prior to the relevant valuation date in case of either of the two assessment years and could not be said to be out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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