TMI Blog1974 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... with ornaments studded with precious stones, and the second category of golden ornaments simpliciter. The Wealth-tax Officer did not grant exemption in view of the disallowance made by him in the preceding year. The order of assessment was made on 19th May, 1965. The Wealth-tax Officer followed the orders made in respect of the previous assessments and held that the articles in question should not be treated as articles of personal use and they were, therefore, taxable. He, however, for the assessment year increased the value of the said articles, viz., jewellery, by 20 per cent. and brought it to Rs. 71,532. The assessee being aggrieved with the said order of the Wealth-tax Officer carried the matter before the Appellate Assistant Commissioner, contending, inter alia, that under section 5(1)(viii) of the Wealth-tax Act, jewellery and ornaments should be held to be exempt in view of the decision of the Gujarat High Court in Arundhati Balkrishna's case . The Appellate Assistant Commissioner accepted this contention of the assessee and by his order of 22nd June, 1968, allowed the exemption claimed by the assessee in respect of the articles meant for personal use, viz., jewellery in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding and certain consequential orders are to be passed to put the matter completely straight, it is always necessary for the Tribunal to hear the matter fully, and, if necessary, to determine such issues. In that view of the matter, therefore, the Tribunal allowed the miscellaneous application by its order dated 3rd July, 1972, on the lines indicated above, and directed that the appeal should be posted for fresh hearing in due course on the aspect of the question, whether the articles in question amounted to jewellery or not. At the instance of the assessee, therefore, the following question has been referred to us for our opinion: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was an error apparent from the record in granting exemption in respect of jewellery while disposing of the appeal on October 16, 1970 ?" At the time of hearing of this reference, the learned Advocate-General, appearing on behalf of the assessee, contended that the Tribunal was clearly wrong in holding that there was an error apparent from the record in granting exemption in respect of jewellery while disposing of the appeal of the Wealth-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s do not become final in the literal sense of the term. According to the learned advocate on behalf of the revenue, the relevant fact which the Tribunal has to consider before exercising its rectification powers is merely to look at the state of law as obtainable on the date of the order sought to be rectified. In the submission of the learned advocate on behalf of the revenue, if the state of law as on the date of the order sought to be rectified is clear and obvious, and if the order is contrary to such state of law, the authority concerned must exercise its rectification powers as envisaged under section 35 of the Wealth-tax Act. In the instant case, it was urged on behalf of the revenue that, by the Finance (No. 2) Act of 1971, section 5(1)(viii) of the Wealth-tax Act was amended with effect from the 1st day of April, 1963, so as to remove the articles of jewellery for personal use from the exempted category of wealth, and if that state of law, as on the date on which the Tribunal made the order, or for that matter on the date on which the Wealth-tax Officer assessed the assessee, was clear and obvious, there cannot be any escape from the conclusion that the order of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Hegde v. Mallikarjun Bhavanappa Tirumale and observed as under: "The question whether the said errors are errors of law or fact cannot be posited on a priori reasoning, but falls to be decided in each case. We do not, therefore, propose to define with any precision the concept of 'error of law apparent on the face of the record', but it should be left, as it has always been done, to be decided in each case." It is no doubt true, as contended by the learned Advocate-General, that the jurisdiction of the taxing authorities either under section 154 of the Income-tax Act of 1961 or section 35 of the Wealth-tax Act, cannot be equated with the jurisdiction of the High Court or the Supreme Court in the matter of issuance of writs on the ground of error apparent on the record of the case. We do not propose to decide this question, whether the error apparent on the record for purposes of exercising extraordinary jurisdiction of this court in the matter of issuance of a writ is the same and co-extensive with that of the taxing authorities while exercising their power of rectification under section 154 of the Income-tax Act of 1961 or section 35 of the Wealth-tax Act. What we have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clause (viii) of section 5(1) as it stood before its amendment on the ground that those articles were meant for personal use. The two broad categories which she had mentioned in the list appended to her return were in respect of gold ornaments studded with precious stones and gold ornaments simpliciter. The Wealth-tax Officer, as stated above, did not grant exemption as prayed for by the assessee as in his opinion the articles in question could not be said to be articles for personal use and, therefore, by his order of 10th May, 1965, added the value of the said articles in the net wealth of the assessee. By the time the matter was heard by the Appellate Assistant Commissioner, this court rendered the decision in Arundhati Balkrishna's case, whereby it held that all the articles of jewellery meant for personal use were entitled to exemption under section 5(1)(viii). The Appellate Assistant Commissioner, therefore, following the decision of this court in Arundhati Balkrishna's case upheld the claim of the assessee and granted exemption in respect of the said articles of jewellery from the liability of being included in the net wealth. In the appeal filed by the Wealth-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which have been put on the statute book on different dates, that we have to examine this question. A short but pointed submission of Mr. Kaji on behalf of the revenue is that the Tribunal was perfectly justified in exercising its rectification power as it was under obligation to look to the state of law as it prevailed on the date of the assessment order. This position admittedly was that the articles of jewellery were not entitled to be excluded from the net wealth. If that was the position of law available on the date of the assessment, and that was admittedly the position, so runs the argument on behalf of the revenue, then the Tribunal must exercise its rectification power, as the assessment order was clearly and apparently contrary to the state of law. If the assessment order is contrary to the position of law as available on that date, may be on account of the retrospectivity given to the amending section, it cannot be said that when the taxing authorities exercised the rectification power, they were trying to disturb the finality of the order, provided the rectification sought to be made was within the prescribed period of limitation under law. It was urged on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or semi-precious stones whether or not set in any furniture, utensils or other articles or worked or sewn into any wearing apparel. The question, therefore, arises as to what is the rational basis for providing two different dates by the two amendments sought to be made in the same clause. Is the enlarged meaning of jewellery going to be operative retrospectively or prospectively ? On the plain reading of the amendment by which the said Explanation is sought to be inserted in section 5(1)(viii), it appears that the enlarged meaning is to come into force prospectively with effect from 1st April, 1972. As the said Explanation gives an inclusive definition, it is reasonable, therefore, that the enlarged meaning of the term "jewellery" for the purpose of the said clause should be effective from 1st April, 1972. If that is so, what would be the meaning of the term "jewellery" for assessments from April 1, 1963 ? The question of retrospectivity is, therefore, a highly debatable question and it cannot be resolved without making a serious and studied attempt of the different amendments sought to be inserted in section 5(1)(viii).Would the term "jewellery" for purposes of assessments from A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that there was a mistake apparent from the record, inasmuch as the firm had not been charged at the maximum rate of tax. The High Court of Bombay, which was moved by the assessee-firm and its partners under article 226 of the Constitution, held that original assessments were prima facie in accordance with law and at any rate no obvious or patent mistake in the order of assessment was found, and, therefore, the order of rectification was bad. Mr. Justice Hegde, as he then was, in the appeal preferred on behalf of the revenue, speaking for the court, observed: "From what has been said above, it is clear that the question whether section 17(1) of the Indian Income-tax Act, 1922, was applicable to the case of the first respondent is not free from doubt. Therefore, the Income-tax Officer was not justified in thinking that on that question there can be no two opinions. It was not open to the Income-tax Officer to go into the true scope of the relevant provisions of the Act in a proceeding under section 154 of the Income-tax Act, 1961. A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purposes, the amendment to section 18A must be deemed to have been included in the principal Act as from that date and the proviso should be deemed to be part of section 18A as on the date of passing of the order. Consequently, therefore, the assessment order was held to be inconsistent with the proviso to section 18A and held to suffer from a mistake apparent from the record which justified the Income-tax Officer in exercising his power under section 35. Mr. Justice Gajendragadkar, as he then was, negativing the contention urged on behalf of the assessee that the retrospective operation of the relevant provision is not intended to affect completed assessments, observed at page 147: "The argument for the respondent is that the assessee had obtained a right under the order passed by the Income-tax Officer to claim credit for the specified amount under section 18A(5) and the said right cannot be taken away by the retrospective operation of section 13 of the amendment Act. The same argument is put in another form by contending that the finality of the order passed by the Income-tax Officer cannot be impaired by the retrospective operation of the relevant provision. In our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Supreme Court will answer all the questions that may arise while considering the jurisdiction of the taxing authorities purporting to exercise rectification power when the extent of the retrospectivity of the amendment has to be considered so as to allow them to disturb the completed assessment. As stated above, it would depend always on the facts of each case to find out what is the position of law available on the date of the order of assessment bearing in mind the retrospective operation of the Amending Act. As discussed above, the position which emerges as a result of the two amendments sought to be made in section 5(1)(viii) by section 32(a)(i) and (ii) of the Finance (No. 2) Act of 1971 does not appear to be clear and apparent so as to rule out the possibility of any debate. The Supreme Court in Bombay Dyeing and Manufacturing's Co. Ltd.'s case was concerned with a case where the retrospectivity of the Amending Act was clear and apparent and the court, therefore, took the deeming fiction to all its logical conclusions and held that, having regard to the position of law as available on the date of the order of assessment, there was no escape from the conclusion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been cited by Mr. Kaji in support of his contentions referred to hereinabove. He has relied on the decisions in Commissioner of Income-tax v. Maharaja Pratapsingh Bahadur of Gidhaur, Income-tax Officer, Alwaye v. Asok Textiles Ltd. and S. A. L. Narayan Row v. Ishwarlal Bhagwandas, where the decision of the Supreme Court in Bombay Dyeing and Manufacturing Company Ltd.'s case has been considered. We do not think it necessary to go into these decisions for the simple reason that the main decision on which Mr. Kaji has relied is that of the Supreme Court in Bombay Dyeing and Manufacturing Co. Ltd.'s case . That decision, as we have stated above, is a decision where the court was concerned with the retrospective date of the operation of the amending Act, which was apparent and clear. The case with which we are concerned here in the present reference is one where, having regard to the entire set-up of the amending section and the purpose for which the amendment is sought to be made in section 5(1)(viii), we do not think the decision of the Supreme Court in Bombay Dyeing and Manufacturing Co. Ltd.'s case can take the case of the revenue any further. The learned Advocate-General has draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Mr. Joshi then argued that in the instant case also the mistake is one which must properly he regarded as glaring and obvious in view of the clear decision of the Supreme Court in Bombay Dyeing Company's case . If as indicated in the main judgment, that decision had stood alone, then, perhaps, it would have been impossible to demur to Mr. Joshi's submission in this regard. As indicated in the main judgment this is not the position. The observations in Bombay Dyeing Company's case have to be considered along with the observations and approach of the Supreme Court in the following cases, viz., Habibullah's case, Atmala Nagaraj's case, Ahmedabad Manufacturing and Calico Printing Company's case, T. S. Devinatha Nadar's case and finally K. S. Rashid's case. After a perusal of all these cases, it is impossible to hold that the submissions made by Mr. Palkhivala are unarguable and must be deemed to be totally concluded by the Supreme Court against the assessee by reason of its decision in Bombay Dyeing Company's case . In this view of the matter, it must be held that the Appellate Assistant Commissioner was not competent to exercise powers of rectification under section 35(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of this judgment. It is no doubt true that when a section is interpreted by court, what is done in fact is the exposition of law and that exposition would be effective as if it was there all along since the inception of the section. We are afraid we cannot agree with the submission of Mr. Kaji that by the decision of this court in Commissioner of Wealth-tax v. Jayantilal Amratlal the question which arose before the Tribunal on the day on which it was seeking to exercise its rectification power, there was no scope for debate. Again what the Tribunal has done by its order passed on 3rd July, 1972, is that directions have been given to reopen the appeal and hear the question afresh for purposes of determining what articles would be jewellery and what articles would not be jewellery. As stated by us above, this cannot be a consequential order which the Tribunal was seeking to pass after ascertaining the main error from the record of the case. In that view of the matter, therefore, we do not think that the Tribunal was justified in exercising its rectification power under section 35 and directing that the appeal should be reopened and the question of exemption of articles of je ..... X X X X Extracts X X X X X X X X Extracts X X X X
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