9911796707
TMI Blog1976 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... by him under the aforesaid Act. The Wealth-tax Officer, originally, completed the assessment taking the status as 'individual'. In the first three assessment years under consideration, the Wealth-tax Officer included certain amounts in the total wealth of the assessee on account of compensation received by the assessee. These amounts were Rs. 1,06,842, Rs. 50,510 and Rs. 65,000 in the three years respectively. In the subsequent five years, the Wealth-tax Officer made the assessments according to the Returns filed and did not include any amount in the total wealth of the assessee on account of compensation receivable. The assessmentx were originally completed thus: Asst. yr. Date of filing the original Return Date of original assessment Net Wealth assessed 1963-64 17th December, 1963 31st August, 1964 Rs. 25,04,693 1964-65 14th September, 1964 24th December, 1964 Rs. 27,03,651 1965-66 17th February, 1966 5th July, 1967 Rs. 27,59,125 1966-67 30th December, 1967 30th December, 1967 Rs. 26,18,008 1967-68 27th December, 1967 30th January, 1968 Rs. 23,79,510 1968-69 1st March, 1969 22nd March, 1969 Rs. 16,63,074 1969-70 9th January, 1970 28th January, 1970 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was the Karta. 6. The Wealth-tax Officer made the reassessments for all the eight years by his different orders all dated 18th July, 1973. He was of the opinion that the original assessments made in the status of individual had become final and that assessments were reopened under s. 17 of the Act with the only object of bringing to tax the full amount of compensation receivable by the assessee. Hence, the assessee was precluded from agitating any point other than the assessability of the compensation receivable in the course of the reassessment proceedings because all those other points had already become final. He relied on the decision in the case of Kewaldas Ranchhoddas vs, Commr. of Income Tax (3) in support of his decision. He thus rejected the assessee's claim to be treated as Hindu undivided family and to be assessed only on the assets which properly belonged to the Hindu undivided family after excluding the compensation receivable which was individual property of the assessee. Accordingly he completed the reassessments taking the status as 'individual' and taking the net wealth as that determined in the original assessment plus the amount of compensation receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Assistant Commissioner erred in directing the Wealth-tax Officer to exclude the assets belonging to the Hindu Undivided family from the reassessments made. 8. We will take up the assessee's appeals first. Sri M.J. Swamy, the learned Representative for the assessee, wanted to raise an additional ground at the outset relating to the validity of invoking s. 17 of the Act but at the close of the hearing, he sought our permission to withdraw his prayer for admitting the additional ground and we permitted him to do so. 9. Sri M.J. Swamy urged before us that the Appellate Assistant Commissioner should have held that the assessee was entitled to claim that the correct status be adopted in the reassessments. He stated that a mistake cannot be perpetrated when it was found out. Referring to the decision in the case of Walchand Nagar Industries Ltd., vs. V.S. Gaitonde (4) he stated that the status taken as individual in the original assessments was not legally correct in view of the decision in the case of N.V. Narendranath vs. Commissioner of Wealth-tax (SC)(1). His contention was that a gross error of law should have been rectified when pointed out. Relying on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opened with a specific purpose of bring to tax a portion of the wealth which had escaped assessment in the original assessments. He relied on the case, referred to by the Wealth-tax Officer, namely, that of Kevaldas Runchhodas vs. Commissioner of Income-tax(3) Regarding the decisions relied on by Sri. M.J. Swamy, he replied that the facts of those cases were different and did not apply to the facts of the instant case. He stated that if there was a gross mistake, apparent from the records, then the proper procedure was to apply for rectification under s. 35 of the Act or move the Commissioner of Wealth -tax for revision and the cases relied on by the assessee were such cases of rectification or revision. When a separate procedure has been prescribed under the Act for setting right obvious mistakes, the assessee could not seek to ignore it and claim that rectification be made during the reassessment proceedings which was not permissible according to the law. 11. We have considered the contentions of both the parties as well as the facts on record. The question before us is whether the assessee's claim to change the status from 'individual' to that of 'Hindu undivided family' shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to determine afresh the original assessment or to correct errors and omissions made by the assessee. It appears to us, that the decision in that case turned upon the fact that the assessee itself made the mistake by showing lesser receipts and lesser expenses deliberately. It was open to the assessee at the time of the original assessment to declare the correct receipts and the correct expenses, It did not choose to do so deliberately. Subsequently, when it was caught and the higher receipts were sought to be taxed, the assessee claimed the higher expenses. It was in that back-ground that the claim of the assessee was not allowed. The important point, in the facts of this case, as it appears to us, is that the assessee was precluded from seeking to rectify the mistakes it deliberately committed at the time of the original assessment. But, in the case before us, the assessee declared the status to be 'individual' obviously under the honest belief that the properties received by him on partition as well as the compensation receivable from the Government on the abolition of the estate belonged to him in this individual capacity. We are told that the assessee had only a wife but no iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee moved the High Court. The High Court held that the effect of the decision of the Supreme Court was that the levy of the additional tax was at no time good and, therefore, the assessment order made by the Income-tax Officer levying the additional tax was bad at its inception on the date it was made notwithstanding the fact that the decision of the Supreme Court was given subsequent to that date and that it was a mistake apparent from the records within the meaning of s. 35 of the 1922 Act. The High Court, therefore, held that the Income -tax authorities were clearly in error in refusing to rectify the mistake. The decision thus lays down the proposition that a point decided by the Income-tax Officer at a certain date can become a mistake retrospectively if a decision to that effect was given by the Supreme Court even on a subsequent date and that such a mistake was rectifiable under s. 35 of the 1922 Act. In this case, the Court quoted with approval, from Venkatachalam vs. Bombay Dyeing And Manufacturing Co., Ltd.,(8) that a glaring and obvious mistake of law can be rectified under s. 35 as much as a mistake of fact apparent from the record. 14. The next case relied on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be of revenue nature. Thereupon, the assessee moved the Commissioner of Income-tax under s. 33A of the 1922 Act and asked for relief. The Commissioner of Income-tax rejected the petition on the ground that it was barred by limitation. The assessee's prayer to condone the delay and admit the petition was repelled by the Commissioner of Income -tax on the ground that the fact that the Supreme Court took a different view was not a valid ground for condoning the delay, in the absence of an appeal filed by the assessee to keep the matter alive. The assessee moved the High Court. It was held that the Commissioner of Income-tax was palpably wrong in holding that the change of legal situation brought about by the decision of the Supreme Court was not a valid ground for condoning the delay. It was further held that the assessee could not have anticipated that relief was due to it before Supreme Court pronounced the law. As the Commissioner of Income-tax was armed with wide powers under s. 33A of the 1922 Act, and was authorised to pass such order as he deemed fit, it was eminently a fit case in which the Commissioner of Income-tax should have exercised his powers judiciously and should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remove the distinction between the assessment under s. 143 (3) of the Income-tax Act, 1961, and the reassessment under s. 147 of the Income-tax Act, 1961 in so far as the powers of the Income-tax Officer or the rights of the assessee are concerned. Consequently, the powers of the Income-tax Officer and the rights of the assessee could no longer be said to be restricted to the particular point for which the assessment was reopened. 17. The Circular cited by the assessee lays down the principle that where, in consequence of a later decision of the Supreme Court pronouncing the correct legal position, the decision already taken earlier becomes illegal, then, the rectification petition filed by the assessee shall be entertained provided the application was filed within the time. This Circular also directs that glaring mistakes should be rectified provided the assessee is not guilty of laches. 18. We may refer to one more decision in this context, namely, that of Manji Dana vs. Commissioner of Income-tax (SC)(9). the assessee filed a Return of income in the status of 'individual' but the Income-tax Officer assessed him in the status of 'Hindu undivided family'. Subsequently, assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be done to the parties taking the facts and circumstances of the case into consideration and narrow and technical view should be eschewed avoiding, of course, any violation of substantial law. 19. Coming to the facts of the case, we find that the assessee had no knowledge that it could be treated as Hindu undivided family in respect of certain of his properties and as individual in respect of certain other properties. Hence, he filed Returns in the status of individual clubbing all the properties together in the said Returns. Later, as a consequence of the decision in the case of N.V. Narendranath vs. Commissioner of Wealth-tax (SC)(1) by the Supreme Court the assessee came to know that he could claim the status as Hindu undivided family in respect of certain properties and in view of the decision in the case of P.V.G Raju vs. Commissioner of Wealth-tax (AP)(2), the compensation receivable by him could be claimed as his individual property. It is true that the proper procedure for him was to apply for rectification or move the Commissioner of Income-tax for revision. But, when the assessments were reopened under s. 17 of the Act, he had a chance to claim that the records be set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act empowers the assessee to file a revised Return if he discovers any omission or wrong statement in the Return originally filed. Had the assessee filed the Returns under s. 14 of the Act, showing the status therein as Hindu undivided family, the Wealth-tax Officer would have been obliged to inquire into the question as to how the status which was taken in the earlier years as individual was claimed to have been changed. In the present case, the Returns filed by the assessee showing the status as Hindu undivided family were in response to the notice under s. 17 of the Act which the Act says should be deemed to be a notice under s. 14(2) of the Act. In view of the above, we see no reason at to why the assessee's claim should have been rejected summarily. This exposition of the law, as given in the case of Deviprasad Kejriwal vs. Commissioner of Income-tax (Bom)(7), is yet another reason for coming to the conclusion that the decision in the case of Kevaldas Ranchhoddas vs. Commissioner of Income-tax(3), relied on by the Department, cannot be applied to the facts of the instant cases, Respectfully following the principles laid down by the authorities cited above and after consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions given therein. We may repeat that the Wealth-tax Officer has to investigate into the claim of the assessee that he is the kata of a Hindu undivided family in respect of certain assets. If this claim is found to be true, then the Wealth-tax Officer has to treat the reassessments as those of the Hindu undivided family only and exclude the assets not belonging to the Hindu undivided family from the reassessments. If the claim of the assessee is found to be untenable, then the Wealth-tax Officer has to assess all the assets belonging to the assessee and he should not confine himself only to the assets declared in the Returns filed in the course of the reassessments proceedings. 21. The other controversy in these appeals relates to the point of time at which the right to receive the compensation could be said to have accrued to the assessee. This point will come up for consideration in the reassessments mow restored by us to the Wealth-tax Officer only if it is found by him that the claim of the assessee, who is the karta of the Hindu undivided family, was not tenable, If the claim of the assessee was found to be correct, then, the question of assessing the compensation receiva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Assistant Commissioner disposed of this contention in the following words: "The contention of the W.T.O. that compensation receivable under s. 39(1) of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, is taxable even when the payment is only interim is not acceptable. The same is assessable when the payment becomes final. The contention of the Representative is, therefore, accepted. The W.T.O. is, therefore, directed to adopt the amount received under s. 39(6) for different Estates in the respective years." 24. Both the assessee as well as the Department have come up in appeal against the above finding of the Appellate Assistant Commissioner. The ground taken by the assessment is these appeals is that the Appellate Assistant Commissioner should have clearly held that the right to receive the compensation accrued to the assessee only after the passing of the order under s. 43 of the aforesaid Act by the Estate Abolition Tribunal. On the other hand, the ground taken by the Department in these appeals is that the Appellate Assistant Commissioner should have held that the right to receive the compensation arose to the assessee on the passing of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation. There is, therefore, no doubt that the assessee was entitled to receive the compensation as provided under the aforesaid Act. It is not as if the assessee was a creditor or the maintenance holder of the estate. He was a successor to the estate and had a vested right. It is, therefore, clear that the assessee had a right in the estate before its abolition as well as immediately after its abolition. His right to receive the compensation arose simultaneously with the vesting of the estate in the Government. It is true that in the aforesaid decision the Court has observed as below: "But the compensation payable to the estate holders become due only when the same was finally determined under s. 39. In other words, the liability of the Government to pay the compensation finally determined arose only after the same was determined under s. 39 though the Act provided for payment of half the amount of compensation on the basis of a rough estimate within six months from the date of vesting......" Even this observation points to the conclusion that the right to receive the compensation accrued to the assessee the latest after the passing of the order under s. 39(1) of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the compensation itself is not immediately payable. We find no material difference between the provisions of the Bihar Land Reforms Act, 1950 as explained in the case of Pandid Lakshmi Kant Fha vs. Commissioner of Wealth-tax (SC)(12) and the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948 as explained in the case of S.R.Y. Sivaram Prasad Bahadur vs. Commissioner of Income-tax (SC)(10). At the time of hearing, Sri M.J. Swamy urged before us that the assessee did not finally receive any compensation in the first two years because they were adjusted against the dues of the Government. His point was that since nothing was actually received by the assessee, no right to receive the same could have accrued prior to the determination of the amount payable under s. 43 of the aforesaid Act. We have considered this argument but do not find any force in the same. The right to receive the compensation had accrued to the assessee on the vesting. When the amount became ripe for payment, it was actually paid constructively to the assessee. In other words, the amounts were applied towards the satisfaction of a debt owed by the assessee which was as good as direct receipt by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Wealth-tax Officer estimated the value of the said five acres at Rs. 60,000 as against the sum of Rs. 5,000 offered by the assessee for assessment. The assessee appealed to the Appellate Assistant Commissioner and contended that the valuation adopted by the Wealth-tax Officer was very high, The Appellate Assistant Commissioner was of the opinion that the Wealth-tax Officer valued this property in accordance with the report of the Valuer. He accordingly confirmed the same. Sri. M.J. Swamy filed a copy of the report by Sri G.K. Chowdary, an Approved Valuer, before us wherein the agricultural lands in respect of the palace of the Rajh of Vizianagaram at Ooty were valued at Rs. 4,360 per acre and that the valuation adopted by the Wealth-tax Officer is excessive. Sri. K.C. Mohapatra, on the other hand, supported the orders of the authorities below. We have heard the contentions of both the parties and have gone through the report produced by the learned Representative for the assessee. We find that the valuation of similar land in the same locality has been made at Rs. 4,360 per acre. Hence the adoption of the value of Rs. 12,000 per acre by the Wealth-tax Officer is certainly exce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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