TMI Blog1973 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, 1972, pursuant to the amendment effected in section 5(1)(viii) of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), by the Finance (No. 2) Act, 1971 (Act No. 32 of 1971) as well as for a writ in the nature of prohibition and/or mandamus restraining the respondents from taking any further steps or proceedings for recovery of the tax on jewellery and ornaments in enforcement of the said rectification order dated 22nd February, 1972. The petitioner is a lady who was assessed by the Wealth-tax Officer for the assessment year 1969-70 to wealth-tax on the total wealth of Rs. 6,07,690, including jewellery and ornaments of the value of Rs. 4,15,942 by an assessment order dated 11th February, 1970. From that assessment order, the present petitioner preferred an appeal to the Appellate Assistant Commissioner of Wealth-tax contending that jewellery and ornaments intended for the personal use of the petitioner were exempt from wealth- tax by reason of the provisions of section 5(1)(viii) of the Act. In support of her contention in the said appeal, the petitioner relied upon the decision of the Supreme Court in the case of Commissioner of v. Arundhati Balkrishna , the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 4,15,942, being the value of the said jewellery and ornaments, in the net wealth of the petitioner. In the said order the Appellate Assistant Commissioner held that his predecessor had committed a mistake apparent on the record in excluding the said jewellery and ornaments and that he was, therefore, entitled to rectify the order of his predecessor under section 35 of the Wealth-tax Act. The petitioner, thereafter, filed the present petition on the 20th of April, 1972, challenging the validity of the rectification order passed by the Appellate Assistant Commissioner and praying for the reliefs already set out above. It will be convenient, at this stage, to refer to the relevant statutory provisions with which the court is concerned in the present case. The material part of section 5 of the Act, as it stood prior to its amendment by the Finance (No. 2) Act, 1971, is in the following terms : " 5. Exemption in respect of certain assets.-(1) Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee .... (viii) furniture, household utensils, wearing apparel, provisions and other art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case, the Supreme Court has rejected (at page 150) the precise argument that if the original assessment made was in accordance with the law, as it then stood, it could not be said to suffer from an error apparent on the face of the record. As far as this coart is concerned, this point must, therefore, be held to be concluded by the said decision of the Supreme Court, and I do not propose to say anything more about it in this judgment. As far as the second limb of the question formulated by Mr. Palkhivala is concerned, even a cursory perusal of the language of section 35 which confers the power of rectification shows clearly that the error which can give jurisdiction to a revenue authority to initiate rectification proceedings must be "a mistake apparent from the record". The plain meaning of the word "apparent" is that it must be something which appears to be so ex facie and is incapable of argument or debate. That is what the Supreme Court has held in the case of T. S. Balaram, Income-tax Officer v. Volkart Byothers. Hegde J., delivering the judgment of the court in the said case, observed in regard to the corresponding provision for rectification that is to be found in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture in that behalf clear beyond doubt. It was the contention of Mr. Palkhivala that the court should not give to the words used by the legislature any greater retrospective effect than is necessary or is warranted by the clear words of the amending provision. In that connection, reference may be made to passages from Maxwell on the Interpretation of Statutes, twelfth edition, as well as to Halsbury's Laws of England, 3rd edition, volume 36. In Maxwell it is stated (at page 216) : " A statute is not to be construed so as to have a greater retrospective operation than its, language renders necessary." and it is further stated at pages 220-21 : " when the substantive law is altered during the pendency of an action, the rights of the parties are decided according to the law as it existed when the action was begun, unless the new statute shows a clear intention to vary such rights. " It would follow, a fortiori, that unless a new statute shows a clear intention to that effect, legal proceedings which have already culminated in an assessment order, or other order or judgment, cannot be affected by such statute. To the same effect are passages from Halsbury (at pages 423 to 426). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the retrospective operation of the amendment in question in the said case. A notice of demand was served by him in due course on the assessee and the assessee thereupon filed a petition under article 226 of the Constitution of India in this court which held that the mistake mentioned in section 35 of the Act had to be apparent on the face of the order and it could only be judged in the light of the law as it stood on the day when the order was passed, and section 35 had, therefore, no application to the said case. A writ was, therefore, issued by this court against the income-tax authorities, who, thereafter, went in appeal to the Supreme Court. The Supreme Court stated (at page 146) that the short question which arose before it in the said appeal was, whether an order which was proper and valid when it was made, could be said to disclose a mistake apparent from the record, if the said order would be erroneous in view of a subsequent amendment which was intended to operate retrospectively. The Supreme Court took the view that the legal fiction introduced by the words giving retrospective operation to the amendment in the said case inevitably meant that at the time when the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rectification could have been invoked had it come to the conclusion that it was an arguable question. The said decision of the Supreme Court does lay down that a deeming fiction couched in words similar to the words used in the present case should be construed as intending to affect even completed assessments, but Mr. Palkhivala has submitted that : (1) the said case does riot dissent from the well-settled principle that a debatable point of law cannot be the subject of rectification since, ex hypothesi, the error could not possibly be called apparent ; (2) the said case is not an authority for the proposition that a deeming provision giving retrospective effect must necessarily be held to affect completed assessments ; (3) the said case is only an authority on the construction of a particular provision of the Income-tax (Amendment) Act, 1953, and on a construction thereof it was held that the provision applied to assessments completed before the date on which the power was invested by the Amending Act ; and (4) in the said case, there is no discussion as to why the point as to the construction of the relevant provision should not be regarded as debatable when two judges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion proceedings. Mr. Palkhivala contended that the view taken by the Supreme Court in Habibullah's case that the amended provision did not cover assessments completed prior to the date of the amendment, also showed that the earlier judgment of the Supreme Court in the Bombay Dyeing Company's case laid down no general principle of law applicable to all retrospective amendments. Turning to the facts of Habibullah's case, the respondent before the Supreme Court was the son of the original assessee who was a partner in two firms registered under the Indian Income-tax Act, 1922, The assessment of the deceased for the assessment years 1946-47 and 1947-48 was completed by the Income-tax Officer on 20th February, 1950, after adopting the estimates furnished by the assessee in his returns in respect of his losses in the two firms. The assessments of the two firms were then completed by the Income-tax Officer on 31st October, 1950, and 30th June, 1951, respectively, and the Income-tax Officer thereafter issued notices on the deceased assessee to show cause why his assessments which had already been completed should not be rectified under section 35 of the Act. On 27th March, 1954, the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cter, that it affected the vested rights of the assessee, and that, therefore, in the absence of compelling reasons, the court would not be justified in giving a greater retrospectivity to the provision than was warranted by the plain words used by the legislature. It further laid down (at page 814) that if by the law prevailing at the time when the assessment of the firm was made, no such result as was contemplated by the new clause (5) arose, to give a larger retrospective operation than was directed, was to ascribe to the legislature an intention different from the one expressed, and " to make a larger inroad upon the finality of that assessment than is permitted by the legislature". The Supreme Court pointed out that the new clause (5) conferred an additional power of rectification upon the income-tax authorities and, in the absence of compelling reasons, the court would not be justified "in upholding the exercise of the power to assessments of firms which have been completed before the date on which the power was invested In connection with the question which arose before it, the Supreme Court referred to the express provision that was to be found in the new sub-clause (6) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 35 of the Indian Income-tax Act, 1922, it was clear that the subject-matter of rectification was the completed assessment of a partner in a firm, and that there was nothing in the section to show that such completed assessment must take place after the provisions of section 35(5) were brought on the statute book. It was further observed that what was to take place to give rise to the power of rectification was the finding or the assessment or reassessment of the firm, which finding alone must be made after the section came into force, and that finding was to be given effect to or made operative on the completed assessment of a partner. Referring to Habibullah's case (at pages 258-259), the Supreme Court in Devinatha Nadar's case quoted a passage from the concluding portion of the judgment in Habibullah's case in which it was stated that the power to rectify the assessment of a partner consequent on the assessment of the firm of which he was a partner by including or correcting his share of profit or loss could be exercised only in the case of the assessment of a firm made on or after 1st April, 1952, from which date the retrospective operation of the amending Act started. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the power of rectification which came into existence on the 1st of April, 1952, could be exercised with regard to assessment of the firm already completed prior to that date so as to affect the "vested rights" which had accrued to the assessees as partners of that firm. It is true that Habibullah's case does not hold that the assessments of the partners completed prior to the first of April, 1952, could not be rectified. In fact, as was pointed out in Devinatha Nadar's case (at page 258). under the amendment in question effected by the addition of section 35(5), the subject-matter of the rectification was the completed assessment of a partner in a firm. Habibullah's case does, however, hold that power to rectify which was conferred as from the 1st of April, 1952, could not be used so as to affect the partners of a firm, the assessment of which had already been completed by that date. The said decision is not based on the later terminus for the computation of the perid of four years provided in the newly added sub-section (5) but, on a construction of the amending Act, the Supreme Court drew the line, as far as the extent of retroactivity was concerned, as the date of completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his category was, according to Mr. Palkhivala, the case of Ahmedabad Manufacturing and Calico Printing Co. Ltd. v. S. G. Mehta, Income-tax Officer ; (2) Cases in which the question was, whether the amending law covered cases where proceedings were barred before the amendment, an instance of the same being, according to Mr. Palkhivala, the case of S. S. Gadgil v. Lal and Co. ; (3) Cases, like the present one, in which the question was, whether the amending law extended to completed assessments against which no further proceedings were pending at the date of the amendment. According to Mr. Palkhivala, other instances of this category were the cases of Bombay Dyeing and Mfg. Co, v. M. K. Venkatachalam, on an appeal Bombay Dyeing and Mfg. Co. case, Commissioner of Income-tax v. Bai Navajbai N. Gamadia, Regina v. General Commissioners of Income Tax for Wallington , Income-tax Officer v. S. K. Habibullah , S. C. Prashar v. Vasantsen Dwarkadas and Income-tax Officer v. T. S. Devinatha Nadar ; and (4) Cases in which the question was, whether the amending law applied to completed assessments against which further proceedings were pending at the date of the amendment. According to Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omething which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions cannot be regarded as obvious and patent and that to be a mistake apparent on the record the mistake must be one which is obvious and patent. In connection with this aspect of the matter, the learned counsel for the respondents relied very strongly on T. S. Rajam v. Controller of Estate Duty, where a Division Bench of the Madras High Court has observed as follows: " On a fair conspectus of the ratio of the various decisions of this court and the Supreme Court, it is now clear that for a rectification of an error which is said to be apparent from the face of the record, the mere complexity of the problem or that genuine argument is necessary to discover the same may not by themselves be sufficient to oust the jurisdiction of a Tribunal to rectify such a mistake. " The Division Bench derived support from the observations of the Supreme Court in K. M. Shanmugam v. S.R.V.S. (P.) Ltd. , where an earlier observation of Das Gupta J. of the Supreme Court in Satyanarayan Laxminarayan, Hegde v. Mallikarjun Bhavanappa Tirumale was considered and explained (see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Wealth-tax Act which he purported to do by his order dated 22nd February, 1972. BY THE COURT: We order that the rule be made absolute in the following terms: (a) We issue a writ in the nature of certiorari and a writ, direction and order under article 226 of the Constitution quashing and setting aside the rectification order passed by the first respondent on the 22nd of February 1972. (b) We also issue a writ in the nature of mandamus and a writ, direction and order under article 226 of the Constitution restraining the respondents, the successors in office of respondents Nos. 1 and 2 and the servants and agents of the respondents, from taking any further steps or proceedings, including proceedings for the recovery of the tax on the jewellery and ornaments in question, in enforcement, pursuance, furtherance or implementation of the said rectification order dated 22nd February, 1972, passed by the first r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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