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TMI Blog1973 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision having been given by the Supreme Court just a few days after the assessment order was passed by the Wealth-tax Officer in the present case. It was held by the Supreme Court in the said case (at page 511) that all jewellery intended for the personal use of the assessee came within the scope of section 5(1)(viii) of the Act, and had to be excluded in the computation of the net wealth of an assessee. In view of the decision of the Supreme Court in Arundhati Balkrishna's case, the Appellate Assistant Commissioner of Wealth-tax, by an order dated 26th June, 1970, allowed the appeal of the assessee and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 articles intended for the personal or household use of the assessee ; .... (xiv) jewellery belonging to the assessee, subject to a maximum of twenty-five thousand rupees in value ; . . . . " Clause (xv) of section 5(1) of the Act was deleted by the Finance Act of 1963 (Act No. 13 of 1963). By section 32 of the Finance (No. 2) Act, 1971, section 5(1)(viii) of the Act was amended so as to read as follows : " 5. (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, wear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly 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 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 reasoning on points on which there may conceivably be two opinions." The same view has been taken by this court in the case of Arvind N. Mafatlal v. T. A. Balakrishnan, Deputy Controller of Estate Duty and in the case of Nandlal Mangaram Pamnani v. G. Lakshminarasimhan in which two other earlier decisions of this court have been cited by the learned judge. The legal position is, therefore, well settled that in order to resort to the power of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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). An instance of our legislature making such an intention clear is to be found in the amendment effected by the new sub-section (6) of section 35 of the Indian Income-tax Act, 1922, by section 19 of the Income-tax (Amendment) Act, 1953 (25 of 1953), which his been noticed by the Supreme Court in its judgment in Habibullah's case, to which I will presently refer. As against these arguments of Mr. Palkivala, Mr. Joshi relied strongly on the decision of the Supreme Court in the case of M. K. Venkatachalam, Income-tax Officer v. Bombay Dyeing and Manufacturing Co. Ltd., to which I have already referred in another context, and if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 Income-tax Officer passed his original assessment order on the 9th of October, 1952, the proviso added by the Amendment Act must be deemed to have already been inserted in the Act as, for all legal purposes, the same must be deemed to have been included in the Act as from 1st April, 1952 (at pages 146-147). The Supreme Court then proceeded to consider the next argument which was urged before it, viz., that the retrospective operation of the relevant provision should not be held to have been intended to affect a completed assessment in the absence of an express enactment or necessary intendment. In regard to that argument, the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the High Court had in the lower court taken a contrary view on construction, nor is there a discussion as to why the retrospective effect provided for in the amending Act should extend to assessments completed before the date of the amendment. Mr. Palkhivala, therefore, contended that the decision of the Supreme Court in the Bombay Dyeing Company's case is a binding authority only in regard to the particular provision, and not for other amending statutes in regard to the extent of retroactivity. I have already made my obser- vations in regard to the first comment and part of the last comment of Mr. Palkhivala in respect of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 Income-tax Officer revised the assessments of the assessee in respect of the said two years, after taking into account his share of the losses as computed in the assessments of the two firms. On application by the deceased assessee's son, the Commissioner held that section 35 had been properly invoked for rectification of the original assessment and he, therefore, rejected that application. On a petition filed in the High Court at Madras under article 226 of the Constitution by the assessee's son, the orders of the Income-tax Officer were quashed, and the revenue authorities thereafter appealed to the Supreme Court. Section 35(1) empowered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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) which was inserted in section 35 by the same amending Act in which the words," after the completion of the corresponding assessment for income-tax (whether before or after the commencement of the Income-tax (Amendment) Act, 1953) " occurred in regard to rectification by reason of the modification of the excess profits tax or the business profits tax payable by the assessee. In the opinion of the Supreme Court, from that clause, it would be reasonable to infer that where the legislature intended to affect completed assessments it had provided for the same in express terms ; and that, as it had not done so in regard to clause (5) added by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtner. 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. It was observed (at page 259) that, therfore, the decision in Habibullah's case was in no way in conflict with the view which, apart from that decision, the Supreme Court took in regard to section 35(5) of the Indian Income-tax Act, 1922. The second decision of the Supreme Court cited by Mr. Joshi for the purpose of explaining the judgment in Habibullah's case was that in the case of Commissioner of Income-tax v. K.S. Rashid in which it was stated (at page 120) that the amendment effected by the addition of section 35(5) of the Indian Income-tax Act, 1922, had no greater retrospective effect than that has been expressly granted to it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the assessment of the firm. It, therefore, held unmistakably that on the completion of an assessment, certain rights accrued which could only be abrogated or curtailed by express words in the amending Act or by the necessary intendment of the words Used therein. Mr. Palkhivala has submitted that the expression "completed assessment" means, completed by the Wealth-tax Officer and that it did not have to be final in the sense that further proceedings were barred. That submission appears to be in consonance with the view taken by the Supreme Court in Habibullah's case, but is contrary to the view taken, by the same court in Bombay Dyein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Palkhivala, instances of this category were the cases of Commissioner of Income-tax v. Dewan Bahadur Ramgopal Mills Ltd. , State of U.P. v. Raja Syed Mohammad Saadat Ali Khan and Commissioner of Income-tax v. Siraw Products Ltd. I do not think it necessary to deal with all these cases. Ironically enough, Mr. Joshi had to debate before us for several hours in order to convince us that the question as to whether a completed assessment was intended to be affected by the amendment in question in the present case, was not debatable at all. As observed by Hegde J. in Volkart Brothers' case (at page 53), a mistake apparent on the record must not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 page 1630). Mr. Joshi submitted that the approach indicated by the Division Bench in the Madras case was the proper approach, and not the one indicated earlier in the Bombay decisions which decisions were followed by me (sitting singly) in Nandlal Mangaram Pamnani's case. One of the cases relied on by me in Pamnani's case was National Rayon Corporation Ltd. v. Income-tax Officer , and the decision of the Division Bench of the Bombay High Court therein has been confirmed by the Supreme Court. With respect, therefore, I am unable to agree that a mistake, which can be ascertained after discussion and debate and sustained argument necessary in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary 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 respondent. As this case is in the nature of a test case on the decision of which a large number of other cases depend, we think that the fair order to make in regard to costs is that each party should bear its own costs of the petition. At this stage, Mr. Joshi applies for a certificate under article 133(a) and (b) of the Constitution for appealing to the Supreme Court. Mr. B. A. Palkhivala opposed that application on the ground that all that we have decided in the present case is that the question is a debatable question, and that cannot be said to be a matter of public importance. We do not accept Mr. Palkhivala's contention as, though that is the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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