D. S. CHENAI v. WEALTH-TAX OFFICER
[Citation -1984-LL-0727-14]

Citation 1984-LL-0727-14
Appellant Name D. S. CHENAI
Respondent Name WEALTH-TAX OFFICER
Court ITAT
Relevant Act Wealth-tax
Date of Order 27/07/1984
Assessment Year 1970-71 to 1974-75
Judgment View Judgment
Keyword Tags mistake apparent from record • additional wealth-tax • immovable property • movable properties • taxable limit • urban asset • estate duty • urban area • net wealth
Bot Summary: 1 9 71-72, the value of the immovable assets held by the assessee similarly was Rs. 6,85,168 and the movable assets was Rs. 16,2 9 ,731. The liabilities eligible as deduction under s. 2(m) of the Act accounted for Rs. 7,06,471 and after deducting those liabilities from the value of the movable assets, the net wealth of the movable assets of the assessee amounted to Rs. 9 ,23,260. 1 9 72-73, the value of the immovable assets of the assessee was Rs. 6,85,168 and the value of the movable assets was Rs. 16,50,774. The learned CWT(A) held, in other words, only in case the value of assets other than urban assets are insufficient to cover the entire liabilities, then only the excess will be eligible for set off against the value of the immovable property constituting urban assets. The only dispute is that all the liabilities must be deducted from the value of the urban asset and if they are so deducted, the value of the urban assets held by the assessee falls below the taxable limit prescribed in Item of Paragraph A of Part I of the Act, relevant to the asst. In determining, for purposes of item of Paragraph A, the value of any urban asset,- any debt incurred for the purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such asset shall be deducted from the gross value of such asset ; other debts which are deductible in computing the net wealth shall be deducted from the gross value of such asset (as reduced by the debts, if any, under cl. 1 9 71-72 to 1 9 74-75 would also show that in order to arrive at the net wealth of the urban assets, such of the debts and the liabilities which exceed the gross value of assets other than urban assets, only are eligible for deduction.


T.V. RAJAGOPALA RAO, J.M.: ORDER Schedule, Rule 2(B)(I) These are five appeals filed by assessee against common order of CWT(A), dt. 28th May, 1 9 83, and they relate to asst. yrs. 1 9 70-71 to 1 9 74-75. point involved is common in all these appeals and, hence, they can be taken up together and disposed of by common order. 2 . assessee is common in all these appeals. He is minor represented by his guardian mother. common question involved in all these appeals is whether there is any mistake apparent from record present in original assessments and in consequential orders passed by WTO while implementing orders of this Tribunal dt. 4th July, 1 9 80 in WT Appeal Nos. 62 to 68 (Hyd.) of 1 9 7 9 . Before coming to grips of matter, it is better to have fair account of events which led to application of s. 35 of WT Act, 1 9 57 ('the Act'). For these five assessment years, originally, assessments were completed on 17th Aug., 1 9 78. Subsequently, appeals were filed against them and ultimately, matters were brought to this Tribunal in WT Appeal Nos. 62 to 68 (Hyd.) of 1 9 7 9 . Some relief was granted to assessee by common orders of this Tribunal passed in those appeals on 4th July, 1 9 80. Consequential orders were passed by WTO redetermining wealth of assessee in pursuance of orders of this Tribunal dt. 4th July, 1 9 80 passed in WT Appeal Nos. 62 to 68 (Hyd.) of 1 9 7 9 . Subsequently, WTO found that urban assets in excess of values specified in Schedule (Part I given under Act) were not charged with additional wealth-tax by mistake. According to WTO, it is mistake apparent from record and as such, he issued notice under s. 35 to assessee calling for his/her objections on 1 9 th Dec., 1 9 81. assessee in his letter dt. 13th Jan., 1 9 82 stated that additional wealth-tax is not chargeable as residue of urban assets was less than taxable limit prescribed for levy of additional wealth-tax. Due to change in incumbent of office of WTO, again notice was issued under s. 35 on 20th July, 1 9 82. assessee sent his/her letter dt. 28th July, 1 9 82, wherein she repeated all grounds which were raised in her letter dt. 13th Jan., 1 9 82. assessment order, date of original assessment order, wealth determined thereunder, date and particulars of orders of Tribunal, wealth determined as per Tribunal's order, date when order under s. 35 was passed, net wealth determined as per rectificatory order and date of CWT(A) now assailed before us, are all given in tabular form as under : Assessment "1. 1 9 70-71 1 9 71-72 1 9 72-73 1 9 73-74 1 9 74-75 year Date of 17th 17th 17th 17th 17th 2. original Aug., 1 9 78 Aug., 1 9 78 Aug., 1 9 78 Aug., 1 9 78 Aug., 1 9 78 assessment Wealth 1 9 , 9 23, 9 23,4 9 3. 18,67,473 26,47,355 determined : ,218 4,577 ,256 Date of 4th July, 4th July, 4th July, 4th July, 4th July, 4. Tribunal's order 1 9 80 in WT 1 9 80 in WT 1 9 80 in WT 1 9 80 in WT 1 9 80 in WT Appeal Appeal Appeal Appeal Appeal Tribunal's No. 62 to 68 No. 62 to 68 No. 62 to 68 No. 62 to 68 No. 62 to 68 reference No. (Hyd.) of 1 9 7 (Hyd.) of 1 9 7 (Hyd.) of 1 9 7 (Hyd.) of 1 9 7 (Hyd.) of 1 9 7 9 9 9 9 9 Wealth deter mined as 16,65,3 9 5. 15,75,328 20,74,605 30,40,151 23,72,401 5. 15,75,328 20,74,605 30,40,151 23,72,401 per Tribunal's 8 order Date when order was passed 31st July, 31st July, 31st July, 31st July, 31st July, 6. under s. 35 of 1 9 82 1 9 82 1 9 82 1 9 82 1 9 82 WT Act Net wealth Rs. determined 15,66,8 9 7. 17,22,473 20,52,442 20,18,680 23,57,125 as per 7 rectification Date of 28th May, 28th May, 28th May, 28th May, 28th May, 8. AAC/ CIT (A)'s 1 9 83 1 9 83 1 9 83 1 9 83 1 9 83" order For asst. yr. 1 9 70-71, out of net wealth value of immovable assets of assessee accounted for Rs. 6,60,168 and movable assets for Rs. 13,28,67 9 . total of liabilities eligible for deduction, in order to arrive at net wealth, amounted to Rs. 3,00,728. After deducting liability from value of movable assets, net wealth of assessee in movable assets amounted to Rs. 10,27, 9 51. For asst. yr. 1 9 71-72, value of immovable assets held by assessee similarly was Rs. 6,85,168 and movable assets was Rs. 16,2 9 ,731. liabilities eligible as deduction under s. 2(m) of Act accounted for Rs. 7,06,471 and after deducting those liabilities from value of movable assets, net wealth of movable assets of assessee amounted to Rs. 9 ,23,260. So also, for asst. yr. 1 9 72-73, value of immovable assets of assessee was Rs. 6,85,168 and value of movable assets was Rs. 16,50,774. liabilities eligible for deduction under s. 2(m) amounted to Rs. 1, 9 2, 99 7 and so after deducting liabilities from value of movables, net wealth of movable assets of assessee came to Rs. 14,57, 9 77. So also, for asst. yr. 1 9 73-74, total value of immovable assets stood at Rs. 5,42,56 9 and movable assets at Rs. 17, 9 6,336. eligible deductions were of value of Rs. 2,40,355. Thus, after deducting liabilities from value of movables, net wealth of movable assets stood at Rs. 15,55, 9 81. For asst. yr. 1 9 74-75, value of immovable assets amounted to Rs. 5,42,568 and that of movable assets at Rs. 20, 99 ,713. liabilities eligible for deduction under s. 2(m) came to Rs. 1,85,327. After deducting liabilities from total value of movable assets, net wealth of assessee in movable assets came to Rs. 1 9 ,14,386. In objection letter filed by assessee on 13th Jan., 1 9 82 which objections were reiterated on 28th July, 1 9 82, it is stated that additional wealth-tax is not chargeable as residue of urban asset was less than taxable limit set out for levy of additional wealth-tax. According to WTO, only point of difference between him and assessee is whether liabilities like estate duty, income-tax and wealth-tax are to be deducted from out of value of immovable assets or movable assets. assessee is of view that said liabilities are to be deducted from out of immovable assets whereas in each of rectificatory orders dt. 31st July, 1 9 82, WTO took view that said liabilities are to be deducted from out of movable assets. Therefore, he proceeded to levy additional wealth-tax on movable assets whose value exceeded taxable limit set out for levy of additional wealth-tax. WTO in his rectificatory orders, determined net wealth of immovable properties for purposes of levy of additional wealth-tax and figures given in Sl. No. 7 of statement furnished above disclosed figures of net wealth arrived at by him for purposes of levy of additional wealth-tax. Thus, WTO levied additional wealth-tax of Rs. 601 for asst. yr. 1 9 70-71, Rs. 9 ,255 for asst. yr. 1 9 71-72, Rs. 9 ,255 for asst. yr. 1 9 72-73, Rs. 2,125 for asst. yr. 1 9 73-74 and Rs. 2,125 for asst. yr. 1 9 74-75. Aggrieved against rectificatory orders passed by WTO dt. 31st July, 1 9 82, assessee went in appeal before CIT(A). 3 . It is contended before learned CWT(A) that WTO should have held that no additional wealth-tax can be levied and order under s. 35 cannot be passed as there was no mistake apparent from record. According to assessee, there was no patent or self-evident error which could be rectified under s. 35. WTO, according to assessee, assumed jurisdiction without all conditions laid down under s. 35 being fulfilled. According to assessee, error, if any, could be found out only by long-drawn process of reasoning on legal point on which there are possibly two opinions. According to assessee, WTO erred in holding that liabilities are not deductible from value of immovable assets for arriving at net wealth. It is also contended that instead of deleting amount of Rs. 3,00,727, WTO deleted only Rs. 2,47,727 towards liabilities for asst. yr. 1 9 70-71. Before CWT(A), reliance was placed upon decision of Supreme Court in T.S. Balaram, ITO vs. Volkart Bros. (1 9 71) 82 ITR 50 (SC), Kerala High Court in Abdul Rahim Haji Jacob Sait. vs. CIT (1 9 73) 87 ITR 183 (Ker) and Calcutta High Court in CIT vs. New Central Jute Mills Co. Ltd. (1 9 76) 105 ITR 262 (Cal) in support of proposition that debatable point of law does not represent mistake apparent from record and for proposition that mistake cannot be taken to be apparent from record, if it has to be established by long-drawn process of reasoning on points on which there may conceivably be two opinions. learned CWT(A) held that criteria laid down in above decisions has to be applied in light of relevant provisions of WT Act which are dealt with in rectificatory proceedings. He extracted relevant clauses from Finance Act, applicable for asst. yr. 1 9 70-71. CWT(A) held that as far as asst. yr. 1 9 70-71 is concerned, no set off of any kind whatever has been provided against value of immovable property which is to be considered for levy of additional wealth-tax as per r. 2 of Paragraph B of Part I of Act. Therefore, he concluded as follows : "I am afraid, in absence of any restrictions placed in matter of arriving at value of such immovable property, it can never be said that such value will be subject to deduction of certain liabilities." As regards other four years involved, he said that in those years term 'value' has been defined in r. 2 of Paragraph B of Part I to be amount after deducting any debts which are incurred for purpose of acquiring, improving, reconstructing, etc., of such asset or property. Also other debts are deductible, provided amounts thereof exceed value of assets other than immovable property. learned CWT(A) held, in other words, only in case value of assets other than urban assets are insufficient to cover entire liabilities, then only excess will be eligible for set off against value of immovable property constituting urban assets. learned CWT(A) was of opinion that provisions quoted in his impugned order for asst. yr. 1 9 70- 71 and provisions noted by him for asst. yrs. 1 9 71-72 to 1 9 74-75 are so obvious and patent that it cannot be said to admit of any ambiguity. He stressed in his impugned orders that ratio of decisions cited before him have always to be applied in context of provisions, which were subject-matter of rectification. He pointed out classic exposition made about scope of rectification under taxation law in T.S. Rajam vs. CED (1 9 68) 6 9 ITR 342 (Mad.), where it is said : "....The essence of rectification is to bring order which was expressed and intended to be in pursuance of existing law, into harmony with such law. It presupposes particular state of affairs and it requires proof that by such mistake final order fails to give proper effect of law and its functions. Once Tribunal or authority is able to predicate with certainty as to in what manner and how order suffers by mistake apparent on its record supported by irrevertiable evidence, then it would indeed enable them to bring order complained against or impugned against in conformity with law and facts in record." According to CWT(A), there was absolutely no warrant for assumption that value has to be taken at net figure after deducting all liabilities as claimed by assessee before him. Thus, he dismissed appeals filed before him. 4 . Aggrieved against impugned common order of CWT(A), second appeals are brought before this Tribunal and, thus, matters stand for our consideration. We have heard Shri P. Muralikrishna, learned counsel for assessee, and Shri C. Satyanarayana, learned senior Departmental Representative. In grounds filed before this Tribunal, assessee had taken stand that no additional wealth-tax is levied by passing order under s. 35 as there was no mistake apparent from record. It is also contended that WTO assumed jurisdiction under s. 35 without requirements of law being satisfied. According to him, there was no mistake apparent from record and that learned CWT(A) justified action of WTO by long-drawn process of reasoning and by taking particular legal view of matter rejecting another possible view. According to him, CWT(A) erred in holding that provisions governing levy of additional wealth-tax are obvious and patent. assessee also contended that CWT(A) went wrong in upholding view of WTO that no liabilities are deductible from value of immovable assets for levy of additional wealth-tax. analogy drawn from Supreme Court decision in Cloth Traders (P.) Ltd. vs. Addl. CIT (1 9 7 9 ) 10 CTR (SC) 3 9 3 : (1 9 7 9 ) 11 8 ITR 243 (SC) for concluding that additional wealth-tax is leviable on gross value of urban assets and liabilities are not deductible, is erroneous. At time of hearing, Shri P. Muralikrishna, learned counsel for assessee, filed order of 'A' Bench of this Tribunal in WT Appeal Nos. 22 9 to 233 (Hyd.) of 1 9 76-77, dt. 24th Jan., 1 9 78. He also filed note noting down his propositions and authorities in support of propositions. He contended that even if there is slightest possibility of controversy, rectification under s. 35 is not possible. In support of proposition, Shri Muralikrishna relied on following decisions : Nandlal Mangaram Pamnani vs. G. Lakshminarasimhan (1 9 71) 82 ITR 1 (Bom), National Rayon Corpn. Ltd. vs. G.R. Bahmani, ITO (1 9 65) 56 ITR 11 4 (Bom), Nilgiris Potato Growers Co-op. Marketing Society Ltd. vs. CIT 1 9 77 CTR (Mad) 58 : (1 9 78) 11 1 ITR 375 (Mad.), New Central Jute Mills Co. Ltd.'s case (supra) and Jeewanlal (1 9 2 9 ) Ltd. vs. ITO (1 9 7 9 ) 11 8 ITR 9 46 (Cal.). As against this, learned Departmental Representative had chosen to bring to our notice provisions contained in Part 1, Paragraph A(3) and r. 2 of Paragraph B of Finance Acts, relating to asst. yrs. 1 9 71-72, 1 9 72-73, 1 9 73-74 and 1 9 74-75. 5. It is essential for us to note contents of these Finance Acts in order to appreciate real point in controversy. As far as asst. yr. 1 9 70-71 is concerned, in Paragraph of Part 1, there are three slabs of rates mentioned. first slab relates to individual. second slab relates to HUF. third slab relates to either individual or HUF, where net wealth of either of them includes value of any asset, being building or land (other than business premises) or any right in such building or land, situated in urban area (such asset being hereinafter referred in this part as urban asset). In short, this para 3 refers to rates of tax applicable to individual or HUF, who happened to hold urban asset. In this slab, we find that if value of urban asset does not exceed Rs. 5 lakhs, then no tax is leviable. But if value of urban asset is between Rs. 5 lakhs and Rs. 10 lakhs, tax prescribed was 5 per cent of amount by which such total value exceeds Rs. 5 lakhs. According to said para, 'urban asset' means either building or land or any right in building or land situated in urban area. words 'urban area' is defined in rule I of Paragraph B. It includes area which is comprised within jurisdiction of municipal corporation which has population of not less than 10,000 according to last preceding census of which relevant figures have been published before valuation date. It is not disputed in this case that immovable asset held by assessee was urban asset. only dispute is that all liabilities must be deducted from value of urban asset and if they are so deducted, value of urban assets held by assessee falls below taxable limit prescribed in Item (3) of Paragraph of Part I of Act, relevant to asst. yr. 1 9 70-71. Now question is whether all liabilities can be deducted from out of value of urban asset. Net wealth can be determined only under s. 2(m). It is no doubt true that some liabilities, whose nature is mentioned in that provision, are entitled to be excluded before net wealth is arrived at. Now, in this case, point of dispute cannot more pithily be put by us than WTO who stated that dispute is that liabilities like estate duty, income-tax and wealth-tax whether to be deducted from out of immovable assets or movable assets. When this is only area of difference, we feel that we can resolve it with reference to r. 2 in Paragraph B of Part I of Act, which, is extracted as under : "2. In determining, for purposes of item (3) of Paragraph A, value of any urban asset,-- (a) any debt (whether secured or not) incurred for purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such asset shall be deducted from gross value of such asset ; (b) other debts which are deductible in computing net wealth shall be deducted from gross value of such asset (as reduced by debts, if any, under cl. (a)) only if, and to extent that, such debts exceed aggregate gross value of assets other than urban asset." According to us, only above liabilities are to be deducted in manner shown above. It is not stated that any of liabilities represent debts, secured or unsecured, incurred by assessee for purposes of acquiring, improving, constructing, repairing, renewing or reconstructing any of urban asset held by him. If there is no such debt, then other debts could be excluded only if total amount of such debts exceed aggregate gross value of assets other than urban asset. Now, in this case, it cannot be argued by any stretch of imagination that movable assets held by assessee are part of urban assets. Therefore, it is clear that unless liabilities exceed or exhaust full value of worth of movable properties held by assessee, then only excess can be deducted from out of gross value of urban asset. According to us, there is no ambiguity in rule and there is no possibility of getting two meanings out of it. terms of rule are very clear and do not give scope to any argument or for plausible opposite view of matter. 6 . For asst. yr. 1 9 71-72, again r. 2 of Paragraph B of Part I of rates of wealth-tax, provided under relevant Finance Act, clearly lays down what categories of debts and liabilities are deductible from value of urban asset. Rule 2 framed for asst. yr. 1 9 71-72 is as follows : "In determining, for purposes of item (3) of Paragraph A, value of any urban asset,-- (a) any debt (whether secured or not) incurred for purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such asset shall be deducted from gross value of such asset ; (b) other debts which are deductible in computing net wealth shall be deducted from gross value of such asset (as reduced by debts, if any, under cl. (a)) only if, and to extent that, such debts exceed aggregate gross value of assets other than urban assets." So also, r. 2 of Paragraph B of Part I for asst. yr. 1 9 72-73 reads as follows : "In determining, for purposes of item (2) of Paragraph A, value of any urban asset, (a) any debt (whether secured or not) incurred for purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such asset shall be deducted from gross value of such asset ; (b) other debts which are deductible in computing net wealth shall be deducted from gross value of such asset (as reduced by debts, if any, under cl. (a)) only if, and to extent that, such debts exceed aggregate gross value of assets other than urban assets." So also r. 2 of Paragraph B of Part I of Schedule of rates of wealth-tax, relevant to asst. yr. 1 9 74-75, reads as follows : "In determining, for purposes of item (2) of Paragraph A, value of any urban asset,-- (a) any debt (whether secured or not) incurred for purpose of acquiring, improving, constructing, repairing, renewing or reconstructing such asset shall be deducted from gross value of such asset ; (b) other debts which are deductible in computing net wealth shall be deducted from gross value of such asset (as reduced by debts, if any, under cl. (a)) only if, and to extent that, such debts exceed aggregate gross value of assets other than urban assets." relevant provisions for asst. yrs. 1 9 71-72 to 1 9 74-75 would also show that in order to arrive at net wealth of urban assets, such of debts and liabilities which exceed gross value of assets other than urban assets, only are eligible for deduction. That means before claiming deduction from gross value of urban assets, whole gross value of assets other than urban assets should be exhausted. To apply it to facts of our case, if liabilities claimed deduction or exclusion liquidates value of whole of movable property held by assessee, remaining liabilities only are entitled to be deducted from out of urban assets. However, it can be seen in none of years under consideration, liabilities exceed value of movable properties held by assessee. Therefore, firstly, claim of assessee that he is entitled to deduct liabilities from urban assets held by him is utterly untenable. Secondly, assessee claimed that WTO went wrong in excluding liabilities only from value of movable properties held by him is also not correct and against fair reading of provisions of r. 2 of Paragraph B of Part I of rates of wealth-tax prescribed for these five years under consideration. Further, it is not case of assessee that question of levy of additional wealth-tax for assets held by assessee was considered in original assessments for any of assessment years under consideration. When applicable provision of law is left out without being applied, in our opinion, order which suffers from non-applicability of relevant provision of law suffers from apparent mistake which is liable to be rectified under s. 35. So, in such case, we are not able to accede to argument that assumption of jurisdiction by WTO itself is wrong. Under circumstances, we are not convinced with any of arguments advanced on behalf of assessee. We do not feel that case law cited on behalf of assessee has any relevance, much less application to facts and circumstances of this case and, hence, we felt that it is burdening record unnecessarily if we discuss them threadbare. Therefore, we avoided it. In result, these appeals are dismissed. *** D. S. CHENAI v. WEALTH-TAX OFFICER
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