Kerala H.C : Whether, on the facts and in the circumstances of the case, the order of rectification passed by the WTO is valid in law ?

Counsel Appeared

P. K. R. Menon, for the Revenue : N. Sreenivasan, for the Assessee

T. KOCHU THOMMEN, J.:

The following question has been, at the instance of the Revenue, referred to us by the Income-tax Tribunal, Cochin Bench:

“Whether, on the facts and in the circumstances of the case, the order of rectification passed by the WTO is valid in law ? “

The net wealth of the assessee had been determined at Rs. 2,09,34,600 by order dt. 4th Oct., 1977. While completing the assessment, it was noticed that a sum of Rs. 75,000, being the value of investment in National Defence and Defence Deposit Certificates, had been inadvertently excluded from the returns filed by the assessee. Accordingly, the assessment was rectified under s. 35 of the WT Act, 1957, so as to include in the total wealth of the assessee the said sum of Rs. 75,000. The assessee then claimed exemption in respect of that amount in terms of s. 5(1)(xvi) of the WT Act. This claim was rejected for the reason that exemption up to Rs. 1,50,000 had already been granted in respect of the same year. The assessee’s claim for the benefit of the proviso to sub-s. (1A) of s. 5 was rejected by the assessing authority. The assessee appealed against that order. The AAC accepted the assessee’s contention and set aside the order made under s. 35. On appeal by the Revenue, the Tribunal affirmed the order of the AAC.

The rectification under s. 35 was made by the assessing authority by annexure B order for the reason that, on the admission of the assessee himself, a sum of Rs. 75,000, though inadvertently, had been excluded from the return filed. That rectification was, therefore, warranted and valid. The contention of the assessee, however, is that, as a result of the rectification, the said sum included by the assessing authority ought to be taken into account, in terms of s. 5, for the purpose of exemption in computing the net wealth. It was that contention which was rejected by the assessing authority, but accepted by the appellate authorities, although their orders seem to show that what they reversed was the order of rectification. The order of rectification, in our view, was beyond challenge, for it was on the representation of the assessee himself that the omission of Rs. 75,000 was accepted as a bona fide and inadvertent mistake. It cannot be disputed that that was an amount which was liable to be included in the returns of the total wealth.

Counsel for the assessee, however, submits that the assessing authority was not justified in refusing to allow the exemption beyond Rs. 1,50,000 because the Tribunal had already held in the proceedings of the earlier years that, even when the value of the investment exceeded Rs. 1,50,000, the assessee was entitled to exemption beyond that limit. That decision held the field at the relevant time, although this Court, in a subsequent decision, declared the law to the contrary.

The view expressed by the Tribunal was no longer the correct view after the decision of this Court in CWT vs. H. H. Sethu Parvathi Bayi 1978 CTR (Ker) 168 : (1979) 116 ITR 135 (Ker). In the light of that subsequent decision whereby this Court declared what the law was at the relevant time, the view of the assessing authority, although opposed to that of the Tribunal, became the right view at the relevant time.

In the light, of the facts stated earlier, there is no justification in the contention that the rectification made by the assessing authority was wrong. Consequent on that rectification by the inclusion of the amount of Rs. 75,000, the assessing authority rightly refused to grant exemption on a correct understanding of the law.

Accordingly, we answer the question in the affirmative, that is, in favour of the Revenue and against the assessee. We direct the parties to bear their respective costs in these tax referred cases.

A copy of this judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Tribunal, Cochin Bench.

[Citation : 169 ITR 273]