1. These appeals are filed by the assessee and they are directed against the consolidated order of CWT(A) dt. 12th May, 2006 for asst.
yrs. 1993-94, 1994-95 and 1995-96.
2. One of the business activities of the assessee is property development which is carried on under the name and style of proprietary concern M/s Krishna Organizers. For the years under consideration, the value/cost of said property including the value of land stood at Rs. 22,48,754 and such value was included by the assessee under the head immovable property in the WT returns for the years under consideration and tax has been paid accordingly. The narration while including such value in the computation of net wealth is as under:Land Rs. 5,53,162Construction Rs. 16,95,591 Rs. 22,49,753 Later on assessee found that the said property being stock-in-trade was not coming within the purview of definition of asset as given in Section 2(ea) of WT Act, 1957. Accordingly the assessee filed application under Section 35 of the WT Act for the years under consideration claiming therein that the said property was not an "asset" within the meaning of Section 2(ea) of the Act and thus there was a mistake in the computation of net wealth by the assessee which is required to be rectified under the provisions of Section 35 of the Act.
The application filed by the assessee was rejected with the following observations: In this case, the assessee filed a WT return for asst. yr. 1993-94 showing total wealth of Rs. 29,26,675. Subsequently, the assessee filed application dt. 19th July, 1997 and 11th Dec, 2004 under Section 35 of the WT Act stating that the value of a property at Pipla Sheri Mahidharpura, Surat amounting to Rs. 22,48,753 was wrongly included in the list of taxable assets.
2. On going through the application of the assessee, it is observed that the mistake pointed out by the assesseo is not apparent from the records and the same does not fall under the purview of the Section 35 of the WT Act, 1957. Under the circumstances, the application of the assessee is hereby rejected.
The assessee filed appeals for the years under consideration before CWT(A) who has upheld the orders passed by AO as per following observations: 5. It is contended by the learned Authorised Representative that the appellant is engaged in the business of construction in his proprietary concern, M/s Krishna Organizers, and that the aforesaid property constituted the stock-in-trade of the appellant. It is further contended that, in the copies of the balance sheets of M/s Krishna Organizers for the relevant periods, which were filed along with the WT returns, it was specifically mentioned that the value of the said property of Rs. 22,48,754 was held for business, i.e.
stock-in-trade. It is, however, stated that while filing the WT returns for the asst. yrs. 1993-94 to 1995-96 the said property was omitted to be claimed as exempt. According to the learned Authorised Representative, w.e.f. 1st April, 1993 any house for residential or commercial purposes which forms part of stock-in-trade was not to be included in the 'assets', as per the definition of assets laid down in Section 2(ea) of the WT Act. It is argued by him that, as the aforesaid mistake was apparent from the records, it clearly fell within the purview of Section 35 of the Act. It is further contended that the WTO has not considered the factual position of the case and has rejected the applications for rectification filed by the appellant without even mentioning any reasons for such rejection.
6. I have carefully considered the facts of the case and the submissions made by the learned Authorised Representative. In accordance with the provisions of Section 2(ea) of the WT Act w.e.f.
1st April, 1993 'any house for residential purposes which forms part of stock-in-trade' was not included in the definition of 'assets' stipulated in the said section. The insertion of the words 'or commercial' in the aforesaid clause was effective from 1st April, 1997 only and, as such would not be applicable to the assessment years under consideration. The contention of the appellant that any house for 'residential or commercial purposes' was exempt under Section 2(ea) w.e.f. 1st April, 1993 is thus not found to be correct in accordance with the provisions of the law. On perusal of the relevant assessment records, it is further seen that there is no mention in the returns or in the computation of wealth or in the balance sheets of M/s Krishna Organizers as to whether the said property, held as the appellant's stock-in-trade, was for 'residential purposes' or not. The claim of the appellant that the said property was exempt under Section 2(ea) as it stood at the relevant point of time, is thus not apparent from the records. The contention of the appellant that his aforesaid claim for exemption was rectifiable under Section 35 of the Act inasmuch as the same was apparent from the records is, therefore, not found to be correct as the facts in regard to the said property being for 'residential' or for 'commercial' purposes are not apparent from the facts available on the records or from the details filed by the appellant with his returns of wealth. In the above facts of the case, the mistake, as contended by the appellant, clearly did not fall within the purview of Section 35 of the1 Act. The action of the AO in rejecting the aforesaid application for rectification filed under Section 35 of the Act by the appellant is, therefore, found to be in order and no interference therein is called for.
3. Our attention was drawn to the submissions made before CWT(A), a copy of which is placed at pp. 1 to 8 of the paper book. In the said submissions it has been pointed out that the relevant property namely 6/2170-71, Pipla Sheri, Mahidharpura, Surat was included in the list of taxable assets whereas in the computation sheet it was specifically mentioned that the value is shown at cost as per sheet-EL Sheet-HI is the copy of balance sheet of M/s Krishna Organizers in which it has specifically been mentioned that the said property has been held as business i.e. stock-in-trade. It was pleaded that where the assessee omits to claim relief allowable to him under the provisions of the Act the assessee is entitled to get relief and for this purpose reliance was placed on the following decisions before CWT(A): (iii) West Bengal State Warehousing Corporation v. CIT .
4. Our attention was also drawn to the application filed before AO dt.
19th July, 1997 a copy of which has been placed for the years under consideration at pp. 9 to 14 of the paper book wherein it has been claimed that in the balance sheet of M/s Krishna Organizers it was specifically mentioned that the property was held by assessee as business and thus it was a stock-in-trade not liable for wealth-tax.
5. Our attention was drawn to the acknowledgement of returns, statement of wealth, documents submitted along with said return, copies of which have been placed from pp. 15 to 43 for all the three years to show that the said property was shown as business property in the documents submitted along with returns. Referring to these documents it was pleaded that the application of assessee under Section 35 has wrongly been rejected, therefore, the claim of assessee should be accepted.
6. On the other hand, learned Departmental Representative relied on the orders of AO and CIT(A). He pleaded that there was no apparent mistake from record as the assessment was made according to the return filed by the assessee and the latter claim of the assessee cannot be accepted being inconsistent with the computation of wealth. Thus it was pleaded that order of CIT(A) should be upheld.7. We have carefully considered the rival submissions in the light of material placed before us. It is the policy of the Department that its officer should not take advantage of ignorance of an assessee as to his rights and it is one of the duties of the officers of the Department to assess the taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard, the officers should take initiative in guiding the taxpayers wherever proceedings or other opportunities indicate that some refund or relief is due to him.
This attitude, according to the Revenue Department would in the long run benefit the Department as the same will inspire confidence in the assessee that he may be sure of getting a square deal from the Department. This policy has been envisaged in Circular No. 14 (XL-35) of 1955 dt. 11th April, 1955. Referring to the abovementioned circular Hon'ble Gujarat High Court in the case of Chokshi Metal Refinery v. CIT has observed as under: Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department, for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with the assessees on whom it is imposed by law, officers should- (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.' (Circular No. 14 (XL-35) of 1955 dt. 11th April, 1955).
In connection with the effect of such circular, Mr. Shah relied upon the decision of the Supreme Court in Navnit Lai C. Javeri v. K.K. Sen, AAC (1965) 56 H'R 198 (SC). There the majority of the learned Judges hearing the appeal held that circulars issued by the Central Board of Revenue, of the kind of circular mentioned therein, would be binding on all officers and persons employed in the execution of the IT Act, under Section 5(8) of the Act. In the light of this decision of the Supreme Court, Mr. Shah contended, that it was obligatory on the ITO when he originally heard the assessment proceedings to draw the attention of the assessee in the instant case to any refunds or reliefs including the relief under Section 84 and Section 80J for the relevant assessment year to which the assessee appeared to be clearly entitled but which the assessee had omitted to claim for some reason or other. It is perfectly true, as Mr. Shah contends, that if the facts set out by the assessee in the applications to the ITO claiming relief by way of rectification, being two applications of 20th Feb., 1970, were already on the record of the ITO at the time of the original assessment, the assessee would be entitled to relief under Section 80J and in view of this circular, it was obligatory on the part of the ITO to draw the attention of the assessee to the relief under Section 80J.Thus there cannot be any dispute to the proposition that if the basis and relevant material is on record to claim/support the exemption/deduction, it is the duty of AO to guide the assessee to enable him to claim such deduction/exemption and if it is not so granted assessee will be entitled to get it by way of rectification.
8. Relying on the above decision of Hon'ble Gujarat High Court, Hon'ble Madhya Pradesh High Court in the case of C1T v. KM Oil Industries (supra) accepted such proposition that in a case where basic facts/material is available on record to support the claim, the same could be accepted by way of rectification. It will be relevant to reproduce following observations from the said decision: On the facts and circumstances of the case, though the assessee had not claimed relief under Section 35B of the IT Act in the original assessment proceedings, if it is apparent from the record that the assessee was entitled to relief admissible under Section 35B of the IT Act, can the relief be granted by an order under Section 154 of the IT Act by rectifying the assessment? The facts briefly stated are that in the assessment proceedings for the asst. yr. 1972-73 the assessee did not claim export markets development allowance under Section 35B of the IT Act, 1961. The ITO started rectification proceedings under Section 154 for correcting an error in the grant of rebate under Section 80J. In those proceedings the assessee contended that there was an apparent error in not allowing to it the relief under Section 35B. The ITO refused to go into this question on the ground that no such claim was made in the return or in the assessment proceedings by the assessee. The AAC, however, held in favour of the assessee that there was an apparent error in not granting the relief under Section 35B even though it was not claimed in the return. In further appeal before the Tribunal, the argument of the Department was that the assessee having omitted to claim the relief under Section 35B in the return, it was not open to it to claim that relief under Section 154 after the assessment was made. This argument was not accepted by the Tribunal. In the opinion of the Tribunal, the jurisdiction to interfere under Section 154 arose when it was found that there was mistake apparent from the record in the relevant order and in deciding whether there was an apparent mistake the ITO was not confined to the return and he could look to the entire material available in the record of the assessment. The Tribunal, therefore, held that it was open to the ITO to assume jurisdiction under Section 154 if it was apparent from the record of assessment that there was a mistake in not granting relief under Section 35B although the said relief was not claimed in the return. It is the correctness of this view which we have to examine in this reference.
The learned standing counsel for the Department placed reliance upon Anchor Pressings (P) Ltd. v. CIT , Sharda Prasad v. CIT and Paramount Trading Corporation v. ITO under Section 35B was claimed by the assessee in the return, the mistake in not granting the relief could not be apparent and could not be corrected under Section 154. These cases which were decided by the Allahabad High Court do support the submission of the learned counsel. But, with great respect, we are unable to agree with the view taken in them. The record of the assessment is not confined to the return. Section 154 which confers jurisdiction for rectifying mistake enables the ITO to assume jurisdiction when he finds 'any mistake apparent from the record'. The word 'record' as used in Section 154 will include all that material which forms part of the assessment proceedings and not only the return. It is also not correct to say that if the assessee omits to claim a relief allowable to him under the provisions of the IT Act, he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment. This duty has been highlighted by a circular issued by the CBR. For these reasons, the Gujarat High Court in Chokshi Metal Refinery v. CIT, dissented from the view taken by the Allahabad High Court in the aforesaid cases and held that if it is apparent from the record of assessment that the assessee was entitled to a particular relief, the ITO can rectify that mistake under Section 154 although the said relief was not claimed by the assessee in the return. We respectfully agree with the view taken by the Gujarat High Court.
The learned Counsel for the Department submitted before us that even otherwise the conclusion that the assessee was entitled to the relief under Section 35B was not apparent from the record. We cannot examine this submission because the question referred has to be answered on the assumption that it was apparent from the record that the assessee was entitled to the relief under Section 35B. If it is apparent from the record that the assessee was entitled to relief admissible under Section 35B, that relief can be granted to him by an order under Section 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings.
9. Now coming to the facts of the present case. We have to determine that whether the basic facts/material is available on record to support such contention. It will be relevant to reproduce Section 2(ea): Section 2(ea) : "assets", in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means- (i) any guest house and any residential house [including a farmhouse situated within twenty-five kilometers from the local limits of any municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board], but does not include- (1) a house meant exclusively for residential purposes and which is allotted by a company to an employee or an officer or a director who is in whole-time employment, having a gross annual salary of less than two lakh rupees; (2) any house for residential purposes which forms part of stock-in-trade; (ii) motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade); (iii) jewellery, bullion, furniture, utensils or any other article made wholly or partly of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals: Provided that where any of the said assets is used by the assessee as stock-in-trade such asset shall be deemed as excluded from the assets specified in this sub-clause; (iv) yachts, boats and aircrafts (other than those used by the assessee for commercial purposes); (vi) cash in hand, in excess of fifty thousand rupees, of individuals and HUFs and in the case of other persons any amount not recorded in the books of account.
From the above definition the relevant property, which can be taxed, can be taxed under Clause (i) only. If the property is held by assessee as its business, then it is not a guest house or a residential house.
Even if it is treated as a house it cannot be taxed if the same is stock-in-trade. According to the balance sheet of M/s Krishna Organizers under which the relevant property has been held by the assessee, the property is held as business property. If it is not a guest house or residential house as already mentioned it cannot be assessed as an "asset" within the meaning of Section 2(ea) of the Act and in case it is considered a house for residential purpose it will come within the exception as the same is forming part of stock-in-trade. Thus by placing the balance sheet on record in which property has been specifically mentioned to be held as business property, material/facts were there in the WT return itself to support the claim of assessee. According to the abovementioned circular a duty has been cast upon the officer of the Department to assess the taxpayer in the matter of claiming and securing relief and the same has not been discharged, therefore, it was desirable to accept the application of the assessee under, Section 35 of the Act even according to the abovementioned decisions in the cases of Chokshi Metal Refinery v. C1T (supra) and CIT v. K.N. Oil Industries (supra). The Department cannot shut the door of the assessee to prove that the claim of assessee is in accordance with law by merely rejecting the claim of assessee on the ground that there is no mistake apparent from record, therefore, the claim of assessee cannot be accepted. In our considered opinion, in the interest of justice the assessee should be given an opportunity to prove its claim on merits instead of rejecting the claim of assessee on the face of it. Therefore, we restore the issue to the file of AO with direction to examine the claim of assessee on merits as per provisions of law and then pass a speaking order regarding exclusion or otherwise of the said property from assessable wealth. We direct accordingly.
10. In the result, for statistical purposes all the appeals are allowed.