Nallasenpathi Sarkarai Mandradiar Vs. Commissioner of Wealth-tax, Madurai - Court Judgment

Ramanujam, J.

1. The assessee in this case seeks a direction from this court to the Income-tax Appellate Tribunal to refer the following five questions :

'(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the order passed under section 27(2) is valid and correct in the eye of law

(ii) Whether the Tribunal was right is holding that the order of the Wealth-tax Officer under section 35 is wrong

(iii) Whether the Tribunal was right in holding that the mistake of fixing the market value of the lands without considering the impact of the Tamil Nadu Land Reforms Act, cannot be rectified under section 35 of the Wealth-tax Act

(iv) Whether the Tribunal was right in holding that the Income-tax Officer did not have jurisdiction under section 35 to rectify the original order

(v) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding and had sufficient materials to hold that the order under section 35 was passed on the basis of fresh materials which were not available at the time of the original assessment ?'

2. The assessee in this case is an individual and he was holding extensive agricultural lands. For the assessment year 1971-72, the wealth-tax assessment was completed adopting the market value of the agricultural lands owned by the assessee. Subsequently, the assessee filed a petition under s. 35 if the W.T. Act requesting the WTO for a rectification on the ground that the adoption of the market value in respect of the agricultural lands was a mistake and that in so far as the lands in excess of the ceiling fixed by the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, are concerned, they have to be valued not on the basis of the market value but on the basis of the compensation which they are likely to get on acquisition under s. 18. This rectification was sought on the basis of the judgment of a single judge of this court in Balakrishnan v. Commr. of Agrl. I.T. : [1972]86ITR263(Mad) , wherein it was held that for the purpose of agricultural income-tax, the lands found to be in excess of the ceiling limit should not be taken into account. But, subsequently, the said decision has been reversed by a Division Bench of this court in Commr. of Agrl. I.T. v. Balakrishnan : [1976]104ITR368(Mad) , wherein the Bench held that so long as s. 18 notification has not been issued, the lands cannot be taken to have been vested with the Government and that, therefore, so long as the acquisition under s. 18 has not taken place, the lands are to be included in the holding of the owner for the purpose of the Agrl. I.T. Act. However, the WTO taking note of the decision in K. S. Balakrishnan v. Commr. Agrl. I.T. : [1972]86ITR263(Mad) , rectified the wealth-tax assessment and substituted the value of compensation fixed at Rs. 71,540 in the place of the market value adopted by him so far as the excess lands were concerned. The CWT thereafter initiated revisional proceedings under s. 25(2) on the ground that the order made by the WTO under s. 35 is erroneous and it is prejudicial to the interests of the Revenue. The Commissioner found in the proceedings initiated under s. 25(2) that the WTO has gone into the question of valuation of the agricultural lands on the basis of fresh materials and there is no case for rectification of the original order of the WTO. The Commissioner also felt that as the compensation amount has not yet been quantified and the quantification also involves a process, the WTO is not justified in adopting a figure as the compensation to be given for the excess lands. So long as there is no acquisition at all by the Government under the provisions of the Tamil Nadu Land Reforms Act, there is no question of the lands being valued on the basis of compensation. The Commissioner also found that the WTO has himself depreciated the value of the excess lands taking into account the fact that in view of the provisions of the Land Reforms Act, the excess lands may not fetch the same price as the lands which are within the ceiling limit. Aggrieved by the decisions of the Commissioner, the assessee filed an appeal before the Tribunal contending that under s. 18 of the Tamil Nadu Land Reforms Act, the notification was published on June 29, 1979, that, therefore, compensation has become payable for the use of the lands from the date of the commencement of the Act and that even though the divesting of the lands is after the valuation date, the lands cannot be valued at the market value by the WTO on a unilateral basis. The Tribunal rejected these contentions observing that the rectification order passed by the WTO under s. 35 is not in order as there is no mistake apparent from the record. The Tribunal also has chosen to rely on the decision of the Supreme Court in T. S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) , in support of the conclusion that the rectification order under s. 35 is wrong and erroneous.

3. Having regard to the facts referred to above, the Commissioner's jurisdiction to initiate proceedings under s. 25(2) cannot be questioned, for, the rectification order of the WTO is based on the decision in K. S. Balakrishnan v. Commr. Agrl. I.T. : [1972]86ITR263(Mad) , which has been subsequently overruled by a Division Bench in Commr. of Agrl. I.T. v. Balakrishnan : [1976]104ITR368(Mad) and, therefore, action is called for under s. 25. Hence, there is no justification for directing a reference on the first question.

4. The other four question set out above deal with the scope and ambit of s. 35 and the question whether the Tribunal is right in holding that the rectification order passed by the WTO is erroneous. As already stated, the WTO, in his original order of assessment, had valued the lands in excess of the ceiling limit fixed under the Tamil Nadu Land Reforms Act at the market value after giving due allowance for the fact that the lands are in excess of the ceiling limit and, therefore, the lands may not fetch the same price as the lands held by the assessee within the ceiling limit. Subsequently, the assessee wanted the WTO to adopt the compensation value for the excess lands which he did in his rectification order following the decision in K. S. Balakrishnan v. Commr. of Agrl. I.T. : [1972]86ITR263(Mad) , without realising that the said decision has been overruled by a Division Bench in Commr. of Agrl. v. Balakrishnan : [1976]104ITR368(Mad) , even before the actual order of rectification was passed. Having regard to the fact that the rectification order was passed on a decision which has been overruled by a Division Bench, the Commissioner has initiated proceedings under s. 25, set aside the rectification order and restored the original order of assessment. This was upheld by the Tribunal. We are of the view that the Tribunal has come to the right conclusion in this case and, on the facts and circumstances of the case, no reference is called for on the other four questions too. The petition is, therefore, dismissed.