DEPUTY COMMISSIONER OF WEALTH TAX Vs. KIRANKUMAR J PATEL
INCOME TAX APPELLATE TRIBUNAL
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B. M. KOTHARI, A. M. : -
(1.) THE Department has submitted this miscellaneous application requiring the Tribunal to rectify its earlier order in view of a subsequent judgment of the Honble Supreme Court in the case of Bharat Hari Singhania vs. CWT (1994) 207 ITR 1 (SC) : (1994) 73 Taxman 3 (SC) in which the decision of the Gujarat High Court in the case of CWT vs. Ashok K. Parikh (1981) 129 ITR 46 (Guj) is stated to have been reversed. THE Honble Supreme Court has given its decision against the assessee and in favour of the Revenue on identical point decided in the case of Ashok K. Parikh (supra).
(2.) The learned Departmental Representative strongly relied on the judgment of Honble Supreme Court and contended that the view taken by the Gujarat High Court in the case of Ashok K. Parikh (supra) had been reversed by the Supreme Court in the above referred judgment. The subsequent judgment of the Apex Court is a valid basis justifying rectification of an order passed at an anterior point of time.
The learned counsel for the assessee submitted that SLP in the case of Ashok K. Parikh (supra) is still pending before the Honble Supreme Court. A decision in some other case will not amount to overruling of the judgment of Honble Gujarat High Court the case of Ashok K. Parikh. (supra) Furthermore, subsequent judgment of the Apex Court cannot lead to the conclusion that the order when made by the Tribunal was an erroneous order. He placed reliance on judgment in the case of Jiyajeerao Cotton Mills Ltd. vs. ITO (1981) 130 ITR 710 (Cal). SLP against the said judgment has been dismissed by the Honble Supreme Court as reported in (1984) 142 ITR 2 (St). The learned counsel for the assessee further submitted that the first debate or controversy in a situation like this would be that whether under such facts an order passed by the Tribunal by following the judgment of jurisdictional High Court is covered within the ambit of the scope of rectification provisions contained in s. 254(2) or not. The second debate will be as to whether under the facts and circumstances of particular case there would be a need of fresh investigation of facts or not and whether the same would be covered within the scope of such a rectification provision. He submitted that both these aspects are highly debatable. It is well settled law that debatable points of law or the matter which requires fresh investigation into facts are clearly beyond the scope of rectification provisions such as s. 154 or 254(2) of IT Act, 1961 or s. 35(1)(e) of the WT Act, 1957, etc. The learned counsel further submitted that the judgment of Gujarat High Court in the case of Ashok K. Parikh (supra) has not been specifically overruled and, therefore, the subsequent judgment of Supreme Court in some other matter cannot be treated as a valid basis for rectification of the order passed by the Tribunal.
(3.) WE have carefully considered the submissions made by the learned representatives and have also gone through the judgments cited by them. 4.1 A perusal of the assessment orders in the case of the present assessee for asst. yrs. 1987-88 and 1988-89 reveals that he has valued the unquoted equity shares of certain companies as per r. 1D applying the principles laid down in the case of Ashok K. Parikh (supra). The Assessing Officer observed that the decision in the case of Ashok K. Parikh has not been accepted by the Department and SLP has been filed before the Supreme Court. He, therefore, determined the value of unquoted equity shares as per the said rule ignoring the principles laid down in the case of Ashok K. Parikh (supra). It would be worthwhile to mention that the assessment orders do not contain the details of advance tax shown in the balance sheet nor the details of provisions for income-tax liability shown in the respective balance sheets. 4.2 The CIT(A) following the judgment of Honble Gujarat High Court in the case of Ashok K. Parikh (supra) directed the Assessing Officer to value the shares adopting the principles as enunciated in the aforesaid decision. The Tribunal confirmed the view taken by the CIT(A) by relying on the aforesaid judgment of Gujarat High Court and by following decisions of the Tribunal in the case of the very same assessee for asst. yr. 1983-84 in WTA Nos. 1802 to 1806/Ahd/1989 vide order dt. 30th June, 1992. 4.3 The Honble Supreme Court in the case of Bharat Hari Singhania (supra) has held that it is obligatory to follow r. 1D in every case where unquoted equity shares of a company other than investment or managing agency company have to be valued. The Valuation Officer is also equally bound by r. 1D. It was further held that no deduction on account of capital gains tax which would have been payable in case said shares were sold on valuation date can be made for determining the market value of such unquoted equity shares as per r. 1D. The Honble Supreme Court has further considered the question as to how sub-cl. (a) of cl. (i) and sub-cl. (e) of cl. (ii) of Expln.-II should be read and understood. The interpretation of these clauses made by the Honble Supreme Court in the said judgment is relevant for the purposes of deciding the present miscellaneous application. While dealing with this question the Supreme Court in para 30 of the judgment, inter alia, gave an illustration in order to clarify and explained the correct interpretation of the relevant provisions contained in the said Expln.-II to r. 1D. "..... The situation is best explained by giving an illustration. Take a case where a company has paid eight lakhs by way of advance tax which is shown as an asset in the balance sheet. The company has made a provision of fifteen lakhs for taxation which is shown as a liability in the balance sheet. The WTO estimates the tax payable on the basis of book profits at ten lakhs. What he is asked to do by cl. (ii)(e) is not to treat the excess five lakhs as a liability. The tax liability as arrived at by him is only ten lakhs, but, inasmuch as, eight lakhs have already been paid and only two lakhs remain payable, the said two lakhs alone will be treated as a liability on the valuation date. It must be remembered that eight lakhs already paid are deleted from the assets shown in the balance sheet. What is shown as an asset cannot at the same time be shown as liability. This does not mean that tax liability is treated by the WTO only as two lakhs. It is ten lakhs. Eight lakhs have already gone out of the profits and debited in the books of the company. By reading cl. (i)(a) and cl. (ii)(e) together, the assessee will be getting the benefit of entire ten lakhs but so far as the balance sheet for the purpose of r. 1D is concerned, only two lakhs will be treated as a liability on the valuation date since that is the actual amount still outstanding. WE do not think that if the aforesaid clauses are understood as explained herein, there is any prejudice to the assessee or to the Revenue. It indeed reflects the true situation. It is brought to our notice that the Andhra Pradesh High Court has taken a similar view in CIT vs. M. Lakshmaiah (1988) 174 ITR 4 (AP) and that similar view has also been taken by the Karnataka High Court in CWT vs. N. Krishnan (1986) 162 ITR 309 (Kar) and the Punjab & Haryana High Court in Ashok Kumar Oswal (Minor) vs. CWT (1984) 148 ITR 620 (P&H). On the other hand, Gujarat High Court in CWT vs. Ashok K. Parikh (1981) 129 ITR 46 (Guj) has taken a different view which has been adopted by some other High Courts. It is enough to indicate that if the said sub-clauses are understood in the manner indicated and clarified by us, the counsel for the assessee agrees that they have no grievance. In this view of the matter, we do not think necessary to deal with the opposing views of the High Courts at any length." The aforesaid finding given by the Honble Supreme Court clearly indicates that the different view expressed by the Gujarat High Court in the case of Ashok K. Parikh (supra) as compared to the view taken by the Andhra Pradesh and Karnataka High Courts was duly noted by the Honble Supreme Court. However, it was observed that it would be enough to indicate that if the said sub-clauses are understood in the manner indicated and clarified in the said judgment, then the parties will have no grievance. Therefore, the Honble Supreme Court further observed that they do not think it necessary to deal with the opposing views of the High Courts at any length. It is, therefore, difficult to accept the contention of the Revenue that the Honble Supreme Court has overruled the judgment in the case of Ashok K. Parikh (supra). 4.4 Even on facts, we find that the request made by the Department in this miscellaneous application does not come within the ambit and scope of the rectification provisions contained in s. 35(1)(e) of the Act. The WTO has not given specific details about the amount of advance tax paid by the respective companies and shown in the asset side of the balance sheet. Likewise, the details of provision made for income-tax liability shown in the balance sheet of the respective companies has also not been given and the WTO has not determined the amount to tax payable on the basis of book profits of the respective companies. The matter would, therefore, necessarily require investigation into fresh facts. The matters which require further enquiries or investigations into fresh facts are clearly outside the scope of the rectification provisions such as s. 154 or 254(2) of the IT Act and s. 35(1)(e) of WT Act. Such a view is fully fortified by the judgment of Honble Supreme Court in the case of T. S. Balaram, ITO vs. Volkart Brothers (1971) 82 ITR 50 (SC). In view of aforesaid discussions, we do not find any merit in the application submitted by the Revenue.;
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