VENKATARAMIAH - (1.) ON the basis of a certificate granted under Section 29 (1) of the Wealth-tax Act, 1957 (hereinafter referred to as 'the Act'), the appellant has filed these appeals against the judgment and order dated 21/12/1972 of the High Court of Gujarat in Wealth-tax Reference No. 2 of 1969. The questions refered to the High Court under Section 27 of the Act by the Income-tax Appellate Tribunal, Ahmedabad Bench read thus : "(1). Whether on the facts and in the circumstances of the case the liability in respect of income-tax payable on the concealed income disclosed by the assessee pursuant to Section 68 of the Finance Act. 1965 is, deductible under Section 2 (m) of the Wealth-tax Act, 1957, in computing net wealth of the assessee for the assessment years 1959-60, 1960-61, 1961-62, 1962-63, 1963-64 and 1964-65. (2) Whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under Section 68 of the Finance Act, 1965, arose not under that Finance Act but under S. 3 of the Indian Income-tax Act, 1922."
(2.) HAVING regard to the assessment years in question, the second question should be read as including within its scope also the question whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under Section 68 of the Finance Act. 1965 arose not under that Finance Act but under Section 4 of the Income tax Act, 1961. The assessee, who is the appellant in these appeals, had been assessed on the basis of his returns of net wealth and the statements filed therewith in the status of an individual to wealth-tax under Section 16 (3), of the Act during the assessment years 1957-58 to 1964-65 on various dates between 15/01/1960 and 14/07/1964. Subsequently the assessee made a disclosure under Section 68 of the Finance Act. 1965 (hereinafter referred to as 'the Finance Act') of Rs. 7,00,000.00 which had been shown as having been covered by some hundi transactions with a concern known as M/s. Abdul Razack and Co. in his books of account at the Bombay branch of his business. Along with the declaration the assessee filed a statement that this concealed income had been earned by him during the assessment years 1957-58 to 1964-65. He, however, did not allocate the total sum disclosed amongst different assessment years but showed it in a lump sum. The amount of income-tax was computed at 60 Per Cent of the total concealed income and it was paid as contemplated under Section 68 of the Finance Act. The Wealth-tax Officer thereafter reopened the assessments of the assessee to Wealth-tax for assessment years 1957-58 to 1964-65 on the ground that he had reason to believe that certain wealth of the assessee had escaped assessment during the said years and that his belief was founded on the disclosure made by the assessee under Section 68 of the Finance Act. We are concerned in these appeals only with the assessment years 1959-60 to 1964-65. On scrutiny it was found on the basis of peak cash credits in each assessment year that the amounts covered by hundies were as under : JUDGEMENT_77_3_1981Html1.htm As can be seen from the above statement, the assessee had substantial sums with him in the years in question which had not been disclosed earlier. Since these amounts constituted the wealth which was liable to tax on the respective valuation dates, the assessee filed returns of wealth for the above mentioned years in compliance with the notices issued to him and in the course of the assessment proceedings he claimed the deduction for income-tax payable by him in respect of the sum which had been progressively earned by him from year to year and which were liable to income-tax under the relevant income-tax law in force during the years relying upon the decision of this Court in Kesoram Industries and Cotton Mills Ltd. v. Commr. of Wealth-tax (Central), Calcutta, (1966) 57 ITR 767 : ( AIR 1966 SC 13707. The Wealth-tax Officer. However, held that since in his balance sheets the assessee had not shown the liability to pay income-tax, the deduction of the amounts claimed could not be allowed in any of the assessment years and accordingly the orders of reassessment were passed by him after disallowing the claim made by the assessee. He however included the sums mentioned in the above statement in the net wealth of the respective assessment years and determined the wealth-tax payable by the assessee. The appeals filed by the assessee against the orders of the Wealth-tax Officer before the Appellate Assistant Commissioner were dismissed. On further appeal to the Income-tax Appellate-Tribunal, the Tribunal held that the deduction claimed in respect of each assessment year was in truth and substance a liability under the Indian Income-tax Act, 1922 or the Income-tax Act. 1961, as the case may be and not a new liability created by the Finance Act, and, therefore, it constituted a 'debt owed' by the assessee on the respective valuation dates within the meaning of Section 2 (m) of the Act and that the deduction claimed should be allowed while computing the net wealth of the assessee, Accordingly the Tribunal allowed the appeals of the assessee. Thereafter at the instance of the Commissioner of Wealth-tax. the Tribunal referred under Section 27 of the Act the two questions mentioned above to the High Court. After hearing the parties the High Court answered both the questions in the negative and in favour of the Revenue by its judgment dated 21/12/1972. On a certificate granted by the High Court under Section 29 (1) of the Act, the assessee has come up in appeal to this Court.
(3.) THE relevant part of Section 2 (m) of the Act reads : "2. (m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than ... ... ." In the case of Kesoram Industries and Cotton Mills Ltd. ( AIR 1966 SC 1370) (supra) this Court has held that income-tax other than that falling under clause (iii) of Section 2 (m) of the Act payable on the valuation date is a debt owed by the assessee and hence is deductible from the total wealth of the assessee while determining the net wealth for the purpose of levying wealth-tax.;