(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Rectification of mistake‑‑‑Power of rectification ‑‑‑Scope‑‑ Wealth Tax Officer, in the present case, while determining the value of the building had separately worked out the value of ground floor and at the same time also added total value of the building as declared by the assessee in the Balance Sheet of the relevant assessment year‑‑‑Such alleged illegality could not be cured in exercise of power under S.35, Wealth Tax Act, 1963‑‑‑Principles.

From the language of section 35 of the Wealth Tax Act, 1963, as amplified with various decisions, it is clear that the power of rectification provided under this provision of law is much wider than the power of review conferred upon the ordinary Courts and that such power of rectification need not be confined to mere correction of arithmetical mistakes/mistakes of calculations or obvious mistake on record but it could also be exercised in the cases of glaring illegalities or failure to follow the relevant precedents.. But at the same time it is to be kept in mind that the scope of rectification cannot be extended in a way so as to empower an officer to set aside its own order or to modify it as if sitting in a Court of appeal.

The mistakes which are not apparent and obvious on the record cannot be termed to be mistakes which can be corrected in exercise of power under section 35 of the Act. More particularly those mistakes which do not surface from the record but need further investigation to reach to a definite conclusion. To say it in other words, while exercising power of rectification, envisaged under section 35, of Wealth Tax Act an officer cannot enter into investigation of factual controversies nor can he investigate into a matter which may require additional evidence for that purpose.

In the present case the Wealth Tax Officer while determining the value of building has separately worked out the value of ground floor and at the same time also added total value of the building as declared by the assessee in the Balance Sheet of the relevant assessment year, but this so‑called illegality cannot be cured in exercise of power under section 35 of the Wealth Tax Act for the reason that assessee while declaring the total value of the building has not given separate value of the ground floor or any other floor or even number of floors in the under construction building which could, for the arguments sake, enable proportionate deduction from the total assessed value of the building, it view of separate valuation of ground floor by the Wealth Tax Officer. It the circumstances obviously the shortcoming in the order of Wealth Tax Officer highlighted by the assessee was not one which could have beer corrected under the ambit of rectification as the corresponding correction in the order was not possible without reopening the whole case of bringing further evidence on record.

24 ITR 93; (1986) 54 Tax 26; (1975) 31 Tax 162; (1992) 65 Tax 257; (1971) 23 ITR 236; (1984) 49 Tax 166; (1985) 52 Tax 35; Meka Venkatappaiah v. I.T.O. (1957) Andhra Pradesh High Court Shaikh Muhammad Iftikharul Haq v. I.T.O. Bahawalpur (1966) 13 Tax 203 and Pakistan River Steamer Ltd. v. CIT 1971) PTD 204 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Rectification of mistake‑-‑Scope‑‑‑Assessee, at the time of assessment, had not brought on record any material before the Wealth Tax Officer to show the annual rental value of the whole property so as to prove that the valuation made by the Wealth Tax Officer was more than ten times annual rental value of the property in which case prior approval of the Inspecting Assistant Commissioner was necessary‑‑‑Such grievance of the assessee was not within the four corners of rectification as provided by S. 35, Wealth Tax Act; 1963.

24 ITR 93; (1986) 54 Tax 26; (1975) 31 Tax 162; (1992) 65 Tax 257; (1971) 23 ITR 236; (1984) 49 Tax 166; (1985) 52 Tax 35; Meka Venkatappaiah v. I.T.O. (1957) Andhra Pradesh High Court; Shaikh Muhammad Iftikharul Haq v. I.T.O. Bahawalpur PLD 1966 SC 524 and Pakistan Rivery Steamer Ltd. v: CIT 1971 PTD 204 ref.

Arshad Siraj for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 27th October, 2004.

JUDGMENT

ANWAR ZAHEER JAMALI, J.‑‑By these four similar applications under section 27(4) of the Wealth Tax Act, 1963, the applicant Messrs A. Majid and Sons Ltd., Karachi have proposed following identical questions of law (except change in figures) for adjudication by this Court:‑‑

(1) Whether in the facts and circumstances of the case, the Income -tax Appellate Tribunal has not misdirected itself in law holding that the mistakes pointed out did not constitute mistakes apparent from record rectifiable under section 35 when the Wealth Tax Officer had taken the total cost of construction of Rs.6,547,075 as per Balance Sheet, as the "costs of other floors", and he had already separately, determined the value of the first floor, thus taxing it twice without deducting if from the total cost?

(2) Whether in the facts and circumstances of the case, the mistake of adding the value of ground floor determined at Rs.588,790 twice is not a mistake apparent from record rectifiable under section 35?

(3) Whether in the facts and circumstances of the case, the adoption of G.P. at 22% on total cost of the incomplete project at Rs.6,547,075 is not a mistake apparent from record when the appellant authorities have‑held in identical cases that no such profit can be added?

(4) Whether in the facts and circumstances of the case, the valuation of the Saddar building at Rs.17,55,600 as an open plot of land by ignoring Rule 8(3) of the Wealth‑tax Rules is not a mistake of law apparent from record rectifiable under section 35?

2. The facts forming background of these proceedings are that the wealth tax assessment cases of the applicant pertaining to assessment years, 1979‑80 to 1982‑83 were finalized by the Wealth Tax Officer. Special Circle, Karachi, vide orders, dated 30‑6‑1985/27‑10‑1985. These order's were not challenged by the applicant in appeal, however, later on as provided under section 35 of the Wealth Tax Act, 1963, they moved separate applications for rectification of these assessment orders, which were followed by another application, dated 2‑9‑1987, justifying non- availing the remedy of appeal by the applicant and seeking joint rectification of the assessment orders of the applicant pertaining to the years 1979‑80, 1980‑81, 1981‑82, 1982‑83. The Wealth Tax Officer, however, vide his order, dated 28‑9‑1987 declined such request for rectification made by the applicant and accordingly directed the applicant for payment of all the outstanding dues as per earlier orders of assessment. Such order of the Wealth Tax Officer was unsuccessfully challenged by the applicant before the Commissioner of Income Tax (Appeals) Zone‑V; Karachi, who rejected the appeals of the applicant vide order, dated 29‑11‑1987. Thereafter applicant preferred appeals before the Income Tax Appellate Tribunal (Headquarters) Karachi, where again they remained unsuccessful and all the four appeals were dismissed vide order, dated 13‑4‑1993. After passing of last order, the applicant made applications under section 27(1) of the Wealth Tax Act, 1963, before the Income Tax Appellate Tribunal Karachi proposing same questions of law as contained in these four applications under section 27(4) of the Wealth Tax Act, but these applications were also rejected by the Tribunal. As a last recourse the applicant has, therefore, preferred these applications under section 27(4) of the Wealth Tax Act, 1963.

3. Mr. Arshad Siraj learned counsel for the applicant vehemently contended that the scope of rectification under section 35 of the Wealth Tax Act, 1963, which is much wider to the ordinary powers of review vested with the Civil Courts, was not duly appreciated by the respondent and other officers under the hierarchy of Wealth Tax Act and this error has resulted in passing of various orders against the applicant. Dilating upon the scope of rectification under section 35 of the Wealth Tax Act, 1963, and to fortify his submissions in this regard, learned counsel placed reliance on the following cases:‑‑

(1) 24 ITR 93; (2) (1986) 54 Tax 26, (3) (1975) 31 Tax 162, (4) (1992) 65 Tax 257, (5) (1971) 23 ITR 236, (6) (1984) 49 Tax 166 and (7) (1985) 52 Tax 35.

4. A review of above cases shows that in the first case it was held by the Supreme Court of India that the power to rectify the order of assessment conferred on the Income‑Tax Officer by section 35 is to ensure that injustice to the assessee or to the revenue may be avoided and it shall be exercised when a mistake apparent from the record is brought to his notice by a concerned person or interested in the proceedings. It was further held that where a case for rectification is made out within the scope of section 35 then exercise of such power by the Officer is not discretionary; in the second case, scope of section 35 of Income Tax Act, 1922, relating to rectification of mistake was examined with reference to the exercise of such power by the Tribunal and it was held that the Tribunal could also exercise such powers and it was justified in revising its own order by deleting the expenses. Referring to the case of Meka Venkatappaiah v. I.T.O. (1957) Andhra Pradesh High Court, it was further held that even overlooking a mandatory provision of law which leaves no option or discretion to the authority would amount to an error apparent from the record which could be rectified in exercise of power under section 35; in the third case, view taken by a Division Bench of this Court was that correction of mistake under section 35 is not confined to arithmetical errors only. But certain limitations were placed on the power of rectification conferred by section 35, which limits are contained in the proviso and in the subsection of the main sections in the fourth case the Hon'ble Supreme Court of Pakistan held that while exercising power under section 35 of the Income Tax Act the essential condition for exercising such power is that the mistake should be apparent on the face of record mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassesses the, evidence or takes into consideration additional evidence and on that basis interpret any provision of law and forms an opinion different from the earlier order, then it will not amount to `rectification' of the order. Referring to the case of Shaikh Muhammad, Iftikharul Haq v. I.T.O. Bahawalpur PLD 1966 SC 524 and Pakistan River Steamer Ltd. v. CIT (1971 PTD 204), it was further held that any mistake which is not patent and obvious on the record cannot be termed to be an order which can be corrected by exercising power under section 35; in the fifth case after dilating upon many other cases from Indian and Pakistani jurisdiction, with reference to scope of section 35 of the Act relating to rectification it was held that such power is not confined merely for correction of arithmetical calculations or obvious omission or some of the mistake held to be error apparent from the record; in the sixth case where the Wealth Tax Officer had assessed the property at 20 times of the gross annual rental value of the property without obtaining prior approval of the Inspecting Assistant Commissioner in this regard, it was held that such power could not be exercised by him without prior approval of the Inspecting Assistant Commissioner in the last case the same Bench of Sindh High Court had reaffirmed its earlier view taken in the case of Commissioner of Income Tax v. Shah Muhammad Ahmed.

5. Coming to the facts, learned counsel submitted that mistake about addition of double value of the ground floor of the Building No.RB‑3/9, Aram Bagh, Karachi was evident from the impugned assessment order passed by the respondent as the applicant has declared the total value of this under construction property in the Balance Sheet in the sum of Rs.54,16,904.30 which also included the value of ground floor of the property, thus, upon separate assessment of value of ground floor in the sum of Rs.5,88,790, proportionately value of one floor should have been deducted from the total value of the property shown by the applicant. He next contended that the value of Plot No. SB4/22‑26, Saddar, Karachi, at Rs.17,55,600 was made without taking into account the annual rental value of this property because such valuation without prior approval of the competent authority (Inspecting Assistant Commissioner) legally could not exceed ten times annual letting value of the property, and such approval was lacking in the present case. Learned counsel, however, frankly conceded that nothing was placed on record before the respondent to show the actual annual rental value of the property, so as to see whether assessment made by the respondent was more than ten times of such value of the property, or not.

6. Mr. Nasrullah Awan learned counsel for the respondent on the other hand contended that the grounds urged by the applicant in their application under section 35 of the Wealth Tax Act may have been good grounds for consideration in appeal but, as rightly held by the respondent as well as by the Commissioner Wealth Tax and Appellate Tribunal, same are not covered within the purview of section 35 relating to rectification as both the points urged needed thorough investigation into factual dispute and further evidence, which exercise cannot be undertaken under the garb of rectification.

7. We have carefully considered the arguments advanced by the learned counsel for the parties, perused the case record and also gone through the judgments referred at the bar. Indeed, from the language of section 35 of the Wealth Tax Act, 1963, amplified with various decisions, discussed above, it is clear that the power of rectification provided under this provision of law is much wider than the power of review conferred upon the ordinary Courts and that such power of rectification need not be confined to mere correction of arithmetical mistakes/mistakes of calculations or obvious mistake on record but it could also be exercised in the cases of glaring illegalities or failure to follow the relevant precedents. But at the same time it is to be kept in mind that the scope of rectification cannot be extended in away, so as to empower an officer to set aside its own order or to modify it as if sitting in a Court of appeal. As has been held by the Supreme Court in f the case of National Food Laboratory (Supra) and also in the case, of Shaikh Muhammad Iftikharul Haq v. Income Tax Officer, Bahawalpur PLD 1966 SC 524, the mistakes which are not apparent and obvious on the record cannot be termed to be, mistakes which cart be corrected in exercise of power under section 35 of the Act. More particularly those mistakes which do not surface from the record but need further investigation to reach to a definite conclusion. To say it in other words, while exercising power of, rectification, envisaged under section 35, an officer cannot enter into investigation of factual controversies nor can he investigate into a matter which may require additional evidence for that purpose.

8. Reverting to the facts of the present case it will be seen that indeed the Wealth Tax Officer while determining the value of Building No. RB‑3/9, Aram Bagh, Karachi has separately worked put the value of ground floor in the sum of Rs.5,88,790 and at the same time also added total value of the building as declared by the assessee in the Balance Sheet of the relevant assessment year, but this so called illegality cannot be cured in exercise of power under section 35 of the Wealth Tax Act for the reason that assessee while declaring the total value of the building has not given separate value of the ground floor or any other floor or even number of floors in the under construction building which could, for the arguments sake, enable proportionate deduction from the total assessed value of the building, in view of separate valuation of ground floor by the Wealth Tax Officer. In the circumstances discussed above, obviously the shortcoming in the order of Wealth Tax Officer highlighted by the assessee was not one which could have been corrected under the ambit of rectification as the corresponding correction in the order was not possible without reopening the whole case or bringing further evidence on record.

9. As to the other property viz. Plot No. SB4/22‑26, Saddar, Karachi, also the grievance of the appellant is not within the four corners of rectification as provided by section 35 of the Wealth Tax Act. The obvious reason being that at the time of assessment the assessee had not brought on record any material before the Wealth Tax Officer to show the annual rental value of the whole property so as to prove that the valuation in the sum of Rs.17,55,600 made by the Wealth Tax Officer was more than 10 times annual rental value of the property, in which case prior approval of the Inspecting Assistant Commissioner was necessary. Mr. Arshad Siraj, learned counsel for the appellant was also unable to controvert this factual position from the record.

10. In view of the foregoing discussion, to sum up to, the view taken by the Income Tax Appellate Tribunal in its order, dated 13‑4 -1993 (which is common in all the four appeals) is found correct.

11. As a result of foregoing discussion all the four proposed questions are answered in the negative and these applications are disposed of accordingly.

M.B.A./A‑148/K Reference answered.