TaxTMI 
TaxTMI 
1972 (6) TMI 9
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....uation date but before the computation of net wealth in the wealth-tax assessment ? What would be the quantum of the liability, where the assessment to income-tax, wealth-tax or gift-tax is rectified by the revenue authorities under section 35 of the Indian Income-tax Act, 1922, or section 154 of the Income-tax Act, 1961, before the assessment to wealth-tax is finalised ? Would the amount of the tax as rectified be deductible in computing the net wealth or the amount of the tax originally assessed or computed on the basis of the return ? So also, where assessment to income-tax, wealth-tax or gift-tax is reopened and fresh assessment is made under section 34 of the Indian Income-tax Act, 1922, or section 147 of the Income-tax Act, 1961, before the final completion of the wealth-tax assessed, what would be the amount of the tax deductible ? Would it be the amount of tax as reassessed or as originally assessed or according to the return ? These three different aspects of the question arose for consideration in the references before us : the first, in Wealth-tax References Nos. 3, 4, 20, 25, 32, 33 and 36 of 1970 and 1 of 1971 ; the second, in Wealth-tax Reference No. 29 of 1970 ; and ....
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....ainable amount." The liability for income-tax is thus a present liability on the last day of the accounting year and is a " debt " owed by the assessee on the relevant valuation date, though it may not have been quantified by assessment and may be payable at a future date. So also, as held by the Supreme Court in H. H. Setu Parvati Bayi v. Commissioner of Wealth-tax the liability for wealth-tax becomes crystallized on the valuation date and not on the first day of the assessment year, though the tax may be quantified by assessment and may become payable after the commencement of the assessment year and, therefore, wealth-tax liability of an assessee on the relevant valuation date for the assessment year beginning on April 1 is a " debt " owed by the assessee which is liable to be deducted in computing the net wealth of the assessee. The same position obtains a fortiori in regard to liability for gift-tax. It attaches as soon as the gift is made, though its quantification by assessment would necessarily take place after the close of the relevant accounting year, that is, after the relevant valuation date. Each of these three liabilities for income-tax, wealth-tax and gift-tax ....
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....oper estimate of the liability ; they may find that it is an over-estimate and rejecting it, they may make their own estimates of the value of the liability. But, where the assessment of the liability for income-tax, wealth-tax or gift-tax is made and the quantum of the liability is ascertained before the wealth-tax assessment is completed, the precise value of the liability ascertained in accordance with the procedure prescribed by law would be known and there would be no need for making an estimate. The assessment made in accordance with the provisions of the relevant statute would quantify the liability, the quantum of the liability should be determined by the process of assessment and once the quantum of the liability is ascertained in the manner contemplated by law, it must displace any attempt at estimation. Then, what is stated by the assessee as his estimation of the liability either by making a provision in the balance-sheet or filing a return would become immaterial because what was an estimate made by the assessee would be superseded by the actual quantum determined by assessment. What the statute requires the revenue authorities to do is to ascertain the value of the li....
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....re nothing but incidents in the process of assessment. The machinery of assessment provided by each relevant statute contemplates filing of a return by an assessee and the return may be accepted by the revenue authorities without demur or the revenue authorities may make further inquiry and find that the total income or net wealth or taxable gift of the assessee is more than what is shown in the return and the tax liability of the assessee is higher than what it would be if the return were accepted as correct. These are all steps in the process of assessment culminating in the quantification of the tax liability. The process of assessment is after all nothing but a process of quantification of tax liability and nothing that is done or may be done in the process of quantification of tax liability can be regarded as a contingency. When assessment is made in accordance with the provisions of the relevant statute the liability to tax which existed in praesenti on the relevant valuation date is quantified or, in other words, its quantum is ascertained by the process of assessment and the amount of tax determined on assessment thus represents the value of that liability. There is no addi....
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....bility was not properly quantified because of non-disclosure of primary material facts by the assessee or because of some other reason and this wrong quantification is sought to be corrected by reopening the assessment and making fresh assessment. The correct quantification made on reassessment is still quantification of the same liability which existed in praesenti on the relevant valuation date. The amount of tax determined on reassessment must, therefore, be deducted in computing the net wealth of the assessee, where the reassessment has taken place before the wealth-tax assessment is finally concluded. It was contended, on behalf of the assessee, in the course of the arguments that even if the assessment of the liability for income-tax, wealth-tax or gift-tax is made or rectified or reopened after the wealth-tax assessment is closed, it would be competent to the assessee as well as the revenue to apply for rectification of the wealth-tax assessment for the purpose of correcting the amount of income-tax, wealth-tax or gift-tax liability deducted in arriving at the net wealth of the assessee under section 35 of the Wealth-tax Act, 1957. This contention would raise an interesti....
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....ee preferred appeals against both these orders of assessment, one on 9th May, 1961, and the other on 9th May, 1962, and claimed in these appeals that the amount of the tax assessed for each assessment year was not payable by him. Now in the assessment of the assessee to wealth-tax for the assessment year 1961-62, the assessee claimed that the sum of Rs. 22,679 representing wealth-tax liability for the assessment year 1960-61 was deductible since it was a debt owed by the assessee on the relevant valuation date, namely, 31st March, 1961. Similar claim for deduction of Rs. 39,692 representing wealth-tax liability for the assessment year 1961-62 was made in the assessment of the assessee to wealth-tax for the assessment year 1962-63. The revenue conceded that each of the two sums of Rs. 22,679 and Rs. 39,692 claimed by the assessee as a deduction represented a debt owed by the assessee on the relevant valuation date, but contended that neither of these two debts was deductible since they fell within the excepted category of debts set out in section 2(m)(iii)(a). The revenue urged that so far as the sum of Rs. 22,679 was concerned, it became payable in consequence of the order of asses....
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....though it is a debt owed by the assessee on the relevant valuation date. There are two requirements of this clause one is that the amount of tax payable in consequence of any order passed under or in pursuance of any of the fiscal statutes there specified including the Wealth-tax Act, 1957, must be outstanding on the relevant valuation date and the other is that it must be claimed by the assessee in appeal, revision or other proceeding as not being payable by him. On a plain reading of the clause, it is obvious that to satisfy the second requirement, it is not necessary that the appeal, revision or other proceeding should have been filed before the relevant valuation date ; it may be filed even after the relevant valuation date. What is required is that the assessee must dispute the amount of tax claimed from him by filing an appeal, revision or other legal proceeding and not that the appeal, revision or other legal proceeding should be instituted before any particular point of time. If the legislative intention had been otherwise, there is no doubt that the legislature would have added the words "before the valuation date " at the end of sub-clause (a). Now this second requirement....
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....payable. That is done by sections 30 and 31 which occur in Chapter VII headed " Payment and recovery of wealth-tax ". Section 30 provides that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Wealth-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable. That is followed by section 31 which, as its marginal note shows, provides when the amount of wealth-tax shall be payable. That section has several sub-sections of which only three are material for our purpose, namely, sub-sections (1), (2) and (3). Sub-section (1) provides that any amount specified as payable in a notice of demand under section 30 shall be paid within thirty-five days of the service of the notice at the place and to the person mentioned in the notice ; and sub-section (2) then goes on to say that if the amount specified in any notice of demand under section 30 is not paid within the period limited under sub-section (1) the assessee shall be liable to pay simple interest at six per cent. per annum from the day commencing after the end of the period mentioned in sub-section (1) and the as....