SIRPUR PAPER MILL LTD. versus THE COMMISSIONER OF WEALTH TAX, HYDERABAD

SJRPUR PAPER MILL LTD.

THE COMMISSIONER OF WEALTH TAX, HYDERABAD

April 20, 1970

[J.C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.J

Wealth Tax Act, 1951, s. 25-Scope of-Commissioner disposing of ·revision application according to direction of Board of Revenue-If proper exercise of his power in Revision.

The Appellate Assistant Commissioner of Wealth Tax confirmed an orde' passed by the Wealth Tax Officer as regards the method adopted by the latter in dealing with claim for depreciation allowance made by the appellant company in the course of its assessment to wealth tax. The appellant company thereafter moved revision applications before the Com-missioner under s. 25 of the Wealth Tax Act and the Commissioner re· iected these applications on the basis of certain directions issued by the lloard of Revenue ..

On appeal to this Court by special Leave,

HELD : The order passed by the Commissioner must be set aside and the revision applications must be heard and disposed of accorciing to law and uninfluenced by any instructions or directions given by the Board of ~evenue. [307 G-HJ

It was clear, on the facts, that from the inception of the proceedings, 1he Commissioner put himself in communication with the Board of Central Revenue and sought instruction.-; from that authority as to how the: revision applications filed before him should be decided. He had exercised no independent judgment. The Commissioner appea.red to have misappre-hended the true character of the jurisdiction with which he is by the Act entrusted and surrendered his )udgmen.t to the directions of the Board of ~evenue. [306 F-G; 307 E-G]

The power conferred by s. 25 is not administrative : it is quasi-judicial. Jn exercise of this power the Commissioner must brin.Q: to bear an un· biased mind. consider impartially the objections raised by the aggrieved Jlarty. and decide the dispute according to proce<.lure consistent with the principles of .1atural justice; he cannot permit his judgement to be in-'fluenced by matters not disclosed to the assessee., nor by dictation of an-·other authority. Any orders or instructions given by the Board and re-quired to be followed under s. 13 by officers employed in the execution ·of the Act may control the exercise of their power in matters adminis-trative but not Quasi-iudicia1. Although the proviso to s. 13, which is som'!what obscure in its import, enacts that no orders shall be J?:iven by the Board so as to in.terfere with the discretion of the Appellate Assistant Commissioner in the exercise of his app~llate functions, it does not thereby ·imply that the Board may give .,.1ch orders to the Wealth Tax Officer or to the Commissioner in exercise '1f his quasi-judicial function. Such an interpretation would be plainly contrary to the scheme of the Act and th• nature of the power conferrecI upon the aL horities invested with quasi .. iudicial power. [306 B-FJ

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2269 and: 2270 of 1966.

Appeals by special leave from the judgment and order dated May 17, 1966 of the Commissioner of Wealth Tax, Andhra Pradesh in J. No. Wt. 3(4) and 3(5) of 1959-60.

A. K. Sen, B. P. Maheshwari and N. R. Kaitan, for the appel-lant (in both the appeals) .

S. Mitra, G. Das, R. N. Sachthey and B. D. Sharma, for the respondent (in both the appeals).

The Judgement of the Court was delivered by

Shah, J. In proceedings for determination of wealth tax

for the assesment years 1957-58 and 1958-59 the appellant Com-pany claimed depreciation allowance. on plant, building and machinery at the rates prescribed under the Income Tax Act and the Rules framed thereunder. The Wealth Tax Officer adopted the method prescribed by s. 7 sub-s. ( 2) of the Wealth Tax Act and. admitted the value of the assets as shown in the certified balance sheets on the respective valuation dates. In appeal, the Appel-late Assistant Commissioner of Wealth Tax confirmed the · order passed by the Wealth Tax Officer. The Company then moved revision applications before the Commissioner of. Wealth Tax under s. 25 of the Wealth Tax Act. Against the '.>rder passed by the Commissioner of Wealth, Tax rejecting the applications, the· Company has filed these appeals under Art. 136 of the Constitu-tion.

Against the orders of the Appellate Assistant Commissioner appeals lay to the Income-tax Appellate Tribunal, but the Com-' pany preferred revision applications before the Commissioner. We do not ordinarily encourage an aggrieved party to appeiil not ordinarily encourage an aggrieved party to appeiil

We do not ordinarily encourage an aggrieved party to appeiil not ordinarily encourage an aggrieved party to appeiil directly to this Court against the order of Tribunal exercising judicial functions under taxing statute, and thereby to bypass the normal procedure of appeal and reference to the High Court, but in the present case, it appears to us that question of princi-G ple of great importance arises. We ha• entertained these appeals becau5e in our judgment the Commissioner of Wealth Tax has-surrendered his authority and judgment to the Board of Revenue in deciding the ·questions which were sought to be raised by the Company in its revision applications.

Section 25 of the Wealth Tax Act provides insofar as it is-. m~tt>rial : " ( 1) The Commissioner may, either of his own "lotion or on application made by an assessee in this

1ehalt, call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him, and may make such inquiry, or .cause such inquiry to be made, and, subject to the provi-'ions of this Act, pass such order thereon, not being order prejudicial to the assessee, as the Commissioner thinks fit :

The power conferred by s. 25 is not administrative it is quasi-judicial. The expression "may make such inquiry and pass such ord"r thereon'' does not confer any absolute discretion on the r·,m~missioner. In exercise of tihe power the Commissioner must ring to bear an unbiased mind, consider impartially the objec-tions raised by the aggrieved party, and decide the dispute accord-ing to procedure consistent with the principles of natural justice : he cannot permit his judgment to be influenced by matters not dis-closed to the assessee. nor by dictation of another au:hority. Section 13 of the Wealth Tax Act provides that all officers and other persons employed in the execution of th.is Act shall observe and follow the orders, instructions and directions of the Board. These instructions may control the exercise of the power of the officers of the Department in m1tters administrative but not quasi-judicial. The proviso to s. 13 is somewhat obscure in its import. It enacts that no orders, in>tructions or directions shall be given by the Board so as to interfere with the discretion of the Appellate Assistant Commissioner of Wealth Tax in the exercise of his appel-late functions. It does not, however, imply that the Board may give any directions or instructions to the Wealth Tax Officer or to the Commissioner in exercise of his quasi-judicial function. Such an interpretation would be plainly contrary to the scheme the Act and the nature of the power conferred upon the authorities invested with quasi-judicial power.

The Commissioner appears, in our judgment, to have wholly misapprehended the true character of the jurisdiction with which he is by the Act entrusted anahas surrendered his judgment to the directions of the Board of Revenue. The order sheet of the Commissioner (at pp. 10-36 of the printed Paper Book) bears eloquent testimony to the manner in which the Commissioner has merely carried out the directions of the Board of Revenue, instead of deciding the case according to his own judgment.

In entry dated December 31, 1959. there is reference to the instructions contained in the Board's Circular No. 7-D (WT) of 59 dated November 12, 19.59 received on November 30, 1959.

Under entry dated April 28, 1960 there is again reference to the Board's Circular No. 7-D of 1959 suggesting the manner in

which depreciation has to be worked out for the purpose of deter-mining wealth-tax.

Again in the entry dated June 17, 1960 under item No. 4 it is stated that the Board's instructions were "specific on the point that no adjustment to depreciation relating to the period prior to March 31, 1957 should be made while i;letermiqing the total wealth of an assessee on the basis of 'global' valuation".

Under entry dated August 7, 1963, recorded by the Inspector, 1t 1s stated that "upon reference to the Board for .instrucllons, it was recommended that the petitions be kept pending decision of the matter till" it was decided by the High Court in which the same question was raised. When on January 27, 1966, the Company requested that the applications be kept pending till the disposal of the reference application by the. High Court for the assessment year 1959-60 in which similar point was involved, the Commissioner was of the view that the application need not be kept pending, but still directed "write to the Board". letter was written to the Board and the Commissioner acted according to the directions of the Board.

There is another entry dated March 14, 1966 which refers to the letter of the Board agreeing that the revision applications for the two years may be rejected.

It is unnecessary to refer to any more entries made in the case sheet maintained by the Commissioner of Wealth Tax. From the inception of the proceedings the Commissioner of Wealth Tax put himself in communication with the Board of Central Revenue and sought instructions from that authority as to how the · revision applications filed before him should be decided. He exercised no indepenent judgment. The Commissioner also recorded that the case did not require personal hearing but since the Director of the Company had made personal request for an interview it was "thought desirable" from "the point of view of public relations to give an interview."· Here also the Commissioner misconceived t!Je nature and extent of his jurisdiction.

Counsel appearing on behalf of the Commissioner of Wealth Tax in these appeals has not attempted to support the order under · appeal. We set aside the order passed by the Commissioner and direct that the revision applications be heard ru disposed of according to Jaw and uninfluenced by any instructions or direc-tions given by the Board of Revenue. The Company will get its costs in this Court. 0.ne hearing fee. R.K.P.S. Appeal allowed.