Holding

Clause (b) of the proviso to s.25(1) bars revision applications in such circumstances, as the order of the Appellate Assistant Commissioner merges into the Tribunal's order, making the revision infructuous.

Summary

The respondent, a shareholder, valued her shares at break‑up value for wealth‑tax assessment, which the Wealth Tax Officer rejected. The Appellate Assistant Commissioner partially allowed her appeal, but the Commissioner appealed to the Appellate Tribunal, which dismissed the appeals. While the Tribunal appeal was pending, the respondent filed revision applications under s.25(1) of the Wealth Tax Act, claiming the Assistant Commissioner’s valuation was unreasonable. The Commissioner rejected the revisions citing clause (b) of the proviso to s.25(1), and the High Court held the revisions competent, a decision later reversed by a Division Bench. The Supreme Court held that when an appeal against the Assistant Commissioner’s order is pending before the Tribunal, that order merges into the Tribunal’s order, rendering any revision application infructuous irrespective of who filed the appeal. Consequently, the revision applications were incompetent and the lower courts’ orders were set aside.

Issues considered

Whether clause (b) of the proviso to sub‑section (1) of section 25 of the Wealth Tax Act bars a revision application before the Commissioner when an appeal against the same order is pending before the Appellate Tribunal, even if the appeal is filed by the Revenue.

Legislation cited

Wealth Tax Act, 1957s. 24, s. 25, s. 26

Subjects

wealth taxrevisionappellate tribunalappellate assistant commissionervaluation of sharesprocedural lawmerger of ordersbar to revision

Judgment

COMMISSIONER OF WEALTII TAX BOMBAY
A
AND ANOTIIER
v.
MRS. KASTURBAI WALCHAND & OTIIERS

MARCH 28, 1989
-) B
[R.S. PATHAK, CJ AND RANGANATII MISRA, J.]
• Wealth Tax Act, 1957-CI. (b) of Proviso to Sub-s. (1) of s.
25-When an appeal against an order of the Appellate Assistant Com-
missioner by either party is pending before the Appellate Tribunal, a
revision application to the Commissioner against the same order l' not
competent. c
+
Sub-s- (1) of s. 25 of the Wealth Tax Act, 1957 investing the
Commissioner with the power to revise an order passed by any autho-
rity subordinate to him stipulates in cl. (b) of the proviso thereto that
the power of revision shall not extend to an order which is the subject of D
an appeal before the Appellate Assistant Commissioner or the Appellate
Tribunal.

">r The respondent, a share-holder in a company, adopted, for the
purpose of assessment under the Act, valuation of shares at their\break-
up values with paid up capital and reserves which was rejected 'by the E
Wealth Tax Officer who estimated their value on the basis of capltalisa-
tion of profits for the assessment year 1960-61 and on the basis of the
breal<-up value with certain modifications for the assessment years
1958-59 and 1959-60. The respondent's appeals were partly allowed by
the Appellate Assistant Commissioner against which the Commissioner
. ""
..i of Wealth Tax preferred appeals to the Appellate Tribunal. The Appel- F
late Tribunal dismissed the appeals. During the pendency of the appeals
before the Tribunal, the respondent preferred revision applications to
the Commissioner of Wealth Tax and contended that the valuation of
the shares adopted by the Appellate Assistant Commissioner was
unreasonable and excessive and should be duly mudified. The Commis-
sioner rejected the applications on the ground that they were incompe- G
~
tent in view of cl. (b) of the proviso to sub-s. (1) of s. 25. Against that
order the respondent filed a writ petition which was allowed by a Single
Judge of the High court holding that the revision applications were
competent since the aforesaid provision would not operate as a bar
against an assessee in a case where the appeal before the Appellate
Tribunal is filed by the Revenue. An appeal filed against his order was H
131
132 SUPREME COURT REPORTS [1989] 2 S.C.R.

A dismissed by a Division Bench of the High Court. +
Allowing the appeal,

HELD: Where an appeal is tiled before the Appellate Tribunal
against an order of the Appellate Assistant Commissioner, the
B · impugned order merges in the order of the Appellate Tribunal when the
. appeal is disposed of on merits. If meanwhile a revision application has
been filed before the Commissioner against the same order of the
Appellate Assistant Commissioner, it will not be open to the Commis-
sioner to pass any order in revision against the order of the Appellate
Assistant Commissioner as the latter will have merged with the order of
the Appellate Tribunal. It is immaterial that the appeal and the revision
c application have not been filed by the same party. This would be plainly
so as in the present case, the subject matter of the appeal before the
Appellate Tribunal is the same as that of the revision application before
the Commissioner. [135B-D]

D In this case the High Court omitted to consider that the appeals
filed before the Tribunal had been disposed of, aud the impugned order
of the Appellate Assistant Commissioner had merged in the order of the
Appellate Tribunal rendering the revision applications infrnctuous.
What the respondent should have done was to tile her own appeals
before the Appellate Tribunal. It must be noted that the Appellate
E Tribunal is a superior body to the Commissioner, as is clear from sub-s.
(1) of s. 26 which provides that an appeal shall lie to the Appellate
Tribunal from an order under sub-s. (2) of s. 25 of the Commissioner.
There would have been no difficulty in the Appellate Tribunal consider-
ing the appeals of both parties and passing suitable orders in regard to
the valuation of the shares. I135F-G; 136A-B]
F
CIVIL APPELLAIB JURISDICTION: Civil Appeal Nos. 88
to 93 to 1974.

From the Judgment and Order dated 10.1.1973 of the Bombay
High Court in Appeal Nos. 102 to 107 of 1966.
G -f
Dr. V. Gauri Shankar and Ms. A. Subhashini for the Appellants.

Nemo for the Respondents.

The Judgment of the Court was delivered by
H
COMMR. OF WEALTII TAX v. MRS. KASTURBAI !PATIIAK, CJ.I 133
+. PATHAK, CJ. These appeals by special leave raise the ques-
A
tion whether the High Court is right in holding that the proviso to
sub-s. (1) of s. 25 of the Wealth Tax Act cannot be invoked by the
Revenue on the facts of this case.

The respondent is assessed in the status of an individual under
the Wealth Tax Act, 1957, and these appeals relate to the assessment B
'I
years 1958-59, 1959-60, and 1960-61 for which the corresponding
.., valuation dates are 31 March, 1958, 31 March, 1959 and 31 March,
1960 respectively.

- The respondent is a share holder in Walchand and Company
Private Limited. On each of the three valuation dates she held 140
shares in the Company. For the purpose of assessment under the
c
+· '
Wealth Tax Act, the respondent adopted the valuation of the shares at
their break-up values with paid up capital and reserves as there was no
market quotation for those shares. When making the assessment
Orders for each of the three assessment years, the Wealth Tax Officer
rejected the valuation of the shares as claimed by the respondent, and D
estimated their value on the basis of capitalisation of profits at six per
cent for the assessment year 1960-61 and on the basis of the break-up
value with certain modifications for the assessment years 1958-59 and
• '< 1959-60. The respondent appealed to the Appellate Assistant Commis-
sioner of Wealth Tax, and the Appellate Assistant Commissioner
determined the value of the shares on the basis of capitalisation of th_e E
investment income at six per cent and other income at twelve and half
per cent. He allowed the appeals of the respondent in part by separate
orders dated 10 November, 1961. The Commissioner of Wealth Tax
preferred appeals to the Appellate Tribunal on the question relating to
valuation of the shares .
'"' I
.
... ' The Appellate Tribunal passed a consolidated order on 23 July,
F

1963, dismissing the appeals for the three assessment years. It
observed that the valuation of the shares of the company on the rele-
vant valuation dates determined by two valuers on arbitration in the
case of another assessee should be taken as the valuation in the case of
>,, the assessee also. The value of the shares, the Appellate Tribunal said, G
worked out to an amount much less than the valuation determined by
the Appellate Assistant Commissioner, and therefore, the question of
enhancing the value determined by the Appellate Assistant Commis-
sioner did not arise. The Appellate Tribunal did not reduce the values
determined by the Appellate Assistant Commissioner as no appeals
had been filed by the respondent. Meanwhile, however, during the H
134 SUPREME COURT REPORTS [1989) 2 S.C.R.

A
pendency of the appeals before the Appellate Tribunal, the respon- +
dent preferred revision applications on 29 June, 1962 under sub-
section (1) of section 25 to the Commissioner of Wealth Tax in respect
of the aforesaid assessment years and contended that the valuation of
the shares adopted by the Appellate Assistant Commissioner was
unreasonable and excessive and should be duly modified. The Com-
B missioner made an order dated 12 August, 1964 rejecting the revision ....
applications on the ground that they were incompetent in view of cl. I
(b) of the proviso to sub-s. (1) of s. 25 of the Act. Against that order
the respondent filed a writ petition in the High Court of Bombay and
contended that the Commissioner had erred in dismissing the revision
'" ~

applications as incompetent. On 10-11 October, 1966 a learned Single
Judge of the High Court allowed the writ petition holding the revision
c applications to be competent, and accordingly directed the Commis-
sioner to entertain and dispose of the revision applications in accor- 4-'
'
dance with law. The Commissioner appealed to a Division Bench of
the High Court and the appeal was dismissed on 10 January, 1973.

D The relevant provisions of s. 25 of the Wealth Tax Act read as
follows:

"Powers of Commissioner to revise orders of subordinate
authorities.-The Commissioner may either of his own y
motion or on application made by an assessee in this be-
E half, call for the record of any proceeding under this Act in
which an order has been passed by any authority sub-
ordinate to him, and may make such inquiry, or cause such
inquiry to be made, and, subject to the provisions of this
Act, pass such order thereon, not being an order prejudi-
cial to the assessee, as the Commissioner thinks fit; 1'
F ~
Provided that the Commissioner shall not revise any
order under this sub-section in any case-

(a) where an appeal against the order lies to the
Appellate Assistant Commissioner or to the Appellate Tri-
bunal, the time within which such appeal can be made has
G
not expired or in the case of an appeal to the Appellate
+-
Tribunal the assessee has not waived his right of appeal;

(b) where the order is the subject of an appeal before
the Appellate Assistant Commissioner or the Appellate
H Tribunal."
COMMR. OF WEALTH TAX v. MRS. KASTURBAI [PATHAK, CJ.[ 135

+ The High Court has taken. the view that cl. (b).of the proviso to sub-.s. A
( 1) of s. 25 of the Act operates as a bar to a revision application by an
assessee before the Commissioner only where the assessee has also
filed an appeal before the Appellate Tribuanl. According to the High
Court, the bar does riot come into operation against an assessee where
the appeal before the Appellate Tribunal has been filed by the
--i Revenue. It seems to us that the view taken by the High Court cannot B
be sustained. Where an appeal is filed before the Appellate Tribunal
I. against an order of the Appellate Assistant Commissioner, the
impugned order merges in the order of the Appellate Tribunal when

- the appeal is disposed of on merits. If meanwhile a revision application
has been filed before the Commisioner against the same order of the
Appellate Assistant Commissioner, it will not be open to the Comm is-
sioner to pass any order in revision against the order of the Appellate
c
+- Assistant Commissioner as the latter will have merged with the order
' of the Appellate Tribunal. It is immaterial that the appeal and the
revision application have not been filed by the same party. This would
be plainly so as in the present case, the subject matter of the appeal
before the Appellate Tribunal is the same as that of the revision appli- D
cation before the Commissioner. Here, the subject matter of the
appeal before the Appellate Tribunal was the valuation of the shares
held by the respondent. So it was also in the revision application
-y before the Commissioner.

In the circumstances, we are unable to agree with the reasoning E

- adopted. by the High Court. The High Court has proceeded on the
view that it was open to the Commissioner to dispose of the revision
applications filed by the respondents. The High Court, it seems to us,
omitted to consider that the appeals filed before the Tribunal had been
disposed of, and the impugned order of the Appellate Assistant Com-
~' missioner must be taken to have merged in the order of the Appellate F
# Tribunal. The revision applications, in short, had become infructuous.

What the respondent should have done, on coming to know of
the filing of the appeal by the Revenue before the Appellate Tribunal,
was to have withdrawn the revision petitions filecl. before the Commis-
... sioner and filed her own appeals before the Appellate Tribunal with an
application for condonation of delay under sub-s. (3) of s. 24, in case
G

the period of limitation had expired, and accordingly both the sets of
appeals would have been disposed of by the Appellate Tribunal. In
case the respondent came to know of the filing of the appeals by the
Revenue before the Appellate Tribunal and had not yet applied in
revision to the Commissioner she should not have filed the revision H
136 SUPREME COURT REPORTS [1989] 2 S.C.R.

A applications but should have preferred her own appeals before the
Appellate Tribunal. It must be noted that the Appellate Tribunal is a
superior body to the Commissioner, as will be clear from sub-s. (1) of
s. 26 which provides that an appeal will lie to the Appellate Tribunal
from an order under sub-s. (2) of s. 25 of the Commissioner. There
B would have been no difficulty in the Appellate Tribunal considering
the appeals of both parties and passing suitable orders in regard to the ~I
valuation of the shares. There is no difficulty now in dealing with such
a situation in view of sub-s. (2A) of s. 24. •
In the case of the other respondents, there is a similar history of
proceedings with similar orders passed therein, and this judgment will
C be considered as disposing of the appeals filed here in those cases also.

In the result, the appeals are allowed and the impugned orders of -+
the Division Bench and the Single Judge on the writ petitions are set
aside and the writ petitions are dismissed. In the circumstances of the
case there is no order as to costs.
D
H.L.C. Appeals allowed.

~ ..