The Wealth Tax Paradox

A question about amending a return under the Wealth Tax Act, 1957, seems strange. The Finance Act, 2015, abolished this tax. This abolition was effective from Assessment Year (AY) 2016-17. The final year for wealth tax was AY 2015-16.

The government’s reason for abolition was practical. The cost to administer and collect the tax was very high compared to the revenue it generated. In the 2013-14 financial year, collections were about INR 1,008 crores. This was a small amount in the total direct tax picture. The Act also caused many procedural problems, like complex valuations and frequent, long legal disputes.

The Legacy Framework: Why Old Cases Are Still Active

The 2015 abolition did not erase all obligations. The Finance Act, 2015, amended the Act’s charging provision, Section 3. It inserted a “sunset clause” stating the tax applied for every assessment year “before the 1st day of April, 2016”.

This action stopped new wealth tax charges but kept the entire legal framework of the Act alive for AY 2015-16 and all previous years. This means all provisions for returns, revised returns (Section 15), reassessment (Section 17), and rectification (Section 35) still apply to those “legacy” years.

Many pending assessments were put “in abeyance” by the CBDT after 2015. Tax departments are now reactivating these old files to complete the proceedings. If you have received a notice, you are part of this process.

The Role of the Affidavit

An affidavit is a written, sworn statement of facts. In tax proceedings, it functions as evidence. The affidavit you may need to file is not the application itself. It is a supporting document that provides a factual basis for your request.

Its purpose is to formally state that an error was made, that it was “inadvertent,” and that a correction is now being supplied in good faith. This is important for preventing penalty proceedings.

Key Terms in the Affidavit

• Deponent: The person (the assessee) making the sworn statement.
• “Inadvertent”: This is the legal core. It means the mistake was a genuine error, not a willful attempt to hide information. This word is chosen to counter potential allegations of concealment under Section 18.
• “Mistake came to notice…”: This explains why the correction is being filed now. It links the discovery of the error directly to the current, active assessment proceeding.
• Verification: This is the formal oath. A false verification can lead to legal penalties for perjury. It is what makes the document a serious piece of evidence.

Choosing the Correct Legal Pathway

The affidavit is a tool. Its use depends on the exact stage of your proceeding. There are three main sections to consider. Your choice is dictated by the status of your assessment.

Visual Guide: Your Correction Pathway

Use this flowchart to identify your correct legal path. The decision hinges on one question: Has a final assessment order been passed?

Comparison of Correction Pathways

Recommended Procedural Steps

Your first action must be to confirm the exact status of your case.

Scenario 1: Assessment is PENDING

This is the most likely situation if you are submitting evidence.

• Action: File a Revised Return under Section 15.
• Procedure: Prepare a new, complete wealth tax return for that specific AY.
• Filing: Mark it clearly as “Revised Return u/s 15”. File it with the AO handling your case.
• Annexures: Attach the completed, notarized affidavit and the new, correct “list of securities”. The affidavit explains *why* you are filing the new return.

Scenario 2: Assessment Order is COMPLETE

If a final order was already passed and served.

• Action: File an Application for Rectification under Section 35.
• Check Limit: First, confirm you are within the 4-year time limit from the order date.
• Procedure: Draft a formal letter (application) that identifies the order, the specific mistake, and the correction needed.
• Annexures: Attach the completed, notarized affidavit and the correct list as evidence supporting your application.

Deep Dive: The Legal Strategy Behind the Affidavit

Filing the affidavit is more than a procedure; it is a critical legal strategy. Its primary function is to build a record of good faith and protect you from penalties.

The Danger: Section 18 – Penalty for Concealment

This is the main provision you are trying to avoid. Section 18 (read with Section 17) allows the AO to impose a penalty for “concealment of the particulars of any assets” or “furnishing inaccurate particulars.”

The penalty could be a minimum of 100% to a maximum of 500% of the tax sought to be evaded. By proactively filing an affidavit and correcting the return, you are creating strong evidence against any allegation of “concealment.”

“Inadvertent” vs. “Willful”: A Critical Distinction

The word “inadvertent” in your affidavit is deliberately chosen.

• Inadvertent: Implies a genuine human error, an oversight, or a mistake made without intention. This is generally not punishable by penalty.
• Willful: Implies a conscious decision to hide information or mislead the tax authority. This is the basis for concealment penalties.

Your affidavit and voluntary correction under Section 15 or 35 repositions the error from potentially “willful” (as the AO might assume) to clearly “inadvertent.”

Judicial View on Genuine Mistakes

Tax tribunals and courts have generally held that a penalty should not be levied for a genuine or bona fide mistake. When an assessee discovers an error and corrects it voluntarily (especially before the AO discovers it), it demonstrates a lack of *mens rea*, or a “guilty mind.”

By filing the affidavit, you are establishing this bona fide conduct on the official record, which would be crucial in any potential appeal.

Practical Filing Guide: Before and After You File

A proper submission involves more than just the template. Follow this guide for a smoother process.

Pre-Filing Checklist

Before you submit anything, gather all the following documents:

• The Original Return: A copy of the wealth tax return originally filed for the AY in question.
• Notice from Department: All communications, notices, or letters received from the tax department regarding this specific proceeding.
• The Erroneous Document: The original, incorrect “list of securities” or other schedule that was filed.
• The Correct Document: The new, 100% correct “list of securities” (this will be Annexure-A).
• Proof of Error (if any): Evidence showing *how* the mistake happened (e.g., a clerical error, a scrip misclassification). This can strengthen your “inadvertent” claim.
• Non-Judicial Stamp Paper: Purchase stamp paper of the correct value as required by your state for notarizing an affidavit.
• Covering Letter: A formal letter addressed to the Assessing Officer that serves as the main application (for Sec 35) or a cover letter (for Sec 15), explaining what you are submitting and why.

The Post-Filing Process: What to Expect

After you (or your consultant) submit the package:

• Get an Acknowledgment: Always get a “Received” stamp with a date on a copy of your covering letter. This is your proof of submission.
• The AO’s Review: The Assessing Officer will review your submission. If you filed a Revised Return (Sec 15), it simply replaces the original return for the assessment.
• Passing an Order:
  • If under Sec 15 (Pending): The AO will consider the revised return and facts when passing the *final assessment order*.
  • If under Sec 35 (Complete): The AO must pass a specific order on your rectification application, either accepting or rejecting it. If accepted, a *rectified order* will be issued.
• Potential for Inquiry: The AO may still ask questions. Be prepared to explain the mistake. Your affidavit provides the formal, legal basis for your explanation.

Template: Affidavit for Amendment

This is a base template. You must adapt it to your specific facts and have it executed (signed and notarized) on appropriate non-judicial stamp paper as per your state’s laws.

Frequently Asked Questions