IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 74 of 2001()
1. COMMISSIONER OF INCOME TAX,COCHIN
... Petitioner
Vs
1. M/S.RAM BAHADUR THAKUR LTD
... Respondent
For Petitioner :SRI.P.K.R.MENON(SR.),SC FOR IT
For Respondent :SRI.JOSEPH MARKOSE
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice T.R.RAMACHANDRAN NAIR
Dated :30/01/2008
O R D E R
C .N. RAMACHANDRAN NAIR &
T.R. RAMACHANDRAN NAIR, JJ.
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I.T.A. No. 74 OF 2001
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Dated this the 30th day of January, 2008
JUDGMENT
C.N. Ramachandran Nair,J.
The respondent-assessee is essentially a plantation company. The
original income tax assessment completed for the assessment year
1985-86 was set aside by the Commissioner under Section 263 of the
Income tax Act with direction to the assessing officer to redo the entire
assessment after hearing the assessee’s objections. While making fresh
assessment pursuant to the order of the Commissioner under Section
263, the assessing officer, among other things, held that the assessee
was liable to pay tax on short-term capital gains for the sale of a
commercial building at Bombay. Even though the assessee filed appeal
against the assessment so issued, the assessment of capital gains as
short-term capital gains was not disputed at all. The Commissioner
(Appeals), decided various other issues and remanded the matter back
to the assessing officer. In the course of giving effect to Commissioner
of Income tax (Appeals) ‘ order, the assessing officer noticed that even
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though short-term capital gains was assessed in the assessment
completed pursuant to revisional order issued by the Commissioner
under Section 263, the rate applied was wrong in as much as, as against
60 per cent applicable to short-term capital gains, the officer applied 50
per cent which is a rate applicable to long term capital gains. Therefore
he issued notice under Section 154 to correct the mistake in regard to
rate of tax applied on short term capital gains computed. Even though
the assessee objected against the proposal for rectification, the
assessing officer overruled the same and issued revised orders applying
the rate of tax on short-term capital gains and along with it giving
effect to the direction of the CIT (Appeals) contained in the appellate
order. The appeal filed against the rectification before the CIT
(Appeals) was unsuccessful and consequently assessee filed second
appeal which was allowed by the Tribunal. It is against this order by
the Tribunal that the revenue has filed this appeal.
2. We have heard senior counsel appearing for the revenue and
counsel appearing for the assessee. We are unable to uphold the order
of the Tribunal in cancelling rectification order issued by the officer
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under Section 154 of the I.T. Act to apply the correct rate of tax on
short term capital gains. The admitted facts are that the original
assessment was set aside in it’s entirety by the Commissioner under
Section 263 of the Act. Pursuant to the same, the Officer made
assessment afresh in which he computed short term capital gains on the
sale of property made by the assessee during the previous year. Even
though there was no discussion as to the rate of tax on capital gains, the
finding by the assessing officer that capital gains is short term capital
gains was not questioned by the assessee in the appeal filed against the
said assessment. In fact in the appeal filed by the assessee before the
CIT (Appeals), even though modification is ordered, the finding in the
original assessment that the capital gains is short term in nature was not
interfered with. Therefore the assessment of short term capital gains
has become final even after one round of appeal against the assessment.
The remaining question is whether the wrong rate of tax applied on
short term capital gains assessed could be corrected in proceedings
under Section 154 of the Act. There can be no dispute that the rate
applied contrary to the rate provided under the statute is an apparent
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mistake which could be corrected under Section 154 of the Act. All
what the assessing officer has done is only correcting the mistake in
regard to rate of tax on short term capital gains which was originally
applied at 50% as against applicable rate of tax of 60%. We do not
find any justification for the Tribunal to interfere with the rectification
order confirmed by CIT (Appeals) in first appeal. We also find that the
Commissioner (Appeals) has recorded in Annexure F first appellate
order that copy of the agreement dated 5.12.1980 by which assessee
acquired right, title and interest over the property later sold was
available in the assessment record. In fact the sale admittedly made on
4.4.1983 was within 36 months from the date of acquisition of property
and therefore capital gains arising under the sale is obviously short
term capital gains. The finding of the CIT (Appeals) that the assessing
officer gave a finding that the capital gains is short term in nature is
based on records even though there was no discussion in the
assessment order. In any case since the finding in the assessment order
that the capital gains is short term in nature, mistake in regard to rate of
tax adopted in the original assessment could be corrected under Section
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154 of the Act. Therefore the Officer is right in doing so. We do not
find any justification for the Tribunal to reverse the rectification order
confirmed by the CIT (Appeals). We therefore allow the appeal by
vacating the order of the Tribunal and by restoring the rectification
order issued by the officer.
(C.N.RAMACHANDRAN NAIR)
Judge.
(T.R.RAMACHANDRAN NAIR)
Judge.
kk
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