Ita/74/2001 Of Commissioner Of Income Tax,Cochin v. M/S.ram Bahadur Thakur Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 30TH JANUARY 2008 / 10TH MAGHA 1929 ITA.No. 74 of 2001() -------------------- ITA.603/COCH/1993 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX, COCHIN BY ADV. SRI.P.K.R.MENON(SR.),SC FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- M/S. RAM BAHADUR THAKUR LTD., COCHIN BY ADV. SRI.JOSEPH MARKOSE SRI.THOMAS VELLAPPALLY THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 30/01/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- I.T.A. No. 74 OF 2001 -------------------------------------------- Dated this the 30th day of January, 2008 JUDGMENT C.N. Ramachandran Nair,J. The respondent-assessee is essentially a plantation company. Theoriginal income tax assessment completed for the assessment year1985-86 was set aside by the Commissioner under Section 263 of theIncome tax Act with direction to the assessing officer to redo the entireassessment after hearing the assessee's objections. While making freshassessment pursuant to the order of the Commissioner under Section263, the assessing officer, among other things, held that the assesseewas liable to pay tax on short-term capital gains for the sale of acommercial building at Bombay. Even though the assessee filed appealagainst the assessment so issued, the assessment of capital gains asshort-term capital gains was not disputed at all. The Commissioner(Appeals), decided various other issues and remanded the matter backto the assessing officer. In the course of giving effect to Commissionerof Income tax (Appeals) ' order, the assessing officer noticed that even though short-term capital gains was assessed in the assessmentcompleted pursuant to revisional order issued by the Commissionerunder Section 263, the rate applied was wrong in as much as, as against60 per cent applicable to short-term capital gains, the officer applied 50per cent which is a rate applicable to long term capital gains. Thereforehe issued notice under Section 154 to correct the mistake in regard torate of tax applied on short term capital gains computed. Even thoughthe assessee objected against the proposal for rectification, theassessing officer overruled the same and issued revised orders applyingthe rate of tax on short-term capital gains and along with it givingeffect to the direction of the CIT (Appeals) contained in the appellateorder. The appeal filed against the rectification before the CIT(Appeals) was unsuccessful and consequently assessee filed secondappeal which was allowed by the Tribunal. It is against this order bythe Tribunal that the revenue has filed this appeal. 2. We have heard senior counsel appearing for the revenue andcounsel appearing for the assessee. We are unable to uphold the orderof the Tribunal in cancelling rectification order issued by the officer 2. We have heard senior counsel appearing for the revenue andcounsel appearing for the assessee. We are unable to uphold the orderof the Tribunal in cancelling rectification order issued by the officer under Section 154 of the I.T. Act to apply the correct rate of tax onshort term capital gains. The admitted facts are that the originalassessment was set aside in it's entirety by the Commissioner underSection 263 of the Act. Pursuant to the same, the Officer madeassessment afresh in which he computed short term capital gains on thesale of property made by the assessee during the previous year. Eventhough there was no discussion as to the rate of tax on capital gains, thefinding by the assessing officer that capital gains is short term capitalgains was not questioned by the assessee in the appeal filed against thesaid assessment. In fact in the appeal filed by the assessee before theCIT (Appeals), even though modification is ordered, the finding in theoriginal assessment that the capital gains is short term in nature was notinterfered with. Therefore the assessment of short term capital gainshas become final even after one round of appeal against the assessment.The remaining question is whether the wrong rate of tax applied onshort term capital gains assessed could be corrected in proceedingsunder Section 154 of the Act. There can be no dispute that the rateapplied contrary to the rate provided under the statute is an apparent mistake which could be corrected under Section 154 of the Act. Allwhat the assessing officer has done is only correcting the mistake inregard to rate of tax on short term capital gains which was originallyapplied at 50% as against applicable rate of tax of 60%. We do notfind any justification for the Tribunal to interfere with the rectificationorder confirmed by CIT (Appeals) in first appeal. We also find that theCommissioner (Appeals) has recorded in Annexure F first appellateorder that copy of the agreement dated 5.12.1980 by which assesseeacquired right, title and interest over the property later sold wasavailable in the assessment record. In fact the sale admittedly made on4.4.1983 was within 36 months from the date of acquisition of propertyand therefore capital gains arising under the sale is obviously shortterm capital gains. The finding of the CIT (Appeals) that the assessingofficer gave a finding that the capital gains is short term in nature isbased on records even though there was no discussion in theassessment order. In any case since the finding in the assessment orderthat the capital gains is short term in nature, mistake in regard to rate oftax adopted in the original assessment could be corrected under Section 154 of the Act. Therefore the Officer is right in doing so. We do notfind any justification for the Tribunal to reverse the rectification orderconfirmed by the CIT (Appeals). We therefore allow the appeal byvacating the order of the Tribunal and by restoring the rectificationorder issued by the officer. (C.N.RAMACHANDRAN NAIR)Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk