Commissioner of Income Tax vs Chandulal alias Vallabhdas Damji

K.A. Puj, J.—The revenue has filed this tax appeal u/s 260A of the Income Tax Act, 1961 for assessment year 1997-98 proposing to formulate the following substantial questions of law for the consideration and determination of this Court:

A. Whether the Tribunal is right in law and on facts in dismissing the appeal filed by the revenue on the ground of low tax effect ?

B. Whether on facts and circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner (Appeals) holding that the addition of Rs. 1,38,422 made on account of short-term capital gains by resorting to rectification of the order u/s 154 of the Act was invalid ?

This Court has admitted the tax appeal on 24-7-2007 in terms of the above referred substantial questions of law.

This appeal was heard by us along with other cognate matters. Submissions were made by both the sides. So far as question (A) is concerned, we have passed a detailed order in Tax Appeal Nos. 1402 to1405 of 2007 (reported as CIT v. Concord Pharmaceuticals (2008) 14 DTK(Guj) J86--Ed.). We have decided the said tax appeal and the question paused therein was answered in affirmative i.e. in favour of the assessee and against the revenue. For the reasons stated and conclusion drawn therein, we answer question (A) in affirmative, i.e., in favour of the assessee and against the revenue.

So far as question (B) is concerned, the assessment was framed u/s 143(3) read with Section 147 of the Act. Thereafter, on account of revenue audit, an objection was raised that the assessing officer has disallowed and added claim of Rs. 1,93.983 and again allowed short-term capital gain offered by the assessee u/s 50 of the Act to the tune of Rs. 1,38,422. On this basis, the assessing officer passed an order of rectification u/s 154 of the Act. The Commissioner (Appeals) held that there is no case of double benefit of set off and hence, there is no mistake which required rectification. On further appeal, the Tribunal upheld the said order. It is contended on behalf of the revenue that the Tribunal has overlooked that there was granting of dual benefit which was an error apparent on the record. The same could be rectified u/s 154 of the Act. The Tribunal has, therefore, erred in holding that there is no error by overlooking vital aspects of the claim made by the assessee with regard to the reduction of WDV of block of assets on sale of two trucks. In this view of the matter, the question (B) was proposed to be formulated by the revenue.

We have considered the submissions made on behalf of the revenue and also gone through the orders passed by the authorities below. The Commissioner (Appeals) has categorically held in his order that the assessing officer has not appreciated the contents of the assessment order and has proceeded to .invoke the provisions u/s 154 in an arbitrary manner. There is no case of double benefit of set off of capital gains as pointed out by the assessing officer. The Commissioner (Appeals), therefore, took the view that there was no mistake which needs rectification. He, therefore, cancelled the order passed by the assessing officer u/s 154 of the Act. The Tribunal has also observed in its order that it was clearly mentioned in the assessment order that in the assessment proceedings, the assessee agreed disallowance on appreciation on trucks and claimed for reducing the income offered of Rs. 1,38,422 as a short-term capital gain u/s 50 of the Act. The Tribunal has further observed that the assessing officer has not appreciated the contents of the assessment order and has proceeded to invoke the proceedings of Section 154 in an arbitrary manner. The Tribunal has also given its finding that there is no case of double benefit of set off of capital gains as pointed out by the assessing officer. Since there was no mistake apparent on the face of the record, the Tribunal has confirmed the order of the learned Commissioner (Appeals) whereby the order passed by the assessing officer u/s 154 of the Act was cancelled. We are, therefore, of the view that the Tribunal was right in confirming the order of Commissioner (Appeals) holding that the addition of Rs. 1,38,422 made on account of short-term capital gains by resorting to rectification of the order u/s 154 of the Act was invalid. Question (B) is, therefore, answered in affirmative, i.e., in favour of the assessee and against the revenue.

This tax appeal is accordingly disposed of without any order as to costs.