Skip to content


Commissioner of Income-tax Vs. United Mercantile Co. (Private) Limited - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B.I.T. Cs. Nos. 84 and 85 of 1979
Judge
Reported in(1986)51CTR(Raj)128; [1986]158ITR41(Raj)
ActsIncome Tax Act, 1961 - Sections 154 and 256
AppellantCommissioner of Income-tax
RespondentUnited Mercantile Co. (Private) Limited
Appellant Advocate J.P. Joshi and; J.L. Daga, Advs.
Respondent Advocate B.R. Arora, Adv.
Excerpt:
.....alleged offence and had not completed eighteen years of age when the juvenile justice act, 2000, came into force - juvenile act, of 2000 has been given retrospective effect by rule 12 of juvenile justice rule, 2007 - as such, accused has to be treated as juvenile under the said act. - 3. the appellate tribunal in its order dated april 27, 1978, has observed as under ;11. a mistake of law apparent from the record in the present case could have occurred only if it appeared clearly that the decision in emerald & co. cit [1964]52itr567(sc) was applicable clearly and without dispute. that decision is good law even today......have been filed by the commissioner of income-tax, jodhpur, for a direction to the income-tax appellate tribunal, jaipur bench, jaipur ('the appellate tribunal'), to state the case and refer the following two questions for the opinion of this court which are said to arise out of the appellate tribunal's order dated february 19, 1979 :'1. whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the mistake corrected by the successor-income-tax officer was not covered by the provisions of section 154 of the income-tax act, 1961 ? 2. whether, on the facts and in the circumstances of the case, the tribunal was right in holding that the issue involved in this case was debatable ?' 2. these two reference applications relate to the assessment years.....
Judgment:

S.K. Mal Lodha, J.

1. These two reference applications under Section 256(2) of the Income-tax Act of 1961 (for short 'the Act' herein), have been filed by the Commissioner of Income-tax, Jodhpur, for a direction to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur ('the Appellate Tribunal'), to state the case and refer the following two questions for the opinion of this court which are said to arise out of the Appellate Tribunal's order dated February 19, 1979 :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the mistake corrected by the successor-Income-tax Officer was not covered by the provisions of Section 154 of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the issue involved in this case was debatable ?'

2. These two reference applications relate to the assessment years 1967-68 and 1968-69. The assessee-respondent is a private limited company which derived its income during the assessment years in question from dividends and interest. The assessee made investments in shares. It also derived interest income during the calendar year 1966. The assessee had in all 18,864 shares costing Rs. 14,02,997.62 including 3,772 bonus shares. During the calendar year 1966 which is the previous year relevant to the assessment year 1967-68, it sold 3,665 shares for Rs. 6,03,808.75 at the rate of Rs. 164-75 per share. The assessee had purchased these shares at Rs. 110 and Rs. 117 per share for a total price of Rs. 4,30,037.50. The capital gains on the aforesaid sale was determined by the assessee at Rs. 2,19,000. The Income-tax Officer accepted the assessee's working of the capital gains with minor modifications. The assessment order was passed by the Income-tax Officer on February 28, 1979. Later on, the successor-Income-tax Officer felt that the capital gain on the sale of shares had not been properly determined inasmuch as the cost of the right shares which had been sold were not determined in accordance with the law laid down by the the Supreme Court in CIT v. Dalmia Investment Co. Ltd. : [1964]52ITR567(SC) which, according to him, was applicable. He was of the view that a mistake of law was committed at the time of the original assessment. A notice was issued under Section 154 of the Act on April 10, (975, for the rectification of the mistake which, according to the successor Income-tax Officer, was apparent on the face of the record. The assessee raised objections to the proposed rectification, inter alia, on the ground that there was no mistake apparent on the face of the record. The Income-tax Officer passed the rectification orders on January 29, 1976, in respect of the assessment years 1967-68 and 1968-69 and revised the computation of the capital gains. The assessee went in appeal before the Appellate Assistant Commissioner. It was, amongst others, submitted by the assessee before the Appellate Assistant Commissioner that the case of the assessee was covered by the decision rendered by the Supreme Court in Emerald & Co. v. CIT : [1959]36ITR257(SC) . The Appellate Assistant Commissioner, by a common order dated September 3, 1976, allowed the assessee's appeals for the assessment years 1967-68 and 1968-69 and cancelled the rectification orders passed by the Income-tax Officer. Aggrieved, the Department went in further appeal. The Appellate Tribunal concurred with the opinion given by the Appellate Assistant Commissioner and held that, at any rate, the question raised by the assessee was highly debatable and, therefore, it cannot be said that there was any mistake apparent on the face of the record so as to be rectified under Section 154 of the Act.

3. The Appellate Tribunal in its order dated April 27, 1978, has observed as under ;

'11. A mistake of law apparent from the record in the present case could have occurred only if it appeared clearly that the decision in Emerald & Co. [1959] 36 ITR 257 was not applicable and the other decision in Dalmia Investment Co. Ltd. v. CIT : [1964]52ITR567(SC) was applicable clearly and without dispute. This is not so. In the case of Emerald & Co. : [1959]36ITR257(SC) , whatever be the circumstances, their Lordships did hold that the capital gain from the sale of such shares could be determined without taking into account the bonus shares. That decision is good law even today. In the case of Dalmia Investment Co. : [1964]52ITR567(SC) , their Lordships laid down the principles of valuation because the sale of bonus shares had taken place and it became necessary to determine their value along with the value of the other shares. In the present case, that situation did not arise because bonus shares themselves had not been sold. It cannot, therefore, be said that the decision in Emerald & Company : [1959]36ITR257(SC) did not apply to the present case or that the decision in Dalmia Investment Co. : [1964]52ITR567(SC) , applied without any dispute. Under such circumstances, it is difficult to say that a glaring and obvious mistake of law had arisen which could be rectified under Section 154.

12. The basic issue in the present case is whether the value of the shares acquired originally or by purchase has to be modified by reference to the bonus shares immediately on their receipt by the assessee even though the bonus shares have not been sold and are in the stock of the assessee or whether such modification should be done at the stage at which the bonus shares themselves are sold. This issue did not arise directly in the case of Dalmia Investment Co. Ltd. : [1964]52ITR567(SC) . It did not arise in the case of Emerald & Co. : [1959]36ITR257(SC) also, but their Lordships did lay down a proposition that the capital gain could be worked out without taking into account the bonus shares since the bonus shares themselves had not been sold. The case of the assessee is definitely closer to the case of Emerald and Co. : [1959]36ITR257(SC) , than to Dalmia Investment Co. Ltd. : [1964]52ITR567(SC) . If the real issue is neither covered by Emerald & Co. : [1959]36ITR257(SC) , nor by Dalmia Investment Co. : [1964]52ITR567(SC) , then it is a highly debatable issue which would not fall within the ambit of Section 154. As we have said, at the time the original assessment was made, the Income-tax Officer had before him both these decisions and full facts. The assessee and also the Income-tax Officer both followed the decision in Emerald & Co. : [1959]36ITR257(SC) . By applying the other decision, the successor-Income-tax Officer merely sought to revise or review the earlier order which Section 154 does not contemplate.

4. The Appellate Tribunal held that the Appellate Assistant Commissioner was right in his view that no mistake apparent on the face of the record had arisen in the case which could be rectified under Section 154 of the Act. The Commissioner of Income-tax filed applications under Section 256(1) of the Act before the Appellate Tribunal. The Appellate Tribunal by its order dated February 19, 1979, rejected the applications filed by the Commissioner of Income-tax whereby observing that no referable question of law arose out of the order passed in respect of the assessment years 1967-68 and 1968-69. It has also been stated in its order rejecting the applications under Section 256(1) of the Act that the issue involved was highly debatable and that the successor-Income-tax Officer purporting to act under Section 154, in fact, sought to review or revise the order of the predecessor-Income-tax Officer which is not covered by Section 154 of the Act. Hence, the Commissioner of Income-tax has filed these two applications under Section 256(2) of the Act.

5. We have heard Mr. J.P. Joshi, learned counsel for the Revenue, and Mr. B.R. Arora for the assessee.

6. The only question that arises in these applications is whether the Appellate Tribunal was right in refusing to state the case and refer the two questions of law suggested by the Commissioner of Income-tax in his application under Section 256(1) of the Act which have been reproduced in para. 9 of the application under Section 256(2) of the Act and as questions of law arise out of its order dated February 19, 1979, its decision, rejecting the applications under Section 256(1) of the Income-tax Act is incorrect.

7. The Income-tax Officer in the order, annexure 1, has computed the capital gains taking the value of the shares at the time of their purchase and accepted the mode of calculation of the capital gains as worked out by the assessee. It is not in dispute that this was done in accordance with the principles laid down by their Lordships of the Supreme Court in Emerald & Co.'s case : [1959]36ITR257(SC) . It may be recalled that, according to the successor-Income-tax Officer, the basis adopted for computation of the capital gains was wrong inasmuch as the law laid down by the Supreme Court in Dalmia Investment Co.'s case : [1964]52ITR567(SC) was not taken note of which is applicable.

8. The basic question is whether the rectifications made by the successor-Income-tax Officer in the two assessment orders in respect of the assessment years 1967-68 and 1968-69 could be done under Section 154 of the Act. Section 154 of the Act reads as under :

'154. Rectification of mistake.--(1) With a view to rectifying any mistake apparent from the record--

(a) the Income-tax Officer may amend any order of assessment or of refund or any other order passed by him ;

(b) the Appellate Assistant Commissioner may amend any order passed by him under Section 250 or Section 271;

(bb) the Inspecting Assistant Commissioner may amend an)' order passed by him in any proceeding under Sub-section (2) of Section 274;

(c) the Commissioner may amend any order passed by him in revision under Section 263 or Section 264.'

9. The scope of Section 154 was examined in T.S. Balaram, ITO v. Volkart Brothers : [1971]82ITR50(SC) . The following illuminating observations were made by Hegde J. (headnotc):

'A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record.'

10. There are a catena of crises of the High Courts of the country that in order to attract the application of Section 154 of the Act, it must be a case of mistake and that that mistake must be apparent on the record. In the case on hand, the Appellate Assistant Commissioner with whom the Appellate Tribunal had agreed, has stated that the case of the assessee is governed by Emerald & Co.'s case : [1959]36ITR257(SC) , whereas the successor-Income-tax Officer has rectified the so-called mistake in the computation of capital gains on the basis of the principles laid down in Dalmia Investment Co.'s case : [1964]52ITR567(SC) .

11. In the circumstances, it is difficult to hold that there was an obvious and patent mistake committed by the Income-tax officer who passed the original assessment orders of the assessee in respect of the assessment years 1967-68 and 1968-69 when he applied the law laid down in Emerald & Co.'s : [1959]36ITR257(SC) , so as to warrant rectification of those assessment orders in exercise of the powers under Section 154 of the Act. There is justification for the observations made by the Appellate Tribunal that the successor-Income-tax Officer merely sought to review or revise the order passed by the predecessor-Income-tax Officer which is not covered by Section 154 of the Act.

12. In our opinion, no substantial question of law arises out of the order of the Appellate Tribunal dated April 27, 1978. The Appellate Tribunal was right in rejecting the Applications under Section 256(1) of the Act. We, therefore, decline to direct the appellate Tribunal to state the case and refer the questions of law stated by the Commissioner of Income-tax in para 9 of the application under Section 256(2) of the Act.

13. The applications under Section 256(2) of the Act are dismissed. In the facts and circumstances of the case, we make no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //