JAI PRAKASH BHARTIA,KOLKATA vs. DCIT, CC-2(2), KOLKATA

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ITSSA 33/KOL/2022Status: DisposedITAT Kolkata23 February 2023AY 2006-075 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the powers under Section 154 of the Income Tax Act, 1961, are to be exercised only for rectifying obvious and patent mistakes apparent from the record, not for issues requiring extensive reasoning or interpretation where there can be differing opinions. The Tribunal found that the determination of the acquisition cost for indexation purposes, whether from 1968 or 01.04.1981, was a disputable aspect requiring a detailed process of reasoning and construction of statutory provisions. It was not a simple, apparent error. Therefore, the Assessing Officer wrongly invoked Section 154 powers, and the CIT(Appeals) erred in upholding this action. Consequently, the Tribunal set aside the order of the CIT(Appeals) and quashed the Section 154 order.

What were the facts?

The assessee, Jai Prakash Bhartia, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Kolkata, challenging an order dated 11.10.2021 passed by the Commissioner of Income Tax (Appeals) for Assessment Year 2006-2007. The appeal was filed after a delay of 158 days, which was condoned by the Tribunal considering the COVID-19 period. The core of the dispute stemmed from a rectification order passed by the Assessing Officer (AO) under Section 154 of the Income Tax Act, 1961. The AO sought to rectify an alleged mistake in the computation of long-term capital gain arising from the sale of silver utensils. The assessee had declared a capital loss, treating the acquisition cost as the fair market value as on 01.04.1981, while the AO believed the cost should be taken from the original acquisition date of 1968.

What were the issues?

1. Whether the Assessing Officer erred in confirming the rectification order passed under Section 154 of the Income Tax Act, 1961, to disturb the computation of long-term capital gain. Assessee's Contention: The assessee argued that the issue of determining the acquisition cost for indexation purposes, specifically whether to use the 1968 value or the 01.04.1981 fair market value, was a debatable issue requiring detailed reasoning and interpretation of provisions. Therefore, it was not an 'obvious and patent mistake' amenable to rectification under Section 154. Revenue's Contention: The revenue, through the Assessing Officer and confirmed by the CIT(A), contended that the assessee's computation of capital gain by using the 01.04.1981 value instead of the 1968 acquisition value for indexation purposes was an apparent mistake that could be rectified under Section 154.

Which sections of the Income-tax Act were involved?

Section 154,Section 153A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH, KOLKATA

Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar

Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals), Kolkata-20 dated 11.10.2021 passed for A.Y. 2006-07.

IT(SS)A No. 33/KOL/2022 Assessment Year: 2006-2007 Jai Prakash Bhartia 2. This appeal was presented before the Tribunal on 17.05.2022 and according to the registry, it is time- barred by 158 days. It is pertinent to note that these days already stood excluded by the general directions issued by the Hon’ble Supreme Court. This period falls in the COVID period therefore, the appeal is not to be treated as time-barred.

3.

The assessee has taken five grounds of appeal, but in brief his grievance is that the ld. CIT(Appeals) has erred in confirming the 154 order passed by the ld. Assessing Officer vide which the computation of long- term capital gain has been disturbed by the ld. Assessing Officer.

4.

Brief facts of the case are that a search and seizure operation under section 132 of the Income Tax Act was conducted on the residential premises of the assessee and accordingly a notice under section 153A was issued and served upon the assessee. The ld. Assessing Officer has ultimately passed the assessment order under section 153A read with 143(3) on 21.03.2013. The ld. Assessing Officer thereafter issued a notice under section 154 on 16.03.2017 vide which he sought to rectify an apparent mistake crept in the assessment order, the reasons of which ld. Assessing Officer sought to exercise such powers under section 154/155 are – Particulars of mistake proposed to be rectified

IT(SS)A No. 33/KOL/2022 Assessment Year: 2006-2007 Jai Prakash Bhartia Wrong calculation of indexation while calculating capital gain arising from sale of silver utensils.

5.

Brief facts of the case are that the assessee had declared a capital loss of Rs.2,27,059/- on sale of silver utensils. According to the assessee, silver utensils were purchased before 31.03.1968. They were disclosed under Voluntary Disclosure of Income Scheme, 1997 at a value of Rs.64,153/-. For the purpose of capital gain/loss computable in A.Y. 2006-07 or any other assessment year i.e. 2004-05, 2005-06, the value of such silver utensils for the purpose of determining acquisition cost it is to be equivalent to the fair market value as on 01.04.1981. The ld. Assessing Officer has harboured belief that capital loss declared by the assessee by taking cost of acquisition value of the silver utensils as on 01.04.1981 instead of 1968 value and thereafter indexation is an apparent error crept in the order, which required rectification. In other words, the ld. Assessing Officer was of the view that valuation of the silver utensils for the purpose of acquisition cost ought to be taken from the date of acquisition, i.e. 1968, whereas the assessee was of the view that such valuation is to be taken from 01.04.1981 as provided in the Act and accordingly the acquisition cost of prior years when actually asset was acquired is not be taken into consideration.

IT(SS)A No. 33/KOL/2022 Assessment Year: 2006-2007 Jai Prakash Bhartia 6. With the assistance of ld. Representative, we have gone through the record carefully. The powers under section 154 can be exercised only when the mistake, which is sought to be rectified, is an obvious and patent mistake, which is apparent from the record, and not a mistake, which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinions. It is a disputable aspect whether the cost of acquisition, for the purpose of indexation is to be taken from 1968 when these utensils were acquired or from 01.04.1981. Such an issue is required to be determined on the basis of long drawn process of reasoning as well as construction of the meaning of the provision. It is not a simply apparent error. The ld. Assessing Officer has wrongly taken it as an issue, which can be rectified and the ld. 1st Appellate Authority amplified that error by concurring with the ld. Assessing Officer. This aspect cannot be rectified by exercising the powers under section 154. Accordingly we set aside the order of the ld. CIT(Appeals) as well as quash the 154 order.

7.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 23rd February, 2023. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 23rd day of February, 2023 Copies to :(1) Jai Prakash Bhartia, 20, Mandevilla Gardens, Flat-3D, Kolkata-700019

IT(SS)A No. 33/KOL/2022 Assessment Year: 2006-2007 Jai Prakash Bhartia (2) Deputy Commissioner of Income Tax, Central Circle-2(2), Kolkata, 110, Shantipally, 4th Floor, Kolkata-700107 (3) Commissioner of Income Tax(Appeals), Kolkata-20; 4) Commissioner of Income Tax- ; (5) The Departmental Representative (6) Guard File TRUE COPY By order

Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.

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