EQUITY INTELLIGENCE INDIA PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX

Relying on the said clauses, it was contended that the income sale of listed shares sold after holding them for more than 12 months amounting to Rs.3,08,67,375/- should be assessed as long term capital gains and should not be treated as business profit.

The 1st respondent passed Ext.P2 assessment order wherein the 1st respondent took a stand that the short term capital gains of Rs.1,43,14,697/- and long term capital gains of Rs.3,08,67,375/- earned by the petitioner Company from the sale of listed equity shares of Indian Companies should be treated as Business Profit and not Capital Gain.

Challenging Ext.P2 order of assessment, the petitioner Company preferred an appeal under Section 246 of the Act before the 3rd respondent and the same is pending. In the meanwhile, the petitioner Company preferred Ext.P6 rectification application before the 1st respondent under Section 154 of the Act. It was contended therein that the 1st respondent, while passing Ext.P2 order, went wrong in disregarding Ext.P3 Circular No.6/2016 of CBDT and treated the long term capital gain from sale of listed shares as taxable under the head business and therefore, there is a mistake apparent from the record which requires to be rectified.

The 1st respondent, by Ext.P7 order, dismissed the application for rectification reiterating the reasons stated in the assessment order. Against Ext.P7, the petitioner Company preferred Ext.P8 revision petition before the 2nd respondent under Section 264 of the Act contending that the assessing authority, while passing the said order, did not advert to Ext. P3 Circular relied on by the petitioner. The 2nd respondent rejected the revision petition by Ext.P9 order. Exts.P7 and P9 are impugned in this writ petition.

A statement has been filed on behalf of the respondents wherein it is stated that the petitioner Company has already instituted a Regular Statutory Appeal against Ext.

Heard Sri.P.K.Ravi Sankar, learned Counsel for the petitioner and Sri.Jose Joseph, learned Standing Counsel for the respondents.

Sri.Ravi Sankar, learned Counsel for the petitioner Company contended that Ext.P6 rectification application under Section 154 of the Act is to correct mistake apparent on the face of record and notwithstanding the appeal filed against the order of assessment, the application for rectification of mistakes is independently maintainable.

According to Sri.Ravi Sankar, the Assessing Officer refused to consider Ext.P3 Circular while issuing Ext.P2 assessment order and the same is a mistake apparent from the record and the assessing authority is bound to rectify such mistake and amend Ext.P2 assessment order when the same is brought to the notice of the said authority by Ext.P6 application. He also contends that Section 119 of the Act provides for powers of the CBDT to issue Circulars and the assessing authority is bound to observe and follow such circulars and instructions. Sri.Ravi Sankar has also relied on the decision reported in Catholic Syrian Bank Ltd. v. Commissioner of Income Tax [2012 (3) SCC 784: 2012 KHC 4121] wherein the Apex Court has held that the circulars issued by the CBDT under Section 119 of the Act are binding on the Income Tax Authorities and the same has to be followed for a uniform and proper administration and application of the provisions of the Act. He also contends that the objection regarding parallel proceedings is raised for the first time by the respondents in the statement filed before this Court and there is no such objection in Exts.P7 and P9 orders. Sri.Ravi Sankar further contends that, since the main factor for consideration by the assessing authority is whether the profit on sale of shares is capital gain or business income, for determining the said issue, Ext.P3 Circular is relevant and the assessment order passed without reference to such circular suffers from mistake apparent from the record and the said mistake is liable to be rectified by the 1st respondent in exercise of the powers under Section 154 of the Act. The 1st respondent has to exercise the powers under Section 154 of the Act even if an appeal is pending consideration before the appellate authority against the order of assessment or even when the matter has been concluded by the appellate authority.

Per contra, Sri. Jose Joseph would rely on the decision reported in T.S.Balaram, Income Tax Officer, Company Circle IV v. Bombay Volkart Brothers and Others [1971 (82) ITR 50 : 1971 KHC 576 : 1971 (2) SCC 526 : AIR 1971 SC 2204] wherein the Hon'ble Supreme Court held that it is not open to the assessing authority to go into the true scope of the relevant provisions of the Act in a proceedings under Section 154 of the Act and that 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. Sri.Jose Joseph also made available a copy of the appeal preferred by the petitioner against Ext. P2 order of assessment and contended that the main issue raised therein is with regard to non- consideration of Ext.P3 Circular by the assessing authority. He submits that what has been raised in Ext.P6 rectification application touches on the merits of the assessment order which can be considered only in appeal. Non-consideration of the circular being a matter pending consideration in appeal, the application for rectification amounts to institution of parallel proceedings.

I do not find any merit in the contention of the petitioner that the refusal to consider Ext.P3 Circular amounts to mistake apparent from the record which is to be rectified in a proceedings under Section 154 of the Act. As submitted by the learned standing counsel for the respondents, the petitioner has raised the very same issue in the rectification application as well in the appeal filed against Ext.P2 assessment order which is pending consideration before the appellate authority. The contention of the petitioner in Ext.P6 rectification application touches on the merits of the grounds raised in the Regular Statutory Appeal filed against Ext.P2 assessment order. The applicability of the circular and whether the assessing authority went wrong in disregarding the CBDT circular are grounds raised in the appeal by the petitioner. This question requires an adjudication in the appeal by hearing parties on questions of facts and law. Therefore, the issue raised in Ext.P6 application is not a mistake apparent from the record which is to be rectified in a proceedings under Section 154 of the Act. There is no merit in the challenge against Exts.P7 and P9 orders. The writ petition is dismissed. However, I make it clear that the statutory appeal filed against Ext.P2 order shall be considered and decided by the appellate authority in accordance with law, untrammeled by any observations in Exts.P7 and P9 orders. There will be no order as to costs. MURALI PURUSHOTHAMAN JUDGE