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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MRS.ANNAPURNA GUPTA & MISS SUCHITRA KAMBLE
O R D E R
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income-Tax(Appeals)-4, Ahmedabad [hereinafter referred to as “Ld.CIT(A) under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) dated 17.10.2018 pertaining to the Asst.Year 2011-12.
The ground raised
by the assessee in his appeal as under: “1. Order Bad in Law: The learned Commissioner of Income tax Appeals - 4 grossly erred to uphold order of Assessing officer disrespecting order of Hon'ble Gujarat High Court.
2. Order passed overlooking Judicial Discipline and Precedents:
The learned Commissioner of Income tax Appeals - 4, grossly erred in passing order overlooking decision of Hon'ble Gujarat High Court on similar facts and further erred in refusing to rectify the error under section 154 of the Income tax Act. All the above grounds of appeal are independent from one other and without prejudice to one other. We further crave to add new grounds of appeal during the course of hearing before your Honor.”
3. As is evident from the ground raised
, the challenge before us is against the order passed by the ld.CIT(A) dismissing the rectification application filed by the assessee u/s 154 of the Act. Without going into facts of the case itself, the ld.counsel for the assessee stated that the order passed by the ld.CIT(A) dismissing the assesseee’s rectification application itself shows that he had admitted to the mistake in the order of the ld.CIT(A) but had refused to rectify the same for the reason that it would change the decision. He drew our attention to the very brief and cryptic order passed by the ld.CIT(A) u/s 154 of the Act dismissing assesses application for rectification of the order of the Ld.CIT(A) passed in quantum proceedings holding as under: “To, Shri Jitendra S. Patel, 2, Ajubhai Park, Opp. Panetar Party Plot, Thaltej, Ahmedabad - 380059 Sub.: Rectification application dated 25/08/2018 for appellate order dated 11/02/2015 regarding. Please refer to above application received in tapal on 27/09/2018.
2. The contents of application have been carefully persued. It is my opinion that accepting the contention raised therein, shall change the decision taken by my predecessor. Therefore, the mistake claimed can't be rectified u/s 154 of the IT Act 1961
The Rectification application dated 25/08/2018 is hereby rejected, Sd/- (Subhash Bains) Commissioner of Income-tax (Appeals)-4, Ahmedabad”
The ld.counsel for the assessee stated that this in itself is sufficient for the order of the ld.CIT(A) to be set aside and rectification application filed by the assessee to be allowed.
Thereafter, he took us through the facts of the case, pointing out that the assessee had sold land which was ancestral land acquired by him. For the purpose of computing capital gains, cost of acquisition of the land as on 1.4.1981 was to be arrived at. The assessee got it valued through a registered valuer who valued it at Rs22,66,500/-. The AO however rejected this valuation for reasons stated in the assessment order, and he referred the valuation to the Department’s valuer under section 55A of the Act. Thereafter adopting the valuation given by the DVO of Rs2,56,870/-, he made addition to the capital gain returned by the assessee of the difference in the valuation of cost of land as furnished by the assessee and as taken by the AO based on DVO’s report. Our attention was drawn to para 5.1 to 5.2 of the ld.CIT(A)’s order passed in quantum proceedings bringing out the above case as under:
“5.1 If was gathered by the AO that appellant has sold agricultural land situated at village Dascroi, district Ahmedabad for Rs. 80 lakhs along with three co-owners. However, no capital gain was shown by the appellant from the aforesaid transaction in the return filed on 23.12.2011. On confrontation by the AO, it was informed that an ancestral property was purchased by his grandfather in the year 1940 and 50% of said property was transferred to his father in the year 1964. In the year 1997, said property was again transferred to his four sons and daughters and as legal heir the appellant received the said ancestral property as Karta of his HUF. The share; of the HUF was only 25%. It was claimed that since the property belonged to H UF.ino capital gain was disclosed by the appellant. As against this, it is observed by the AO in para-3.5 of the assessment order that the land in question was received by the appellant by succession and not by total/partial partition of HUF of his father. No return was filed by HUF and there was no PAN in the name of HUF. From this, it was clear that relevant capital gain was not disclosed either in the hands of HUF or appellant. In view of above facts. AO taxed the capital gain in the hands of appellant. This decision of AO has not been challenged by the appellant as clear from the grounds of appeal. The only issue challenged by the appellant is computation of capital gain.
5.2 . The appellant has, during assessment proceedings, computed capital gain by taking the fair market value of land as on 01.04.1981 at Rs. 22,66,500/- at the rate of Rs. 300/square metre. The valuation was based on the report of the government approved valuer Amit B. Rami. The AO noted that in Annexure-A of the report, there was reference to 3 sale instances as comparables out of which first sale instances was at the rate of Rs.299 per square metre whereas other two instances were at the rate of Rs. 15.58 and Rs. 12.58 per square metre only. The AO observed that the area in question in the case of first instance was very small, only 83.61 m2 whereas the area of land under the relevant transaction was 7555 m2 and therefore the rate taken by the valuer was not comparable. The AO has also produced a scanned copy of the valuation report in the assessment order. In view of above facts, AO noted that the fair market value of the agricultural land taken by the appellant as on 01.04.1981 was not correct and accordingly he referred the land for valuation. Valuation Officer, after giving, show cause to the appellant, valued the land at Rs.2,56,870/- as on 01-04- 1981 by taking the rate at Rs. 53.06 per square metres. Accordingly, taking appellant's share as 1/4th, AO calculated the long-term capital gain in the hands of appellant at Rs.10,06,995/- which was added as undisclosed capital gain to the income of the appellant.
The ld.counsel for the assessee thereafter stated that before the ld.CIT(A) the assessee had challenged the reference made by the AO to the DVO under section 55A of the Act for the purpose of determining cost of acquisition of the land as being not in accordance with law and relied on the decision of jurisdictional High Court in this regard. But the ld.CIT(A) followed decision of Hon’ble Delhi High Court and ruled against the assessee, however, at the same time mentioning that with due respect to the order of the Hon’ble Gujarat High Court he was rejecting the technical and legal contentions raised by the assessee. The ld.counsel for the assessee drew our attention to para 7.1 to 7.3 of the order of the ld.CIT(A) in quantum proceedings as under:
The ld.counsel for the assessee stated that since the ld.CIT(A) had failed to follow the decision of the jurisdictional High Court which was in favour of the assessee, and had even made reference to the same also in his order, the assessee accordingly filed rectification application to the ld.CIT(A) to the effect that not following decision of jurisdictional High Court in the case of the assessee tantamounted to the order passed by the ld.CIT(A) being erroneous. The ld.counsel for the assessee drew our attention to the application filed to the ld.CIT(A) in this regard placed at PB Page No.2 to 5 as under: “2. - The copy of Order of Assessment, Grounds of Appeal
and Appellant Order passed by Honble C1T (A) - 4 Ahmedabad is enclosed as annexure 1 - 3, herewith for your immediate reference arid perusal.
3. It is evident that the order of assessment was challenged on one ground that the reference under section 55A of the Act to DVO, by the learned AO was invalid. The appellant was before your office stating that reference to DVO under section 55A was unlawful and therefore order was not tenable in eyes of law. The appellant has placed reliance on the jurisdictional Gujarat High Court on the same point of law as represented in written submissions dated 09/02/2015, as re-produced here-under
23. We wish to place reliance on judgments of Hon'ble jurisdictional Gujarat High Court in case of Hitaben Jayantilal Shah vs ITO (2009) 310 ITR 31 (Gujarat High Court). The said judgment directly and fully applied to the facts of the present case. (Copy of decision enclosed as Annexure 4)
24. Further decision of Hon'ble ITAT Ahmedabad Bench C in case of ITO vs Nitin Jayantilal Shah date of order 6/5/2011. Copy of decision is enclosed on Page No 14 to 27 of Paper Book. (Copy of decision enclosed as Annexure 5) 5 However the Honble CIT (A) erred by passing order not following order of Hon'ble Gujarat High Court. The CIT (A) has stated in the order as follows: [Page 9 - Para 7.3 of CIT (A) order....
"In view of above, with due respect to the order of Hon'ble Gujarat High Court, the technical and legal contentions raised by the appellant are hereby rejected."
The ld.counsel for the assessee stated that in response to this application filed by the assessee, the ld.CIT(A) passed a very cryptic order stating that allowing rectification of the assessee would tantamount to changing decision of the CIT(A), which he was not inclined to do so. The ld.counsel for the assessee stated that it was evident that even the ld.CIT(A) was aware that not following jurisdictional High Court’s decision would tantamount to an apparent mistake in his order, and therefore, his refusal to allow assessee’s rectification application was in violation of all principles of law in this regard.
The ld.DR however supported the order of the ld.CIT(A).
We have considered the rival contentions and have gone through the order of the Ld.CIT(A) impugned before us as also all the documents and other orders referred to before us. The grievance of the assessee before us is against the rejection by the Ld.CIT(A) of the rectification application filed by the assessee u/s 154 of the Act. The assessee had sought rectification of the mistake in the order of the Ld.CIT(A) passed in quantum proceedings of not following the decision of the jurisdictional High Court, cited by the assessee, while deciding the issue of reference made to DVO by the AO for valuation of land sold by the assessee for the purposes of determining its cost of acquisition as on 01-04-1981.
We are inclined to agree with the ld.counsel for the assessee’s submissions before us that the rectification order passed by the ld.CIT(A) u/s 154 of the Act is, as per the Ld.CIT(A)’s own admission,
11 bad in law, having not allowed the rectification despite accepting to the mistake.
The contents of the order passed by the Ld.CIT(A) both in quantum proceedings and u/s 154 of the Act on rectification application filed by the assessee ,we agree with the Ld.Counsel for the assessee, itself are self-speaking and loud and clear that the ld.CIT(A) was aware that the decision of the jurisdictional High Court cited by the assessee was applicable in the facts of the case before him.
In his order passed in quantum proceedings, we find, he dismisses assessee’s contention of the reference made to DVO by the AO being bad in law relying on a decision of the Hon’ble Delhi High Court, this despite the fact that the assessee cited decision of the jurisdictional High Court in favour of the assessee. The Ld.CIT(A) did so without distinguishing the decision of the jurisdictional High Court cited by the assessee. In fact, he on the contrary implicitly accepted the applicability of the said decision to the facts of the case when he dismissed assesses plea stating in his order “with due respect to the order of the jurisdictional high court”. This shows that he was aware that the decision of the jurisdictional High court applied to the issue before him
Further, even when the assessee filed a rectification application before him for not following the jurisdictional High Court decision, the Ld.CIT(A) did not distinguish the said decision while dismissing assesses application, but again on the contrary stated that “accepting assesses application would tantamount to changing the decision .” This again is an implicit acceptance by the Ld.CIT(A) of the mistake in his order passed in quantum proceedings by not following the ratio laid down by the jurisdictional High Court on the issue before him.
Having admitted to this mistake in his order, there was no other recourse available in law to the Ld.CIT(A) other than allowing assessee’s rectification application. His dismissal of the rectification application on the ground that it would change the CIT(A)’s order is in blatant disregard and against all settled principles of law. If a mistake is admitted to have occurred in an order, the same needs to be rectified. There are no two ways about it.
Therefore, without going into the merits of the case, on the basis of the admission of the ld.CIT(A) itself that jurisdictional High Court decision applied in the case of the assessee which he repeatedly implied in his order passed both in quantum proceedings and under section 154 of the Act, we set aside the order of the ld.CIT(A) passed under section 154 of the Act and direct him to allow the assessee’s rectification application.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 7th October, 2022 at Ahmedabad.