AUTO FINANCE ENTERPRISES,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 12(3), MUMBAI

आदेश / O R D E R

Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2010-11 contest the order of Ld. Commissioner of Income-Tax (Appeals)-28,

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 Mumbai [CIT(A)], Appeal No. CIT(A)-28/IT-251/AC-17(1)/2013-14 dated 06/10/2017 on following grounds of appeal: - The Ld. CIT(A) has erred in confirming the order passed by the Assessing Officer u/s 154 of the Act which is bad in law and against the principle of natural justice. The Ld. CIT(A), in law and on facts and circumstances of the case, ought to have directed the Assessing Officer to allow the appellant to carry forward long term capital loss of Rs.3,26,31,579/- as all relevant undisputed facts were on record.” 2.1 Facts in brief are that the assessee being resident firm stated to be engaged in investment / trading in shares & derivatives was assessed for impugned AY u/s 143(3) on 30/01/2013 accepting the returned Loss of Rs.216.02 Lacs. Para No.3 of the quantum assessment order record a finding that during the year, the investment in listed shares held by the assessee have been converted into stock-in-trade as on 01/04/2009. 2.2 Subsequently, the assessee filed rectification application u/s 154 on 13/05/2013 by submitting that Long-Term Capital Loss [LTCL] of Rs.326.31 Lacs remained to be allowed to be carried forward while framing assessment. It was submitted that the aforesaid loss arose as per the provisions of Section 45(2) on conversion of investment into stock-in-trade. The investment so converted into stock-in-trade was already sold during the year and the resultant gains were offered to tax as Business Income. Accordingly, loss arising on account of conversion was to be assessed under the head Capital Gains as per the provisions of Section 45(2) and taxed during the year. In the above background, the assessee worked out loss of Rs.326.31 Lacs which was to be carried forward for set-off in subsequent years. It was submitted that since all the particulars, in respect thereof, were already on record and the resultant gains were already offered to tax, the aforesaid omission was

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 only a mistake apparent from record which would require rectification u/s 154. 2.3 However, Ld. AO rejected the said plea on the ground that the aforesaid claim was not made in the return of income filed u/s 139(1) and further, the figures of Long-Term Capital Loss in the statement of computation of income filed during scrutiny assessment proceedings were mentioned as Nil. Therefore, as per the provisions of Section 80 read with section 139(3), any loss which has not been determined in pursuance of a return filed within the time allowed u/s 139(1) shall not be allowed to be carried forward u/s 74(1) of the Income Tax Act, 1961. Hence, the application was rejected vid order dated 05/09/2013. 2.4 The Ld. CIT(A) confirmed the same by observing as under: - Appellant conceded in hearing on 04/10/2017 that facts noted in Para-5 of AO's order are factually correct. The appellant having conceded his own wrong doing cannot be permitted to take advantage of his own fault and compel adjudication under such an issue as it not even covered u/s. 154. Further, on merit too, it is amply clear that what was claimed, was allowed as per law. The provisions are crystal clear. The AO cannot travel beyond law. The petition does not deserve to succeed. In regard to scope of section-154, the following is relied upon: 1.Banswara Syntex (108 ITD 48)(Jodh.): a mistake apparent is which is manifest, plain or obvious. Apparent is what is ex-facie incapable of argument or debate. 2.Saurashtra Kutch Stock Exchange (305 ITR 227)(SC): 2.3 The issue is definitely debatable. Facts noted by AO on para.5(supra) are correct, as conceded. 3. Under the circumstances AO has rightly not given her consent in regard to claimed relief.

Aggrieved, the assessee is in further appeal before us. 3. The Ld. Authorized Representative for assessee [AR], while assailing the stand of lower authorities, placed reliance on CBDT circular

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 No.14(XL-35) dated 11/04/1955 and relied upon following judicial pronouncements for various submissions: - No. Case Law Judicial Authority & Citation 1. Sanchit Software and Solutions P. Ltd. Hon’ble Bombay High Court [349 ITR Vs. Ld. Commissioner of Income Tax 404] (Appeals)- Mumbai [CIT(A)] 2. CIT V/s Nalwa Investment Ltd. Hon’ble Delhi High Court [322 ITR 233] 3. CIT Vs. K.N. Oil Industries Hon’ble High Court of Madhya Pradesh [142 ITR 13] 4. Container Corporation of India Ltd. Vs. ITAT Delhi Bench DCIT [94 TTJ 502] 5. Asia Pacific Fund Inc. Vs. DCIT ITAT Mumbai Bench [96 TTJ 548] 6. ACIT Vs. Rupam Impex ITAT, Rajkot Bench [157 ITD 360] 7. Alka Agarwal V/s ADIT ITAT Delhi Bench [15 Taxmann.com 176]

Per Contra, Ld. DR submitted that there was no mistake apparent from record within the meaning of Section 154 and therefore, the assessee’s prayer could not be accepted. 4.1 We have carefully heard the rival submissions and perused relevant material on record and deliberated on the judicial pronouncements as cited before us. The undisputed fact that emerges are that that the assessee had filed return of income u/s 139(1) which was accepted in scrutiny assessment u/s 143(3). The assessee has converted certain investments into stock-in-trade as on 01/04/2009. This fact has also been noted by Ld. AO in the quantum assessment order. The investments so converted has been sold during the year and resultant gains of Rs.76.82 Lacs have been assessed as Business Income. The act of conversion of capital asset into stock-in-trade amounts to transfer within the meaning of Section 2(47)(iv) and the provisions of Section 45(2) get trigger in such a case. As per these

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 provisions, the resultant gains shall be taxable in the year of sale of stock-in-trade and the fair market value of the asset on the date of conversion is deemed to be the full value of consideration upon such conversion. In the present case, it transpires that the stock-in-trade was sold and therefore, the resultant gains / losses under the head Capital Gains were required to be assessed in terms of Section 45(2). The same has remained to be assessed. 4.2 So far as the question that whether the aforesaid claim could be entertained u/s 154, we find that the fact of the conversion was duly reported by Tax Auditor in Tax Audit Report Form No. 3CD, as placed on record. The fact of conversion has also been noted by Ld. AO in the quantum assessment order. The stated loss on sale of share investment was separately reflected under the head expenditure in the Profit & Loss account. The aforesaid loss has also been adjusted from losses in the statement of computation of income. The fact of conversion of investment into stock-in-trade was duly mentioned in assessee’s financial statements in Schedule-J Notes forming part of the Accounts as on 31/03/2010. All the above documents were filed by the assessee before Ld. AO during scrutiny assessment proceedings vide submissions dated 11/07/2012. Not only this, specific queries were raised by Ld. AO pertaining to conversion which were duly replied to by the assessee vide submissions dated 03/01/2013. The aforesaid facts would lead us to conclude that the assessee’s claim as urged before us was not a new claim but it sprang from existing records as already filed / available before Ld. AO. Therefore, the plea that the claim remained to

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 be made due to inadvertent error was plausible as well as bona-fide one. This being so, the same could be subject-matter of rectification u/s 154 since the revenue would not be justified to take advantage of inadvertent error when material, in that respect, was already available on record. 4.3 The Hon’ble Bombay High Court, in Writ Petition titled as Sanchit Software & Solutions P. Ltd. V/s CIT [349 ITR 404], after considering CBDT Circular No.14 (XL-35) dated 11/04/1955 observed as under: - 5. In any civilized system, the assessee is bound to pay the tax which he liable under the law to the Government. The Government on the other hand is obliged to collect only that amount of tax which is legally payable by an assessee. The entire object of administration of tax is to secure the revenue for the development of the Country and not to charge assessee more tax than that which is due and payable by the assessee. It is in aforesaid circumstances that as far back as in 11/04/1955 the Central Board of Direct Tax had issued a circular directing Assessing Officer not to take advantage of assessee's ignorance and/or mistake. The relevant portion of the above Circular is as under: "3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should:- (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them so to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs." Therefore the above Circular should always be borne in mind by the officers of the respondent-revenue while administering the said Act. 4.4 The Hon’ble Delhi High Court in the case of CIT V/s Nalwa Investment Ltd. [supra], under identical situation, held as under: - We are of the view that the Tribunal correctly appreciated the provisions of section 80 of the Act read with section 139(3) of the Act and allowed the carry forward of loss for

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 the purposes of set off against income of the subsequent year(s). A plain reading of provision of section 80 of the Act permits an assessee to carry forward a loss and seek its set off under section 72(1) or 73(2) or sub-section (1) of section 74 or 74A(3) except when, the loss has not been determined in pursuance of a return filed in accordance with provisions of sub-section (3) of section 139. Section 80 of the Act reads as follows:— "Submission of return for losses.—Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A." 12.1 In the instant case, there is no doubt that the assessee had filed a return under section 139 of the Act within the prescribed time. It is also not disputed that a loss had been claimed even though the same had been claimed to the extent of Rs. 90 and that too as a capital loss with respect to DWs issued to the assessee, on the assessee investing in the rights issue of JISCO. The assessee carried out a course correction by claiming a loss on sale of SRNCDs to UTI at Rs. 111 per SRNCD as they had sold SRNCDs of a face value of Rs. 500 to UTI at Rs. 389 per SRNCD. The Tribunal in the first round in its order dated 5-6-2000 came to a conclusion based on the judgments of the Supreme Court as well as those of various High Courts that what was important and relevant was the true legal effect of a transaction and in coming to the said conclusion the view that the assessee may take in the return of income or the treatment that is meted out in the books of account or the method of accounting that an assessee uses are not relevant in considering the effect to be given to the transactions which are governed by the provisions of the Act. The Tribunal went on to observe while allowing the claim of loss by the assessee that the fact that in the return filed by the assessee wherein the assessee does not take a proper position, cannot be a ground to take advantage of the ignorance of the assessee if the assessee is otherwise entitled to relief and/or claim of loss as in the instant case. Keeping the aforesaid rationale in mind the Tribunal vide order dated 5-6-2000 had directed the Assessing Officer to allow the assessee's claim of loss on sale of SRNCDs at the rate of Rs. 111 as a business loss. It is evident that the Assessing Officer (Jt. Commissioner of Income-tax) in the second round while giving effect to the orders of the Tribunal dated 5-6-2000 was determining the income/loss in pursuance of an original return filed by the assessee under section 139 of the Act. In the return the assessee had claimed erroneously a loss to a lesser extent that is at Rs. 91 against DWs as against SRNCDs which was corrected pursuant to a stand taken before conclusion of proceedings by the Assessing Officer in the first round and a stand which was sustained by the Tribunal by its order dated 5-6-2000. In view of the said circumstances obtaining in the present case the Tribunal in the second round vide the impugned judgment has correctly held in our opinion, that both the CIT(A) and the Assessing Officer had misdirected themselves in law in preventing the carry forward and the set off of the assessed loss against subsequent profits as the conditions prescribed for triggering the provisions of section 80 of the Act were not present in the instant case. 13. The matter can be looked at from another angle also. It would in one sense turn the law on its head if after the Tribunal vide its order dated 5-6-2000 had allowed the

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 assessee's claim of loss on sale of SRNCDs at the rate of Rs. 111 per SRNCD as a business loss based on the reasoning that the assessments had to be carried out keeping in mind the real effect of a legal transaction notwithstanding the treatment meted out by the assessee, it would then appear anomalous and incongruous if the Assessing Officer while giving effect to the said order would denude the efficacy of the Tribunal's order by, in a manner of speaking, taking away with one hand what was given by the other, that is, even while adjusting loss in assessment year 1995-96, deprive the assessee of a consequent benefit of carry forward and set off of the balance loss in the subsequent year(s). Such an approach would in our view be completely contrary to the directions issued by the Tribunal. We are here reminded of the observations of the Supreme Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323 where the Court in respect of an income-tax matter has observed that while equity and taxes are strangers an attempt should be made to bring them nearer. The observations of the case are apposite and extracted hereinbelow:— ". . .Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. . . ." (p. 339) 14. At this stage, it would be pertinent to note the observations of the Supreme Court with respect to the approach that the Income-tax Authorities are required to adopt while assessing the income of an assessee. The relevant observations being apposite are extracted hereinbelow:— CIT v. C. Parakh & Co. (India) Ltd. [1956] 29 ITR 661 (SC). ". . .We do not see any force in this contention. Whether the respondent is entitled to a particular deduction or not will depend on the provision of law relating thereto, and not on the view which it might take of its rights, and consequently, if the whole of the commission is under the law liable to be deducted against the Indian profits, the respondent cannot be stopped from claiming the benefit of such deduction, by reason of the fact that it erroneously allocated a part of it towards the profits earned in Karachi. . . ." (p. 665) CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC). "By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is canvassed. Under sub-section (4) of section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal: if for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him." (p. 712) Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC).

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 ". . .We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter. . . ." (p. 367) 15. As regards the other issue as to whether the Assessing Officer in the second round had exceeded his jurisdiction in observing that the loss of Rs. 6,27,81,805 assessed by him could not be carried forward and set off by the assessee against his future income, we are of the opinion that in view of the line of reasoning taken by us, the Assessing Officer in the second round was required to give full effect to the consequences which flowed from the order of the Tribunal dated 5-6-2000. The Assessing Officer to our minds exceeded his jurisdiction by not applying the provisions of law, keeping in mind the correct perspective of the matter at hand. 16. In view of the discussions above, we answer both the questions in favour of the assessee and against the revenue. In the result the appeal is dismissed. There shall be no orders as to cost.

4.5 The Hon’ble High Court of Madhya Pradesh in the case of CIT V/s K.N.Oil Industries [supra], while interpreting the meaning of Record for the purpose of Section 154, held as under: - The facts briefly stated are that in the assessment proceedings for the assessment year 1972-73 the assessee did not claim export markets development allowance under section 35B of the Income-tax Act, 1961. The ITO started rectification proceedings under section 154 for correcting an error in the grant of rebate under section 80J. In those proceedings the assessee contended that there was an apparent error in not allowing to it the relief under section 35B. The ITO refused to go into this question on the ground that no such claim was made in the return or in the assessment proceedings by the assessee. The AAC, however, held in favour of the assessee that there was an apparent error in not granting the relief under section 35B even though it was not claimed in the return. In further appeal before the Tribunal, the argument of the department was that the assessee having omitted to claim the relief under section 35B in the return, it was not open to it to claim that relief under section 154 after the assessment was made. This argument was not accepted by the Tribunal. In the opinion of the Tribunal, the jurisdiction to interfere under section 154 arose when it was found that there was a mistake apparent from the record in the relevant order and in deciding whether there was an apparent mistake the ITO was not confined to the return and he could look to the entire material available in the record of the assessment. The Tribunal, therefore, held that it was open to the ITO to assume jurisdiction under section 154 if it was apparent

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 from the record of assessment that there was a mistake in not granting relief under section 35B although the said relief was not claimed in the return. It is the correctness of this view which we have to examine in this reference. The learned standing counsel for the Department placed reliance upon Anchor Pressings (P.) Ltd. v. CIT [1975] 100 ITR 347 (All.), Sharda Prasad v. CIT [1975] 100 ITR 373 (All.) and Paramount Trading Corporation v. ITO [1980] 124 ITR 55 (All.), in support of his submission that as no relief under section 35B was claimed by the assessee in the return, the mistake in not granting the relief could not be apparent and could not be corrected under section 154. These cases which were decided by the Allahabad High Court do support the submission of the learned counsel. But, with great respect, we are unable to agree with the view taken in them. The record of the assessment is not confined to the return. Section 154 which confers jurisdiction for rectifying mistake enables the ITO to assume jurisdiction when he finds "any mistake apparent from the record". The word "record" as used in section 154 will include all that material which forms part of the assessment proceedings and not only the return. It is also not correct to say that if the assessee omits to claim a relief allowable to him under the provisions of the Income-tax Act, he is not entitled to get that relief. It is the duty of the ITO and other officers administering the Act to inform the assessee that he is entitled to a particular relief if it is apparent that he is so entitled from the material available in the proceedings of assessment. This duty has been highlighted by a circular issued by the CBR. For these reasons, the Gujarat High Court in Chokshi Metal Refinery v. CIT [1977] 107 ITR 63 (Guj.), dissented from the view taken by the Allahabad High Court in the aforesaid cases and held that if it is apparent from the record of assessment that the assessee was entitled to a particular relief, the ITO can rectify that mistake under section 154 although the said relief was not claimed by the assessee in the return. We respectfully agree with the view taken by the Gujarat High Court. The learned counsel for the Department submitted before us that even otherwise the conclusion that the assessee was entitled to the relief under section 35B was not apparent from the record. We cannot examine this submission because the question referred has to be answered on the assumption that it was apparent from the record that the assessee was entitled to the relief under section 35B. For the reasons given above, we answer the question as follows: "If it is apparent from the record that the assessee was entitled to relief admissible under section 35B, that relief can be granted to him by an order under section 154 by rectifying the assessment even though relief under that section had not been claimed by the assessee in the original assessment proceedings"

4.6 The Delhi bench of Tribunal in Container Corporation of India Ltd. V/s DCIT [Supra], taking favorable view in the matter of rectification u/s 154, held as under: - 7. The next question for our consideration is whether assessee could claim depreciation under section 32 by making application for rectification under section 154 of the Act on

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 the ground that it forgot to claim the same. This question came up for consideration before the Hon’ble Supreme Court in the case of Anchor Pressings (P.) Ltd. (supra). In that case, the assessee was engaged in the business of the manufacture and sale of locks used in suitcases and therefore, was entitled to relief under section 84 of the Act, as it then was. No claim was made by assessee for relief under this section either in the return of income or in the assessment proceedings or before the first appellate authority. Subsequently, the assessee made an application before the Assessing Officer under section 154 praying for rectification of the assessment order by grant of relief under section 84. This application was rejected by ITO. A revision petition filed before CIT has also been rejected. The writ petition moved by the assessee before the High Court was also dismissed. Hence, the matter reached the Apex Court. Their Lordships held that jurisdiction under section 154 of the Act to rectify a mistake is much wider than provided in Order XLVII, rule 1 of the Code of Civil Procedure, 1908 and, therefore, relief could be allowed in the rectification proceedings if all the factual materials necessary for allowing the relief was available on record and such relief could not be denied merely because assessee had omitted to claim the same. The relevant observations of Their Lordships are quoted below: "The jurisdiction under section 154 of the Income-tax Act, 1961, to rectify mistakes is wider than that provided in Order XLVII, rule 1, of the Code of Civil Procedure, 1908. Nonetheless, there must be material to support the claim for relief under section 84 and unless such material can be referred to, no grievance can be made if the ITO refused relief. An obligation is imposed on the Income-tax Officer by section 84 of the Income-tax Act, 1961, to grant relief thereunder and the relief cannot be refused merely because the assessee had omitted to claim the relief, but the mere existence of such an obligation on the Income-tax Officer is not sufficient. Precise factual material and clear data must be contained in the record sufficient to enable the Income-tax Officer to consider whether the relief should be granted under section 84. In the absence of such material, no fault can be found with the Income-tax Officer for not making an order under section 84 favouring the assessee." 8. In view of above observations, we are of the view that assessee was legally entitled to claim depreciation in the rectification proceedings under section 154. But the contention of the department is that such claim cannot be allowed in view of Supreme Court judgment in the case of Mahendra Mills (supra). In that case, the assessee did not claim depreciation for assessment year 1974-75 in the return but the Income-tax Officer allowed the same. The contention of assessee that right to claim depreciation was optional was rejected by Assessing Officer. The CIT(A) allowed the appeal of assessee and the Tribunal affirmed the order of CIT(A). The following question was referred to the Hon’ble High Court:- "Whether, on the facts and in the circumstances of the case, the Tribunal was right in coming to the conclusion that the Income-tax Officer could not grant depreciation allowance to the assessee under the Income-tax Act, 1961, when the same was not claimed by the assessee?" The High Court answered the question in favour of the assessee. On appeal to the Supreme Court, it was held that in the absence of any claim by assessee, the same could not be forced upon the assessee. Their Lordships at Page 78 of the Report observed as under:

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 "The language of the provisions of sections 32 & 34 of the Income-tax Act, 1961, is specific and admits of no ambiguity. Section 32 allows depreciation as deduction subject to the provisions of section 34. Section 34 provides that deduction under section 32 shall be allowed only if the prescribed particulars have been furnished. Rule 5AA of the Income-tax Rules, 1962, since deleted, provided for the particulars required for the purpose of deduction under section 32. Even in the absence of rule 5AA, the return of income in the form prescribed itself requires particulars to be furnished if the assessee claims depreciation. These particulars are required to be furnished in great detail. There is a circular of the Board dated August 31, 1965, which provides that depreciation could not be allowed where the required particulars have not been furnished by the assessee and no claim for the depreciation has been made in the return. The Income-tax Officer in such a case is required to compute the income without allowing depreciation allowance. The circular of the Board dated April 11, 1955, imposes merely a duty on the officers of the Department to assist the taxpayers in every reasonable way, particularly, in the matter of claiming and securing relief. The officer is required to do no more than to advise the assessee. It does not place any mandatory duty on the officer to allow depreciation if the assessee does not want to claim that. The provision for claim of depreciation is certainly for the benefit of the assessee. If he does not wish to avail of that benefit for some reason, the benefit cannot be forced upon him. It is for the assessee to see if the claim of depreciation is to his advantage." [Emphasis supplied] 9.1 There appears to be some conflict between these two judgments inasmuch as in former case it was held that an obligation is imposed on the Income-tax Officer to grant relief if all factual material is available on record while in latter case, it has been held that there is no mandatory duty on the officer to allow the depreciation in the absence of assessee’s claim. Both these judgments were delivered by Bench of two Judges and the judgment in the former case was not brought to the notice of Their Lordships in the latter case. At this stage, it would be appropriate to refer to the judgment of the Apex Court delivered by Bench of three judges in the case of Sun Engg. Works (P.) Ltd. (supra) wherein it was held that judgment of a Court has to be understood in the context in which it was considered. The relevant observations of Their Lordships are quoted below : "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Supreme Court divorced from the context of the question under consideration and treat it to be the complete law declared by the court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. A decision of the Supreme Court takes its colour from the questions involved in the case in which it is rendered and, while applying the decision to a latter case, courts must carefully try to ascertain the true principle laid down by the decision." Keeping in mind the above observations, let us try to understand whether in reality there is any conflict between the two judgments referred to by the parties. After going through both the judgments minutely, we are of the view that both the judgments hold the different fields and cannot be said to be in real conflict with each other. In the former case, the court was concerned with the question whether there was any mistake apparent from record under section 154 in denying relief to assessee under section 84 where assessee omits to claim the same. It is in this context, Their Lordships held that jurisdiction of Income-tax Officer under section 154 is much wider than that provided in

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 Order XLVII Rule 1 of Civil Procedure Code. Considering such scope of section 154, it was held that if on the basis of factual evidence on record, the assessee is entitled to claim a relief, then relief cannot be denied where assessee omitted to claim the same. Impliedly, it was held that omission on the part of assessee to claim any relief constituted mistake apparent from record. 9.2 On the other hand, in the latter case, the court was not concerned with the issue of ‘mistake apparent from record’ under section 154. The question before the Court was whether the Income-tax Officer could thrust upon the assessee any relief which assessee did not intend to avail of. It is in the context of such question, it was held that the officer was not under obligation to allow the same where assessee did not want to avail of such deduction. Further, Their Lordships were considering the provisions of section 32(1) as existed in 1974-75. Such provisions were subject to the provisions of section 34 which provided the furnishing of prescribed particulars for claiming such deduction. Their Lordships also considered a circular which provided that without furnishing of such particulars, deduction under section 32 could not be allowed. In view of such provi-sions and circular, Their Lordships observed "The Income-tax Officer in such cases is required to compute the income without allowing deprecia- tion allowance." [Emphasis supplied] After making such observations, Their Lordships clarified another circular dated 11-4-1955 and said that role of ITO was advisory and there was no mandatory duty to allow the claim if the assessee does not want to claim. So the entire context was with regard to the provisions of section 32 as then existed which provided allowance and depreciation subject to furnishing of prescribed particu- lars. It is in this context, decision was rendered that if assessee did not avail the deduction by not furnishing the particulars then ITO was not bound to allow the same. So, it was a case where assessee deliberately did not avail the deduction. 9.3 In view of above discussions, we are of the view that the latter decision would be inapplicable where question regarding jurisdiction under section 154 is raised. In the present case, we are concerned with the issue of jurisdiction under section 154 which has been considered by Apex Court in the former case. Jurisdiction under section 154 can be assumed if there is mistake apparent from record. It is immaterial as to whose mistake it is. If on the basis of material on record, assessee is entitled to relief then it would constitute mistake apparent from record and consequently, such relief cannot be denied merely because the assessee omitted to claim by mistake. This is the ratio which has been laid down by the Hon’ble Supreme Court in the former case. Hence, the present case would be governed by the ratio laid down by the former case, i.e., Anchor Pressings (P.) Ltd. (supra).

4.7 Similarly Mumbai Bench of Tribunal in Asia Pacific Fund Inc. Vs DCIT [supra], held as under: - 4. We find that the mandate of Section 143(1)(a) is quite clear and unambiguous inasmuch as "where a return has been made under Section 139, or in response to notice under Sub-section (1) of Section 142,...if any refund is due on the basis of such return, it shall be granted to the assessee...". The only thing which entitles an assessee to refund of excess tax due to him is such a refund being due to him' on

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11

the basis of such a return. Now, the question is how this exercise is to be carried out. It presupposes that the AO has to first compute the tax payable by the assessee, and in case the sum so arrived at is in excess of the aggregate of prepaid and self-assessment taxes, the excess amount is to be refunded. The tax so payable has to be worked out in accordance with the law as in force. In this process, it is not open to the Revenue authorities to take advantage of mistakes committed by the assessee or to deprive the assessees of a fair and reasonable opportunity, even when specifically prayed for, of correcting their inadvertent errors. A tax cannot be levied on an assessee at a higher rate merely because the assessee, under a mistaken belief, offered the income for taxation at that rate. It can only be levied when it is authorised by the law, as is the mandate of Article 265 of the Constitution of India. A sense of fairplay by the field officers towards the taxpayers is not an act of benevolence by the field officers, but it is the minimum civilized behaviour that is required to be extended to the taxpayers. If authority is needed even for justifying this basic civilized behaviour towards the taxpayers, one need not look beyond the circulars issued by the CBDT itself. In Circular No. 14, which has been taken note of by the Hon'ble jurisdictional High Court in the case of Dattatraya Gopal Bhotte v. CIT , the Board has these words of advice for the field officers : "...Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist taxpayer in every reasonable way, particularly in the matter of claiming and securing any relief and in this regard the officers should take initiative in guiding the taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would in the long run benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Government...." It is heartening to note that the CBDT has given such humane guidance to the field officers. The best thing that the field officers can do to enhance the respect for and trust in the Department, is to follow these valuable words of advice in letter and in spirit, but then, sometime overzealous, even if well meaning, efforts to collect the revenue end up sacrificing these humane niceties on the way, and thus derail the efforts of the CBDT to earn taxpayer's confidence and trust. That must not be allowed to happen. An action or inaction which erodes any taxpayer's faith, and particularly of a non-resident taxpayer's faith which is now so important for attracting the much needed foreign investment, in Indian tax and judicial system does not do any Indian any good. The well meaning advice given by the CBDT must be implemented to the fullest extent. As to what is binding nature of this advice, we may only refer to Section 119 of the Act and Hon'ble Supreme Court's judgment in the case of UCO Bank v. CIT . Hon'ble Supreme Court has time and again held that the circulars of the CBDT are legally binding on the Revenue and that this binding character attaches to the circular even if they be found not in accordance with the correct interpretation of section or they depart or deviate from such construction. The advice contained in the circular, which is reproduced above, is also legally binding on all the field officers.

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 The other decisions also support the same view. 4.8 So far as the contention that the investments were Long Term in nature and the resultant gains thereof were exempt under certain conditions, we find that the same has also been dealt with by Delhi Tribunal in Smt. Alka Agarwal V/s ADIT [15 Taxmann.com 176] in the following manner: -

4.9 In the background of above facts and circumstance, we set-aside the impugned order and direct Ld. AO to consider the aforesaid claim u/s 154 as urged by assessee before us. The Ld. AO is directed to allow the carry forward of the losses, if found admissible as per law, after due verification. The assessee is directed to substantiate the same including quantification thereof.

ITA No.259/Mum/2018 M/s Auto Finance Enterprises Assessment Year 2010-11 5. The appeal stands allowed in terms of our above order.

Order pronounced in the open court on 16th September, 2019.

Sd/- Sd/- (C.N.Prasad) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member

मुंबई Mumbai; िदनांक Dated : 16/09/2019 Sr. PS : Jaisy Varghese आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai 5. गाड�फाईल / Guard File 6.

आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai.