KIRIT R. PATEL,MUMBAI vs. ITO WD 21(1)(2), MUMBAI

The present appeal is filed by the assessee challenging the validity of order passed u/s. 154 dated 20.07.2007 passed by CIT(A)-32, Mumbai wherein the order passed by CIT(A) dated 31.03.2010 was rectified on the application of Assessing Officer (AO). In the application, the AO contended that assessment against the assessee was completed u/s 143(3) of the Act determining the income of the assessee at Rs. 1,87,87,420/- . The assessee along with his brother Shri Bharat R. Patel received amount from builder which was considered as income from other sources by the AO after looking into nature of the receipt treated the same as income from other sources. Against the order of AO, the assessee preferred an appeal and the CIT(A) in its order dated 31.03.2010 on the appeal by assessee, the CIT(A) granted relied to the assessee holding that the amount received by assessee against sale of TDR are not chargeable to capital gain tax.

On the application of AO for rectification of order, the CIT(A) issued a notice u/s. 154 dated 09.07.2010 along with the CIT(A) letter dated 14.07.2010 requiring the assessee to make his submission. In the application the AO made the submission that in the case of assessee, it was held that receipts are not to be charged as income from other sources, as the same is capital receipt and the amount received by the assessee against TDR/FSI right are not chargeable to tax. However, in the case of brother of assessee the same was treated as capital gain receipt.

The assessee objected about the rectification of order dated 31.03.2010 and argued that there was no error apparent from the record and argued that assessee objected to the initiation of rectification proceeding and submitted that there was no mistake in the order passed by the CIT(A) in the case of assessee and the mistake, if any, was in the order passed in the case of Mr. Bharat R. Patel (brother of assessee), the assessee’s representative further argued that relief claimed in the ground of appeal

Further, the Hon’ble Apex Court in Satynarayan Laxminarayan Hedge vs. Mallikarjun Bhavanappa Thirumala, AIR 1960 SC 137, held 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. A decision on a debatable point of law is not a mistake apparent from the record”.

Let us, examine the mistake what it comprises? – “Mistake” is an ordinary word, but in taxation law, it has a special signification. It is not an arithmetical or clerical error alone that comes within its purview. It comprehends errors which, after a judicious probe into the record from which it is supposed to emanate, are discerned. The word “mistake” is inherently indefinite in scope, as what may be a mistake for one may not be one for another. It is mostly subjective and the dividing line in border areas is thin and indiscernible.

The plain reading of word (apparent) is that it must be something which appears to be so ex-facie and is incapable of argument or debate.

The Ld. CIT(A) while making rectification in its order dated 31.03.2010 on the petition filed by the AO dated 01.07.2010 has observed that in the case of Bharat R. Patel which was also decided on the same day have treated the amount received as capital gain. The CIT(A) after comparing and discussing both the orders passed by him on the same day rectified the order passed in the case of assessee and treated the amount received by assessee as a capital receipt and held to be chargeable under the capital gain tax.

We have perused the order of CIT(A) in case of Bharat R. Patel and of assessee. Shri Bharat R. Patel who had claimed the sale of development right as a LTCG which was denied to him by the AO and treated the same as income from other sources, however, the same was allowed by CIT(A) in its order dated 30.03.2010. The assessee claimed the amount received against TDR/FSI as a capital receipt which is not chargeable to capital tax. However, the AO treated the same as income from other sources by concluding that it is not a transfer falling within the provision of section 45 of I.T. Act.

Though the assessee and his brother received the amount from builder but since beginning both the brother set up their different claim in respect of amount received under TDR agreement for the purpose of assessment. The case of assessee was considered by CIT(A) on which conceivably two opinion are available. Since Ld.