2016 (2) TMI 1326 - AT - Income Tax

Rectification of mistake u/s 154 - amount received against TDR/FSI as a capital receipt which is not chargeable to capital tax - HELD THAT - 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. CIT(A) has taken one of the possible views his order cannot said to suffer from mistake apparent from record. CIT(A) while exercising the power u/s. 154 of the Act are ignored the principle and basic scope of rectification of order as discussed in paras 5 to 8 supra. Hence the order dated 20.07.2010 passed by CIT(A) is not sustainable under the scrutiny of law and the same is set-aside.

Summary

Issues: Validity of order passed u/s. 154 by CIT(A) rectifying the original order dated 31.03.2010

Analysis:

1. The appeal was filed by the assessee challenging the validity of the order passed u/s. 154 by CIT(A) dated 20.07.2007, rectifying the original order dated 31.03.2010. The assessment against the assessee was completed u/s 143(3) of the Act, determining the income at a specific amount. The assessee, along with his brother, received an amount from a builder, which the Assessing Officer (AO) treated as income from other sources. The CIT(A) initially granted relief to the assessee, holding that the amount received against the sale of Transfer of Development Rights (TDR) was not chargeable to capital gains tax.

2. The AO applied for rectification of the order, stating that in the case of the assessee, the receipts should not be taxed as income from other sources but as capital receipts. However, in the case of the brother of the assessee, the same was treated as capital gain receipt.

3. The assessee objected to the rectification, arguing that there was no mistake in the original order passed by CIT(A) in the case of the assessee. The representative of the assessee highlighted that the relief claimed by the assessee and his brother was different. The CIT(A) had agreed to the relief claimed by the assessee, and it was contended that there was no apparent mistake in the case of the assessee.

4. The Learned DR for revenue supported the order passed by CIT(A).

5. The scope of Section 154 of the Act was examined, emphasizing that a mistake apparent on the record must be obvious and patent, not requiring a long process of reasoning. The judgments in various cases were cited to explain the concept of a mistake apparent on the record.

6. The CIT(A, while rectifying the order, compared the cases of the assessee and his brother, where different treatments were given to the amount received. The CIT(A) rectified the order for the assessee, treating the amount received as a capital receipt chargeable under capital gains tax.

7. The orders passed for the assessee and his brother were analyzed, highlighting the differing claims made by them regarding the amount received under the TDR agreement. The CIT(A) had considered one of the possible views, indicating that his order did not suffer from an apparent mistake.

8. It was concluded that the CIT(A) had ignored the principles and scope of rectification while exercising power u/s. 154 of the Act. Therefore, the order passed by CIT(A) on 20.07.2010 was deemed unsustainable under the law and was set aside, allowing the appeal filed by the assessee.