1983 (8) TMI 92 - AT - Income Tax

Agricultural Land, Assessment Order, Capital Gains, High Court, Mistake Apparent From Record, Original Assessment

Summary

Issues:
Appeal against Commissioner (Appeals) order allowing petition under section 154 of the Income-tax Act, 1961 regarding assessment year 1975-76. The issue revolves around the taxation of capital gains arising from the sale of agricultural land, challenged as ultra vires the Constitution, and rectification of the original assessment order post the Bombay High Court judgment in Manubhai A. Sheth v. N.D. Nirgudkar.

Analysis:
The original assessment was completed in 1978, where the assessee contended that capital gains from the sale of agricultural land were exempt from tax due to constitutional reasons. The ITO noted the challenge but included the gains in the total income assessed, pending the Bombay High Court's decision in similar cases challenging the amendment. The High Court, in the case of Manubhai A. Sheth, held the amendment ultra vires, exempting such gains from taxation under the Income-tax Act.

Post the High Court's decision, the assessee requested rectification of the assessment order, citing the judgment. The ITO refused, stating that the matter was sub judice in the Supreme Court. The assessee appealed to the AAC, relying on the Allahabad High Court's decision that a High Court's ruling is binding on income-tax authorities in that state. The AAC allowed the appeal, emphasizing the binding nature of the High Court decision on the ITO.

The department contended that the Bombay High Court's decision was not final until the matter reached the Supreme Court, citing the Calcutta High Court's decision for support. However, the assessee argued that the ITO was duty-bound to rectify the order post the High Court's decision, as mentioned in the original assessment order. The assessee also relied on various High Court decisions supporting the notion that a mistake apparent from the record can arise post a Supreme Court or High Court's decision on a specific point.

The Tribunal upheld the Commissioner (Appeals) decision, stating that the ITO's statement in the original assessment order implied a commitment to rectify post the High Court's decision. The Tribunal emphasized that a High Court's decision binding on an authority must be accepted without debate or doubt, making the mistake apparent. The Tribunal distinguished the Calcutta High Court's decision based on the timing of the High Court's ruling. Consequently, the Tribunal dismissed the appeal, affirming the Commissioner (Appeals) order.

This case highlights the significance of a High Court's decision on tax matters and the duty of income-tax authorities to adhere to such decisions without further debate. The judgment underscores the binding nature of High Court decisions on authorities within their jurisdiction, emphasizing the clarity and finality they bring to tax assessments.