1982 (6) TMI 108 - AT - Income Tax

Summary

Issues:
1. Rectification of order under section 254(2) of the Income-tax Act, 1961.
2. Application of section 52(2) in determining capital gains tax.
3. Interpretation of the Supreme Court's decision on the application of section 52(2).
4. Validity of the Tribunal's order in light of subsequent Supreme Court judgment.
5. Timeliness of filing a rectification petition after the expiry of the prescribed period.

Analysis:
1. The assessee filed a miscellaneous petition seeking rectification of the Tribunal's order under section 254(2) of the Income-tax Act, 1961, based on a mistake apparent from the records. The petition aimed to amend the order dated 21-3-1978 in IT Appeal No. 340 (Coch.) of 1976-77 for the assessment year 1971-72.

2. The core issue revolved around the application of section 52(2) of the Act in determining capital gains tax. The dispute arose from the sale of 'Sundaravilasom Palace' by the assessee, with the revenue contending that the fair market value exceeded the consideration declared, invoking section 52(2) to levy tax on capital gains.

3. The Tribunal initially upheld the levy of capital gains tax under section 52(2), contrary to the assessee's argument that the section did not apply when the declared consideration was accurate. However, the Supreme Court's subsequent decision clarified that section 52(2) applies only when there is an understatement of consideration by the assessee, shifting the burden of proof to the revenue.

4. The Tribunal's order was deemed erroneous and illegal in light of the Supreme Court's judgment, which rendered the application of section 52(2) incorrect. The error of law was apparent and required rectification to align with the clarified legal position by the Supreme Court.

5. Despite the revenue's argument on the timeliness of the rectification petition, the Tribunal rejected the contention, citing precedents where rectification was allowed even after the prescribed period had expired. The Tribunal emphasized that the rectification was necessary to correct the apparent error of law in upholding the levy of capital gains tax.

6. In conclusion, the Tribunal allowed the miscellaneous petition, recalled the order, and dismissed the appeal, acknowledging the mistake apparent from the records and rectifying the error in line with the Supreme Court's interpretation of section 52(2) of the Income-tax Act, 1961.