1980 (3) TMI 163 - AT - Income Tax

Summary

Issues:
1. Whether the capital gains of Rs. 40,000 should be treated as long term or short term capital gains.
2. Jurisdiction of the first appellate authority to entertain the appeal.
3. Whether the assessee's acceptance of the proposed assessment in writing precludes him from appealing.

Analysis:
1. The case involved a Departmental appeal against the order directing the treatment of capital gains as long term instead of short term. The assessee sold buses along with route permits, with the route value of Rs. 40,000 treated as capital gains. The first appellate authority found that the assessee had possession of the routes since 1969, indicating long term holding. The Tribunal held that the capital gains were assessable as long term capital gains under s. 2(42A) of the IT Act, as they were held for more than 60 months preceding the transfer, regardless of renewability. The appellate order's factual findings were upheld, dismissing the Department's appeal.

2. The Department argued that the first appellate authority lacked jurisdiction to entertain the appeal, especially after the assessee had accepted the proposed assessment in writing. However, the Tribunal held that the ITO cannot disregard facts and compute liability erroneously, even if the assessee had initially agreed to a different assessment. The Tribunal noted that the assessee's lack of knowledge regarding legal implications justified allowing the appeal. Drawing a distinction from a previous case, the Tribunal concluded that the appeal was rightly entertained by the first appellate authority, dismissing the Department's appeal.

3. The Department contended that the assessee's acceptance of the proposed assessment in writing precluded him from appealing. The Tribunal rejected this argument, emphasizing that the ITO cannot impose a larger liability based on the assessee's agreement to a different assessment. The Tribunal noted that the assessee's admission was based on advice regarding the liability for capital gains tax, and thus, the assessee could not be denied the right to appeal. Citing a previous case, the Tribunal highlighted the distinction between known tax effects and matters dependent on statutory requirements, ultimately upholding the first appellate authority's decision and dismissing the Department's appeal.