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TMI Blog2005 (9) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... directions. In fact, he should have confined himself only to the directions given to him by the Tribunal. 4. The Assessing Officer erred in computing the capital gains on the sale of various lands. 5. The Assessing Officer erred in treating the said capital gains as regular profits and again erred in calculating and computing the said alleged profits. 6. The Assessing Officer erred in assessing the Appellant's share in the sale consideration realised on the sale of land to Sweet Home Developers Private Limited without appreciating that the said land was the subject-matter of litigation. 7. The Assessing Officer erred in taxing profit on sale of lands to Lodha Kanungo and Prakash Pore without appreciating that the Appellant was a tenant of the lands and that originally, his predecessor had assessed the profit on their sale as capital gains. 8. The Assessing Officer erred in law and on facts in assessing the Appellant's total undisclosed income without computing the same assessment year-wise. 9. The Assessing Officer erred in invoking Chapter XIV-B in respect of incomes from certain transactions without appreciating that the same could not be treated as 'undisclosed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wnership rights to give due effect to the cash-flow statements and consider the various claims, vis-a-vis capital accounts." 6. The ld. counsel of the assessee contended that in the fresh block assessment order the income as originally assessed could not be enhanced. The ld. counsel contended that the Tribunal has no power to make the enhancement of the assessment in the appeal filed by the assessee. The ld. counsel contended that where a set aside of the entire order of assessment results in an enhancement of assessment under appeal, the Tribunal is not empowered to do indirectly what it cannot directly do. In this regard the ld. counsel referred to the commentary of ld. authors Chaturvedi Pithisaria on Income-tax Law page 7834 and relied upon judgment of Allahabad High Court in the case of S.P. Kochhar v. ITO [1984] 145 ITR 255. 7. On the other hand, the ld. DR contended that if the entire assessment order is set aside to the file of the Assessing Officer for fresh consideration, the fresh assessment order will be perfectly valid even if it results in enhancement of the total income determined in the original assessment. 8. We have given careful consideration to the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made by the Assessing Officer particularly when it is not the case of the assessee that some of the undisclosed income computed falls outside the block period. We, therefore, dismiss ground of appeal No. 8. 10. In ground of appeal No. 9 it has been contended that Assessing Officer has erred in invoking Chapter XIV-B in respect of incomes from certain transactions without appreciating that the same could not be treated as undisclosed income as defined in section 158B(b) of the Act. This ground of appeal was not argued by the ld. counsel during the course of hearing of the appeal. It, therefore, appears to us that the assessee is not serious to press this ground. Moreover, the ground is of general nature and no specific instances were given by the ld. counsel in support of the contentions raised in the ground. Ground of appeal No. 9, therefore, fails. 10.1 In ground of appeal No. 12 of concised grounds it has been stated that the Assessing Officer has erred in denying exemption under section 54F to the assessee from long-term capital gains. The ld. counsel of the assessee pointed out that the assessee is also aggrieved by denial of exemption under section 54B from long-term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged on capital gains. The ld. counsel contended that even though the assessment is a block assessment under section 158BC, yet provisions of section 112 will apply. In support of his arguments, the ld. counsel placed reliance upon the decision of ITAT, Cochin Bench in the case of P.A. Chandran v. Asstt. CIT [2001] 69 TTJ (Coch.) 566. 14. On the other hand, the ld. DR contended that tax is leviable at the rate of 60 per cent as per the provisions of section 113 even on the capital gains which are included in the undisclosed income determined in the block assessment order passed under section 158BC. It was submitted by the ld. DR that section 112 specifying the lower rate of taxation for the capital gains is applicable only in respect of normal computation of income under normal provisions. It was stated that in respect of block assessment under section 158BC, the rate has been prescribed in section 113 which is a special provision, in support of the argument that the special provisions will override the general provisions, the ld. DR placed reliance on the following decisions- (i) CIT v. Shahzada Nand Sons [1966] 60 ITR 392 (SC), (ii) CIT v. Fertilizers Chemicals (Trava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oversy item-wise, we consider it proper to give some history of the case. The agricultural lands were inherited by the assessees as well as some lands were also purchased by them. The agricultural lands were inherited by the two assessees along with three other brothers from their grand-father Shri Kastu Patil. After the death of the father of the assessees in 1976, the said agricultural lands were entered in 7/12 extract, in the names of five Patil brothers including the 2 assessees, their mother Smt. Bhiwaribai and 2 sisters Dhakubai and Anandibai, as co-owners. Originally, the block assessments were completed in the hands of the assessees disregarding that agricultural lands so inherited by five brothers, two sisters and mother were jointly held by them as HUF property. The ITAT had set aside the original assessments vide its order dated 29-9-1999 to the file of the Assessing Officer for assessing the relevant income in the hands of the respective HUFs. The fresh assessment orders were passed on 28-3-2002. 18. The ld. counsel of the assessees explained that Patil family is basically agriculturist family and the persons are illiterate. It was stated that they were wrongly advis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey made an application on 17-4-1986 to Tahsildar, Thane to declare them as tenants of land. The Tahsildar by his order dated 23-10-1986 declared them as occupants of the land by adverse possession and mutation Entry was made in the land record accordingly. The Asstt. Collector, Thane set aside the mutation Entry by his Order dated 12-6-1989. The Real Owners M/s. Estate Investments Co. Ltd., preferred an appeal to Sub-Divisional Officer, Thane who by his Order dated 11-7-1994 held that the Patil brothers had no right to defend mutation entry as the same was cancelled by the Asstt. Collector on merits. SDO held that the Tahsildar had no jurisdiction to decide the issue of adverse possession and set aside his order. SDO held that the issue of adverse possession lay within the jurisdiction to decide the issue, of adverse possession and set aside his order. SDO held that the issue of adverse possession lay within the jurisdiction of Civil Court and the matter is still pending in the Civil Court. The latest 7/12 Extract is in the name of M/s. Estate Investment Co. Ltd. It is submitted that as the assessees possessed possessory rights in the aforesaid plot of land." The ld. counsel fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are taxable as long-term capital gains. As we have held that the amounts received by the assessees are taxable as long-term capital gains for transfer of possessory rights of the land, it is only academic to consider whether the amounts received were held as trust money. In fact, the ld. counsel of the assessees conceded that the profits or gains are taxable as capital gains in view of the amended section 55(2). Thus, the issue whether the suit was pending in the civil court or not is of academic interest only and it has no bearing on the transfer of possessory rights and taxability of capital gains as long-term capital gains. The SDO had observed that the issue of the adverse possession over the land lay within the jurisdiction of civil court. However, as pointed out above, this issue is not relevant for taxing the capital gains on the transfer of possessory rights. The 1/5th share of the sale consideration has been taxed at Rs. 6,00,000 in the hands of the each two of the assessees, but this amount is assessed as business profits but in view of above discussion, the same is directed to be assessed as capital gains. However, the question of granting the benefit of cost indexation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of plot in survey Nos. 193 and 169/9 and these tenancy rights were sold prior to 1-4-1994, the cost of acquisition of the said plots of land cannot be computed and consequently on surrender of tenancy rights, capital gains do not arise. In holding this view, we are fortified by the decisions of Supreme Court in the case of B.C. Srinivasa Shetty and of Bombay High Court in the case of Cadell Wvg. Mills Co. (P.) Ltd. The Assessing Officer is, therefore, directed not to assess any capital gains or business profits in respect of tenanted plots in survey Nos. 193 and 169/9 the tenancy rights of which were transferred or surrendered much before 1-4-1994. 26. The assets at serial Nos. 4, 5, 6 and 8 of the chart filed by the assessee are the plots of land owned by the assessee and were purchased with the intention to make sales to earn profits therefrom. The plot at serial No. 4 bearing survey No. 165 (Pt) was purchased on 22-2-1982 and was sold from 21-12-1990 onwards after dividing it into 31 small plots. The plot at serial No. 5 bearing survey No. 114/5 was purchased on 30-9-1985 and was sold to Oswal Builders on 20-9-1989. The plot at serial No. 6 bearing survey Nos. 486/15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of the Gauhati High Court in the case of CIT v. O.T. Rahman [180 ITR 183] and the Allahabad High Court in the case of Additional CIT v. Virendra Singh [118 ITR 923]. (b) As the method of accounting is treated as cash basis, then the unrealized sale proceed of Rs. 17.39 lakhs in respect of sale of land to M/s. Shree Oswal Builders Private Limited [serial No. 5 of the Chart] cannot be brought to tax in the Block Period. In fact, Shree Oswal Builders Private Limited have refused to pay the said amount on the ground that the plot was actually smaller than described in the agreement. This will also reduce the capital gains if leviable. We have no objection if this aspect is examined by the Assessing Officer in setting aside the assessment order. (ii) The Cost of land and development expenses as claimed by the assessee should be allowed. Alternatively, the cost of land and the development expenses as allowed in the original Block Assessment should be allowed. (iii) It is submitted that development expenses should be allowed on some consistent basis, in this regard, the Block Assessment Order recently made in the case of Shri Chandrakant D. Patil (HUF), (being HUF of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. counsel relied upon the letter dated 1-12-1989 of ARCH-HOME, Architects, Engg., Interior Decorators, wherein estimated cost of development expenses in respect of plot bearing survey No. 165(Pt) has been worked out at Rs. 20,57,000 by applying the rate of Rs. 85 per sq.yd. for 24,200 sq. yards. The relevant portion of the Architect's letter [written to the assessee] dated 1-12-1989 is extracted below- "This is to inform you that as per our discussion, we have visited the Site thoroughly, bearing Land Survey No. 165 (Part), Kharigaon, Bhayandra (East). The plot is in very bad position. Salty water are filled in, big pits are noticed, land have very much ups and down, having no level at all. On the basis of above facts, we suggest following- 1. It is not possible to Sale the Plot as a whole, considering big size and bad shape. 2. It requires to get plot fully developed by filling in Stones/red earth by manually or by help of donkeys, to carry red earth. 3. Land level is to be done properly with systematic way by employing qualified professional/experts in the field and with modern Equipments to make it usable for Building Construction in future. 4. Total Estimated Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenanted lands were also sold. 7. In some cases, the assessees have sold the lands which were illegally occupied by them. 8. In some cases, as in the case of land at Survey No. 165 (vide para-8 of the assessment order under appeal), the assessee had entered into joint agreement with another group namely Shri Naveen Shah and family of joint developer and sale of the land at 50 per cent share of each group. This agreement itself shows that there was a clear business motto to carry on the real estate transaction by buying and selling of lands in order to make profit." Thus, the cumulative effect of all the above-said factors of multiplicity of transactions, sale of land of which the assessees are not the owners combining with the other outsiders do clearly demonstrate that the assessee was carrying on the business of real estate of buying and selling of house plots or commercial plots as an organized business venture. Therefore, the Assessing Officer's action of treating the income as Business Income is very justified.' The ld. DR also relied upon the following judicial pronouncements- (i) D.S. Virani v. CIT [1973] 90 ITR 255 (Guj.), (ii) Sawandas Devram v. CIT [1984] 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of acquisition was claimed at Rs. 14,500, Rs. 1,35,177 and Rs. 61,421 respectively, but the same was allowed at Rs. 8,000, Rs. 5,000 and Rs. 20,000 respectively in the fresh assessment. The Assessing Officer is directed to allow the cost of acquisition as per the actual purchase price incurred by the assessee as these plots were purchased for the purpose of making sales thereof. For this purpose, agreements or the title deeds of the relevant plots or land may be examined by the Assessing Officer. 31.1 Regarding the development expenditure, we are informed that development expenditure allowed in the fresh assessment on estimated basis in respect of plot at Sr. No. 4 of the chart comes to Rs. 26.60 per sq.yd. as against the assessee's claim of Rs. 106 per sq.yd. On the basis of the certificate of the architect, we hold that it will be reasonable to allow development expenditure at Rs. 85 per sq.yd. in respect of plot at Sr. No. 4. In respect of plot at Sr. No. 5 of the chart, the development expenditure allowed by the Assessing Officer appears to be reasonable and no interference is called for. In respect of plot at Sr. No. 6 of the chart, the development expenditure claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -7-1981 but the same was sold on 11-9-1989. Assessee's claim is that this land was being cultivated before it was sold and the profits earned on the sale of this land are claimed as long-term capital gains. However, the Assessing Officer has taxed the same as business profits. 33. We have given a careful consideration to rival submissions in the light of decisions cited before us. For the purpose of deciding whether the lands were purchased with a view to trade or to hold the same as investment, it is noted that in the present case the lands were purchased by the assessees who are agriculturists for the purpose of carrying on agricultural activities which in fact they have done. With increasing urbanization and expanding cities, the builders give attractive offers to develop the lands as building cites which the present assessees, who are basically agriculturists, could not resist. The resultant gain, in our opinion, can only be realization of capital assets and hence is taxable as capital gains. We order accordingly. 34. Similarly, in respect of plots at Sr. Nos. 11 to 14 of the chart [Survey Nos. 55/2,292, 240/8 and 220/Pt. 12], the arguments of the assesses are the same as f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the plot was a trading asset. The ld. counsel contended that the agricultural income was earned by carrying out agricultural operations on this plot. It was further submitted c that the assessee had no intention of dealing in land. It was stated that as the assessee was from the family of agriculturists and the intention was to cultivate the land. Hence, according to the ld. counsel, the Assessing Officer was not justified in treating the profits earned by the assessee as business profits. But the ld. counsel fairly conceded that in view of amendment of section 55, the profits earned by the assessee are taxable as long-term capital gains. 36.1 The ld. counsel relied upon the following decisions (in respect of both the appeals) on the issue that profits derived by the assessees on sale of lands were long-term capital gains and not business profits - (i) G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 (SC), It was pointed out that the Hon'ble Supreme Court has held that cases of realization of investments consisting of purchase and sale, though profitable, are clearly outside the domain of adventures in the nature of trade. (ii) Bhogilal H. Patel v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain Sons (P.) Ltd. v. CIT [196l] 41 ITR 534 (SC), It was stated that Hon'ble Supreme Court has held that in considering whether a transaction is or is not an adventure in the nature of trade, the problem must be approached in the light of the intention of the assessee having regard to the legal requirements which are associated with the concept of trade or business. 37. On the other hand, the ld. DR relied upon the order of the Assessing Officer as also decisions mentioned in the case of Shri P.D. Patil. 38. Having considered the rival submissions in the light of the material placed before us, we hold that profits earned by the assessee were taxable as long-term capital gains in view of the amended provisions of section 55. However, we hold that while working out the capital gains, the cost claimed by the assessee at Rs. 4,00,000 cannot be allowed as there cannot be any cost to the tenanted land. We further find that development expenditure was claimed by the assessee at Rs. 3,96,400 for which there was no evidence. The Assessing Officer had allowed the development expenditure at Rs. 1,00,000. We do not find any infirmity in the order of the Assessing Officer in this regard. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e direct the Assessing Officer to allow the development expenditure at Rs. 42,000 for working out the capital gains. The plot under consideration being owned by the assessee, the indexation of the cost has also to be allowed in accordance with the relevant rules. 41.1 Land bearing survey No. 252/7(P) was sold by the assessee to Shri B.R. Patel on 12-8-1994 for sale consideration of Rs. 16 lakhs. In the course of search, certain receipts were also found from which the Assessing Officer could find that further amounts were received by the assessee in several instalments aggregating to Rs. 7,25,000 and, hence, the Assessing Officer adopted the sale consideration at Rs. 23,25,000. This land was purchased by the assessee on 10-1-1991 for Rs. 2,00,000. The development expenditure in respect of this land was claimed at Rs. 3,96,500 but the same was allowed at Rs. 1,00,000 in the original assessment and at Rs. 1,42,000 in the fresh assessment. 42. The ld. counsel of the assessee contended that this land was also purchased as a capital asset to carry on the agricultural operations and hence the profits should have been taxed as long-term capital gain and not as business profit. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years, but he vehemently contended that the net profit rate of 12 per cent applied by the Assessing Officer is highly excessive and arbitrary. It was stated that the net profit shown by the assessee was 2.43 per cent. The ld. counsel by referring to pages 63 and 64 of the paper book, contended that in identical case of M/s. Bhoir Sand Agency the net profit was shown by the assessee at 4.50 per cent which was accepted by the department in the order passed under section 143(1)(a) on 16-10-1996. The order was passed in the case of Shri Shashikant Krishna Bhoir, proprietor of M/s. Bhoir Sand Agency. The ld. counsel also referred to the submissions made before the Assessing Officer by the assessee vide its letter dated 7-3-2002. It was pointed out from para 10(iii) of the letter that the assessee had referred to a parallel case in which assessment was completed with 4.50 per cent net profit on sales. It was stated that this parallel case was of M/s. Bhoir Sand Agency only. The ld. counsel stated that he has no objection if net profit rate of 4.50 per cent is applied on the sales estimated by the Assessing Officer. 49. On the other hand, the ld. DR relied on the order of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acing on record my dissenting view, I disassociate myself, inter alia, because of the language used in the charging section itself. Section 112(1) states, as follows: " 112. Tax on long-term capital gains. - (1) Where the total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head "Capital gains", the tax payable by the assessee on the total income shall be the aggregate of,- (a) in the case of an individual or a Hindu undivided family, [being a resident,] (i) (ii) the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent]" On plain reading of this section it is evident that this section is applicable on capital gain included in the total income of an assessee to be assessed in the general provisions of IT Act. On the other hand, section 113 of IT Act is applicable on the income not disclosed and assessed in the block period, reads as follows: "113. Tax in the case of block assessment of search cases. - The total undisclosed income of the block period, determined under section 158BC, shall be chargeable to tax at the rate of sixty per cent:]" So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve on the income described therein and the general enactment must be taken to effect only on the other income prescribed in the statute to which it may generally apply. "The classic statement of Rowlatt, J. in Cape Brandy Syndicate v. IRC (1921) 1 KB 64, 71 still holds the field. It reads: ... In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, one can only look fairly at the language used". (Reference from Narain Das Paramanand Das v. ITO [1979] 117 ITR 174 (Cal.). It is worth to add further that to arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of such enactment. I hasten to add that the aim and object is unambiguous that section 112 is in respect of "total income" and section 113 is in respect of "undisclosed income". In support of the view expressed in this para I take shelter of certain precedents quoted from the side of the revenue already cited in para 14 of the draft order, hence need not be reproduced again. 55. The next and utmost important asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed in the return of income under the other general provisions of IT Act. This vital distinction has not been addressed to Cochin Bench, therefore, deprived of the benefit of examining the distinction between the two sections, I am aware that a consistency has to be maintained and judicial propriety requires one Bench to follow the decision of another Bench on identical facts and circumstances. But as observed by the Hon'ble Apex Court in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120 that there is no heroism to perpetuate an error. To rectify is a compulsion of the judicial conscious. Further it can be added that in the name of adhering to the principle of consistency, we cannot leave any scope for perpetuation of errors, hence emboldened to take a view in a deserving case and thus has the liberty of applying the mind afresh to adjudicate upon the matter. Because of the unambiguous structure of two section as distinguished above, I have strong reason to depart from the stand already taken by my ld. Brother as well as by the respected Cochin Bench. 56. In view of above discussion and after scrutinizing both the sections a conclusion can be draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961: "Whether long-term capital gain is subject to tax at the rate of 60 per as provided under section 113 being part of undisclosed income assessed under Chapter XIV-B of IT Act or the same is subject to tax at the rate of 20 per cent under section 112 which lays down rate of tax on long-term capital gains?" ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Per Sunil Kumar Yadav, Judicial Member. - In these appeals on account of Difference of Opinion with regard to Ground No. 15 which relate to chargeability of rate of interest on long-term capital gain, which was created as part of the undisclosed income for the block period, following question was referred to Third Member for his Opinion: "Whether long-term capital gain is subject to tax at the rate of 60 per cent as provided under section 113 being part of the undisclosed income assets under Chapter XIV-B of the IT Act or the same is subject to tax at the rate of 20 per cent under section 112 which lays down the rate of tax on long-term capita1 gain." 2. The Third Member has approved the view of the learned Judicial Member that section 113 of the I.T. Act is a specific provision concerning to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in this case for following reasons:- "15. We have carefully considered the rival submissions in the light of material placed before us. The decisions relied upon by the DR pertain to the proposition that special provisions override the general provisions. In the instant case, not only section 113 is a special provision, but section 112 is also a special provision specifying the rate of tax to be charged upon capital gains. Therefore, we are of the opinion that the judgments relied upon by the ld. DR do not assist the case of the revenue. The Cochin Bench of the Tribunal Bench in the case of P.A. Chandran, has held that tax is leviable at the rate of 20 per cent as provided in section 112(1)(a)(ii) on the capital gains included in the undisclosed income computed under Chapter XIV-B. We are inclined to agree with the decision of the Cochin Bench which is a direct decision on the point at issue. Respectfully following the precedent on the point at issue, we hold that tax is leviable at the rate of 20 per cent on the capital gains included in the undisclosed income computed under Chapter XIV-B. The appeals of the assessees, therefore, succeed on this issue." 5. The learned Judici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment in the statute then the particular enactment would overrule the general enactment. So a conclusion can be arrived at that the particular enactment must be operative on the income described therein and the general enactment must be taken to effect only on the other income prescribed in the statute to which it may generally apply. "The classic statement of Rowlatt, J. in Cape Brandy Syndicate v. IRC [1921] 1 KB 64 at page 71 still holds the field. It reads .... in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, one can only look fairly at the language used". [Reference from Narain Das Paramanad Das 117 ITR 174]. It is worth to add further that to arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope and object of such enactment. I hasten to add that the aim and object is unambiguous that section 112 is in respect of "total income" and section 113 is in respect of "undisclosed income". In support of the view expressed in this para, I take shelter of certain precede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to tax at the rate specified in section 113 of the Act. This section provides to tax undisclosed income at the rate of 60 per cent. On the other hand, section 112 is in respect of taxing long-term capital gain disclosed in the return of income under the other general provisions of Income-tax Act. This vital distinction has not been addressed to Cochin Bench, therefore, deprived of the benefit of examining the distinction between the two sections. I am aware that a consistency has to be maintained and judicial propriety requires one Bench to follow the decision of another Bench on identical facts and circumstances. But as observed by the Hon'ble Apex Court in the case of Distributors (Baroda) 155 ITR 120 that there is no heroism to perpetuate an error. To rectify is a compulsion of the judicial conscious. Further it can be added that in the name of adhering to the principle of consistency, we cannot leave any scope for perpetuation of errors, hence emboldened to take a view in a deserving case and thus has the liberty of applying the mind afresh to adjudicate upon the matter. Because of the unambiguous structure of two sections as distinguished above, I have strong reason to depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n charged accordingly. He emphasized that all provisions applicable to a regular assessment are applicable to the assessment made under Chapter XIV-B of Income-tax Act as is clear from section 158 BH of the Income-tax Act. In this connection Shri Trivedi referred to two decisions of ITAT, Kerala Bench, wherein it was held that even in cases of block assessment, capital gains as part of undisclosed total income, was to be subjected to tax under section 112 of the Income-tax Act. The cases cited are as under:- (1) P.A. Chandran's case. (2) Smt. Chandra Balakrishnan IT (S S) A No. 26/Coch/1996 read with M.P. No. 119/Coch/1997, dated 8-12-1997. In fact the first decision followed the second decision. Shri Trivedi further submitted that under the scheme of the Income-tax Act relating to computation of "undisclosed income" the total income is to be charged at the rate of 60 per cent under section 113 of the Income-tax Act. However, there is nothing to show that provision of section 113 override the provision of section 112 specifically made applicable to income under the head "Capital gains". Shri Trivedi further drew my attention to the decision of the Hon'ble Supreme Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IV-B of the Income-tax Act. In the alternative, Shri Trivedi submitted that in case two reasonable views of the matter are possible, then a view in favour of assessee has to be adopted as per the settled law. In this connection Shri Trivedi referred to and relied upon the following decisions:- 1. CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518 (SC) 2. CIT v. Naga Hills Tea Co. Ltd. [1973] 89 ITR 236 (SC) 3. CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC) 4. CIT v. Smt. Chandra Balakrishnan [2003] 132 Taxman 235 (Ker.). 7. The learned DR while opposing the submission, made on behalf of the assessee supported the proposed order of the learned Judicial Member. He referred to assessment orders dated 28-3-2002 to show that two assessments involved before me were block assessments for several years. Capital gains in dispute was assessed as part of total "undisclosed income". The learned DR further drew my attention to provision to section 158BA(2) of the Income-tax Act which provides that in computing the undisclosed income of the block period, provisions of sections 68, 69A, 69B and 69C shall so far as may be applied and reference to financial year sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant sections have been made in that case. The dispute there was whether income was disclosed or not. No question whether section 113 would apply or not was raised before the Court. 10. I have given careful thought to rival submission of the parties. There is no controversy that capital gain in dispute has been assessed under Chapter XIV-B of the Income-tax Act in consequence to a search conducted by the Revenue under section 132 of Income-tax Act. The dispute is limited to the claim of the assessee that capital gain forming part of total undisclosed income is required to be charged at the rate of 20 per cent as per provision of section 112 of the Income-tax Act. It is the contention that there is nothing in section 112 to show that the same would not be applicable to "undisclosed income" computed under section 158BC or BD of the Income-tax Act. Even in cases where provisions of section 164 of Income-tax Act are applicable and total income is liable to be charged at maximum marginal rate, the capital gain included in such total income was held to be chargeable as per rate prescribed by section 112 of the Act. The same analogy was applicable to search cases also. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition to the regular assessment in respect of each previous year included in the block period; (b) the total undisclosed income relating to the block period shall not include the income assessed in any regular assessment as income of such block period; (c) the income assessed in this Chapter shall not be included in the regular assessment of any previous year included in the block period.] (3) Not relevant at present." Thereafter section 158BB provides for computation of income. The said section is titled as under:- "Computation of undisclosed income of the block period". 12. A bare reading of aforesaid provisions makes it abundantly clear that these are overriding and are applicable 'notwithstanding anything contained in any other provisions of the Act'. It is further clear from the statutory provisions that block assessments relate to several years and are different from a regular assessment confined to a particular year. The method of computation of undisclosed income is also different from computation of regular income although machinery relating to regular assessment is also used in the block assessment. The total undisclosed income is required to be charged to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus application of above section to "capital gains" is "saved" under the provision. After computing income under various sections not in conflict with provisions of Chapter XIV-B, the income left out (balance income) is to be charged to tax at the rate provided in section 113 of the Income-tax Act. It is immaterial as to under what head the income has been assessed as "undisclosed Income". The purpose of provisions sought to be applied for computing income is over as soon as total income is available. Rate of tax to be applied, is a different thing. The total income being "undisclosed income" is charged to tax as per provisions of section 113 of the Income-tax Act. I see no scope to apply provisions of section 112. 15. The learned counsel for assessee had also relied upon two decisions of ITAT, Cochin Bench, wherein it was held that even in search and seizure cases capital gain included in total undisclosed income was liable to be charged to tax as per section 112 of Income-tax Act. The second decision in the case of P.A Chandran had merely followed earlier decisions of ITAT in the case of Smt. Chandra Balakrishnan dated 8-12-1997. The learned counsel for assessee has placed on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear case which falls in the wording of section 158B(b) i.e., "would not have been disclosed for the purpose of this Act". 16. In this view of the matter, the income in question had to be taxed in the hands of the assessee as per the provisions applicable to block assessment read with section 113 of the Act treating the income to be an income from undisclosed one as defined under section 158B(b) ibid 17. Accordingly and in view of the foregoing discussion, we are of the view that no fault can be found in the conclusion arrived at by the Assessing Officer and that of the Tribunal. Though we uphold their eventual conclusion, but we do so on our own reasoning which we have arrived at on interpretation of the relevant sections referred to supra. In fact, the Tribunal should have examined the case legally on these lines rather than on simple facts and that too without taking recourse to any of the legal provisions which are applicable to the facts of this case." 18. In the light of above discussion, I fully agree with the view taken by the learned Judicial Member. Let the matter be placed before regular Bench for disposal of appeals in accordance with law. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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