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Section 154 of the Income-tax Act, 1961 - Rectification of mistake - Apparent from record - In original assessment order ITO did not determine tax payable by assessee, a registered firm, on capital gains - ITO's rectification order was however set aside by AAC on ground that question whether capital gains was taxable in hands of a registered firm was disputable - ITO's rectification order was made after the above decision - Later AAC rectified his order on basis of decision in case of CIT v. Hasanali Khanbhai & Sons 1974 Tax 36(3)-4 (Guj.) in which it was held that registered firm was liable to pay tax on capital gains - Whether AAO was justified in rectifying his order on basis of abovesaid decision - Held, yes - Whether fact that assessment order was passed before aforesaid case was decided had no material bearing on question whether said order disclosed any mistake apparent on record -Held, yes FACTS The business of the assessee, a registered partnership firm, was transferred to a company 'S' on the last day of its accounting year, i.e., 31-7-1965. While framing the assessment for the year 1966-67 the ITO committed a mistake of Rs. 10,000 in computation of capital gains. Subsequently, the ITO also found that he had not determined the tax payable by the assessee-firm on capital gains. The ITO sought to rectify these matters under section 154 treating the above as mistake apparent on face of the record. The assessee objected to the rectification proceeding on the ground that it was not decided whether or not capital gains were taxable in the hands of a registered firm and, hence, tax payable on capital gains could not be determined by rectifying the order under section 154. The ITO, however, rejected the assessee's contention and he recomputed the total income of the assessee-firm by his order dated 6-3-1975. On appeal, the AAC upheld the contention of the assessee relying on the decision of CIT v. Navinchandra Tribhovandas [IT Reference No. 40 of 1971, dated 25-9-1973]. No appeal was preferred against the order dated 30-6-1975 of the AAC. But after 2½ years the AAC amended his order dated 30-6-1975 on the basis of the decision in the case of CIT v. Hasanali…

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