Law: Income Tax Act, 1961

Section: 154

Income-tax----Rectification---Mistake apparent on the face of record---Application of wrong provision of Act or erroneous application of same will amount to mistake apparent on the face of record---Capital gains ---I.T.O. in original assessment applying wrong provision of law permitting assessee option of adopting fair market value as do 1-1-1954, for cost of acquisition of depreciable assets in computing capital gains ---I.T.O. rectifying his order and withdrawing permission given to assessee to adopt fair market value as on 1-1-1954---Mistake apparent on the face of record in passing original order of assessment---Rectification valid---Indian Income Tax Act, 1961, Ss.50, 55(2) & 154. For the assessment years 1968-69, 1969-70 and 1972-73, the assessee derived capital gains in respect of depreciable assets acquired before January 1, 1954. The Income-tax Officer had in the computation of capital gains for these three assessment years, allowed the assessee in the original assessments the option of adopting the fair market value as on January 1, 1954, as the cost of acquisition of these assets. Later, the Income-tax Officer invoked section 154 of the Income Tax Act, 1961, and deprived the assessee of that option of Adopting the fair market value and revised the assessments by taking the written down value as the cost of acquisition. The Appellate Assistant Commissioner confirmed the order passed by the Income-tax Officer. The Tribunal affirmed the order of the Income-tax Authorities, on the merits, but held that the issue was highly debatable and hence, section 154 was not applicable and cancelled the rectification orders passed by. the Income-tax Officer. On a reference: `Held, (i) that section 50 of the Income Tax Act, 1961, is a special provision dealing with the determination of capital gains in regard to depreciable assets. Therefore, on the merits, the Tribunal was right in holding that the assessee was not entitled to exercise the option to adopt the fair market value as on January 1, 1954, with regard to depreciable assets acquired before January 1, 1954, while computing capital gains. (ii) That section 55(2) of the Act is applicable only in respect of…

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