AUTO FINANCE ENTERPRISES, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 12(3), MUMBAI

ITA 259/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8840 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE LD
• Assessee Lawyers: GOVIND JHAVERI LD ARS
• Keywords: Capital asset; Business income; Depreciation; Principle of natural justice; Date of conversion; Fair market value; Capital Gains
• Section: 45(2); 143(3); 72(1); 139(1); 32; 154; 15; 139

Judgement Text

1 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , ' , % BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.259/MUM/2018 ( & '& / ASSESSMENT YEAR: 2010-11) AUTO FINANCE ENTERPRISES 41, NARIMAN BHAVAN, 221, NARIMAN POINT, MUMBAI-400 021 / VS. ACIT - CIRCLE 12(3) 1 ST FLOOR, AAYKAR BHAVAN, M. K. ROAD MUMBAI-400 020 ./ ./PAN/GIR NO. AAAFA-2325-G ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI VIJAY MEHTA & SHRI GOVIND JHAVERI-LD. ARS REVENUE BY : SHRI SATISH CHANDRA RAJORE - LD. DR / DATE OF HEARING : 23/08/2019 / DATE OF PRONOUNCEMENT : 16/09/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-28, 2 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 MUMBAI [CIT(A)], APPEAL NO. CIT(A)-28/IT-251/AC-17(1)/2013-14 D ATED 06/10/2017 ON FOLLOWING GROUNDS OF APPEAL: - THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ORDER PA SSED BY THE ASSESSING OFFICER U/S 154 OF THE ACT WHICH IS BAD IN LAW AND AGAINST THE PRINCIPLE OF NATURAL JUSTICE. THE LD. CIT(A), IN LAW AND ON FACTS AND CIRCUMSTANC ES OF THE CASE, OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ALLOW THE APPELLA NT TO CARRY FORWARD LONG TERM CAPITAL LOSS OF RS.3,26,31,579/- AS ALL RELEVANT UN DISPUTED FACTS WERE ON RECORD. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT FIRM STATED TO BE ENGAGED IN INVESTMENT / TRADING IN SHARES & DERIVAT IVES WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 30/01/2013 ACCEPTING THE RETURNED LOSS OF RS.216.02 LACS. PARA NO.3 OF THE QUANTUM ASSESSMENT ORDER RECORD A FINDING THAT DURING THE YEAR, THE INVESTMENT IN LIS TED SHARES HELD BY THE ASSESSEE HAVE BEEN CONVERTED INTO STOCK-IN-TRADE AS ON 01/04/2009. 2.2 SUBSEQUENTLY, THE ASSESSEE FILED RECTIFICATION APPLICATION U/S 154 ON 13/05/2013 BY SUBMITTING THAT LONG-TERM CAPITAL LOSS [LTCL] OF RS.326.31 LACS REMAINED TO BE ALLOWED TO BE CARRIED FORWARD WHILE FRAMING ASSESSMENT. IT WAS SUBMITTED THAT THE AFORE SAID LOSS AROSE AS PER THE PROVISIONS OF SECTION 45(2) ON CONVERSION O F INVESTMENT INTO STOCK-IN-TRADE. THE INVESTMENT SO CONVERTED INTO ST OCK-IN-TRADE WAS ALREADY SOLD DURING THE YEAR AND THE RESULTANT GAIN S WERE OFFERED TO TAX AS BUSINESS INCOME . ACCORDINGLY, LOSS ARISING ON ACCOUNT OF CONVERSIO N WAS TO BE ASSESSED UNDER THE HEAD CAPITAL GAINS AS PER THE PROVISIONS OF SECTION 45(2) AND TAXED DURING THE YEAR. IN THE ABOVE BACKGROUND, THE ASSESSEE WORKED OUT LOSS OF RS.326.31 LACS WHICH WA S TO BE CARRIED FORWARD FOR SET-OFF IN SUBSEQUENT YEARS. IT WAS SUB MITTED THAT SINCE ALL THE PARTICULARS, IN RESPECT THEREOF, WERE ALREADY O N RECORD AND THE RESULTANT GAINS WERE ALREADY OFFERED TO TAX, THE AF ORESAID OMISSION WAS 3 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 ONLY A MISTAKE APPARENT FROM RECORD WHICH WOULD REQ UIRE RECTIFICATION U/S 154. 2.3 HOWEVER, LD. AO REJECTED THE SAID PLEA ON THE G ROUND THAT THE AFORESAID CLAIM WAS NOT MADE IN THE RETURN OF INCOM E FILED U/S 139(1) AND FURTHER, THE FIGURES OF LONG-TERM CAPITAL LOSS IN THE STATEMENT OF COMPUTATION OF INCOME FILED DURING SCRUTINY ASSESSM ENT PROCEEDINGS WERE MENTIONED AS NIL. THEREFORE, AS PER THE PROVISIONS OF SECTION 80 READ WITH SECTION 139(3), ANY LOSS WHICH HAS NOT BE EN DETERMINED IN PURSUANCE OF A RETURN FILED WITHIN THE TIME ALLOWED U/S 139(1) SHALL NOT BE ALLOWED TO BE CARRIED FORWARD U/S 74(1) OF THE INCO ME TAX ACT, 1961. HENCE, THE APPLICATION WAS REJECTED VID ORDER DATED 05/09/2013. 2.4 THE LD. CIT(A) CONFIRMED THE SAME BY OBSERVING AS UNDER: - APPELLANT CONCEDED IN HEARING ON 04/10/2017 THAT FA CTS NOTED IN PARA-5 OF AO'S ORDER ARE FACTUALLY CORRECT. THE APPELLANT HAVING C ONCEDED HIS OWN WRONG DOING CANNOT BE PERMITTED TO TAKE ADVANTAGE OF HIS OWN FA ULT AND COMPEL ADJUDICATION UNDER SUCH AN ISSUE AS IT NOT EVEN COVERED U/S. 154 . FURTHER, ON MERIT TOO, IT IS AMPLY CLEAR THAT WHAT WAS CLAIMED, WAS ALLOWED AS P ER LAW. THE PROVISIONS ARE CRYSTAL CLEAR. THE AO CANNOT TRAVEL BEYOND LAW. THE PETITION DOES NOT DESERVE TO SUCCEED. IN REGARD TO SCOPE OF SECTION-154, THE FOL LOWING IS RELIED UPON: 1.BANSWARA SYNTEX (108 ITD 48)(JODH.): A MISTAKE AP PARENT IS WHICH IS MANIFEST, PLAIN OR OBVIOUS. APPARENT IS WHAT IS EX- FACIE INCAPABLE OF ARGUMENT OR DEBATE. 2.SAURASHTRA KUTCH STOCK EXCHANGE (305 ITR 227)(SC) : 2.3 THE ISSUE IS DEFINITELY DEBATABLE. FACTS NOTED BY AO ON PARA.5(SUPRA) ARE CORRECT, AS CONCEDED. 3. UNDER THE CIRCUMSTANCES AO HAS RIGHTLY NOT GIVEN HER CONSENT IN REGARD TO CLAIMED RELIEF. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], WHILE ASSAILING THE STAND OF LOWER AUTHORITIES, PLACED RE LIANCE ON CBDT CIRCULAR 4 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 NO.14(XL-35) DATED 11/04/1955 AND RELIED UPON FOLLOWING JUDICIAL PRONOUNCEMENTS FOR VARIOUS SUBMISSIONS: - NO. CASE LAW JUDICIAL AUTHORITY & CITATION 1. SANCHIT SOFTWARE AND SOLUTIONS P. LTD. VS. LD. COMMISSIONER OF INCOME TAX (APPEALS)- MUMBAI [CIT(A)] HONBLE BOMBAY HIGH COURT [349 ITR 404] 2. CIT V/S NALWA INVESTMENT LTD. HONBLE DELHI HIGH COURT [322 ITR 233] 3. CIT VS. K.N. OIL INDUSTRIES HONBLE HIGH COURT OF MADHYA PRADESH [142 ITR 13] 4. CONTAINER CORPORATION OF INDIA LTD. VS. DCIT ITAT DELHI BENCH [94 TTJ 502] 5. ASIA PACIFIC FUND INC. VS. DCIT ITAT MUMBAI BEN CH [96 TTJ 548] 6. ACIT VS. RUPAM IMPEX ITAT, RAJKOT BENCH [157 ITD 360] 7. ALKA AGARWAL V/S ADIT ITAT DELHI BENCH [15 TAXMA NN.COM 176] PER CONTRA, LD. DR SUBMITTED THAT THERE WAS NO MIST AKE APPARENT FROM RECORD WITHIN THE MEANING OF SECTION 154 AND THEREF ORE, THE ASSESSEES PRAYER COULD NOT BE ACCEPTED. 4.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD AND DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS AS CITED BEFORE US. THE UNDISPUTED F ACT THAT EMERGES ARE THAT THAT THE ASSESSEE HAD FILED RETURN OF INCO ME U/S 139(1) WHICH WAS ACCEPTED IN SCRUTINY ASSESSMENT U/S 143(3). THE ASSESSEE HAS CONVERTED CERTAIN INVESTMENTS INTO STOCK-IN-TRADE A S ON 01/04/2009. THIS FACT HAS ALSO BEEN NOTED BY LD. AO IN THE QUANTUM A SSESSMENT ORDER. THE INVESTMENTS SO CONVERTED HAS BEEN SOLD DURING T HE YEAR AND RESULTANT GAINS OF RS.76.82 LACS HAVE BEEN ASSESSED AS BUSINESS INCOME. THE ACT OF CONVERSION OF CAPITAL ASSET INTO STOCK-I N-TRADE AMOUNTS TO TRANSFER WITHIN THE MEANING OF SECTION 2 (47)(IV) AND THE PROVISIONS OF SECTION 45(2) GET TRIGGER IN SUCH A C ASE. AS PER THESE 5 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 PROVISIONS, THE RESULTANT GAINS SHALL BE TAXABLE IN THE YEAR OF SALE OF STOCK-IN-TRADE AND THE FAIR MARKET VALUE OF THE ASS ET ON THE DATE OF CONVERSION IS DEEMED TO BE THE FULL VALUE OF CONSID ERATION UPON SUCH CONVERSION. IN THE PRESENT CASE, IT TRANSPIRES THAT THE STOCK-IN-TRADE WAS SOLD AND THEREFORE, THE RESULTANT GAINS / LOSSES UN DER THE HEAD CAPITAL GAINS WERE REQUIRED TO BE ASSESSED IN TERMS OF SECTION 45 (2). THE SAME HAS REMAINED TO BE ASSESSED. 4.2 SO FAR AS THE QUESTION THAT WHETHER THE AFORESA ID CLAIM COULD BE ENTERTAINED U/S 154, WE FIND THAT THE FACT OF THE C ONVERSION WAS DULY REPORTED BY TAX AUDITOR IN TAX AUDIT REPORT FORM NO . 3CD, AS PLACED ON RECORD. THE FACT OF CONVERSION HAS ALSO BEEN NOT ED BY LD. AO IN THE QUANTUM ASSESSMENT ORDER. THE STATED LOSS ON SALE O F SHARE INVESTMENT WAS SEPARATELY REFLECTED UNDER THE HEAD EXPENDITURE IN THE PROFIT & LOSS ACCOUNT . THE AFORESAID LOSS HAS ALSO BEEN ADJUSTED FROM LO SSES IN THE STATEMENT OF COMPUTATION OF INCOME. THE FACT OF CON VERSION OF INVESTMENT INTO STOCK-IN-TRADE WAS DULY MENTIONED I N ASSESSEES FINANCIAL STATEMENTS IN SCHEDULE-J NOTES FORMING PART OF THE ACCOUNTS AS ON 31/03/2010. ALL THE ABOVE DOCUMENTS WERE FILED BY THE ASSESSEE BEFORE LD. AO DURING SCRUTINY ASSESSMENT PROCEEDING S VIDE SUBMISSIONS DATED 11/07/2012. NOT ONLY THIS, SPECIF IC QUERIES WERE RAISED BY LD. AO PERTAINING TO CONVERSION WHICH WER E DULY REPLIED TO BY THE ASSESSEE VIDE SUBMISSIONS DATED 03/01/2013. THE AFORESAID FACTS WOULD LEAD US TO CONCLUDE THAT THE ASSESSEES CLAIM AS URGED BEFORE US WAS NOT A NEW CLAIM BUT IT SPRANG FROM EXISTING REC ORDS AS ALREADY FILED / AVAILABLE BEFORE LD. AO. THEREFORE, THE PLEA THAT T HE CLAIM REMAINED TO 6 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 BE MADE DUE TO INADVERTENT ERROR WAS PLAUSIBLE AS W ELL AS BONA-FIDE ONE. THIS BEING SO, THE SAME COULD BE SUBJECT-MATTE R OF RECTIFICATION U/S 154 SINCE THE REVENUE WOULD NOT BE JUSTIFIED TO TAK E ADVANTAGE OF INADVERTENT ERROR WHEN MATERIAL, IN THAT RESPECT, W AS ALREADY AVAILABLE ON RECORD. 4.3 THE HONBLE BOMBAY HIGH COURT, IN WRIT PETITIO N TITLED AS SANCHIT SOFTWARE & SOLUTIONS P. LTD. V/S CIT [349 ITR 404], AFTER CONSIDERING CBDT CIRCULAR NO.14 (XL-35) DATED 11/04/1955 OBSERV ED AS UNDER: - 5. IN ANY CIVILIZED SYSTEM, THE ASSESSEE IS BOUND TO PAY THE TAX WHICH HE LIABLE UNDER THE LAW TO THE GOVERNMENT. THE GOVERNMENT ON THE OT HER HAND IS OBLIGED TO COLLECT ONLY THAT AMOUNT OF TAX WHICH IS LEGALLY PAYABLE BY AN ASSESSEE. THE ENTIRE OBJECT OF ADMINISTRATION OF TAX IS TO SECURE THE REVENUE FOR THE DEVELOPMENT OF THE COUNTRY AND NOT TO CHARGE ASSESSEE MORE TAX THAN THAT WHICH IS DUE AND PAYABLE BY THE ASSESSEE. IT IS IN AFORESAID CIRCUMSTANCES THAT AS FAR BACK A S IN 11/04/1955 THE CENTRAL BOARD OF DIRECT TAX HAD ISSUED A CIRCULAR DIRECTING ASSESSIN G OFFICER NOT TO TAKE ADVANTAGE OF ASSESSEE'S IGNORANCE AND/OR MISTAKE. THE RELEVANT P ORTION OF THE ABOVE CIRCULAR IS AS UNDER: '3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIES TO ASSI ST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE OF CLAIMING AND SECURING RELIEF S AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WHERE PRO CEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THEM INDICATE THAT SOME REFUND OR RELI EF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOUL D INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPAR TMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RES TS WITH ASSESSEES ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD:- ( A ) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR S OME REASON OR OTHER; ( B ) FREELY ADVISE THEM WHEN APPROACHED BY THEM SO TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS.' THEREFORE THE ABOVE CIRCULAR SHOULD ALWAYS BE BORNE IN MIND BY THE OFFICERS OF THE RESPONDENT-REVENUE WHILE ADMINISTERING THE SAID ACT . 4.4 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V/S NALWA INVESTMENT LTD. [SUPRA], UNDER IDENTICAL SITUATION, HELD AS UNDER: - WE ARE OF THE VIEW THAT THE TRIBUNAL CORRECTLY APPR ECIATED THE PROVISIONS OF SECTION 80 OF THE ACT READ WITH SECTION 139(3) OF THE ACT AND ALLOWED THE CARRY FORWARD OF LOSS FOR 7 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 THE PURPOSES OF SET OFF AGAINST INCOME OF THE SUBSE QUENT YEAR(S). A PLAIN READING OF PROVISION OF SECTION 80 OF THE ACT PERMITS AN ASSES SEE TO CARRY FORWARD A LOSS AND SEEK ITS SET OFF UNDER SECTION 72(1) OR 73(2) OR SUB-SEC TION (1) OF SECTION 74 OR 74A(3) EXCEPT WHEN, THE LOSS HAS NOT BEEN DETERMINED IN PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH PROVISIONS OF SUB-SECTION (3) OF SECTION 139. SECTION 80 OF THE ACT READS AS FOLLOWS: ' SUBMISSION OF RETURN FOR LOSSES. NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAPTER , NO LOSS WHICH HAS NOT BEEN DETERMINED IN PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) OF SECTION 1 39, SHALL BE CARRIED FORWARD AND SET OFF UNDER SUB-SECTION (1) OF SECTION 72 OR SUB-SECT ION (2) OF SECTION 73 OR SUB-SECTION (1) OR SUB-SECTION (3) OF SECTION 74 OR SUB-SECTION (3) OF SECTION 74A.' 12.1 IN THE INSTANT CASE, THERE IS NO DOUBT THAT THE AS SESSEE HAD FILED A RETURN UNDER SECTION 139 OF THE ACT WITHIN THE PRESCRIBED TIME. IT IS ALSO NOT DISPUTED THAT A LOSS HAD BEEN CLAIMED EVEN THOUGH THE SAME HAD BEEN CLAIMED TO THE EXTENT OF RS. 90 AND THAT TOO AS A CAPITAL LOSS WITH RESPECT TO DWS ISSUED TO THE ASSESSEE, ON THE ASSESSEE INVESTING IN THE RIGHTS ISSUE OF JISCO. THE ASSESSE E CARRIED OUT A COURSE CORRECTION BY CLAIMING A LOSS ON SALE OF SRNCDS TO UTI AT RS. 111 PER SRNCD AS THEY HAD SOLD SRNCDS OF A FACE VALUE OF RS. 500 TO UTI AT RS. 389 PER SRNCD. THE TRIBUNAL IN THE FIRST ROUND IN ITS ORDER DATED 5-6-2000 CAME TO A C ONCLUSION BASED ON THE JUDGMENTS OF THE SUPREME COURT AS WELL AS THOSE OF VARIOUS HIGH COURTS THAT WHAT WAS IMPORTANT AND RELEVANT WAS THE TRUE LEGAL EFFECT OF A TRANSAC TION AND IN COMING TO THE SAID CONCLUSION THE VIEW THAT THE ASSESSEE MAY TAKE IN T HE RETURN OF INCOME OR THE TREATMENT THAT IS METED OUT IN THE BOOKS OF ACCOUNT OR THE METHOD OF ACCOUNTING THAT AN ASSESSEE USES ARE NOT RELEVANT IN CONSIDERING THE E FFECT TO BE GIVEN TO THE TRANSACTIONS WHICH ARE GOVERNED BY THE PROVISIONS OF THE ACT. TH E TRIBUNAL WENT ON TO OBSERVE WHILE ALLOWING THE CLAIM OF LOSS BY THE ASSESSEE THAT THE FACT THAT IN THE RETURN FILED BY THE ASSESSEE WHEREIN THE ASSESSEE DOES NOT TAKE A PROPE R POSITION, CANNOT BE A GROUND TO TAKE ADVANTAGE OF THE IGNORANCE OF THE ASSESSEE IF THE ASSESSEE IS OTHERWISE ENTITLED TO RELIEF AND/OR CLAIM OF LOSS AS IN THE INSTANT CA SE. KEEPING THE AFORESAID RATIONALE IN MIND THE TRIBUNAL VIDE ORDER DATED 5-6-2000 HAD DIRECTED THE ASSESSING OF FICER TO ALLOW THE ASSESSEE'S CLAIM OF LOSS ON SALE OF SRNCD S AT THE RATE OF RS. 111 AS A BUSINESS LOSS. IT IS EVIDENT THAT THE ASSESSING OFF ICER (JT. COMMISSIONER OF INCOME-TAX) IN THE SECOND ROUND WHILE GIVING EFFECT TO THE ORDE RS OF THE TRIBUNAL DATED 5-6-2000 WAS DETERMINING THE INCOME/LOSS IN PURSUANCE OF AN ORIGINAL RETURN FILED BY THE ASSESSEE UNDER SECTION 139 OF THE ACT. IN THE RETUR N THE ASSESSEE HAD CLAIMED ERRONEOUSLY A LOSS TO A LESSER EXTENT THAT IS AT RS . 91 AGAINST DWS AS AGAINST SRNCDS WHICH WAS CORRECTED PURSUANT TO A STAND TAKEN BEFOR E CONCLUSION OF PROCEEDINGS BY THE ASSESSING OFFICER IN THE FIRST ROUND AND A STAN D WHICH WAS SUSTAINED BY THE TRIBUNAL BY ITS ORDER DATED 5-6-2000. IN VIEW OF TH E SAID CIRCUMSTANCES OBTAINING IN THE PRESENT CASE THE TRIBUNAL IN THE SECOND ROUND VIDE THE IMPUGNED JUDGMENT HAS CORRECTLY HELD IN OUR OPINION, THAT BOTH THE CIT(A) AND THE ASSESSING OFFICER HAD MISDIRECTED THEMSELVES IN LAW IN PREVENTING THE CAR RY FORWARD AND THE SET OFF OF THE ASSESSED LOSS AGAINST SUBSEQUENT PROFITS AS THE CON DITIONS PRESCRIBED FOR TRIGGERING THE PROVISIONS OF SECTION 80 OF THE ACT WERE NOT PR ESENT IN THE INSTANT CASE. 13. THE MATTER CAN BE LOOKED AT FROM ANOTHER ANGLE ALS O. IT WOULD IN ONE SENSE TURN THE LAW ON ITS HEAD IF AFTER THE TRIBUNAL VIDE ITS ORDER DATED 5-6-2000 HAD ALLOWED THE 8 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 ASSESSEE'S CLAIM OF LOSS ON SALE OF SRNCDS AT THE R ATE OF RS. 111 PER SRNCD AS A BUSINESS LOSS BASED ON THE REASONING THAT THE ASSES SMENTS HAD TO BE CARRIED OUT KEEPING IN MIND THE REAL EFFECT OF A LEGAL TRANSACT ION NOTWITHSTANDING THE TREATMENT METED OUT BY THE ASSESSEE, IT WOULD THEN APPEAR ANO MALOUS AND INCONGRUOUS IF THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE SAID O RDER WOULD DENUDE THE EFFICACY OF THE TRIBUNAL'S ORDER BY, IN A MANNER OF SPEAKING, TAKIN G AWAY WITH ONE HAND WHAT WAS GIVEN BY THE OTHER, THAT IS, EVEN WHILE ADJUSTING L OSS IN ASSESSMENT YEAR 1995-96, DEPRIVE THE ASSESSEE OF A CONSEQUENT BENEFIT OF CAR RY FORWARD AND SET OFF OF THE BALANCE LOSS IN THE SUBSEQUENT YEAR(S). SUCH AN APP ROACH WOULD IN OUR VIEW BE COMPLETELY CONTRARY TO THE DIRECTIONS ISSUED BY THE TRIBUNAL. WE ARE HERE REMINDED OF THE OBSERVATIONS OF THE SUPREME COURT IN THE CASE O F CIT V. J.H. GOTLA [1985] 156 ITR 323 WHERE THE COURT IN RESPECT OF AN INCOME-TAX MAT TER HAS OBSERVED THAT WHILE EQUITY AND TAXES ARE STRANGERS AN ATTEMPT SHOULD BE MADE T O BRING THEM NEARER. THE OBSERVATIONS OF THE CASE ARE APPOSITE AND EXTRACTED HEREINBELOW: '. . .THOUGH EQUITY AND TAXATION ARE OFTEN STRANGER S, ATTEMPTS SHOULD BE MADE THAT THESE DO NOT REMAIN ALWAYS SO AND IF A CONSTRUCTION RESULTS IN EQUITY RATHER THAN IN INJUSTICE, THEN SUCH CONSTRUCTION SHOULD BE PREFERR ED TO THE LITERAL CONSTRUCTION. . . .' (P. 339) 14. AT THIS STAGE, IT WOULD BE PERTINENT TO NOTE THE O BSERVATIONS OF THE SUPREME COURT WITH RESPECT TO THE APPROACH THAT THE INCOME-TAX AU THORITIES ARE REQUIRED TO ADOPT WHILE ASSESSING THE INCOME OF AN ASSESSEE. THE RELE VANT OBSERVATIONS BEING APPOSITE ARE EXTRACTED HEREINBELOW: CIT V. C. PARAKH & CO. (INDIA) LTD. [1956] 29 ITR 661 (SC) . '. . .WE DO NOT SEE ANY FORCE IN THIS CONTENTION. W HETHER THE RESPONDENT IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROV ISION OF LAW RELATING THERETO, AND NOT ON THE VIEW WHICH IT MIGHT TAKE OF ITS RIGHTS, AND CONSEQUENTLY, IF THE WHOLE OF THE COMMISSION IS UNDER THE LAW LIABLE TO BE DEDUCTED A GAINST THE INDIAN PROFITS, THE RESPONDENT CANNOT BE STOPPED FROM CLAIMING THE BENE FIT OF SUCH DEDUCTION, BY REASON OF THE FACT THAT IT ERRONEOUSLY ALLOCATED A PART OF IT TOWARDS THE PROFITS EARNED IN KARACHI. . . .' (P. 665) CIT V. MAHALAKSHMI TEXTILE MILLS LTD. [1967] 66 ITR 710 (SC). 'BY THE FIRST QUESTION THE JURISDICTION OF THE TRIB UNAL TO ALLOW A PLEA INCONSISTENT WITH THE PLEA RAISED BEFORE THE DEPARTMENTAL AUTHORITIES IS CANVASSED. UNDER SUB-SECTION (4) OF SECTION 33 OF THE INDIAN INCOME-TAX ACT, 1922, THE APPELLATE TRIBUNAL IS COMPETENT TO PASS SUCH ORDERS ON THE APPEAL 'AS IT THINKS FIT'. THERE IS NOTHING IN THE INCOME-TAX ACT WHICH RESTRICTS THE TRIBUNAL TO THE DETERMINATION O F QUESTIONS RAISED BEFORE THE DEPARTMENTAL AUTHORITIES. ALL QUESTIONS WHETHER OF LAW OR OF FACT WHICH RELATE TO THE ASSESSMENT OF THE ASSESSEE MAY BE RAISED BEFORE THE TRIBUNAL: IF FOR REASONS RECORDED BY THE DEPARTMENTAL AUTHORITIES IN REJECTING A CONT ENTION RAISED BY THE ASSESSEE, GRANT OF RELIEF TO HIM ON ANOTHER GROUND IS JUSTIFIED, IT WOULD BE OPEN TO THE DEPARTMENTAL AUTHORITIES AND THE TRIBUNAL, AND INDEED THEY WOULD BE UNDER A DUTY, TO GRANT THAT RELIEF. THE RIGHT OF THE ASSESSEE TO RELIEF IS NOT RESTRICTED TO THE PLEA RAISED BY HIM.' (P. 712) KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC) . 9 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 '. . .WE ARE WHOLLY UNABLE TO APPRECIATE THE SUGGES TION THAT IF AN ASSESSEE UNDER SOME MISAPPREHENSION OR MISTAKE FAILS TO MAKE AN ENTRY I N THE BOOKS OF ACCOUNT AND ALTHOUGH, UNDER THE LAW, A DEDUCTION MUST BE ALLOWE D BY THE INCOME-TAX OFFICER, THE ASSESSEE WILL LOSE THE RIGHT OF CLAIMING OR WILL BE DEBARRED FROM BEING ALLOWED THAT DEDUCTION. WHETHER THE ASSESSEE IS ENTITLED TO A PA RTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. . . .' (P. 367) 15. AS REGARDS THE OTHER ISSUE AS TO WHETHER THE ASSES SING OFFICER IN THE SECOND ROUND HAD EXCEEDED HIS JURISDICTION IN OBSERVING TH AT THE LOSS OF RS. 6,27,81,805 ASSESSED BY HIM COULD NOT BE CARRIED FORWARD AND SE T OFF BY THE ASSESSEE AGAINST HIS FUTURE INCOME, WE ARE OF THE OPINION THAT IN VI EW OF THE LINE OF REASONING TAKEN BY US, THE ASSESSING OFFICER IN THE SECOND ROUND WAS R EQUIRED TO GIVE FULL EFFECT TO THE CONSEQUENCES WHICH FLOWED FROM THE ORDER OF THE TRI BUNAL DATED 5-6-2000. THE ASSESSING OFFICER TO OUR MINDS EXCEEDED HIS JURISDI CTION BY NOT APPLYING THE PROVISIONS OF LAW, KEEPING IN MIND THE CORRECT PERS PECTIVE OF THE MATTER AT HAND. 16. IN VIEW OF THE DISCUSSIONS ABOVE, WE ANSWER BOTH T HE QUESTIONS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE RESULT THE APPEAL IS DISMISSED. THERE SHALL BE NO ORDERS AS TO COST. 4.5 THE HONBLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT V/S K.N.OIL INDUSTRIES [SUPRA], WHILE INTERPRETING THE MEANING OF RECORD FOR THE PURPOSE OF SECTION 154, HELD AS UNDER: - THE FACTS BRIEFLY STATED ARE THAT IN THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 1972-73 THE ASSESSEE DID NOT CLAIM EXPORT MARK ETS DEVELOPMENT ALLOWANCE UNDER SECTION 35B OF THE INCOME-TAX ACT, 1961. THE ITO STARTED RECTIFICATION PROCEEDINGS UNDER SECTION 154 FOR CORRECTING AN ERR OR IN THE GRANT OF REBATE UNDER SECTION 80J. IN THOSE PROCEEDINGS THE ASSESSEE CONT ENDED THAT THERE WAS AN APPARENT ERROR IN NOT ALLOWING TO IT THE RELIEF UND ER SECTION 35B. THE ITO REFUSED TO GO INTO THIS QUESTION ON THE GROUND THAT NO SUCH CL AIM WAS MADE IN THE RETURN OR IN THE ASSESSMENT PROCEEDINGS BY THE ASSESSEE. THE AAC , HOWEVER, HELD IN FAVOUR OF THE ASSESSEE THAT THERE WAS AN APPARENT ERROR IN NO T GRANTING THE RELIEF UNDER SECTION 35B EVEN THOUGH IT WAS NOT CLAIMED IN THE R ETURN. IN FURTHER APPEAL BEFORE THE TRIBUNAL, THE ARGUMENT OF THE DEPARTMENT WAS TH AT THE ASSESSEE HAVING OMITTED TO CLAIM THE RELIEF UNDER SECTION 35B IN THE RETURN , IT WAS NOT OPEN TO IT TO CLAIM THAT RELIEF UNDER SECTION 154 AFTER THE ASSESSMENT WAS M ADE. THIS ARGUMENT WAS NOT ACCEPTED BY THE TRIBUNAL. IN THE OPINION OF THE TRI BUNAL, THE JURISDICTION TO INTERFERE UNDER SECTION 154 AROSE WHEN IT WAS FOUND THAT THER E WAS A MISTAKE APPARENT FROM THE RECORD IN THE RELEVANT ORDER AND IN DECIDING WH ETHER THERE WAS AN APPARENT MISTAKE THE ITO WAS NOT CONFINED TO THE RETURN AND HE COULD LOOK TO THE ENTIRE MATERIAL AVAILABLE IN THE RECORD OF THE ASSESSMENT. THE TRIBUNAL, THEREFORE, HELD THAT IT WAS OPEN TO THE ITO TO ASSUME JURISDICTION UNDER SECTION 154 IF IT WAS APPARENT 10 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 FROM THE RECORD OF ASSESSMENT THAT THERE WAS A MIST AKE IN NOT GRANTING RELIEF UNDER SECTION 35B ALTHOUGH THE SAID RELIEF WAS NOT CLAIME D IN THE RETURN. IT IS THE CORRECTNESS OF THIS VIEW WHICH WE HAVE TO EXAMINE I N THIS REFERENCE. THE LEARNED STANDING COUNSEL FOR THE DEPARTMENT PLA CED RELIANCE UPON ANCHOR PRESSINGS (P.) LTD. V. CIT [1975] 100 ITR 347 (ALL.), SHARDA PRASAD V. CIT [1975] 100 ITR 373 (ALL.) AND PARAMOUNT TRADING CORPORATION V. ITO [1980] 124 ITR 55 (ALL.), IN SUPPORT OF HIS SUBMISSION THAT AS NO REL IEF UNDER SECTION 35B WAS CLAIMED BY THE ASSESSEE IN THE RETURN, THE MISTAKE IN NOT G RANTING THE RELIEF COULD NOT BE APPARENT AND COULD NOT BE CORRECTED UNDER SECTION 1 54. THESE CASES WHICH WERE DECIDED BY THE ALLAHABAD HIGH COURT DO SUPPORT THE SUBMISSION OF THE LEARNED COUNSEL. BUT, WITH GREAT RESPECT, WE ARE UNABLE TO AGREE WITH THE VIEW TAKEN IN THEM. THE RECORD OF THE ASSESSMENT IS NOT CONFINED TO THE RETURN. SECTION 154 WHICH CONFERS JURISDICTION FOR RECTIFYING MISTAKE ENABLES THE ITO TO ASSUME JURISDICTION WHEN HE FINDS 'ANY MISTAKE APPARENT FROM THE RECORD '. THE WORD 'RECORD' AS USED IN SECTION 154 WILL INCLUDE ALL THAT MATERIAL WHICH FO RMS PART OF THE ASSESSMENT PROCEEDINGS AND NOT ONLY THE RETURN. IT IS ALSO NOT CORRECT TO SAY THAT IF THE ASSESSEE OMITS TO CLAIM A RELIEF ALLOWABLE TO HIM UNDER THE PROVISIONS OF THE INCOME-TAX ACT, HE IS NOT ENTITLED TO GET THAT RELIEF. IT IS THE DU TY OF THE ITO AND OTHER OFFICERS ADMINISTERING THE ACT TO INFORM THE ASSESSEE THAT H E IS ENTITLED TO A PARTICULAR RELIEF IF IT IS APPARENT THAT HE IS SO ENTITLED FROM THE MATE RIAL AVAILABLE IN THE PROCEEDINGS OF ASSESSMENT. THIS DUTY HAS BEEN HIGHLIGHTED BY A CIR CULAR ISSUED BY THE CBR. FOR THESE REASONS, THE GUJARAT HIGH COURT IN CHOKSHI METAL REFINERY V. CIT [1977] 107 ITR 63 (GUJ.), DISSENTED FROM THE VIEW TAKEN BY THE ALLAH ABAD HIGH COURT IN THE AFORESAID CASES AND HELD THAT IF IT IS APPARENT FRO M THE RECORD OF ASSESSMENT THAT THE ASSESSEE WAS ENTITLED TO A PARTICULAR RELIEF, THE I TO CAN RECTIFY THAT MISTAKE UNDER SECTION 154 ALTHOUGH THE SAID RELIEF WAS NOT CLAIME D BY THE ASSESSEE IN THE RETURN. WE RESPECTFULLY AGREE WITH THE VIEW TAKEN BY THE GU JARAT HIGH COURT. THE LEARNED COUNSEL FOR THE DEPARTMENT SUBMITTED BE FORE US THAT EVEN OTHERWISE THE CONCLUSION THAT THE ASSESSEE WAS ENTITLED TO THE RE LIEF UNDER SECTION 35B WAS NOT APPARENT FROM THE RECORD. WE CANNOT EXAMINE THIS SU BMISSION BECAUSE THE QUESTION REFERRED HAS TO BE ANSWERED ON THE ASSUMPTION THAT IT WAS APPARENT FROM THE RECORD THAT THE ASSESSEE WAS ENTITLED TO THE RELIEF UNDER SECTION 35B. FOR THE REASONS GIVEN ABOVE, WE ANSWER THE QUESTION AS FOLLOWS: 'IF IT IS APPARENT FROM THE RECORD THAT THE ASSESSE E WAS ENTITLED TO RELIEF ADMISSIBLE UNDER SECTION 35B, THAT RELIEF CAN BE GRANTED TO HI M BY AN ORDER UNDER SECTION 154 BY RECTIFYING THE ASSESSMENT EVEN THOUGH RELIEF UND ER THAT SECTION HAD NOT BEEN CLAIMED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS' 4.6 THE DELHI BENCH OF TRIBUNAL IN CONTAINER CORPORATION OF INDIA LTD. V/S DCIT [SUPRA], TAKING FAVORABLE VIEW IN THE MATTER OF RECTIFICATION U/S 154, HELD AS UNDER: - 7. THE NEXT QUESTION FOR OUR CONSIDERATION IS WHETHER ASSESSEE COULD CLAIM DEPRECIATION UNDER SECTION 32 BY MAKING APPLICATION FOR RECTIFIC ATION UNDER SECTION 154 OF THE ACT ON 11 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 THE GROUND THAT IT FORGOT TO CLAIM THE SAME. THIS Q UESTION CAME UP FOR CONSIDERATION BEFORE THE HONBLE SUPREME COURT IN THE CASE OF ANCHOR PRESSINGS (P.) LTD. ( SUPRA ). IN THAT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF THE MANUFACTURE AND SALE OF LOCKS USED IN SUITCASES AND THEREFORE, WAS ENTITLED TO RELIEF UNDER SECTION 84 OF THE ACT, AS IT THEN WAS. NO CLAIM WAS MADE BY ASSESSEE FOR R ELIEF UNDER THIS SECTION EITHER IN THE RETURN OF INCOME OR IN THE ASSESSMENT PROCEEDINGS O R BEFORE THE FIRST APPELLATE AUTHORITY. SUBSEQUENTLY, THE ASSESSEE MADE AN APPLI CATION BEFORE THE ASSESSING OFFICER UNDER SECTION 154 PRAYING FOR RECTIFICATION OF THE ASSESSMENT ORDER BY GRANT OF RELIEF UNDER SECTION 84. THIS APPLICATION WAS REJEC TED BY ITO. A REVISION PETITION FILED BEFORE CIT HAS ALSO BEEN REJECTED. THE WRIT PETITIO N MOVED BY THE ASSESSEE BEFORE THE HIGH COURT WAS ALSO DISMISSED. HENCE, THE MATTER RE ACHED THE APEX COURT. THEIR LORDSHIPS HELD THAT JURISDICTION UNDER SECTION 154 OF THE ACT TO RECTIFY A MISTAKE IS MUCH WIDER THAN PROVIDED IN ORDER XLVII, RULE 1 OF THE C ODE OF CIVIL PROCEDURE, 1908 AND, THEREFORE, RELIEF COULD BE ALLOWED IN THE RECTIFICA TION PROCEEDINGS IF ALL THE FACTUAL MATERIALS NECESSARY FOR ALLOWING THE RELIEF WAS AVA ILABLE ON RECORD AND SUCH RELIEF COULD NOT BE DENIED MERELY BECAUSE ASSESSEE HAD OMITTED T O CLAIM THE SAME. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIPS ARE QUOTED BELOW: 'THE JURISDICTION UNDER SECTION 154 OF THE INCOME-T AX ACT, 1961, TO RECTIFY MISTAKES IS WIDER THAN THAT PROVIDED IN ORDER XLVII, RULE 1, OF THE CODE OF CIVIL PROCEDURE, 1908. NONETHELESS, THERE MUST BE MATERIAL TO SUPPORT THE CLAIM FOR RELIEF UNDER SECTION 84 AND UNLESS SUCH MATERIAL CAN BE REFERRED TO, NO GRIEVAN CE CAN BE MADE IF THE ITO REFUSED RELIEF. AN OBLIGATION IS IMPOSED ON THE INCOME-TAX OFFICER BY SECTION 84 OF THE INCOME-TAX ACT, 1961, TO GRANT RELIEF THEREUNDER AND THE RELIEF CAN NOT BE REFUSED MERELY BECAUSE THE ASSESSEE HAD OMITTED TO CLAIM THE RELIEF, BUT THE M ERE EXISTENCE OF SUCH AN OBLIGATION ON THE INCOME-TAX OFFICER IS NOT SUFFICIENT. PRECIS E FACTUAL MATERIAL AND CLEAR DATA MUST BE CONTAINED IN THE RECORD SUFFICIENT TO ENABLE THE INCOME-TAX OFFICER TO CONSIDER WHETHER THE RELIEF SHOULD BE GRANTED UNDER SECTION 84. IN THE ABSENCE OF SUCH MATERIAL, NO FAULT CAN BE FOUND WITH THE INCOME-TAX OFFICER F OR NOT MAKING AN ORDER UNDER SECTION 84 FAVOURING THE ASSESSEE.' 8. IN VIEW OF ABOVE OBSERVATIONS, WE ARE OF THE VIEW THAT ASSESSEE WAS LEGALLY ENTITLED TO CLAIM DEPRECIATION IN THE RECTIFICATION PROCEEDI NGS UNDER SECTION 154. BUT THE CONTENTION OF THE DEPARTMENT IS THAT SUCH CLAIM CAN NOT BE ALLOWED IN VIEW OF SUPREME COURT JUDGMENT IN THE CASE OF MAHENDRA MILLS ( SUPRA ). IN THAT CASE, THE ASSESSEE DID NOT CLAIM DEPRECIATION FOR ASSESSMENT YEAR 1974-75 IN THE RETURN BUT THE INCOME-TAX OFFICER ALLOWED THE SAME. THE CONTENTION OF ASSESSE E THAT RIGHT TO CLAIM DEPRECIATION WAS OPTIONAL WAS REJECTED BY ASSESSING OFFICER. THE CIT(A) ALLOWED THE APPEAL OF ASSESSEE AND THE TRIBUNAL AFFIRMED THE ORDER OF CIT (A). THE FOLLOWING QUESTION WAS REFERRED TO THE HONBLE HIGH COURT:- 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN COMING TO THE CONCLUSION THAT THE INCOME-TAX OFFICE R COULD NOT GRANT DEPRECIATION ALLOWANCE TO THE ASSESSEE UNDER THE INCOME-TAX ACT, 1961, WHEN THE SAME WAS NOT CLAIMED BY THE ASSESSEE?' THE HIGH COURT ANSWERED THE QUESTION IN FAVOUR OF T HE ASSESSEE. ON APPEAL TO THE SUPREME COURT, IT WAS HELD THAT IN THE ABSENCE OF A NY CLAIM BY ASSESSEE, THE SAME COULD NOT BE FORCED UPON THE ASSESSEE. THEIR LORDSH IPS AT PAGE 78 OF THE REPORT OBSERVED AS UNDER: 12 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 'THE LANGUAGE OF THE PROVISIONS OF SECTIONS 32 & 34 OF THE INCOME-TAX ACT, 1961, IS SPECIFIC AND ADMITS OF NO AMBIGUITY. SECTION 32 ALL OWS DEPRECIATION AS DEDUCTION SUBJECT TO THE PROVISIONS OF SECTION 34. SECTION 34 PROVIDES THAT DEDUCTION UNDER SECTION 32 SHALL BE ALLOWED ONLY IF THE PRESCRIBED PARTICUL ARS HAVE BEEN FURNISHED. RULE 5AA OF THE INCOME-TAX RULES, 1962, SINCE DELETED, PROVIDED FOR THE PARTICULARS REQUIRED FOR THE PURPOSE OF DEDUCTION UNDER SECTION 32. EVEN IN THE ABSENCE OF RULE 5AA, THE RETURN OF INCOME IN THE FORM PRESCRIBED ITSELF REQUIRES PARTI CULARS TO BE FURNISHED IF THE ASSESSEE CLAIMS DEPRECIATION. THESE PARTICULARS ARE REQUIRED TO BE FURNISHED IN GREAT DETAIL. THERE IS A CIRCULAR OF THE BOARD DATED AUGUST 31, 1965, W HICH PROVIDES THAT DEPRECIATION COULD NOT BE ALLOWED WHERE THE REQUIRED PARTICULARS HAVE NOT BEEN FURNISHED BY THE ASSESSEE AND NO CLAIM FOR THE DEPRECIATION HAS BEEN MADE IN THE RETURN. THE INCOME-TAX OFFICER IN SUCH A CASE IS REQUIRED TO COMPUTE THE INCOME WI THOUT ALLOWING DEPRECIATION ALLOWANCE. THE CIRCULAR OF THE BOARD DATED APRIL 11, 1955, IM POSES MERELY A DUTY ON THE OFFICERS OF THE DEPARTMENT TO ASSIST THE TAXPAYERS IN EVERY REASONABLE WAY, PARTICULARLY, IN THE MATTER OF CLAIMING AND SECURING RELIEF. THE OFFICER IS REQUIRED TO DO NO MORE THAN TO ADVISE THE ASSESSEE. IT DOES NOT PLACE ANY MANDA TORY DUTY ON THE OFFICER TO ALLOW DEPRECIATION IF THE ASSESSEE DOES NOT WANT TO CLAIM THAT. THE PROVISION FOR CLAIM OF DEPRECIATION IS CERTAINLY FOR THE BENEFIT OF THE AS SESSEE. IF HE DOES NOT WISH TO AVAIL OF THAT BENEFIT FOR SOME REASON, THE BENEFIT CANNOT BE FORCED UPON HIM. IT IS FOR THE ASSESSEE TO SEE IF THE CLAIM OF DEPRECIATION IS TO HIS ADVANTAGE.' [EMPHASIS SUPPLIED] 9.1 THERE APPEARS TO BE SOME CONFLICT BETWEEN THESE TW O JUDGMENTS INASMUCH AS IN FORMER CASE IT WAS HELD THAT AN OBLIGATION IS IMPOS ED ON THE INCOME-TAX OFFICER TO GRANT RELIEF IF ALL FACTUAL MATERIAL IS AVAILABLE ON RECO RD WHILE IN LATTER CASE, IT HAS BEEN HELD THAT THERE IS NO MANDATORY DUTY ON THE OFFICER TO A LLOW THE DEPRECIATION IN THE ABSENCE OF ASSESSEES CLAIM. BOTH THESE JUDGMENTS WERE DELIVER ED BY BENCH OF TWO JUDGES AND THE JUDGMENT IN THE FORMER CASE WAS NOT BROUGHT TO THE NOTICE OF THEIR LORDSHIPS IN THE LATTER CASE. AT THIS STAGE, IT WOULD BE APPROPRIATE TO REFER TO THE JUDGMENT OF THE APEX COURT DELIVERED BY BENCH OF THREE JUDGES IN THE CAS E OF SUN ENGG. WORKS (P.) LTD. ( SUPRA ) WHEREIN IT WAS HELD THAT JUDGMENT OF A COURT HAS TO BE UNDERSTOOD IN THE CONTEXT IN WHICH IT WAS CONSIDERED. THE RELEVANT OBSERVATIO NS OF THEIR LORDSHIPS ARE QUOTED BELOW : 'IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK OU T A WORD OR A SENTENCE FROM THE JUDGMENT OF THE SUPREME COURT DIVORCED FROM THE CON TEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW D ECLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM T HE JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUESTIONS WHICH WERE BEFORE THE COURT. A DECISION OF THE SUPREME COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND, WHILE APPLYING THE DECISION TO A LATTER CASE, COURTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LAID DOWN BY THE DECISION.' KEEPING IN MIND THE ABOVE OBSERVATIONS, LET US TRY TO UNDERSTAND WHETHER IN REALITY THERE IS ANY CONFLICT BETWEEN THE TWO JUDGMENTS REFERRED TO BY THE PARTIES. AFTER GOING THROUGH BOTH THE JUDGMENTS MINUTELY, WE ARE OF THE VIEW THA T BOTH THE JUDGMENTS HOLD THE DIFFERENT FIELDS AND CANNOT BE SAID TO BE IN REAL C ONFLICT WITH EACH OTHER. IN THE FORMER CASE, THE COURT WAS CONCERNED WITH THE QUESTION WHE THER THERE WAS ANY MISTAKE APPARENT FROM RECORD UNDER SECTION 154 IN DENYING R ELIEF TO ASSESSEE UNDER SECTION 84 WHERE ASSESSEE OMITS TO CLAIM THE SAME. IT IS IN TH IS CONTEXT, THEIR LORDSHIPS HELD THAT JURISDICTION OF INCOME-TAX OFFICER UNDER SECTION 15 4 IS MUCH WIDER THAN THAT PROVIDED IN 13 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 ORDER XLVII RULE 1 OF CIVIL PROCEDURE CODE. CONSIDE RING SUCH SCOPE OF SECTION 154, IT WAS HELD THAT IF ON THE BASIS OF FACTUAL EVIDENCE O N RECORD, THE ASSESSEE IS ENTITLED TO CLAIM A RELIEF, THEN RELIEF CANNOT BE DENIED WHERE ASSESSEE OMITTED TO CLAIM THE SAME. IMPLIEDLY, IT WAS HELD THAT OMISSION ON THE PART OF ASSESSEE TO CLAIM ANY RELIEF CONSTITUTED MISTAKE APPARENT FROM RECORD. 9.2 ON THE OTHER HAND, IN THE LATTER CASE, THE COURT W AS NOT CONCERNED WITH THE ISSUE OF MISTAKE APPARENT FROM RECORD UNDER SECTION 154. T HE QUESTION BEFORE THE COURT WAS WHETHER THE INCOME-TAX OFFICER COULD THRUST UPON TH E ASSESSEE ANY RELIEF WHICH ASSESSEE DID NOT INTEND TO AVAIL OF. IT IS IN THE C ONTEXT OF SUCH QUESTION, IT WAS HELD THAT THE OFFICER WAS NOT UNDER OBLIGATION TO ALLOW THE S AME WHERE ASSESSEE DID NOT WANT TO AVAIL OF SUCH DEDUCTION. FURTHER, THEIR LORDSHIPS W ERE CONSIDERING THE PROVISIONS OF SECTION 32(1) AS EXISTED IN 1974-75. SUCH PROVISION S WERE SUBJECT TO THE PROVISIONS OF SECTION 34 WHICH PROVIDED THE FURNISHING OF PRESCRI BED PARTICULARS FOR CLAIMING SUCH DEDUCTION. THEIR LORDSHIPS ALSO CONSIDERED A CIRCUL AR WHICH PROVIDED THAT WITHOUT FURNISHING OF SUCH PARTICULARS, DEDUCTION UNDER SEC TION 32 COULD NOT BE ALLOWED. IN VIEW OF SUCH PROVI-SIONS AND CIRCULAR, THEIR LORDSHIPS O BSERVED 'THE INCOME-TAX OFFICER IN SUCH CASES IS REQUIRED TO COMPUTE THE INCOME WITHOU T ALLOWING DEPRECIA- TION ALLOWANCE.' [EMPHASIS SUPPLIED] AFTER MAKING SUCH OBSERVATIONS , THEIR LORDSHIPS CLARIFIED ANOTHER CIRCULAR DATED 11-4-1955 AND SAID THAT ROLE OF ITO WAS ADVISORY AND THERE WAS NO MANDATORY DUTY TO ALLOW THE CLAIM IF T HE ASSESSEE DOES NOT WANT TO CLAIM. SO THE ENTIRE CONTEXT WAS WITH REGARD TO THE PROVIS IONS OF SECTION 32 AS THEN EXISTED WHICH PROVIDED ALLOWANCE AND DEPRECIATION SUBJECT T O FURNISHING OF PRESCRIBED PARTICU- LARS. IT IS IN THIS CONTEXT, DECISION WAS RENDERED THAT IF ASSESSEE DID NOT AVAIL THE DEDUCTION BY NOT FURNISHING THE PARTICULARS THEN IT O WAS NOT BOUND TO ALLOW THE SAME. SO, IT WAS A CASE WHERE ASSESSEE DELIBERATELY DID N OT AVAIL THE DEDUCTION. 9.3 IN VIEW OF ABOVE DISCUSSIONS, WE ARE OF THE VIEW T HAT THE LATTER DECISION WOULD BE INAPPLICABLE WHERE QUESTION REGARDING JURISDICTION UNDER SECTION 154 IS RAISED. IN THE PRESENT CASE, WE ARE CONCERNED WITH THE ISSUE OF JU RISDICTION UNDER SECTION 154 WHICH HAS BEEN CONSIDERED BY APEX COURT IN THE FORMER CAS E. JURISDICTION UNDER SECTION 154 CAN BE ASSUMED IF THERE IS MISTAKE APPARENT FROM RE CORD. IT IS IMMATERIAL AS TO WHOSE MISTAKE IT IS. IF ON THE BASIS OF MATERIAL ON RECOR D, ASSESSEE IS ENTITLED TO RELIEF THEN IT WOULD CONSTITUTE MISTAKE APPARENT FROM RECORD AND C ONSEQUENTLY, SUCH RELIEF CANNOT BE DENIED MERELY BECAUSE THE ASSESSEE OMITTED TO CLAIM BY MISTAKE. THIS IS THE RATIO WHICH HAS BEEN LAID DOWN BY THE HONBLE SUPREME COU RT IN THE FORMER CASE. HENCE, THE PRESENT CASE WOULD BE GOVERNED BY THE RATIO LAID DO WN BY THE FORMER CASE, I.E., ANCHOR PRESSINGS (P.) LTD. ( SUPRA ). 4.7 SIMILARLY MUMBAI BENCH OF TRIBUNAL IN ASIA PACIFIC FUND INC. VS DCIT [SUPRA], HELD AS UNDER: - 4. WE FIND THAT THE MANDATE OF SECTION 143(1)(A) IS QUITE CLEAR AND UNAMBIGUOUS INASMUCH AS 'WHERE A RETURN HAS BEEN MADE UNDER SEC TION 139 , OR IN RESPONSE TO NOTICE UNDER SUB-SECTION (1) OF SECTION 142 ,...IF ANY REFUND IS DUE ON THE BASIS OF SUCH RETURN, IT SHALL BE GRANTED TO THE ASSESSEE... '. THE ONLY THING WHICH ENTITLES AN ASSESSEE TO REFUND OF EXCESS TAX DUE TO HIM IS SUCH A REFUND BEING DUE TO HIM' ON 14 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 THE BASIS OF SUCH A RETURN. NOW, THE QUESTION IS HO W THIS EXERCISE IS TO BE CARRIED OUT. IT PRESUPPOSES THAT THE AO HAS TO FIRST COMPUT E THE TAX PAYABLE BY THE ASSESSEE, AND IN CASE THE SUM SO ARRIVED AT IS IN E XCESS OF THE AGGREGATE OF PREPAID AND SELF-ASSESSMENT TAXES, THE EXCESS AMOUNT IS TO BE REFUNDED. THE TAX SO PAYABLE HAS TO BE WORKED OUT IN ACCORDANCE WITH THE LAW AS IN FORCE. IN THIS PROCESS, IT IS NOT OPEN TO THE REVENUE AUTHORITIES TO TAKE A DVANTAGE OF MISTAKES COMMITTED BY THE ASSESSEE OR TO DEPRIVE THE ASSESSEES OF A FA IR AND REASONABLE OPPORTUNITY, EVEN WHEN SPECIFICALLY PRAYED FOR, OF CORRECTING TH EIR INADVERTENT ERRORS. A TAX CANNOT BE LEVIED ON AN ASSESSEE AT A HIGHER RATE MERELY BE CAUSE THE ASSESSEE, UNDER A MISTAKEN BELIEF, OFFERED THE INCOME FOR TAXATION AT THAT RATE. IT CAN ONLY BE LEVIED WHEN IT IS AUTHORISED BY THE LAW, AS IS THE MANDATE OF ARTICLE 265 OF THE CONSTITUTION OF INDIA. A SENSE OF FAIRPLAY BY THE FIELD OFFICERS TOWARDS THE TAXPAYERS IS NOT AN ACT OF BENEVOLENCE BY THE FIELD OFFICERS, BUT IT IS THE MINIMUM CIVILIZED BEHAVIOUR THAT IS REQUIRED TO BE EXTENDED TO THE TAXPAYERS. IF AUTHOR ITY IS NEEDED EVEN FOR JUSTIFYING THIS BASIC CIVILIZED BEHAVIOUR TOWARDS THE TAXPAYER S, ONE NEED NOT LOOK BEYOND THE CIRCULARS ISSUED BY THE CBDT ITSELF. IN CIRCULAR NO . 14, WHICH HAS BEEN TAKEN NOTE OF BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF DATTATRAYA GOPAL BHOTTE V. CIT , THE BOARD HAS THESE WORDS OF ADVICE FOR THE FIELD OFFICERS : '...OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIES TO ASSI ST TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING ANY RELIEF AND IN THIS REGARD THE OFFICERS SHOULD TAKE INITIATIVE IN GUIDING THE TAXP AYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND O R RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD IN THE LONG RUN BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM T HE GOVERNMENT....' IT IS HEARTENING TO NOTE THAT THE CBDT HAS GIVEN SU CH HUMANE GUIDANCE TO THE FIELD OFFICERS. THE BEST THING THAT THE FIELD OFFICERS CA N DO TO ENHANCE THE RESPECT FOR AND TRUST IN THE DEPARTMENT, IS TO FOLLOW THESE VALUABL E WORDS OF ADVICE IN LETTER AND IN SPIRIT, BUT THEN, SOMETIME OVERZEALOUS, EVEN IF WEL L MEANING, EFFORTS TO COLLECT THE REVENUE END UP SACRIFICING THESE HUMANE NICETIES ON THE WAY, AND THUS DERAIL THE EFFORTS OF THE CBDT TO EARN TAXPAYER'S CONFIDENCE A ND TRUST. THAT MUST NOT BE ALLOWED TO HAPPEN. AN ACTION OR INACTION WHICH EROD ES ANY TAXPAYER'S FAITH, AND PARTICULARLY OF A NON-RESIDENT TAXPAYER'S FAITH WHI CH IS NOW SO IMPORTANT FOR ATTRACTING THE MUCH NEEDED FOREIGN INVESTMENT, IN INDIAN TAX A ND JUDICIAL SYSTEM DOES NOT DO ANY INDIAN ANY GOOD. THE WELL MEANING ADVICE GIVEN BY THE CBDT MUST BE IMPLEMENTED TO THE FULLEST EXTENT. AS TO WHAT IS BI NDING NATURE OF THIS ADVICE, WE MAY ONLY REFER TO SECTION 119 OF THE ACT AND HON'BLE SUPREME COURT'S JUDGMENT IN THE CASE OF UCO BANK V. CIT . HON'BLE SUPREME COURT HAS TIME AND AGAIN HELD TH AT THE CIRCULARS OF THE CBDT ARE LEGALLY BINDING ON THE RE VENUE AND THAT THIS BINDING CHARACTER ATTACHES TO THE CIRCULAR EVEN IF THEY BE FOUND NOT IN ACCORDANCE WITH THE CORRECT INTERPRETATION OF SECTION OR THEY DEPART OR DEVIATE FROM SUCH CONSTRUCTION. THE ADVICE CONTAINED IN THE CIRCULAR, WHICH IS REPR ODUCED ABOVE, IS ALSO LEGALLY BINDING ON ALL THE FIELD OFFICERS. 15 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 THE OTHER DECISIONS ALSO SUPPORT THE SAME VIEW. 4.8 SO FAR AS THE CONTENTION THAT THE INVESTMENTS W ERE LONG TERM IN NATURE AND THE RESULTANT GAINS THEREOF WERE EXEMPT UNDER CERTAIN CONDITIONS, WE FIND THAT THE SAME HAS ALSO BEEN DEA LT WITH BY DELHI TRIBUNAL IN SMT. ALKA AGARWAL V/S ADIT [15 TAXMANN.COM 176] IN THE FOLLOWING MANNER: - 6. A CUMULATIVE READING OF THE AFORESAID PROVISIONS, IN OUR MIND, MAKES IT CLEAR THAT AS FAR AS THE BENEFIT OF SECTION 10(38) IS CONCERNE D, THE ASSESSEE SHALL NOT BE ELIGIBLE FOR THIS BENEFIT AT THE FIRST STAGE OF CHA RGEABILITY OF CAPITAL GAINS BECAUSE THE DEEMED SALE IS THE POINT OF CONVERSION INTO STOCK-I N-TRADE WHICH HAD NOT SUFFERED STT. FURTHER, WITH REGARDS TO THE SECOND PART OF TH E TRANSACTION, THE ASSESSEE IS NOT ELIGIBLE FOR BENEFIT UNDER SECTION 10(38) BECAUSE T HE SECOND PART OF THE TRANSACTION IS PURELY A BUSINESS TRANSACTION AND PROVISIONS OF SECTION 10(38) ARE APPLICABLE ONLY IN TERMS OF LONG TERM CAPITAL ASSETS. IN OUR V IEW, THESE PROVISIONS SHOULD BE READ IN THIS MANNER AND THERE CAN BE NO CONFUSION O R TWO OPINIONS ABOUT THE SCHEME OF THE PROVISIONS OF CONVERSION OF CAPITAL A SSET INTO STOCK-IN-TRADE AS ALSO THE LIABILITY TOWARDS THE CAPITAL GAINS TAX ON SALE OF SHARES HELD AS CAPITAL ASSET WHICH HAS SUFFERED STT. NOWHERE ON THE DATE OF ACTU AL SALE, THE ASSESSEE WAS HOLDING THE IMPUGNED SECURITIES AS A PART OF CAPITA L ASSET. THEY HAVE ALREADY BECOME THE STOCK-IN-TRADE OF THE BUSINESS. SO, WE D O NOT AGREE WITH THE ASSESSEE AS REGARDS THE TOTAL EXEMPTION FROM CAPITAL GAINS T AX IN RESPECT OF THE CAPITAL ASSETS WHICH WERE CONVERTED INTO STOCK-IN-TRADE AS ON 1ST APRIL, 2005 MERELY BECAUSE ON THE DATE OF SALE SUCH STOCK-IN-TRADE THE ASSESSEE W AS REQUIRED TO PAY STT ON THEM. WE AGREE WITH THE DEPARTMENTAL STAND IN RESPECT OF THIS ISSUE AS WE DO NOT FIND ANY MERIT IN SUCH CONTENTIONS OF THE ASSESSEE. 4.9 IN THE BACKGROUND OF ABOVE FACTS AND CIRCUMSTAN CE, WE SET-ASIDE THE IMPUGNED ORDER AND DIRECT LD. AO TO CONSIDER TH E AFORESAID CLAIM U/S 154 AS URGED BY ASSESSEE BEFORE US. THE LD. AO IS DIRECTED TO ALLOW THE CARRY FORWARD OF THE LOSSES, IF FOUND ADMISSIBL E AS PER LAW, AFTER DUE VERIFICATION. THE ASSESSEE IS DIRECTED TO SUBSTANTI ATE THE SAME INCLUDING QUANTIFICATION THEREOF. 16 ITA NO.259/MUM/2018 M/S AUTO FINANCE ENTERPRISES ASSESSMENT YEAR 2010-11 5. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2019. SD/- SD/- (C.N.PRASAD) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 16/09/2019 SR. PS : JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. ! , ! , / DR, ITAT, MUMBAI 6. #$% / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.