HIS HIGHNESS SIR RAMA VARMA Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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M. Fatima Beebi, Judicial Member -
(1.) THIS miscellaneous petition is filed by the assessee under Section 254(2) of the Income-tax Act, 1961 ('the Act'), seeking amendment of the order of the Tribunal dated 21-3-1978 in IT Appeal No. 340 (Coch.) of 1976-77 for the assessment year 1971-72, by rectifying a mistake stated to be apparent from the records.
(2.) The short facts which form the background of this petition are these. The assessee sold his place known as 'Sundaravilasom Palace' on 27-3-1971 for Rs. 1,50,000. The value of this asset as on 31-3-1971 was shown in the wealth-tax assessment as Rs. 3,93,000. The ITO invoked Section 52(2) of the Act, on the basis that the fair market value of the property as on the date of transfer exceeded by more than 15 per cent of the full value of the consideration declared by the assessee and levied tax on capital gains substituting the full value of the consideration as Rs. 3,93,000. The contention of the assessee was that Section 52(2) has no application to the case when the declared consideration is the real consideration. The ITO had never disputed the fact that there had been no understatement of consideration. He held that the fair market value exceeded by more than 15 per cent of the consideration declared and, therefore, Section 52(2) applied. The AAC allowed the appeal filed by the assessee against the levy of such capital gains tax, holding that the market value of the property is the consideration declared by the assessee. In further appeal by the revenue, the Tribunal fixed the fair market value at Rs. 3,00,000 and held that Section 52(2) is attracted. The Tribunal negatived the contention of the assessee that Section 52(2) cannot be applied. The Tribunal upheld the levy, applying the decision of the Kerala High Court in ITO v. K.P. Varghese  91 ITR 49 (FB). Subsequently, the Supreme Court in K.P. Varghese v. ITO  131 ITR 597 reversed the Kerala High Court's view and held that Section 52(2) has no application in the case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, that Section 52(2) can be invoked only where the consideration for the transfer of a capital asset has been understated by the assessee or, in other words, the full value of the consideration in respect of the transfer is shown at a lesser figure than that actually received by the assessee, and the burden of proving such understatement or concealment is on the revenue.
The assessee, therefore, claims that the order of the Tribunal is contrary to the true legal position and the effect of the decision of the Supreme Court is to render the order bad in law and the error of law apparent from the records is to be rectified by dismissing the departmental appeal. It is contended for the revenue that there is no mistake apparent from the record because at the time of passing the order it was a good order in conformity with the law as settled by the Kerala High Court in Varghese (supra) and the Supreme Court had not then declared that Section 52(2) is inapplicable in such cases and it is only thereafter the Supreme Court declared so. The mistake discovered as a result of the subsequent judgment of the Supreme Court, it is argued, cannot be a mistake apparent from the record.
(3.) SECTION 254(2) empowers the Tribunal to rectify any mistake in its order provided the mistake is apparent from the record. The provision is analogous to that in the corresponding SECTION 154 relating to an assessment order. The mistake apparent from the record within the meaning of SECTION 254(2) is not only a mistake of fact but a mistake of law as well.;
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