- (1.) THE writ petitioner No. 1 is a private limited company ('the company') and the writ petitioner No. 2 is a shareholder of the company. In this writ application, the writ petitioners have challenged an order dt. 30th Nov., 1994 passed under S. 264 of the IT Act, 1961 ('the Act') by the CIT, West Bengal-V, Calcutta affirming an order passed by the Asstt. CIT (Company's circle-9(1) Calcutta) under S. 154 of the Act relating to the asst. yr. 1990-91. On 31st Dec., 1990 the petitioners filed a return for the asst. yr. 1990-91 showing an income of Rs. 33,100 enclosing herewith the statutory audit as also tax audit under S. 44AB of the Act. An intimation was received under S. 143(1)(a) of the Act by the company where from it appears that the Asstt. CIT, Company circle 9(1) accepted the said return without making any adjustment. Subsequently thereafter the company received a notice issued under S. 142(1) of the Act by which the company was directed to furnish information and documents specified in the enclosure to the said orders. Accordingly to the company they duly complied with the said notice and produced all information and documents as required by the Asstt. CIT from time to time. It was brought to the notice of the Asstt. CIT, company circle of the fact that it was a tenant in respect of an office premises of the writ petitioners in New Delhi at 23A, Ansari Road, Darya Ganj, New Delhi since 1940-41 for which the company did not have to pay anything excepting the monthly rent of the said premises. In the previous year relevant for the asst. yr. 1990-91, the company surrendered the said tenancy right for which the company received a sum of Rs. 1,50,000 which they showed in the profit and loss appropriation account under the head 'Consideration money on surrender of tenancy right'. According to the company the said sum of Rs. 1,50,000 received by it was not taxable either an income or casual gains in view of several decisions referred to before the Asstt. CIT by the company by filling the letters. The matter was preferred to the Dy. CIT to seek his direction in the matter of addition of Rs. 1,50,000 under the head 'Other source'. It appears from the record that Dy. CIT, Range 9 directed the Asstt. CIT to treat the said sum of Rs. 1,50,000 as capital receipt and assessable to capital gains. On 23rd March, 1993 a notice was received from the Asstt. CIT directing the company to file an explantion regarding taxability of Rs. 1,50,000 as capital gains and also to produce other correct papers in support of the claim of the company that the said sum of Rs. 1,50,000 was not taxable. A reply to the show-cause notice was filed on 24th March, 1993 by the company wherein it was pointed out that the Supreme Court in Gasper vs. CIT held that the tax was not payable by the assessee although the Supreme Court for technical reasons dismissed the appeal of the assessee. Alternatively it was pointed out by the company in the said letter that since the company had invested the entire sum of Rs. 1,50,000 in acquiring another property by utilising Rs. 1,50,000 no capital gains would be leviable in view of S. 54 of the Act. However, subsequently an assessment order was received by the company on 26th March, 1995 passed by the Asstt. CIT under S. 143 (3)/144(9) wherefrom it appears that the Asstt. CIT computed the total income of the company at Rs. 3,570 and computed the profit under S. 150J of the Act at Rs. 33,105. From the said assessment order it would also appears that the Asstt. CIT accepted the submissions of the company on this question of taxability of Rs. 1,50,000 which was received by the company on surrender of tenancy right of the New Delhi Office. The order of assessment is annexed with the writ application and marked as enclosure 'E' to the same. The company thereafter received a notice purported to have been issued under S. 154, from which it appears that the Asstt. CIT alleged that the order under S. 143(3)/144 dt. 26th March, 1993 as referred to hereinabove required to be rectified as there was a mistake apparent from the record within the meaning of S. 154. It appears from the notice issued under S. 154 by the Asstt. CIT that the AO in passing the original assessment order charged the sum of Rs. 1,50,000 as was received by the writ petitioner company on surrender of the tenancy right under the head 'capital gains'. But he allowed exemption under s. 54. On that basis in the said notice the Asstt. CIT held that as the company was not entitled to claim exemption under S. 54 it was mistake apparent from the record. He, therefore, included the aforesaid sum of Rs. 1,50,000 under the head 'capital gains' and computed the total income at Rs.
(2.) ,957. On the basis of the above, the Asstt. CIT determined the tax payable by the company at Rs. 69,397 on which he levied interest under S. 234B and S. 234C of the Act and determined a sum of Rs. 1,08,678 as tax payable by the company. The company feeling aggrieved by this order passed under S. 154 preferred a revisional application before the CIT, West Bengal-V under S. 264. The CIT on 5th Dec., 1994 dismissed the said revisional application affirming the order passed by the Asstt. CIT under S. 154. Feeling aggrieved by the order of affirmance passed by the CIT this writ application has been moved. The learned counsel for the Revenue however, concedes, before me that since this case involved only a question of law, the matter can be disposed of with the available records and no affidavit-in-opposition is necessary to be filed on behalf of the Revenue. The learned counsel for the Revenue also prays before me that the writ application be disposed of without any direction of filling affidavits. In view of such stand being taken the writ petition is taken up for hearing. 2. I have heard the learned counsel for the parties. I have considered the materials on record. On consideration of the materials on record and after giving my anxious consideration to the submission made by the counsel for the parties. I am of the view that in the fact and circumstances of this case, the authorities below have acted illegally and with material irregularity in the exercise of their jurisdiction in passing the impugned orders. Reasons are as follows: In my view, under S. 154 it is now well-settled that a mistake apparent from the record must be an obvious mistake and patent mistake not something which can be established by a long drawn process of reasoning on points on which there may be a specifically two opinions. That is to say, the authority under S. 154 cannot have any jurisdiction of competence to rectify any order on points which are debatable. It appears from the record that all throughout the main grievance of the company was that the sum of Rs. 1,50,000 received by the writ petitioner on surrender of tenancy right at New Delhi was of a casual nature and it could not be treated as income as original said by the Asstt. CIT. It was admittedly the case of the company before the Asstt. CIT that the said sum of Rs. 1,50,000 was a capital receipt. Since the company did not acquire the said tenancy right on making any payment in view of the principles laid down by the Hon'ble Supreme Court in the case of CIT vs. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) : 5 Taxman 1 as also the various decisions on different High Courts, no capital gains can be charged. It also appears from the record and alternatively the company submitted that in view of S. 54 no capital gains tax can be levied on the said sum of Rs. 1,50,000. I have carefully perused the original assessment order. From the same it will be clear that the Asstt. CIT in making the assessment accepted all the aforesaid contentions of the company, and, therefore, it will be incorrect to say in the order under S. 154 and also in the order under S. 264 that no capital gain was charged in view of exemption under S. 54. It is now well settled by the decisions of the Supreme Court that charging section and the computation provisions together constitute an integrated code. When there is a case to which computation provisions cannot apply to all, it is evident that such a case was not intended to fall within the charging section. In this connection S. 45 of the Act may be referred. For the purpose of imposing the charge the legislature has indicated different provisions in order to complete the profits and gains under the head. All the transactions as mentioned in S. 45 must fall under the computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by S. 45 to be the subject-matter of the charge. When there is a case to which computation provisions cannot apply at all it is evident that such a case was not intended to fall within the charging section. The Supreme Court in (1) B.C. Srinivasa Setty's case (supra) held that the expression 'asset' is S. 45 contemplates that in the acquisition of 'asset' it is possible to invest cost. If there is any self-generated asset which does not cost it does not come within the Applying the aforesaid principle laid down by the Supreme Court in B.C. Srinivasa Setty's case (supra), various High Courts of India have held that there is no cost of acquisition of tenancy right. Consequently all the High Courts held that no capital gains can be charged on the money received on surrender of tenancy right as there was no cost of acquisition for tenancy. In view of the aforesaid decisions of the Supreme Court and also of the different High Court decisions it cannot be said to be a mistake at all in the original assessment order when the AO accepted the above submissions of the company. Even assuming that the alternative submissions of the company which was based on S. 54 was incorrect, the said point does not make any difference to the ultimate decision of the Asstt. CIT when he held in the assessment order that the capital gain does not attract in the case of the company. Therefore, in my view, the notice under S. 154 and the order passed thereunder by the Asstt. CIT and also the order passed by the CIT under S. 264 are on the face of it illegal and invalid and without jurisdiction. Even assuming that the alternative submission of the company on the applicability of S. 54 cannot be accepted even then I am of the view that the original assessment order by which the AO accepted the submission of the company as correct cannot be said to be a mistake apparent on the face of the record inasmuch as it is debatable points on which there may be two opinions. Even if there is any mistake in the lines under S. 54 in the original assessment order, the question as to whether the capital gains at all can be charged on the aforesaid sum of Rs. 1,50,000 on account of surrender of tenancy is itself a debatable points on which there may be two views. In view of the decision of the Supreme Court regarding the jurisdiction of the AO to issue a notice under S. 154, I am of the view that there is a debatable point on which there may be two different views, the AO respondent No. 2 had no competence or authority or jurisdiction either to issue the notice under S. 154 or to pass any order on the basis of such notice. There is another aspect of the matter for which interference of the writ Court is needed against the orders. Apart from the observations made hereinabove I find from the records that the Asstt. CIT passed the order under S. 154 without giving the writ petitioner a real opportunity of being heard. As a matter of fact he passed the order under S. 154 prior to the date fixed by him for showing cause and even before the petitioner had failed any reply to the show- cause notice. Therefore, it is apparent from a reading of the order of the AO under S. 154 that he had made up his mind to pass the order under S. 154 and the show-cause notice was nothing but a mere.... to make a show of complying with the requirement of natural justice. Let me now consider the order of the CIT passed under S. 264 which is also challenged in this writ application. It is on record that the CIT by disposing of the proceeding under S. 264, no personal hearing was given to its various representatives but directed the company to submit a written submission. It is on record that a written submission was filed by the company. I have carefully gone through the written submission filed by the company, before the CIT. However, from the order passed under S. 264 by the CIT it does not appear that he had dealt with or considered any of the points taken by the company in the petition of S. 264 as also those contained in the written submission. Therefore in my view, the order of the Act was passed in gross violation of the principle of natural justice and it must be held that the CIT in considering the petition under S. 264 filed by the company acted with close and biased mind and, therefore, the impugned order passed by him was patently illegal and bad. For the reasons aforesaid I held that the invocation of power conferred on the AO under s. 154 was not appropriate in the facts and circumstances of this case and in view of the observations made hereinabove. The impunged orders are set aside and other proceedings hereinabove and/or in pursuance thereof are hereby quashed. Accordingly, this writ application succeeds. There will be no order as to costs.;