Bombay H.C : This appeal assails the order of summary dismissal of the writ petition filed by the appellant. The assessment year with which we are concerned in this appeal is the asst. yr. 1975-76.

Counsel Appeared

Dr. Dilip Dwarkadas i/b by Malvi Ranchoddas & Co., for the Appellant : G.S. Jetly & Mrs. Manjula Singh, for the Respondent

S. P. BHARUCHA, J.:

This appeal assails the order of summary dismissal of the writ petition filed by the appellant. The assessment year with which we are concerned in this appeal is the asst. yr. 1975-76. The appellant owned immovable property at Marol and Parjapur in the registration sub-district of Bandra in Bombay. The appellant agreed to sell a part of this property (now called “the said land”) on 17th May, 1972. Clause 17 of the agreement for sale contained the appellant’s declaration that the said land was assessed to land Revenue as agricultural land. On 3rd Dec., 1972, the said land was conveyed to the ultimate purchaser thereof. For the purposes of his income-tax assessment, the appellant offered the capital gain made on the sale of the said land for taxation. On 22nd Sept., 1979, the order of assessment was passed and capital gains tax was levied on the capital gain made as aforesaid. Thereafter, the CIT, on appeal, ordered a recomputation and it was made.

At about this time, this Court held in Manubhai A. Sheth vs. N. D. Nirgudkar, ITO (1981) 22 CTR (Bom) 91 : (1981) 128 ITR 87 (Bom) : TC 20R.604, that capital gains tax could not be levied on a capital gain arising out of the sale of agricultural land. Accordingly. on 2nd Feb., 1981, an application was made by the appellant under the provisions of s. 264 of the IT Act, 1961, to the CIT to order the deletion from the said order of assessment of the levy of capital gains tax on the sale of the said land on the ground that it was agricultural land. On 27th Feb., 1981, the CIT rejected the application on the ground that he had no jurisdiction to do so because the said order of assessment had merged in the order of the CIT in the appeal therefrom and because there was no evidence of agricultural operations on the said land at the relevant time. The appellant did not then adopt any other proceeding in this behalf.

The Revenue now started proceedings for recovery of the tax as aforesaid. In Sept., 1983, an order was made attaching some of the appellant’s properties in this behalf.

On 15th Feb., 1983, when the recovery proceedings had been commenced, the appellant made an application under s. 154 for rectification of the said order of assessment by the deletion of the item of the said capital gains tax on the ground, raised once again, that the said land was agricultural land. On 23rd April, 1983, a letter was written to the ITO furnishing information in regard to the said land. On 11th May, 1983, the ITO rejected the application under s. 154. He came to the conclusion that under the provisions of s. 154 only a mistake apparent from the record could be rectified and this meant a glaring mistake which would shock the judicial conscience. That which required further evidence or fresh application of mind could not be rectified under s. 154. A perusal of the record revealed that the appellant had never claimed the said land to be agricultural land. In fact, the appellant had himself worked out, for the purpose of capital gains tax, what had to be assessed. Therefore, the issue as to whether the said land was agricultural or not required the appreciation of fresh evidence. Hence, there was no mistake apparent from the record which had crept into the assessment. The ITO also noticed that the said order of assessment had merged with the order of the CIT (A) and he said he was incompetent to pass an order under s. 154 in respect thereof.

The appellant then preferred an application under s. 264 in respect of the order of the ITO under s. 154. This application was rejected by an order dt., 30th Aug., 1983. It was held by the CIT that the application involved the review of the earlier order passed under s. 264 which could not be done. The CIT approved what the ITO had held, namely, that the question of rectification on facts did not arise.

The appellant by a writ petition assailed the said order of assessment, the order of the ITO rejecting his rectification application under s. 154 and the order of the CIT rejecting the application thereagainst made under s. 264. The petition, as we have mentioned, was summarily rejected by the learned single judge. No reasons for the rejection were stated.

We will proceed on the basis that if it had been the admitted position that the said land was agricultural land when it was conveyed, the order of assessment would have been capable of rectification under s. 154. It is not necessary to go into the judgments cited by Mr. Dwarkadas, learned counsel for the appellant, in this behalf.

Mr. Dwarkadas contended that the rectification application under s. 154 ought to have been granted because the record revealed that the said land was at the relevant time agricultural land. The record consisted of the valuation report which had been tendered by the appellant, his wealth-tax assessment orders for several years and the agreement for sale. The valuation report, though it is as of 1st Jan., 1954, described, according to Mr. Dwarkadas, the said ‘land as agricultural land at the time of its conveyance. Mr. Dwarkadas referred to the wealth-tax assessment orders of the appellant which, according to him, showed that the said land was agricultural land. In this behalf, Mr. Dwarkadas also relied upon cl. 17 of the agreement for sale, which we have adverted to.

Mr. Dwarkadas, while we were at this point of dictating the judgment, referred to a valuation report for the purpose of wealth-tax assessment as on 31st March, 1974, which showed the lands belonging to the appellant at the villages aforementioned to be agricultural lands. Mr. Dwarkadas fairly stated that this valuation report was not mentioned anywhere in the petition and, while the order of assessment spoke of a valuation report, he could not be certain that it was this valuation report which was referred to. In these circumstances, this valuation report must be ignored.

9. Mr. Dwarkadas referred to the judgment of the Supreme Court in Maharana Mills (P) Ltd. vs. ITO (1959) 36 ITR 350 (SC) : TC53R.275. It was there held that the power of rectification was limited to the rectification of mistakes which were apparent from the record. The mistake contemplated was not one which was to be discovered as a result of an argument.

It was open to the ITO to examine the record, including the evidence, and, if he discovered any mistake, he was entitled to rectify it. To the same effect is the judgment of the Supreme Court in Anchor Pressings (P) Ltd. vs. CIT (1986) 58 CTR (SC) 126 : (1986) 161 ITR 159 (SC) : TC53R.301.

Mr. Dwarkadas reterred to the judgments in the cases of Maharana Mills (P) Ltd. (supra) and Anchor Pressings (P) Ltd. (supra) in support of his submission that the wealth-tax assessment orders of the appellant formed part of the record before the ITO for the relevant assessment year. We will assume this and proceed to examine the material on the record.

10. The valuation report on record, it was argued, showed the said land to be agricultural land at the date of its conveyance. That is far from clear from a perusal of the valuation report which is made as of 1st Jan., 1964 There is, undoubtedly, the declaration of the appellant made in the agreement for sale that on that date, the said land was agricultural land. But it must be remembered that the agreement for sale was entered into about 2-1/2 years earlier to the relevant date which is the date of the conveyance. As against this, there is the order of the CIT (Appeals) which for the wealth-tax assessment of the appellant for the relevant assessment year denies relief on the plea that the said land was agricultural land. Mr. Dwarkadas said he does not read the order in that manner and so we reproduce what is said: “Having regard to these circumstances and factual evidence, it is contended that the WTO should have accepted the claim of the appellant that the lands in question are agricultural lands for the years under appeal. However, it is seen that the lands are situate within 8 kms. of the municipal limits. Hence this contention is rejected.”

It is crystal clear that the material upon the record does not unambiguously lead to the conclusion that the said land was agricultural land at the date of its conveyance. The ITO could not in the application for rectification under s. 154 have come to the conclusion that the said land was agricultural land without conducting an investigation into material not on the record. There was, therefore, no mistake apparent from the record. The order of the ITO in this behalf is unassailable.

The appellant carried this order of the ITO before the CIT under s. 264. The CIT was entirely correct in upholding the ITO’s findings. It must be noted here that he could not have exercised a power any wider than that conferred on the ITO under s. 154.

Mr. Dwarkadas pointed out that the said order of assessment was also impugned in this petition. It was passed as far back as 22nd July, 1979. There is, therefore, gross delay. Further, it was carried in appeal and the appellate order is not impugned in the petition.

After the judgment was dictated but before it was signed, an application, supported by an affidavit, was made by Mr. Dwarkadas asking that we should take into consideration an order passed in May, 1985, by the ITAT in relation to the assessments of the assessee to wealth-tax for the asst. yrs. 1972-73 to 1975-76. This order is said to reverse the finding of the CIT (A) for the year relevant to this appeal that the said land was not agricultural land. A reference to the dates shows that this order could not have been on the record of the ITO at the time he considered the appellant’s application for rectification. What is relevant is what in fact was then on the record by reference to which the ITO could find whether there was an error or not. We must, therefore, ignore this order.

In conclusion, therefore, the order of the learned single judge rejecting the writ petition in limine is upheld and the appeal is dismissed with costs.

Mr. Dwarkadas applies for a stay of this order for a period of eight weeks. Having regard to what we have set out, we see no reason to stay our order.

[Citation : 170 ITR 621]