The Tax Publishers2012 TaxPub(DT) 1905 (All-HC) : (2012) 046 (I) ITCL 0607 : (2012) 346 ITR 0543 : (2012) 249 CTR 0051 : (2012) 069 DTR 0122

INCOME TAX ACT, 1961

--Capital gains--Cost of acquisitionClaim for benefit of proviso to section 112(1) raised before first appellate authority--During the assessment year under consideration, assessee had sold 16,000 equity shares of M/s V Ltd. on 15-9-2000 for a consideration of Rs. 14,91,320 which was purchased for Rs. 88,168 on 3-7-1999. The sales resulted in long-term capital gain of Rs. 12,34,006. At the rate of 20 per cent, which was shown by assessee on the basis of indexation, assessing officer accepted long-term capital gain and passed assessment order on 25-3-2004. However, being aggrieved, assessee had filed an appeal before the first appellate authority, where a legal ground was raised that the long-term capital gain will have to be computed @ 10 per cent as per the proviso of section 112(1). Assessee also submitted an application dated 4-4-2005 under rule 46A(1)(c)/(d) of the IT Rules to this effect. Finally, the first appellate authority had accepted the plea of assessee and directed assessing officer to compute the long-term capital gain @ 10 per cent in accordance with Circular No. 14 (XL-35) dated 11-4-1955 read with proviso to section 112(1). Not being satisfied, the Department had filed an appeal before the Tribunal, who observed in its impugned order that the assessee had shown the long-term capital gain @ 20 per cent. Assessee had not filed any revised return, so assessee cannot raise the ground before the first appellate authority. Held: Needless to mention that proviso of section 112(1) was introduced with effect from 1-4-2000 by the Finance Act, 1999. In other words, it was introduced during the assessment year under consideration and assessee was not aware about latest amendment introduced by the Finance Act, 1999 with effect from 1-4-2000. Though ignorance of law has no excuse, but it can be excused in tax matter as per the ratio laid down in the case of P.V. Devossy v. CIT (1972) 84 ITR 502 (Ker) : 1972 TaxPub(DT) 269 (Ker-HC) . It is not expected that the Department shall take the advantage of assessee's ignorance as per CBDT Circular No. 14 (XL-35) 1955, dated 11-4-1955.

Needless to mention that proviso of section 112(1) was introduced with effect from 1-4-2000 by the Finance Act, 1999. In other words, it was introduced during the assessment year under consideration and assessee was not aware about latest amendment introduced by the Finance Act, 1999 with effect from 1-4-2000. Though ignorance of law has no excuse, but it can be excused in tax matter as per the ratio laid down in the case of P.V. Devossy v. CIT (1972) 84 ITR 502 (Ker) : 1972 TaxPub(DT) 0269 (Ker-HC). It is not expected that the Department shall take the advantage of assessee's ignorance as per CBDT Circular No. 14 (XL-35) 1955, dated 11-4-1955. Even under the bona fide belief, the assessee has shown the long-term capital gain @ 20 per cent, but it was expected from the assessing officer to know the latest amendment. The mistake might have been corrected by passing an order under section 154. [Para 8] The assessee is entitled to raise the legal issue before the first appellate authority, which possessed co-terminus powers similar to the assessing officer as per ratio laid down by Supreme Court in the case of Jute Corporation of India Ltd. v. CIT (1991) 18 ITR 688 (SC) : 1950 TaxPub(DT) 0084 (Punj-HC) . Hence, Commissioner (Appeals) has rightly adjudicated the statutory right of the assessee and directed (Sic- the assessing officer) to allow the long-term capital gain @ 10 per cent. The justice must not only be done but seem to have been done as observed by Lord Hewart, C.J. in R. v. Susses Justices (1924) 1 KB 256. [Para 15] Therefore, the impugned order passed by the Tribunal is set aside and the order of the Commissioner (Appeals) is restored. [Para 16]

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