Retrospective Supreme Court ruling and stock-in-trade valuation justify rectification and allowance of banking securities losses.

A subsequent Supreme Court declaration of law may operate retrospectively and reveal an error apparent from the record, justifying rectification under section 254(2). The Tribunal also reiterated that banking companies' shares and securities, though shown as investments in statutory balance sheets under the Banking Regulation Act, may still constitute stock-in-trade for income-tax purposes. Where the assessee has consistently valued such stock at cost or market value, whichever is lower, that method cannot be ignored in computing real income. The rectification application was allowed and the claimed valuation losses for the relevant assessment years were directed to be granted.

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Issues: Whether the Tribunal's earlier order suffered from a mistake apparent from the record in view of the subsequent Supreme Court , and whether the assessee-bank was entitled to valuation loss on securities treated as stock-in-trade for income-tax purposes.

Analysis: The Tribunal held that the earlier order had been founded on a High Court view which was later reversed by the Supreme Court. A subsequent declaration of law by the Supreme Court has retrospective operation and can expose an error apparent from the record for rectification under section 254(2). The Tribunal also noted that, although banking companies show shares and securities as investments in the statutory balance sheet under the Banking Regulation Act, they remain stock-in-trade for business purposes, and a consistently followed method of valuing such stock at cost or market value, whichever is lower, cannot be disregarded for tax computation of real income.

Conclusion: The rectification application was allowed, the earlier order was corrected on the issue of valuation of investments as stock-in-trade, and the Assessing Officer was directed to allow the claimed losses for the relevant assessment years.

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