TMI Blog2010 (9) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... regular scrutiny assessment. The CIT(A) took a wrong path, though, for the reasons we will now set out, he reached the right conclusion anyway. Surrender of tenancy right - Taxability under the head capital gain where cost of acquisition is NIL - held that:- merely because an asset does not have a cost of acquisition, this fact per se cannot lead to the conclusion that the sale of such an asset will not lead to capital gains liable to be taxed. Capital gains on sale of premises - premises which was sold by the assessee had not cost the appellant anything in terms of money - Held that:- cost of acquisition may be 'nil' on the facts of a case but yet the cost of acquisition may have been incurred (such as by surrender of tenancy rights on the facts of this case) and it may be capable of being determined (market value of premises at the point of time when tenancy rights were surrendered), gains on sale of property, received on surrendering the tenancy rights, were taxable as capital gains in the hands of the assessee. The claim made by the assessee is ill conceived and devoid of any merits. We, therefore, approve the conclusions arrived at by the learned CIT(A) and decline to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts to that effect in the intimation processed under s. 143(1)(a), since the premises sold by the assessee did not have any cost of acquisition. It is thus against the inertia, and not the action of the AO that the matter is now in appeal before us. 3. Let us first take a look at the material facts of this case and the developments leading to this appeal before us. In the IT return for the asst. yr. 1996-97, filed by the assessee on 17th Sept., 1996, the assessee, inter alia, disclosed capital gains on the sale of property at ₹ 1,07,00,000. Vide intimation under s. 143(1)(a), the AO did accept the capital gains so returned to tax, and he also raised demand for interest under s. 234C, amounting to ₹ 1,87,352. Aggrieved by the said intimation under s. 143(1)(a), assessee carried the matter in appeal before the CIT(A). One of the grievances raised by the assessee was against levy of interest under s. 234C, but, interestingly, the assessee also raised a grievance that the AO accepting taxability of the capital gains on sale of property. This grievance was as follows : Dy. CIT erred in charging capital gains on the sale of premises of the appellant, and failed to appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the impugned order and restore the appeal to the file of the CIT(A) with directions to decide the same in accordance with the law . In coming to these conclusions, their Lordships also observed that the right to appeal should be construed in a practical, reasonable and liberal manner, that no tax can be levied without the authority of law, that if a particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel, that an appeal cannot be partly maintainable and partly non-maintainable as has been held in this case by the CIT(A) and the Tribunal, and that the authorities under the IT Act are under an obligation to act in accordance with the law. The matter was thus remitted to the file of the CIT(A). That is how the CIT(A) has come to be in seisin of the matter, and, in accordance with the directions of Hon'ble High Court, passed the impugned order. The CIT(A) proceeded to examine the taxability of capital gains on sale of premises on merits. The CIT(A) noted that the assessee's late father P.V. Acharya was sole proprietor of one Laxmi General Supply Co. (LGSC) which was a monthly tenant from 1952 in respect of ground floor t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime. On the same lines were the views of a Co-ordinate Bench of this Tribunal, in the case of Sabnis Ashok Anant v. Asstt. CIT [2008] 117 TTJ (Pune) 96/[2009] 29 SOT 29 (Pune)(URO) (Pune)(Trib.) 203, wherein the Tribunal, speaking through one of us (i.e., the AM) had observed thus : not only a mistake in the acts of an authority; even a wrongful inertia of a public authority is also a mistake apparent on record. All the powers of someone holding a public office are powers held in trust for the good of public at large. There is, therefore, no question of discretion to use or not to use these powers. It is for the reason that when a public authority has the power to do something, he has a corresponding duty to exercise these powers when circumstances so warrant or justify-a legal position which has the approval of Hon'ble Supreme Court. What follows is that merely because an assessee had offered something to tax, AO could not have declined to exercise his powers to give relief to the assessee by not taxing the same. It is in this perspective that the CIT(A) ought to have decided the appeal on merits, and the CIT(A) could not have rejected the same in limine. It was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 143(1)(a), could have held that the capital gains on sale of property ought not to have been included in the income liable to be taxed for that assessment year. The CIT(A) completely overlooked the limitations placed on the AO under s. 143(1)(a) and proceeded to decide the matter as if the AO had arrived at his impugned conclusion in a regular scrutiny assessment. The CIT(A) took a wrong path, though, for the reasons we will now set out, he reached the right conclusion anyway. 9. The statement of taxable income attached to the IT return showed the cost of acquisition as 'nil', but then can that fact by itself could have lead AO to conclude that the capital gains on sale of a property which has no cost of acquisition cannot lead to taxable capital gains ? We do not think so. In the case of B.C. Srinivasa Setty (supra) on which so much of reliance has been placed by the learned counsel, Hon'ble Supreme Court has held that when cost of an asset is incapable of being determined, the gains on sale of such assets cannot be brought to tax as capital gains. The key test is whether or not cost of the asset can be determined. Their Lordships also took note of the subtl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition, but then there is an important distinction between an asset not having cost of acquisition and an asset cost of acquisition of which cannot be determined. As Hon'ble Supreme Court has observed, the former could lead to taxable capital gains, the sale of latter cannot lead to taxable capital gains. On the basis of the fact that the asset did not have any cost of acquisition, the AO, for the purposes of prima facie adjustments under s. 143(1)(a), could not have come to the conclusion that the income on sale of such asset cannot lead to taxable capital gains. The plea of the assessee is thus devoid of legally sustainable merits, and we hold that the AO was justified in not excluding, in the course of processing under s. 143(1)(a), capital gains from taxable income. The CIT(A) was thus quite justified in dismissing the plea of the assessee. In any event, the scope of B.C Srinivasa Setty (supra) judgment is confined to the assets in respect of which cost of acquisition cannot be determined in the sense it is inherently impossible to determine such a cost. In the present case, the asset sold is a property which is given free of cost to the assessee on surrender ..... X X X X Extracts X X X X X X X X Extracts X X X X
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