TaxTMI 
TaxTMI 
2010 (9) TMI 825
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.... Supreme Court judgment in the case of ITO v. B.C. Srinivasa Setty [1981] 21 CTR (SC) 138 : [1981] 128 1TR 294 (SC). 2. The CIT(A) has erred in not following the order of the High Court and failed to appreciate that the judgment of Supreme Court in the case of B.C. Srinivasa Setty (supra) applies to the appellant's case, since the appellant had not transferred the tenancy right but the ownership right in the premises, and also further failed to appreciate that the judgment of Bombay High Court, in the case of CIT v. Dr. D.A. Irani [1999] 151 CTR (Bom.) 288 : [1998] 234 ITR 850 (Bom.) is not applicable to the facts of the appellant's case." 2. As a perusal of the material before us show, and as agreed to by the learned counsel during the course of hearing, the grievance of the assessee is against the finding given by the CIT(A), in the course of proceedings remanded by the Hon'ble High Court, confirming the AO's action in including the capital gains on sale of certain premises, as was disclosed by the assessee himself in his IT return, in the taxable income as per impugned intimation under s. 143(l)(a). In other words, grievance of the assessee is t....
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....(a) is not maintainable, the matter travelled in appeal before a Co-ordinate Bench of this Tribunal. Our distinguished colleagues were of the view that "the scope of the appeal is limited to the adjustments made under s. 143(1)(a)". The assessee was, however, not satisfied with the stand so taken by the Tribunal, and carried the matter in appeal before the Hon'ble Bombay High Court. The substantial question of law, which was admitted for consideration by their Lordships, was as follows : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that no appeal lies against the order of intimation under s. 246 of the Act, and that the order under s. 143(1)(a) is limited to the adjustments made by the AO and the said adjustment does not include denial of tax liability by the assessee and that additional ground leading to tax liability of capital gain does not arise from the order of the CIT(A) ?" 5. Hon'ble Bombay High Court held [order is reported as Balmukund Acharya v. Dy. CIT [2009] 176 Taxman 316 (Bom.) that "in the case on hand, it was obligatory on the part of the AO to apply his mind to the facts disclosed in the return....
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.... market value of tenancy right as on 6th Dec., 1987, i.e., the date on which the assessee was given free premises by the developer, was the cost of acquisition in respect of the asset sold. In support of this conclusion, the CIT(A) relied upon Hon'ble Bombay High Court's judgment in the case of CIT v. Dr. D.A. Irani [1998] 234 ITR 850/[2000] 111 Taxman 600 (Bom.). For this short reason, the CIT(A) dismissed the appeal of the assessee. The assessee is aggrieved and is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 7. In the light of Hon'ble Bombay High Court's judgment, it is now free from doubt that not only an action of the AO, but also an inaction of the AO, can be appealed against. In case an AO fails to exercise the powers conferred upon him by the statute, when facts of the case warrant or justify the exercise of such powers, this inaction of the AO can also be called into question before an appellate authority. Every power granted to a public functionary comes with a corresponding duty to exercise such a power when circumstan....
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....(1)(a) lies in severe limitation of powers of the AO under this section. Any relief that he can grant, or the disallowance he can make, under this section must be solely on the basis of material on record. To that extent, i.e., "determination of liability as ascertainable from the return filed", this section has been held to be somewhat analogous to s. 154. In the case of Khatau Junkar Ltd. v. K.S. Pathania [1992] 196 ITR 55/61 Taxman 157 (Bom.), Hon'ble Bombay High Court explained the scope of these powers as follows : "In fact the wording of this provision itself makes this very clear. Under cl. (ii) of the proviso to s. 143(1)(a), any loss carried forward, deduction, allowance or relief has to be allowed on the basis of the information available in such return or accounts or documents accompanying it. Similarly, under cl. (iii) of the proviso, to disallow any deduction, allowance or relief claimed, such deduction, allowance or relief must be such as is, on the basis of the information available in the return, accounts or documents, prima facie inadmissible. The ITO, therefore, has no power to go beyond or behind the return, accounts or documents, either in allowing or in ....
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....e on the expenditure of money to a person seeking to acquire it. It is immaterial that although the asset belongs to such a class, it may, on the facts of a certain case, be acquired without the payment of money. That kind of case is covered by s. 49 and its cost, for the purpose of s. 48, is determined in accordance with those provisions. There are other provisions which indicate that s. 48 is concerned with an asset capable of acquisition at a cost. Sec. 50 is one such provision. So also is such sub-s. (2) of s. 55. None of the provisions pertaining to the head 'Capital gains' suggests that they include an asset in the acquisition of which no cost at all can be conceived." 10. In view of the above discussions, in our considered view, 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. As we have noted, during the analysis of AO's powers under s. 143(1)(a), only such adjustments could have been made by the AO as could have been conclusively held to be admissible on the basis of IT return and accompanying documents. The only suppor....