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Income Tax Appellate Tribunal, ‘A’ SMC BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN
आदेश /O R D E R
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -2, Madurai, dated 05.03.2019 and pertains to assessment year 2009-10.
No one appeared for the assessee inspite of issue of notice of hearing. Therefore, I heard the Ld. D.R. and proceeded to dispose the appeal on merit.
Shri K. Hari Govind, the Ld. Departmental Representative, submitted that the assessee inherited the property by way of will executed by his mother. According to the Ld. D.R., the assessee is having 1/5th share in the property. The assessee claims that his mother purchased the property in 1956 and constructed building thereon. The will was executed on 05.03.2007. The assessee’s mother expired on 02.05.2007. Therefore, according to the Ld. D.R., as per the sub-clause (iii) under Explanation to Section 48 of the Income-tax Act, 1961 (in short 'the Act'), the cost of the land to be adopted is when the assessee held the land for first time. Accordingly, the value as on 02.05.2007 was adopted for the purpose of computing capital gains. According to the Ld. D.R., the assessee has raised one more ground with regard to sale consideration for the purpose of computing capital gains under Section 50C of the Act. However, there is no discussion with regard to sale consideration in the assessment order as well as in the CIT(Appeals)’s order.
I heard the Ld. D.R. and perused the relevant material available on record. It is not in dispute that the assessee’s mother purchased the property in the year 1956 and executed a will on 05.03.2007. It is also not in dispute that the assessee’s mother expired on 02.05.2007. Therefore, the question arises for consideration is whether the market value has to be estimated for ascertaining the cost of acquisition as on 01.04.1981 or as on 02.05.2007 when the assessee’s mother expired and the assessee acquired right through will? This issue was examined by the Bombay High Court in CIT v. Manjula J. Shah (2013) 355 ITR 474.
The Bombay High Court found that the cost of acquisition of the original owner has to be taken into consideration. In other words, the cost of acquisition by the assessee’s mother has to be taken into consideration. Therefore, this Tribunal is of the considered opinion that the fair market value as on 01.04.1981 has to be estimated for the purpose of computing capital gain. This Tribunal is of the considered opinion that for the purpose of computing capital gain as on 01.04.1981, the Assessing Officer is expected to consider various factors such as the location of the property, area of the land, infrastructure facilities available around the land, access to public facilities such as road, etc., potential for future development, etc. apart from the guideline value of Registration Department and comparative sale instance at the relevant point of time in the locality. These factors were not taken into consideration.
Therefore, the matter needs to be re-examined by the Assessing Officer.
The CIT(Appeals) has dismissed the appeal without examining anything on merit. The CIT(Appeals) has simply observed that he proceeded to dispose the appeal on merit.
Disposal of appeal on merit means re-appreciating the material available on record, reconsideration of issues arise for consideration and recording the reasoning of the CIT(Appeals) for conclusion reached thereon by way of a speaking order. In this case, even though the CIT(Appeals) has referred that he will dispose the appeal on merit, he simply says that nothing on record to justify any of the grounds of appeal of the appellant. Other than this observation, he has not disposed anything on merit. Therefore, this is not a way of disposing appeal on merit.
6. This Tribunal is of the considered opinion that the CIT(Appeals) cannot disown his responsibility caused under the scheme of Income-tax Act. Under the scheme of Income-tax Act, the CIT(Appeals) has all the powers of the Assessing Officer, including the power to enhance the assessment. If the CIT(Appeals) simply dismisses the appeal without re-examining the material available on record, this Tribunal is of the considered opinion that it would amount to failure on the part of the CIT(Appeals) to exercise the statutory power conferred on him. The CIT(Appeals) is expected to call for records from the Assessing Officer and re-appreciate the same. The application of mind to material available on record shall be reflected in the appellate order.
Therefore, observation by the CIT(Appeals) that he is proceeding to dispose the appeal on merit does not in any way amount to disposal of appeal on merit. Since the facts need to be examined, this Tribunal is of the considered opinion that the matter needs to be re- examined by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue and estimate the cost of acquisition as on 01.04.1981 after taking all the factors which were referred above into consideration and also considering applicability of Section 50C of the Act and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the court on 2nd August, 2019 at Chennai.