(1.) THESE three appeals are preferred by the Revenue is against the common order passed by the Tribunal in respect of the three assessees setting aside the order passed by the Commissioner of Income -tax under section 263 of the Income -tax Act, 1961 (for short hereinafter referred to as "the Act") and grant relief to the assessees. The assessees in these three appeals are individuals. They are the legal heirs of one Mr. C.B. Devaiah. Mr. C.B. Devaiah owned the property which had been acquired by him prior to April 1, 1981. Mr. C.B. Devaiah died on April 23, 2000. His legal heirs sold the property owned by him during the previous year relevant to 2005 -06, i.e., on October 18, 2004. The three assessees as legal heirs were entitled to one -fifth share each over the property owned by Mr. C.B. Devaiah. They declared capital gains on sale of the property in their returns of income filed for the assessment year 2005 -06. In the computation of capital gains, they adopted the fair market value (FMV) of the property as on April 1, 1981, as the cost of acquisition of the property. The Revenue did not dispute this valuation. The assessees while computing their cost of acquisition also claimed indexation on fair market value as on April 1, 1981. The assessing authority while completing the assessment of the assessees, accepted the claim of the assessees in the order of assessment dated December 24, 2010, passed under section 143(3) of the Act allowing the benefit of indexation from April 1, 1981. The Commissioner of Income -tax exercising his power under section 263 of the Act was of the view that the Assessing Officer's order in the case of the assessees allowing the benefit of indexation from April 1, 1981, was erroneous and prejudicial to the interests of the Revenue because as per the Explanation (iii) to section 48 of the Act, "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessees or for the year beginning on the 1st day of April, 1981, whichever is later. According to the appellate authority, the assets was held by the assessees only from April 23, 2000, when Mr. C.B. Devaiah died. Therefore, the benefit of indexation has to be allowed only from April 23, 2000, and not from April 1, 1981, as claimed by the assessees. Accordingly, the order passed by the assessing authority was revised and the assessing authority was directed to allow the indexation benefit from the financial year 2000 -01 only.
(2.) AGGRIEVED by the said order, the assessees preferred appeals to the Tribunal. The Tribunal, after hearing both the parties and relying on a judgment of the Bombay High Court in the case of CIT v. Manjula J. Shah reported in : [2013] 355 ITR 474 (Bom) : [2012] 68 DTR 269 (Bom) , held that the Commissioner was not justified in not following the decision of the hon'ble Bombay High Court, the ratio of the decision of the Bombay High Court rendered in the context of acquisition of property by way of gift will apply with greater force when property devolves by succession. The view taken by the assessing authority was correct and, therefore, the Commissioner of Income -tax was not justified in exercising his jurisdiction under section 263 of the Act and in interfering with the order passed by the assessing authority. Therefore, the appeal was allowed. The order of the appellate authority was set aside. The order of assessment was restored.
(3.) LEARNED counsel for the Revenue assailing the impugned order contends as is clear from Explanation (iii) to section 48, the indexed cost of acquisition is to be allowed for the first year in which the asset was held by the assessees or in the year beginning on the first day of April, 1981, whichever is later. Therefore, the Tribunal was not justified in interfering with the order passed by the Commissioner of Income -tax. In fact, the Revenue has preferred a special leave petition against the judgment of the Bombay High Court and it is pending consideration before the apex court and, therefore, he submits the order requires to be interfered with.