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आदेश/Order
The present appeal has been preferred by the assessee against the order dated 23.08.2018 of the Commissioner of Income Tax (Appeals)- 2, Chandigarh [hereinafter referred to as ‘CIT(A)’] agitating the levy of penalty u/s 271 (1)(c) of the Income Tax Act, 1961 (in short 'the Act').
The brief facts of the case are that the land in question of the assessee was acquired by the Government and in lieu of which the assessee received compensation. Later on, the compensation was enhanced. Along with enhanced compensation, the assessee also received interest on enhanced compensation. The said amount received - Shri Pal Singh, Chandigarh 2 by the assessee was deposited in the bank account of the assessee, whereupon, the assessee earned interest of Rs. 1,86,084/-. The assessee originally did not show this interest income in the return of income.
However, later on, the case of the assessee was selected for scrutiny assessment proceedings, during which, it was found that the assessee had received the aforesaid interest on enhanced compensation as well as interest from saving bank account. On being asked to explain in this respect, the assessee surrendered the aforesaid interest on enhanced compensation as interest received u/s 34 of the Land Acquisition Act and claimed 50% deduction thereupon. So far as the interest from Saving Bank account was concerned, the assessee offered the same for taxation. The assessee duly paid the taxes thereupon. However, the Assessing Officer initiated penalty proceedings u/s 271 (1)(c) of the Act for concealment of income on the aforesaid interest income i.e. interest on enhanced compensation as well as interest on saving bank account.
The assessee pleaded that the assessee inadvertently and due to wrong advice of his tax consultant offered the said interest on enhanced compensation for taxation. However, as per the settled law since the said interest on enhanced compensation was to be treated as part of the compensation, hence, was not taxable, the land sold being agricultural land not falling in the definition of capital asset.
So far as the interest income of Rs. 1,86,084/- was concerned, the assessee submitted that if the interest on enhanced compensation is subtracted or to say is not considered as income, the only income that - Shri Pal Singh, Chandigarh 3 would remain is Rs. 1,86,084/-, which is below the taxable limit, hence, it is not a case of evasion of tax by way of concealment of income or furnishing of inaccurate particulars of income.
The Ld. DR, on the other hand, has submitted that the assessee had not offered the true picture of his income. He did not show in the return of income the aforesaid interest on enhanced compensation and interest on saving bank account. It was only because the case was selected for scrutiny assessment, that the above fact came to light. He, therefore, has submitted that it is a clear case of concealment of income.
I have heard the rival contentions of the Ld. Authorized Representatives of both the parties and have gone through the material available on record. A perusal of the impugned order of the Ld. CIT(A) reveals that the Ld. CIT(A) has specifically mentioned that the assessee had received the aforesaid interest as interest on enhanced compensation. It is settled that as per the law laid down by the Hon'ble Supreme Court in the cases of “CIT v Ghanshyam 'HUF' 315 ITR 1 (SC), ‘CIT vs Hari Singh and Ors’ in Civil appeal No. 15041 of 2017 vide order dated 15.9.2017 and also the decision of the Coordinate Chandigarh Bench of the Tribunal dated 17.7.2018 in ‘Som Nath v ITO’ of Land Acquisition Act, 1894 is part of enhanced value of the land and as such the same is not taxable as interest Income u/s 34 of the said Act. I, accordingly, find that the same being part of the compensation - Shri Pal Singh, Chandigarh 4 received, was not taxable. However, the assessee inadvertently may be due to wrong advice offered the same for taxation and also paid due taxes thereupon. Now to impose penalty in respect of an addition, which otherwise, as per the settled law was not warranted, if the assessee would have made the claim of being the same as tax exempt income during the assessment proceedings, in my view, is not justified at all.
It would amount to doubly punish the assessee for the offence which, in fact, has not been committed by him.
So far as the interest from saving bank account is concerned, the same is the only income left, but the total amount of the said income would below the taxable limit. In view of this, the levy of penalty in this case is not justified and the same is ordered to be deleted. However, it is made clear that findings given above will not have any operation or bearing to raise any dispute or to contest at this stage the validity of the addition or otherwise.
With the above observations, the appeal of the assessee is treated as allowed.
Order dictated and pronounced in the Open Court immediately on completion of hearing on 01.01.2020.