BIRBAL KUMAR,HARYANA vs. ITO, HARYANA

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ITA 418/CHANDI/2026Status: DisposedITAT Chandigarh01 September 2026AY 2018-195 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was valid as the AO had specific information about escaped income. Following a coordinate bench decision, the Tribunal ruled that interest on enhanced compensation is taxable in the year of receipt, with a 50% deduction allowed under Section 57(iv).

What were the facts?

The assessee received interest of Rs. 1,00,14,606/- on enhanced compensation for agricultural land acquisition. The Assessing Officer (AO) added 50% of this interest to the assessee's total income, treating it as taxable under Section 56(2)(viii) of the Income Tax Act.

What were the issues?

The key issues were the taxability of interest on enhanced compensation for land acquisition and the validity of the assessment reopening.

Which sections of the Income-tax Act were involved?

Section 10(37),Section 56(2)(viii),Section 147,Section 57(iv),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH

Before: SHRI LALIET KUMAR & SHRI VIJAY VARMA

For Appellant: Shri Vibhor Garg, CA
For Respondent: Shri Vivek Vardhan, Addl. CIT Sr.DR
Hearing: 19.08.2026Pronounced: 01.09.2026

PER LALIET KUMAR, JM

This is an appeal filed by the assessee feeling aggrieved by the order passed by the ld. Commissioner of Income Tax (Appeals), NFAC [in short ‘the CIT (A)’] dated 24.01.2026 passed for assessment year 2018-19.

2.

The facts of the case are that the assessee is an individual and running a business of trading in timber under the name and style of M/s Sarpanch Timber. During the year under

ITA 418/CHD/2026 A.Y. 2018-19 2 consideration the assessee has earned income from business and income from other sources. During the assessment proceedings, it was noticed that the assessee has received interest of Rs.1,00,14,606/- on enhanced compensation from compulsory acquisition of agriculture land from Distt. Revenue Officer, Yamuna Nagar and the same has been claimed exempt in his revised return of income filed for A.Y. 2018-19. In response to the notices u/s 143(2) and 142(1) of the IT. Act, the assessee submitted his reply. The said submission of the assessee was examined in the light of provision of Section 10(37) of the IT. Act. The AO did not accept the submissions of the assessee and added 50% interest received of Rs.50,07,303/- (50%of Rs.1,00,14,606/-) on enhanced compensation to the total income of the assessee u/s 56(2)(viii) of the Income Tax Act.

3.

Aggrieved by the order of the AO dated 14.02.2021, the assessee went in appeal before the ld.CIT (Appeals). However, did not get any relief and the ld.CIT (Appeals) dismissed the appeal of the assessee vide order dated 24.01.2026 upholding the additions made by the Assessing Officer.

4.

The assessee is in further appeal before this Tribunal. The ld. counsel for the assessee submitted that the learned CIT(A) has wrongly and illegally upheld the addition of Rs.50,07,303/- treating the same as interest taxable u/s 56(2)(viii) of the Act and

ITA 418/CHD/2026 A.Y. 2018-19 3 has illegally ignored that the land acquired is not a capital asset in terms of Section 2(14) and there cannot be any sort of tax liability. The ld. counsel for the assessee further stated that the ld.CIT (Appeals) has wrongly upheld the interest levied u/s 234A, 234B and 234C of the Income Tax Act. The ld. counsel for the assessee has further submitted that the impugned appellate order is contrary to law and principles of natural justice.

5.

Before us, the AR reiterated the submissions made before the lower authorities and contended that interest received under section 28 of the Land Acquisition Act is part of compensation and partakes the character of a capital receipt. It was submitted that such receipt is exempt under section 10(37) of the Act and reliance was placed on various decisions of the Hon’ble Supreme Court including the case of Ghanshyam (HUF) and others. The Ld. AR further submitted that the reopening of the assessment was bad in law and liable to be quashed.

6.

On the other hand, the Ld. DR strongly supported the orders of the lower authorities and submitted that the issue is now squarely covered against the assessee by the decision of the Chandigarh Bench of the Tribunal in the case of Ajay Kumar & Others Vs. ITO in ITA No. 463/Chd/2023 and others dated 11.11.2025. It was contended that after insertion of section 56(2)(viii) and section 145A, interest on enhanced compensation is

ITA 418/CHD/2026 A.Y. 2018-19 4 taxable in the year of receipt and the Assessing Officer has rightly taxed 50% of such interest after allowing deduction under section 57(iv).

7.

We have heard the rival submissions and perused the material available on record. Insofar as the validity of reopening is concerned, we find that the Assessing Officer had received specific information regarding receipt of interest on enhanced compensation by the assessee which had not been offered to tax. This constituted tangible material leading to formation of belief that income had escaped assessment. Therefore, the reopening of assessment under section 147 is held to be valid.

8.

Coming to the issue on merits, we find that the controversy relating to taxability of interest received under section 28 of the Land Acquisition Act is no longer res integra. The Chandigarh Bench of the Tribunal in the case of Ajay Kumar & Others Vs. ITO (supra) has dealt with an identical issue and held that after the amendments brought by the Finance Act, 2009, interest on compensation or enhanced compensation is taxable under the head “Income from Other Sources” in the year of receipt and only 50% deduction is allowable under section 57(iv). The Tribunal in the said decision has also considered and distinguished the earlier judgments of the Hon’ble Supreme Court in light of the statutory amendments.

ITA 418/CHD/2026 A.Y. 2018-19 5 9. Since the facts of the present case are identical to those considered by the Coordinate Bench in the aforesaid decision, we respectfully follow the same and hold that the Assessing Officer has rightly taxed 50% of the interest received by the assessee. Accordingly, we find no infirmity in the order of the Ld. CIT(A) in confirming the addition made by the Assessing Officer.

10.

In the result, the appeal of the assessee is dismissed.

Order pronounced on 01st September,2026.

Sd/- Sd/-

(VIJAY VARMA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER “Poonam” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�/ CIT 3. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 4. गाड� फाईल/ Guard File 5.

Assistant Registrar Income Tax Appellate Tribunal Kendriya Sadan, Sector 9-A, Chandigarh.

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