BALKAR SINGH,HARYANA vs. INCOME TAX OFFICER WARD-1, SIRSA, HARYANA

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ITA 1545/CHANDI/2026Status: DisposedITAT Chandigarh14 August 2026AY 2013-145 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the reopening of assessment was valid as there was tangible material indicating escaped income. Following a coordinate bench decision, the Tribunal ruled that interest on enhanced compensation is taxable under 'Income from Other Sources' with a 50% deduction, as per statutory amendments.

What were the facts?

The assessee appealed against the CIT(A)'s order for AY 2013-14, which upheld the addition of interest on enhanced compensation. The AO had reopened the assessment and taxed 50% of the interest received under 'Income from Other Sources' after statutory amendments.

What were the issues?

The key issues were the validity of reassessment proceedings and the taxability of interest received on enhanced compensation, particularly in light of statutory amendments and previous judicial precedents.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 56(2)(viii),Section 145B,Section 57(iv),Section 10(37),Section 250

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “बी” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE �ी लिलत कुमार, �ाियक सद� एवं �ी िवजय वमा� , लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIJAY VARMA, AM आयकर अपील सं./ ITA No. 1545/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2013-14 Balkar Singh बनाम The ITO H.No. 13/1189, Near Huda Chowk Ward-1, Sirsa Sirsa, Haryana- 125055 �ायी लेखा सं./PAN NO: AINPD5343C अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A and Shri Harithik Singla, C.A राज� की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 06/08/2026 उदघोषणा की तारीख/Date of Pronouncement : 14/08/2026 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 19/02/2026 for the Assessment Year 2013-14.

2.

At the outset, the Registry pointed out that there is a delay of 40 days in filing the present appeal. In response, an application seeking condonation of delay was filed by the Ld. Counsel for the Assessee, which has been taken on record.

3.

The Ld. DR opposed the application for condonation of delay. 4. We have heard both the parties and perused the application seeking condonation of delay placed on record. Upon consideration of the facts and circumstances of the case, and the reasons explained therein, I am satisfied that the assessee was prevented by sufficient and reasonable cause from filing the appeal within the prescribed period of limitation. Accordingly, the delay of 40 day in filing the appeal is condoned, and the appeal is admitted for adjudication.

5.

In the present case assessee has raised the following grounds:

1.

That on facts, circumstances and legal position of the case, the Worthy CIT(A) in Appeal No. NFAC/2012-13/10145843 has erred in passing the order dtd. 19.02.2026 in contravention of the provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as 'Act'). 2. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in upholding the validity of reassessment proceedings initiated u/s 148 r.w.s. 147 even when the initiation itself was void-ab-initio and more-so when the approval granted by the Pr. CIT was mechanical, without proper application of mind, thereby rendering the reassessment proceedings void ab initio. 3. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the addition of Rs. 18,60,610/ made by the Ld. AO on account of interest received on enhanced compensation, by wrongly treating the same as taxable income under the head "Income from Other Sources" u/s 56(2)(viii), ignoring the following: i. that the interest received u/s 28 of the Land Acquisition Act, 1894 is in the nature of compensation and forms part of the enhanced compensation, thus being a capital receipt; ii. that such receipt is not taxable as income from other sources and is eligible for exemption u/s 10(37) of the Act in case of compulsory acquisition of agricultural land; iii. that the reliance placed by the appellant on binding judicial precedents including the decision of Hon'ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) and Union of India vs. Hari Singh has been wrongly disregarded; and iv. that the provisions of section 56(2) (viii) and section 145B has been incorrectly applied to the facts of the present case v. that the interest received was intrinsically linked to compensation on compulsory acquisition of agricultural land and thus partakes the character of capital receipt. 4. That on facts, circumstances and legal position of the case, the order passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed in extreme haste and without providing reasonable opportunity of being heard to the appellant. 5. That the appellant craves leave for addition, deletion and/or amendment in the grounds of appeal on or before the disposal of the same. 6. The assessee, Balkar Singh Dhariwal, an individual resident, did not file an original return of income for A.Y. 2013-14. Based on system-generated information regarding receipt of interest amounting to Rs. 37,21,220/- from the

Land Acquisition Department, Hisar, the AO reopened the assessment under Section 147 after obtaining Pr. CIT approval and issued a notice under Section 148. In response, the assessee filed a return declaring a taxable income of Rs. 5,13,330/- while claiming the entire interest of Rs. 37,21,220/- as exempt under Schedule EI, treating interest under Section 28 of the Land Acquisition Act, 1894 as a non-taxable capital receipt. The AO rejected this claim, holding that pursuant to post-2009 statutory amendments introducing Sections 145B(1) and 56(2)(viii), interest on enhanced compensation is deeming taxable income under "Income from Other Sources" in the year of receipt. Allowing a 50% statutory deduction under Section 57(iv), the AO added Rs. 18,60,610/- to the total income, assessing it at Rs. 23,73,940/-.

7.

Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) condoned an 8-day delay and confirmed the assessment. The Ld. CIT(A) held that the reopening under Section 147 was valid as the Ld. Pr. CIT granted approval after due examination of material, negating claims of mechanical sanction. On merits, the Ld. CIT(A) affirmed that under Section 56(2)(viii) read with Section 57(iv), interest on compensation is specifically taxable under "Income from Other Sources" subject to a 50% standard deduction. The Ld. CIT(A) distinguished pre- amendment precedents like CIT v. Ghanshyam (HUF) and Union of India v. Hari Singh, holding that statutory amendments override these rulings and that Section 10(37) does not exempt interest income, thereby dismissing the appeal.

8.

Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.

9.

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.

10.

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 taxable in the year of receipt and the Assessing Officer has rightly taxed 50% of such interest after allowing deduction under section 57(iv).

11.

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.

11.1 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.

11.2 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.

12.

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

Order pronounced on 14/08/2026 Sd/- Sd/- िवजय वमा� लिलत कुमार (VIJAY VARMA) (LALIET KUMAR) लेखा सद�/ ACCOUNTANT MEMBER �ाियक सद� /JUDICIAL MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

BY ORDER, ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A CHANDIGARH

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