KARTAR SINGH THROUGH LEGAL HEIR SATNAM SINGH,HARYANA vs. INCOME TAX OFFICER WARD-1, SIRSA, HARYANA

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ITA 1546/CHANDI/2026Status: DisposedITAT Chandigarh14 August 2026AY 2018-195 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 in the year of receipt, with a 50% deduction allowed.

What were the facts?

The assessee received interest of Rs. 70,02,050/- on enhanced compensation from compulsory acquisition of agricultural land, claiming it as exempt. The Assessing Officer taxed this interest under 'Income from Other Sources', allowing a 50% deduction.

What were the issues?

The key issues were the taxability of interest on enhanced compensation under the Land Acquisition Act and the validity of the assessment reopening.

Which sections of the Income-tax Act were involved?

Section 10(37),Section 56(2)(viii),Section 57,Section 143(2),Section 145B,Section 147,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. 1546/Chd/ 2026 िनधा�रण वष� / Assessment Year : 2018-19 Kartar Singh through legal heir बनाम The ITO Satnam Singh Ward-1, Sirsa House No. 11/1188, Hisar Road, Sirsa, Haryana-125055 �ायी लेखा सं./PAN NO: DLFPS7859G 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. 13/02/2026 for the Assessment Year 2018-19.

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 the facts, circumstances and legal position of the case, Worthy CIT(A), NFAC in Appeal No. NFAC/2017-18/10028605 has erred in passing order dtd. 13.02.2025 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as "Act"). 2. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in impliedly upholding the action of Ld. AO in assuming jurisdiction u/s 143(2) via notice which was not in the format prescribed under the Act and the Rules, thereby making the notice defective and void ab initio rendering the consequential assessment deserving to be quashed. 3. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in impliedly upholding the addition of Rs. 70,02,050/- received by the appellant on account of interest awarded u/s 28 of the Land Acquisition Act, 1894, as taxable income under the head "Income from Other Sources" u/s 56(2)(viii) of the Act. 4. That on facts, circumstances and legal position of the case, the Worthy CIT(A) failed to appreciate that the impugned receipt represents interest awarded u/s 28 of the Land Acquisition Act, 1894, which in law constitutes an accretion to compensation and hence forms part of enhanced compensation. 5. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in invoking provisions of s. 56(2) (viii) r.w.s. 145B, without appreciating that these provisions apply only to interest in the nature of s. 34 of the Land Acquisition Act, and not to interest u/s 28, which is in the nature of compensation itself. 6. That on the facts, circumstances and in law, the authorities below have erred in not allowing exemption u/s 10(37) consequentially available to the appellant in respect of compensation arising from compulsory acquisition of agricultural land. 7. 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 without affording reasonable opportunity of being heard to the appellant. 8. That the appellant craves for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same. 6. Briefly stated, the assessee filed his return of income for A.Y. 2018-19 declaring income of Rs.2,63,970/-. During the year, he received interest of

Rs.70,02,050/- on enhanced compensation arising from compulsory acquisition of agricultural land, which was claimed as exempt income. The case was selected for limited scrutiny to examine the said claim. The Assessing Officer held that interest on compensation/enhanced compensation was taxable under the head “Income from Other Sources” in terms of section 56(2)(viii) of the Act and that exemption under section 10(37) was not available in respect of such interest. Accordingly, the amount of Rs.70,02,050/- was brought to tax, while deduction of 50% amounting to Rs.35,01,025/- was allowed under section 57. The total income was consequently assessed at Rs.37,64,995/-.

7.

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). Before the Ld. CIT(A) the assessee contended that the interest was received under section 28 of the Land Acquisition Act, 1894 and formed part of enhanced compensation. The Ld. CIT(A), however, rejected the contention and held that, in view of section 56(2)(viii) read with section 145A(b) and section 57 of the Act, such interest was taxable as “Income from Other Sources” in the year of receipt. The addition made by the Assessing Officer was therefore sustained and the appeal of the assessee was dismissed.

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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