TARA CHAND,SIRSA vs. INCOME TAX OFFICER, SIRSA

Invalid Re-assessment Proceedings

1 That the Ld. CIT(A) has erred in law and on facts in upholding the reassessment proceedings u/s 147, which are void ab initio, bad in law and without juri iction.

That the mandatory procedure laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. ITO (259 ITR 19) for disposal of objections to reopening was not followed, rendering the reassessment invalid.

Violation of Principle of Natural Justice

That the Ld. CIT(A) has erred in dismissing the appeal ex-parte for non- prosecution, without adjudicating the issues on merits, which is contrary to law.

That the Ld. CIT(A) failed to appreciate that dismissal of appeal for non- appearance is impermissible, and the appellate authority is duty-bound to decide the appeal on merits, as held in various judicial precedents.

Taxability of Interest on Enhanced Compensation

That the Ld. CIT(A) has erred in law and on facts in confirming the addition of Rs. 14,52,970/-, being 50% of interest received on enhanced compensation, treating the same as taxable u/s s6(2)(viii).

That the authorities below failed to appreciate that interest received u/s 28 of the Land Acquisition Act, L894 is part of enhanced compensation, being a capital receipt, as conclusively held by the Hon'ble Supreme Court in CIT v. Ghanshyam (HUF) [315 ITR 1].

Exemption u/s 10(37) Ignored

That the Ld. ClT(A) has erred in law in ignoring the claim of exemption u/s 10(37) of the Act, despite the fact that: the land was agricultural, the transfer was by compulsory acquisition, and compensation (including enhanced compensation and interest u/s 28)was received after 01/04/2004. 5. Misapplication of Section 56(2) (viii)

1 That the Ld. ClT(A) erred in law in holding that section s6(2)(viii) applies to interest u/s 28 of the Land Acquisition Act, ignoring the binding ratio of the Hon,ble Supreme court distinguishing interest u/s28 from interest u/s 34. 6. Mechanical Confirmation of AO's, Order

That the Ld. CIT(A) has passed a non-speaking and cryptic order; merely reproducing the findings of the Assessing Officer without independent application of mind.

Levy of Interest & Penalty

That the Ld. CIT(A) has erred in law in upholding levy of interest uls234A,2348 and 234D, which is consequential and unwarranted. 7 .2.fhat initiation of penalty proceedings u/s 271(1)(c) is bad in law and liable to be quashed.

General

That the appellant craves leave to add, alter, amend or withdraw any ground of appeal at or before the time of hearing.

Briefly, the facts of the case are that he assessee, Shri Tara Chand, filed his return of income for A.Y. 2013-14 on 23.02.2015 declaring total income of Rs.1,49,240/-. The assessee claimed exempt income of Rs.61,25,821/-, which included interest received on compensation/enhanced compensation amounting to Rs. 29,05,941/- arising from compulsory acquisition of land. The Assessing Officer formed a belief that income chargeable to tax had escaped assessment and accordingly initiated reassessment proceedings

1 The controversy related to taxability of interest received on enhanced compensation. The assessee contended that the interest received under section 28 of the Land Acquisition Act formed part of enhanced compensation and was exempt under section 10(37) of the Income-tax Act in view of the judgment of the Hon'ble Supreme Court in CIT v. Ghanshyam (HUF).

2 The Assessing Officer considered the assessee's reply but rejected the same. The AO held that after the amendments introduced by the Finance Act, 2009 with effect from 01.04.2010, section 56(2)(viii), section 57(iv), and section 145A(b) specifically provide that interest received on compensation or enhanced compensation shall be taxable as “Income from Other Sources” in the year of receipt, with a deduction of 50% under section 57(iv).

3 Applying the above provisions, the AO held that 50% of the interest received on enhanced compensation amounting to Rs.29,05,940 was taxable. Accordingly, an addition of Rs.14,52,970/- (being 50% of Rs.29,05,940/-) was made to the income of the assessee under the head “Income from Other Sources”. The AO also initiated penalty proceedings under section 271(1)(c).

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The CIT(A) noted that several notices of hearing were issued during the appellate proceedings on 25.10.2023, 01.10.2024 and 19.03.2025, but the appellant did not respond to any of the notices and did not file any written submissions in support of the appeal.

1 The Ld. CIT(A) observed that the assessee remained non-compliant throughout the appellate proceedings and failed to discharge the burden of proving that the findings of the AO were incorrect. Reliance was placed on various judicial precedents holding that an appeal can be dismissed for non- prosecution where the appellant shows no interest in pursuing the appeal, including Chemipol v. Union of India, CIT v. B.N. Bhattacharya, Whirlpool of India Ltd. v. DCIT, Chadha Finlease Ltd. v. ACIT, CIT v. Gold Leaf Capital Corporation Ltd., and PCIT v. Ashokjichanduji Thakor.

2 The Ld. CIT(A) further recorded that despite multiple opportunities, the assessee failed to place any documentary evidence or material on record to rebut the findings of the Assessing Officer. Since there was nothing on record to controvert the assessment order, the CIT(A) declined to interfere with the findings of the AO, confirmed the addition, and dismissed the appeal.

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

During the course of hearing none appeared on behalf of the assessee.

Per contra, the Ld. DR relied upon the orders of the lower authorities. The Ld. DR submitted that the issue is now squarely covered against the assessee by the decision of Chandigarh Bench of the Tribunal in the case of Shri Ajay Kumar Vs. ITO & Others in ITA No.463/Chd/2023 and connected matters.

1 The Ld. DR submitted that the Tribunal in the aforesaid decision has considered the entire statutory scheme including sections 56(2)(viii), 57(iv) and 145B of the Act and has held that interest received on enhanced compensation is taxable under the head “Income from Other Sources” after allowing statutory deduction of 50% under section 57(iv) of the Act.

2 It was further submitted that the legal grounds raised by the assessee are devoid of merit as the assessee had duly participated in the reassessment proceedings and no prejudice has been demonstrated.

We have heard the rival submissions and perused the material available on record.

1 The primary issue involved in the present appeal relates to taxability of interest received on enhanced compensation under section 28 of the Land Acquisition Act.

2 We find that an identical issue has been considered by the Coordinate Chandigarh Bench of the Tribunal in the case of Shri Ajay Kumar Vs. ITO & Others in ITA No.463/Chd/2023 and connected matters. In the said decision, the Bench, after considering the provisions of sections 56(2)(viii), 57(iv) and section 145B of the Act as amended by Finance Act, 2009, held that interest received on compensation or enhanced compensation is taxable under the head “Income from Other Sources” and only deduction permissible is the statutory deduction of 50% under section 57(iv) of the Act.

3 The Bench in the said decision also considered the judgments of Hon’ble Supreme Court in the cases of Ghanshyam (HUF) and Hari Singh and thereafter concluded that after the statutory amendments brought by the Finance Act, 2009, the issue stands covered in favour of the Revenue.

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In the result, appeal of the Assessee is dismissed.

""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