GULAB SINGH,KURUKSHETRA, HARYANA vs. INCOME TAX OFFICER, WARD-1, KURUKSHETRA, KURUKSHETRA, HARYANA

Whether the Ld. CIT(A) has erred in upholding the addition of Rs. 31,00, 221/- made by Ld. AO on account of interest on compensation received on compulsory acquisition of rural agricultural land under section 56(2)(viii) in light of the provisions of section 10(37).

Whether the Ld. CIT(A) has erred in upholding the addition made by Ld. AO of Rs. 19,25,805/- on account of short-term capital gain as the same is bad in law since the compensation received on compulsory acquisition of rural agricultural land in light of the provisions of section 10(37).

That the order of Ld. CIT (A) is passed is in the gross violation of principle of natural justice.

That the appellant craves to add, amend, or alter grounds of appeal before the appeal is finally heard and disposed of.

The brief facts of the case, as emanating from the assessment order as well as the order of the Ld. CIT(A), are that the assessee is an individual who had filed his return of income declaring total income after claiming exemption in respect of compensation received on compulsory acquisition of land. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee had received compensation as well as interest on enhanced compensation. The Assessing Officer required the assessee to furnish complete details including documentary evidences regarding the nature of land, copy of award, details of compensation and interest received, and justification for claiming exemption.

1 However, as noted by the Assessing Officer and subsequently recorded by the Ld. CIT(A), the assessee failed to furnish requisite details and supporting evidences. In the absence of necessary verification, the Assessing Officer treated the interest on enhanced compensation as income taxable under section 56(2)(viii) of the Act and further treated the compensation received as giving rise to short-term capital gain, thereby making addition to the income of the assessee.

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). From a perusal of the appellate order, particularly the findings recorded at pages 6 and 7 , it is evident that the Ld. CIT(A) has elaborately discussed the conduct of the assessee during the appellate proceedings. It has been specifically recorded that despite issuance of multiple notices and grant of sufficient opportunities, the assessee failed to furnish any supporting documentary evidences in respect of his claims. The Ld. CIT(A) has observed that even the basic details such as land records, documentary evidences regarding nature of land, copy of award of compensation and supporting material in respect of interest received were not filed.

1 The Ld. CIT(A) has further recorded a categorical finding that the assessee did not substantiate his claim either during the assessment proceedings or during the appellate proceedings and that no evidences were placed on record to establish that the land in question was agricultural land not falling within the definition of capital asset under section 2(14) of the Act. The Ld. CIT(A) thus held that in the absence of any supporting evidence, the Assessing Officer was justified in treating the compensation received as taxable short-term capital gain. It was also observed that the conduct of the assessee clearly demonstrated that he does not possess or intend to submit any supporting evidence to prove his claim.

Aggrieved by the said order, the assessee is in appeal before us.

During the course of hearing, the Ld. AR reiterated that the land in question was agricultural land and therefore no capital gain arises on its transfer. It was submitted that the assessee could not properly comply with the notices issued by the lower authorities and therefore prayed that one more opportunity may be granted to substantiate the claim with necessary evidences.

Per contra, the Ld. DR relied heavily upon the findings recorded by the Ld. CIT(A). The Ld. DR submitted that the Ld. CIT(A) has given a clear and categorical finding that despite repeated opportunities, the assessee failed to furnish any documentary evidence in support of his claim. It was further submitted that the addition has been rightly confirmed in the absence of any evidence and no interference is called for.

We have heard the rival submissions and perused the material available on record. We have also carefully gone through the orders of the lower authorities. In so far as the issue relating to taxability of interest on enhanced compensation is concerned, we find that the same is squarely covered against the assessee by the decision of the Coordinate Bench in the case of Shri Ajay Kumar Vs. ITO & Others in ITA No. 463/Chd/2023 & Othrs dt.

1

2 This issue of taxability of capital gain requires proper verification of relevant facts such as the nature and character of land, its location, distance from municipal limits, usage of land and other surrounding circumstances. These factual aspects go to the root of the matter and cannot be adjudicated conclusively in the absence of necessary evidences.

3 Considering the totality of facts and circumstances of the case and in the interest of justice, we are of the considered view that one more opportunity should be granted to the assessee to substantiate his claim with respect to taxability of the capital gain arising on account of sale of land (allegedly agriculture land). Accordingly, we set aside the order of the Ld. CIT(A) on this issue alone and restore the matter to the file of the Assessing Officer with the direction to examine afresh whether any capital gain arises to the assessee on the alleged transfer of agricultural land, in accordance with law.

4 The Assessing Officer shall provide an adequate opportunity to be heard to the assessee and shall decide the issue after considering the evidence that may be furnished by the assessee. The assessee is also directed to cooperate in the proceedings and furnish all necessary

In the result, the appeal of the assessee is partly allowed for statistical purposes.

""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