NARESH KUMAR,GURGAON, HARYANA vs. PCIT, JAIPUR

Result

P a g e | 52 ITA No. 209/JPR/2024 Naresh Kumar not been able to persuade myself to agree to the conclusion drawn in the said order. Hence, I am constrained to pass a separate order.

“1. The Ld. Principal Commissioner of Income Tax, Jaipur-1, ('PCIT') was not justified in passing order u/s 263 of the Income Tax Act, 1961 ('the Act'), overlooking the assessment order passed by the Assessing officer and failing to satisfy the statutory twin conditions prescribed under section 263 of the Act. viz., (i) that the assessment order is erroneous; and (ii) that the assessment order is prejudicial to the interest of Revenue, which are to be cumulatively satisfied. 2. The Ld. PCIT was not justified in passing order u/s 263 of the Act, by failing to appreciate that the assessment order passed by the Ld. assessing officer is in accordance with the decisions of the Hon'ble Supreme Court in the cases of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1(SC), CIT, Rajkot v GovindbhaiMamaiya [2014] 52 taxmann.com 270/[2015] 229 Taxman 138/2014) 367 ITR 498(SC), UOI V Hari Singh [2018] 91 taxmann.com 20 (SC) and, therefore, being so the assessment order passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 08.09.2021 was not amenable to revision under section 263 of the Act. 3. The Ld. PCIT was not justified in passing order u's 263 of the Act, in considering the interest u/s 28 of the Land Acquisition Act received as part of enhanced compensation, being taxable ignoring the fact that the exemption of said interest is duly supported by judicial precedents and therefore, at best, could be said to be debatable issue ousting the jurisdiction under section 263 of the Act. 4. The Ld. PCIT was not justified in passing order u/s 263 of the Act, in considering the interest u/s 28 of the Land Acquisition Act received as part of enhanced compensation, being taxable by failing to appreciate that the same was duly scrutinized by the Assessing Officer while passing the assessment order under section 143(3) r.w.s. 144B of the Act.

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Re: In the matter of Shri Naresh Kumar, PAN: APXPK7727E, Α.Υ. 2019-20, Appeal No. ITA 209/JPR/2024 against the order passed by the Ld. Principal Commissioner of Income Tax. Jaipur-1, Jaipur, Application for granting leave to urge Additional ground under Rule 11 of the Appellate Tribunal Rules, 1963 It is Most Respectfully submitted that the appellant is a resident of Gurgaon, having income from other sources earned from bank deposits. The address of Gurgaon is reflected on the portal in the profile information of the appellant. The returns of income have been regularly filed at Gurgaon address AY 2011-12 onwards. The details of filing of return of income and acknowledgment right from the AY 2011-12 to 2023-24 are attached for your ready reference and kind perusal. The notices and order of assessment under section 143(3) of the Income Tax Act, 1961 (the Act) as well as the notice and the order of revision under section 263 of the Act were also sent to the Gurgaon address of the appellant. The appellant is neither having any place of business/residence nor any situs of income in Rajasthan. In the case of the appellant, the assessment was completed by the National Faceless Assessment Centre, However, the impugned order under section 263 of the Act was passed by the Ld. PCIT Jaipur and, therefore, the appellant is outside the territorial jurisdiction of the Ld. PCIT Jaipur, in accordance with the provisions of section 120 of the Act. It is Most respectfully prayed that this Hon'ble Bench may kindly grant leave to the appellant to take the following ground as an additional ground in addition to those taken

P a g e | 54 ITA No. 209/JPR/2024 Naresh Kumar in the memorandum of appeal by virtue of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. This being a question of law and, therefore, though not raised before the Id. PCIT, is raised as an additional ground before this Hon'ble Bench for adjudication on merits. Additional ground "Ground no. 1 The Ld. AO has erred in passing the impugned order for revision under section 263 of the Act, by completely ignoring the fact that the appellant is residing at Gurgaon and neither has any business/place of residence nor any situs of income in Rajasthan, and, therefore, the appellant is beyond the territorial jurisdiction of the Ld. PCIT, in accordance with the provisions of section 120 of the Act." In support of his contention to grant leave to urge for additional ground at this stage, the appellant places reliance on the judgement of the Hon'ble Supreme Court in the case of Chitturi Subbannav. Kudapa Subbanna & Others [1965 AIR 1325] wherein it was held by the Hon'ble Apex Court that a question of law can be raised at any stage of the proceedings. Reliance is also placed on the judgment rendered by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax [1998] 229 ITR 383 (SC) for admission of additional ground.

As is evident from the assessment order dated 08.09.2021 vide para 2 and the paper book filed it is evident that the assessee has submitted its response and submitted all the details / documents as available on record in

P a g e | 55 ITA No. 209/JPR/2024 Naresh Kumar support of the claim made in the return of income filed. Ld. AO vide para three of his order noted that ;

“3. The assessee has submitted its response and submitted details / documents as available on record. After considering the reply and documents furnished by the assessee, no addition is being made in this case.” Ultimately the assessment was completed by the ld. AO accepting the returned income filed by the assessee.

Ld. PCIT was of the view that since the assessee has received the interest he was liable to pay income tax on receipt of interest after deduction of equal to fifty percent as per the provision of section 145B(1) r.w.s. 56(2)(viii) and section 57(iv) of the Act.

Ld. PCIT, based on the record, noted that the assessee had not paid the tax on the interest income received by the assessee. She also noted that while undertaking the assessment the ld. AO did not examine that issue. Therefore,

P a g e | 56 ITA No. 209/JPR/2024 Naresh Kumar she noted that an amount of Rs. 74,34,568/- being the fifty percent of the interest should have been taxed under the head “Income from Other Sources”. In view of those observations she noted that the assessment order passed u/s. 143(3) of the Act dated 08.09.2021 was erroneous and prejudicial to the interest of revenue.

Having noted so, she issued a notice dated 04.12.2023 asking the assessee to file a response by 15.12.2023. The assessee filed the response on 14.12.2023 which was reproduced by the ld. PCIT in her order.

The assessee contended before the PCIT that he has received the interest being the enhanced compensation as per provision of section 28 of the Land Acquisition Act. That interest is covered by the provision of section 10(37) of the Act. The issue has been examined by the ld. AO and after considering the submission and evidence placed on record ld. AO has allowed the claim of the assessee. Therefore, the order of the ld. AO is in accordance with the law and thereby the said order of the ld. AO is neither erroneous nor prejudicial to the interest of the revenue.

Record reveals that the relevant question was raised by the ld. AO vide point no. 3 of the annexure attached with the notice 11.06.2021 [ page 87 of the paper book filed ]. The assessee also filed a detailed reply

P a g e | 57 ITA No. 209/JPR/2024 Naresh Kumar explaining the fact that the income is as per provision of section 28 of the Land Acquisition Act 1894 and in support of that claim relevant documents were placed on record [ para 3 of the reply dated 22.06.2021 to the ld. AO]. The assessee in his reply vide para 4 also dealt with the aspect of the matter that the claim of the assessee is in accordance with the provision of section 10(37) of the Act. The assessee also supports his claim by relying on the various legal judicial precedents in support of his claim before the ld. AO. The ld. AO considered the reply of the assessee and allowed the claim of the assessee.

Ld. PCIT noted that she considered and perused carefully the reply filed by the assessee, but she did not find the same as tenable and she passed the following order as per provision of section 263 of the Act :

P a g e | 58 ITA No. 209/JPR/2024 Naresh Kumar revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under- ".... An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same categoryfall orders passed without applying the principles of natural justice or without application of mind." 8. Considering all the facts and circumstances of the case and for the reasons discussed above, the assessment order dated 08/09/2021 for A.Y. 2019-20 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying the applicable sections of the Act. The AO has not verified the details which were required to be verified under the scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after allowing reasonable opportunity to the assessee.

P a g e | 59 ITA No. 209/JPR/2024 Naresh Kumar 4. Assessment order was issued by the Ld. AO after considering the submissions of the appellant and, therefore, no addition was made therein. 5. Revision proceedings alleging the wrong application of law under section 263 were initiated and concluded by Ld. PCIT considering the assessment order erroneous and prejudicial to the interest of the revenue. All the documents as submitted to the Ld. AO were furnished to the Ld. PCIT requesting the PCIT that the order was not erroneous. 6. Assessee relied upon the judgement of Hon'ble Supreme Court in CIT vs. Ghanshyam HUF [2009] 182 Taxman 368, where a clear distinction is made between interest u/s 28 and that u/s 34, i. Intt u/s 28 is paid on the excess amount under section 28 of the 1894 Act depends upon verdict of the Court where excess compensation is claimed, whereas interest under section 34 is for delay in making payment. ii. Interest under section 28 is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined. iii. CIT vs. Ghanshyam HUF continues to hold good post amendment in section 56, 57 and 145A of the Act because the Hon'ble Court has held that amount received under section 28 is not interest but is an accretion to the compensation and, therefore, forms part of the compensation. As also held by Hon'ble Gujarat High Court in Movaliya in Bhikhubhai vs. ITO-TDS-1-Surat, [2016] 70 taxmann.com 45. A plethora of cases are there where the Hon'ble Courts/Tribunals have followed CIT Vs Ghanshyam while deciding taxability of interest u/s 28 of LAA and distinguished the amendment in section 56, 57 and 145. 7. Alternatively, one can argue on the decision of the Hon'ble P&H High Court in the cases of Manjeet Singh (HUF) Karta Manjeet Singh v. UOI [2016] 65 taxmann.com 160 and Mahender Pal Narang v. CBDT [2020] 120 taxmann.com 400. SLP was filed in both the cases which was dismissed. without any speaking order and, hence, no binding precedence is created. Thus, CIT v. Ghanshyam continues to hold legal weight. 8. Further, it is a legally accepted point that where two views are possible and the Assessing Officer has taken the one favouring the assessce, such a judgement does not render the decision of the AO as erroneous and prejudicial to the interest of the revenue as has been held by Hon'ble Jaipur Bench in the case of M/s JAP Info Systems Pvt. Ltd. v. PCIT-2, Jaipur, ITA No. 244/JP/2021. List of cases where out of two views, the one favouring the assessee has been accepted, the order does not stand to be erroneous and, hence, revision u/s 263 is not required. i. Hon'ble Delhi High Court in CIT vs. Hindustan Coca Cola Beverages P Ltd. (2011) 331 ITR 192 (Del.) ii. Max India Ltd. (2007) 213 CTR (SC) 266: (2007) 295 ITR 282 (SC)

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iii. Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC) iv. ACIT Vs. M/s. The Nilgiri Tea Estate Limited ITA No. 37/Coch/2014

v. ITAT Delhi in Smt. Pumima Sareen vs. PCIT, ITA No. 892/Del/2023 vi ITAT Kolkata in The Baranagar Jute Factory PLC vs. PCIT, LT.A. No. 1149/Kol/2018 vii. ITAT Delhi in Pawan Kumar vs PCIT, ITA No. 1655/Del/2023 viii. ITAT Delhi în Sanjay Kumar Sharma vs. PCIT, ITA No.357/Del-2023 ix. ITAT Delhi in Gulshan Kumar vs. PCIT, ITA No. 1676/Del 2023 x. ITAT Chandigarh in Ishwar Singh vs. PCIT, ITA NO.45/CHD/2020 xi. ITAT Bangalore in M/s. ETA Star Infopark vs PCIT, ITA No.415/Bang/2020 and ITA No.248/Bang/2021

Vide Submission dated 01.10.2024 the assessee submitted as under:

Re: In the matter of Shri Naresh Kumar, PAN: APXPK7727E, Α.Υ. 2019-20, Appeal No. ITA 209/HR/2024 against the order passed by the Ld. Principal Commissioner, Jaipur-1, This is further to the proceedings held in the matter on September 11, 2024. During the course of the proceedings, this Hon’ble Bench had directed the respondent to provide a copy of the proof of jurisdiction submitted by the Ld. Department Representative (DR) to the Appellate Representative (AR). We have been provided a copy thereof, as below:-

P a g e | 61 ITA No. 209/JPR/2024 Naresh Kumar

In this respect, it is submitted that there is no denying the fact that the income tax portal of the appellant shows the details of the jurisdictional officer being in Jaipur. A screenshot of the same is attached for your ready reference.

However, it may also be noted that the address of the appellant as per the appellant’s income tax profile is that of Gurgaon. A screenshot of the same is attached below for your ready reference.

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Further, attention is drawn to the fact that the first notice in the matter was issued to the appellant by the Directorate of Income Tax, Intelligence and Criminal Investigation Office, Gurgaon, Dated 08.07.2013 (copy attached). This notice was sent at the Gurgaon address of the appellant because it is this address which is available from the Income tax profile of the appellant, as well as from the address appearing in the income tax returns filed by the appellant for the assessment years prior to the date of this notice. It reiterated that the appellant has been residing at Gurgaon, earning interest income from Gurgaon, the profile address on the portal is that of Gurgaon and the Income Tax Returns (ITR) have been regularly filed at Gurgaon address AY 2010-11 onwards. The appellant isneither having any place of business/residence nor any situs of income in Rajasthan Jurisdiction of any assessee is determined by taking into account the provisions of section 120 of the Income Tax Act, 1961 (the Act). The relevant extract is reproduced here for the sake of convenience. Jurisdiction of income-tax authorities.

P a g e | 63 ITA No. 209/JPR/2024 Naresh Kumar 120 (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria namely:- (a) territorial area: (b) persons or classes of persons: (c) incomes or classes of income, and (d) cases or classes of cases. Accordingly, jurisdiction bears a nexus with the territory of the assessee. Territory could be the place of residence or the place of business. This implies that jurisdiction would be determined on the following parameters: 1. Based on the residential address of the assessee 2. Based on the registered office or principal place of business of the assessee The assessee must file their income tax returns with the income tax office that has jurisdiction over their area and any tax assessments, scrutiny, or notices issued by the Income Tax Department will come from the Assessing Officer (AO) with territorial jurisdiction over the assessee's location. In the case before Your Honours, the appellant has received notice under section 143(2)/142(1) from NFAC and notice and order under section 263 of the Act from the Ld. PCIT, Jaipur at his Gurgaon address. It is reiterated that the appellant is residing in Gurgaon and has been filing his return of income from Gurgaon only. The jurisdiction at Jaipur, as appearing in the income tax profile of the appellant might have been wrongly assigned as appearing on the portal. However, jurisdiction is determined in accordance with the provisions of section 120 of the Act and not on the basis of where the PAN is residing. The Ld PCIT has failed to notice that there is no territorial nexus of the assesse with Jaipur as required under section 120 and, therefore, to take appropriate measures to migrate the PAN wrongly assigned to his jurisdiction instead of exercising the jurisdiction himself beyond the territory assigned to him by the CBDT in accordance with the provisions of section 120 of the Act. It is, therefore, submitted that the action of the Ld. PCIT is not in accordance with the law and order passed by him beyond his jurisdiction is liable to be set aside. Appellant place reliance on the judgement of the Hon'ble ITAT Delhi in ACIT vs. M/s. UV Realtors Pvt. Ltd., ITA No.6033/Del/2016, wherein it has been held that:

P a g e | 64 ITA No. 209/JPR/2024 Naresh Kumar "However, nowhere in the statute it has been provided that PAN address will decide the territorial jurisdiction of the Assessing Officer. Section 1394 merely provides who are the persons required to obtain PAN having regard to the nature of transaction of business and other conditions laid down that, Assessing Officer may allot a PAN and other procedure and mechanism of allotment of the PAN. The territorial jurisdiction is decided by the CBDT in terms of Section 120 only. Here, in this case, as discussed above, none of the parameters laid down for the territorial jurisdiction are applicable to the assessee. Even the Assessing Officer or the Ld. CIT(A) has not LTA. No.6033/DEL/2016 & CO No.11/DEI/2017 23 made out any case that assessee's case fulls in either of the given categories provided in sub Section (3) of Section 120 Allotment of a PAN from a particular place cannot provide jurisdiction to the Assessing Officer The jurisdiction of the Assessing Officer over an assessee is decided by the CBDT on the basis of from where the assessee is either carrying the business in that area assigned to the Assexxung Officer w/s. 120 or the assessee is residing within that area" It is clear that fromhe judgement that PAN is not the determinative factor for assessing the jurisdiction of the assessee. It is further submitted that an order which is passed without jurisdiction is non est in the eyes of law. Considering the fact that at the time of assessment, the appellant was residing, earning income and filing his return of income at Gurgaon, the assumption of jurisdiction by the Ld. PCIT at Jaipur was invalid. Reliance is also placed on the judgement of the Presidential Bench of the Hon'ble Mumbai Tribunal in Jeeri Keerthana Reddy vs. ITO, ITA No. 3224/Mum/2023, wherein it has been held that: "19. It is trite that on order which is passed without jurisdiction (which is on cave which grex the root of the matter) is non est in the eyes of law Considering the fact that at the time of assessment, the appellant-assessee was residing and carrying on her profession at Bangalore the assumption of jurisdiction by the 40 at Mumbai was invalid. The change of address in the records and/or migration of PAN are not strictly relevant in the matter where the jurisdiction is governed by the stontory provisions as contained in Section 120 read with Section 124 of the Act and the notification issued by the Board"

Further, the Ld. DR has asserted on the jurisdiction of the appellant lies in Jaipur and that is because the PAN was located in Jaipur. It is submitted that PAN is an identifier in the Indian taxation system, which links various activities to a single individual. It is a well- known fact that nowadays quoting of PAN is mandatory on all financial transactions. The purpose is to link and identify the transactions to the individual or the entity and, therefore, it is only a tool for identification, PAN is not the legal factor to determine the jurisdiction of any assessee. The Hon'ble Mumbai High Court has laid down in the case of PCTT vs. M/s Capstone Securities Analysis Pvt. Ltd., [2023] 146 taxmann.com 423 (Bombay) that it is the PAN which follows the jurisdiction and not vice versa.

P a g e | 65 ITA No. 209/JPR/2024 Naresh Kumar "5 The Tribunal rejected the argument of the revenue that the assessing officer would continue to exercise the jurisdiction in the case of the assesseemasmuch as PAN of the assessee came to be transferred only 29 December 2014 It was held that the transfer of PAN is consequential to the Order of transfer of jurisdiction and that it is a PAN, which follows the jurisdiction and not vice versa." In view of the above, and from the judicial precedents relied upon by the appellant, it may be inferred that PAN is not a contributing factor for determining the jurisdiction of the assessee. It is the place of residence or the place of business which governs the jurisdiction, which in the case of the appellant is at Gurgaon. It is, therefore, Most Respectfully prayed that the order of the Ld. PCIT under section 263 of the Act is without proper jurisdiction and, therefore, deserves to be quashed. Your Honours may kindly be pleased to pass such other order as deemed fit. Vide Submission dated 26.02.2025 the assessee submitted as under:

Re: In the matter of Shri Naresh Kumar, PAN: APXPK7727E, Α.Υ. 2019-20, Appeal No. ITA 209/HR/2024 against the order passed by the Ld. Principal Commissioner, Jaipur-1, This is further to the proceedings being held in the matter from time to time. For the convenience of the hon hie Bench, the appellant's contentions are summarized below: The assesseeis a resident of Gurgaon for last 15 years, having income from other sources earned from bank deposits. The address of Gurgaon is reflected on the portal in the profile information of the appellant. The returns of income have been regularly filed from his Gurgaon address AY 2011-12 onwards. The details of filing of retum of income and acknowledgment right from the AY 2011-12 10 2023-24, have already been submitted and are attached for your ready reference and kind perusal (P.B.No. 1-23). The notices and order of assessment under section 143(3) of the Income Tax Act. 1961 (the Act) as well as the notice and the order of revision under section 263 of the Act were also sent to the Gurgaon address of the appellant. The appellant is neither having any place of business/residence nor any situs of income in Rajasthan. In the case of the appellant, the assessment was completed by the National Faceless Assessment Centre and, therefore, the question of jurisdiction did not arise. However, the impugned order under section 263 of the Act was passed by the Ld. PCIT Jaipur and the same was addressed to the Gurgaon address of the appellant, which is indicative of the fact that while reviewing and examining the appellant's file and issuing notice under section 263 of the Act, the Id. PCTT was well aware of the fact that the appellant is residing in Gurgaon and is not having situs of income or residence in Rajasthan and, therefore, he was bereft of the territorial jurisdiction over the assesseeurisdiction is determined in accordance with the provisions of section 120 of the Act. According to the provisions of section 120,

P a g e | 66 ITA No. 209/JPR/2024 Naresh Kumar jurisdiction is determined on territorial basis. This implies that jurisdiction would be determined on the following parameters 1. Based on the residential address 2. Based on the registered office or principal place of business. The assessee must file their income tax returns with the income tax office that has jurisdiction over their area and any tax assessments, scrutiny, or notices issued by the Income Tax Department will come from the Assessing Officer (AO) having territorial jurisdiction over the assessee's location. In the case of the appellant, the appellant has received notice and order under section 263 of the Act from the Ld. PCIT, Jaipur. It is reiterated that the appellant is a resident of Gurgaon and has been filing his retum of income from Gurgaon only. Further, it is understood that an assessee's right to question the jurisdiction of the Assessing Officer with respect to the instances mentioned in sub section 3 of section 127 is not available beyond 30 days However, such instances exclude the one as in the case of the appellant where jurisdiction of the L.d. PCTT is questioned with respect to the notice and the order of revision issued under section 263, and therefore the time limit of 30 days for challenging the jurisdiction is not applicable in the case of the appellant. Moreover, by virtue of the provisions of sub section 2 of section 124, Principal Commissioner has been vested with the powers to determine jurisdiction whenever any question arises thereto. However, in this case, the Ld. PCIT has failed to determine his own jurisdiction which is based on geographical proximity of the residence/place of business or any other criteria as provided under section 120 of the Act. It is already explained that the appellant's case doesn't fall on any criteria within the jurisdiction of the L.d PCIT, Jaipur. Attention is drawn to the fact that the appellant is a farmer, who is not well versed with every procedural requirement under the Act. On the other hand, PCIT, being the administrative officer, is well versed with the judicial as well as the procedural obligations cast upon him/her under the Act. After reviewing the file and knowing well that the appellant is a resident of Haryana (Gurgaon), filing his ITR therefrom and notices and orders being sent and served upon him at the same address, and, therefore, he would have taken the necessary steps to transfer the PAN to the proper jurisdiction, which he had failed to do so and. therefore, he cannot take shelter of the procedural requirement of section 139A(5), the assessee being a small farmer, not weil versed with the complicated procedures of the tax laws. It is reiterated that the reliance of the L.d. PCIT on the provisions of section 139A(5)(d) is misplaced as it is only a procedural requirement and it does not prescribe the criteria for determining the jurisdiction.Moreover, nowhere in the statute it has been provided

P a g e | 67 ITA No. 209/JPR/2024 Naresh Kumar that PAN address will decide the territorial jurisdiction of the AO. Section 139A merely provides who are the persons required to obtain PAN having regard to the nature of transaction of business and other conditions laid down that, AO may allot a PAN and other procedure and mechanism of allotment of the PAN. The territorial jurisdiction is decided by the CBDT in terms of Section 120 only. Further, the appellant's contentions can be summarized as below: Determination of jurisdiction Jurisdiction is determined in accordance with the provisions laid down under section 120 of the Act where the criteria is- (a) territorial area, (b) persons or classes of persons, (c) incomes or classes of income, and (d) cases or classes of cases. It is further elaborated in section 124 of the Act that jurisdiction Assessing officer shall have Jurisdiction: (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area In the present case, appellant neither resides nor is having any business connection or any situs of income in Jaipur and, hence, the Ld. PCIT is bereft of territorial jurisdiction over the appellant. Appellant has been residing and filing his returns from Gurgaon for more than 15 years and even the impugned notice and order under section 263 were sent at the Gurgaon address only. Reliance is placed on the following case laws: Hon'ble ITAT Mumbai in RDC Ventures vs. PCIT, [2024] 159 taxmann.com 395 "Under the Sec. 1448 the whole procedure of faceless assessment has been specified. As per the detailed procedure laid down in clause xxxi of zub-section (1) of Sec. 144AB of the Act the National e-Assessment Center shall after completion of the assessment, transfer all the electronic records of the cave to the assessing officer having jurisdiction over the said cave for such action at may be required under the provisions of the Act. It is evident from the provision of Sec. 1448 of

P a g e | 68 ITA No. 209/JPR/2024 Naresh Kumar the Act that once after completion of assessment the faceless assessment unit transfer all the electronic record of the case to the assessing officer having territorial jurisdiction thereafter for all the other action the jurisdiction is vested with the assessing officer having territorial jurisdiction and the PCIT having such territorial jurisdiction The provision of Section 263 is invoked after the completion of the assessment on examination of record of any proceedings under the Act, therefore, once the assessment record is transferred by the faceless unit to the assessing officer having territorial jurisdiction then no action w/s 263 of the Act is possible with the PCIT who wat having jurisdiction of the faceless assessment unit." (Ρ.Β.Νο. 24-68) Hon'ble High Court of Delhi in Veena Devi Karnani v. Income Tax Officer, [2019] 102 taxmann.com 470 (Delhi) 5 Rule 127(2) clearly states that the addresses to which a notice or summons or requisition or order or any other communication may be delivered or transmitted shall be either available in the PAN database of the assessee or the address available in the income tax return to which the communication relates or the address available in the last income tax return filed by the assessee all these options have to be resorted to by the concerned authority in this case the AO. Therefore, in the facts of this case when the AO issued the reassessment notice, as he did on 13.12.2013 he was under a duty to access the available PAN data base of the addressee or the address available in the income tax return to which the communication related or the address available in the last income return filed by the addressee.” (Ρ.Β.Νο. 69-75) Hon'ble Madras High Court in Abdul Azeez Haroon vs The Deputy Commissioner Of Income Tax, WP (MD)No.20171 of 2016 and WMP(MD) Nos. 14462 and 15917 of 2016 "42. In the present case the petitioner has, no doubt obtained a PAN from the Assessing Officer at Maduras, wherein the address of the assessee is stated to be in Madurai. However, no assessments have been completed by the officials at Madurai, till date For AY 2012-2013 to 2015-2016 the petitioner has filed returns of income electronically, stipulating his jurisdictional officer as the Income tax officer. Shimoga. Karnataka. These returns of income have been processed and Intimations issued by the CPC wherein the address of the petitioner is stated to be Shimoga 43. The appropriate officer to assess the pentioner is thus the officer at Shimogo. No doubt, the provisions of Section 124(5) provide for the vesting of jurisdiction concurrently upon twe officers if the situation and circumstances so warrant the same, such as if the assessee in question has business interests or assets as well as income arising there from spread over various party of the country. (Ρ.Β.Νο. 76-92) 2 PAN does not decide jurisdiction Jurisdiction assumed by the Ld. PCIT on the basis of PAN is incorrect as PAN is not the determinative factor for jurisdiction, which has also been held in the following decided cases:

P a g e | 69 ITA No. 209/JPR/2024 Naresh Kumar Hon'ble ITAT Delhi in ACIT vs. Mis. UV Realtors Pvt. Ltd., ITA No.6033/Del/2016 "Allotment of a PAN from a particular place cannot provide jurisdiction to the Assessing Officer. The jurisdiction of the Assessing Officer over an assessee is decided by the CBDT on the baxis of from where the assesseeis either carrying the business in that areu assigned to the Assessing Officer u/s. 120 or the assessee is residing within that area. (Ρ.Β.No. 93-116) Hon'ble ITAT Mumbai in Jeeri Keerthana Reddy vs. ITO, ITA No. 3224/Mum/2023 "19. It is trite that an order which is passed without jurisdiction (which is an issue which goes to the root of the matter) is non est in the eyes of law Considering the fact that at the time of assessment, the appellant-assessee wat residing and carrying on her profession at Bangalore, the assumption of jurisdiction by the 10 at Mumbai was invalid The change of address in the records and/or migration of PAN are not strictly relevant in the matter where the jurisdiction is governed by the statutory provisions as contained in Section 120 read with Section 124 of the Act and the notification issued by the Board." (Ρ.Β.Νο. 117-127) Hon'ble Bombay High Court in PCIT v. Capstone Securities Analysis (P) Ltd. [2023] 146 taxmann.com 423 (Bombay) "The Tribunal rejected the argument of the revenue that the assessing officer would continue to exercise the jurisdiction in the case of the assessee inasmuch as PAN of the assessee came to be transferred only 29 December 2014. It was held that the transfer of PAN is consequential to the Order of transfer of jurisdiction and that it is PAN which follows the price and not (P.B.No. 128-129) Hon'ble High Court of Calcutta in PCTT-2, Chermal. Mix. Ojasvi Motor Fasance Pvt. Lat. ITAT/106/2024 "Before us, the Revenue has canvassed that the files as well as the PAN was still lying within the jurisdiction of the Income Tax Officer Ward 1(4) Kolkata. The transfer of the files is a ministerial or an administrative act to be done by the department for which the assessee cannot be held responsible. That apart, the transfer of the PAN was only a consequential proceeding to the transfer of jurisdiction and therefore the same cannot be a ground to hold that the Assessing Officer had jurisdiction over the matter despite the order of transfer passed by the Commissioner on 15.03.2013" (Ρ.Β.Νο. 130-135) 3. Ld. PCIT to examine jurisdiction on basis of all available data

P a g e | 70 ITA No. 209/JPR/2024 Naresh Kumar It is incumbent on the Ld. PCIT to assess the jurisdiction and that the same has to be ascertained and determined every year based upon the complete assessee data available which also includes the return filing details. Determination of jurisdiction goes to the root of the matter and any defect therein, renders the order null and void. Further, the criteria of 30 days for challenging the jurisdiction as per the provisions of section 127, is not applicable to the orders issued under section 263. Reliance is placed on the following judgements: Hon'ble High Court of Delhi in CIT, Delhi-XVI v. S.S. Ahluwalia, [2014] 46 taxmann.com 169 (Delhi) "The provisions indicate that Sections 120. 124 and 127 of the Act recognizes flexibility and choice, both with the assessee and the authorities te the Assessing Office before whom return of income could be filed and assessment could be made. The Assessing Officer within whose area an assessee was carrying on business, resided or otherwise income had accrued or arisen (in the last case, subject to the limitation noticed above) has jurisdiction, Similarly, the Assessing Officer also has authority due to class of income or nature and type of business.………. On the said aspect, decision of the Delhi High Court in the case of K.K. Loomba [2000] 241 ITR 152 (Delhi) is binding on us. Thus, the question of jurisdiction or the place of filing has to be examined each year with reference to provisions of Section 124 of the Act. Decision in K.K Loomba [1996] 220 ITR 446/89 Taxman 536 (Pun & Har.) was pronounced in the year 2000 and dissents from the view/ratio of the Punjab and Haryana: High Court in Lt. Col Paramjit Singh (supra). Thus, when the proceedings were going on, the legal position was not clear and hence debatable. However, as noticed above. Section 124 of the Act provides flexibility and postulates multiple and concurrent jurisdiction including filing of return and where the assessee has permanent or current residence or where he has sole/only source of income.” (P.B. No. 136-166)

Hon'ble High Court of Calcutta in PCIT v. Divine Light Finance Ltd. [2024] 165 taxmann.com 254 (Calcutta) 9. Where an authority or court lacks inherent jurisdiction in passing a decree or order, the decree or order passed by such authority or court would be without jurisdiction, non est and void abinitio. Lack of territorial jurisdiction of the Commissioner of Income Tax-IV who passed the order dated 19.01.2016 under Section 263 of the Act, 1961 to exercise supervisory jurisdiction goes to the root of the matter and strikes at his very authority to pass the said order. Such defect is basic and fundamental and, therefore, the order passed by the aforesaid C.LT having no territorial jurisdiction over the respondent assessee, is nullity. (P.B.No. 167-171) The judgementare also attached for your ready reference and kind perusal.

P a g e | 71 ITA No. 209/JPR/2024 Naresh Kumar In view of the above, it is, therefore, Most respectfully prayed that the order of the Ld. PCIT under section 263 of the Act is without proper jurisdiction and, therefore, deserves to be quashed Your Honours may kindly be pleased to pass such other order as deemed fit.

was placed on the following evidence / records / decision :

Index of Paper book - 1

Particulars Page Nos. Attachment No. 1 1 — 2 Copy of notice from Directorate of Income Tax, Intelligence and Criminal Investigation Office, Gurgaon, dated 08.07.2013 2 Copy of ITR V from AY 2011-12 to AY 2024-25 3 — 17 3 Copy of Notice u/s 143(2) 18 — 18 4 Copy of Notice u/s 142(1) 19 — 21 5 Copy of Notice of hearing u/s 263 22 — 23 6 24 — 47 Hon'ble ITAT Delhi in ACIT vs. M/s. UV Realtors Pvt. Ltd., ITA No.6033/DelI2016 7 48 — 58 Hon'ble ITAT Mumbai in Jeeri Keerthana Reddy vs. ITO, ITA No. 3224/Mum/2023 8 59 — 60 Hon'ble Mumbai High Court in PCIT vs. M/s Capstone Securities Analysis Pvt. Ltd. [2023] 146 taxmann.com 423 (Bombay)

Attachment Particulars Page Filed Nos. befor No. ee 1. Submission 1-24 Hon'ble Bench 25-27 2. Notice of the Ld. AO under section 142(1) 3. Reply to the Notice u/s 142(1) 28-66 Ld. AO 4. Notice of the Ld. PCIT under section 263 67-68 5. Reply to the Notice u/s 263 69-107 Ld. PCIT

P a g e | 72 ITA No. 209/JPR/2024 Naresh Kumar

Attachment Particulars Page Filed Nos. before No. Submission 1. 1-4 Hon'ble Bench 2. Land Acquisition certificate 5-6 3. Certificate of enhanced compensation 7-8 4. Copy of Khatauni and 9-1 1 Girdawari (crop records) Ld. AO & Ld. PCIT 5. Relevant extract of the Judgement of 12- the Hon'ble Punjab & Haryana High 17 Court in favour of the appellant for granting enhanced compensation and interest thereon

of the additional ground raised which reads as follows :

Re. In the matter of Shri Naresh Kumar, PAN: APXPK7727Ε. Α.Υ. 2019-20, Appeal No. ITA 209/JPR/2024 against the order passed by the Ed. Principal Commissioner of Income Tax. Jaipur-1. Jaipur. Submission on Additional ground under Rule 11 of the Appellate Tribunal Rules, 1963 The appellant, vide letter dated August 22, 2024, had prayed for this Hon'ble Bench for granting leave is urgean additional ground in the appeal. This submission is being filed with respect to the additional ground, under the instructions of the Hon'ble Bench. The appellant had raised an additional ground as below: "Ground no, 1 The Ld. 40 has erred in passing the impugned order for revision under section 263 of the Act, by completely ignoring the fact that the appellant is residing at Gurgaon and neither has any business/place of residence nor any situs of income in Rajasthan, and, therefore, the uppellant is beyond the territorial jurisdiction of the Ld. PCIT, in accordance with the provisions of section 120 of the Act." SUBMISSION It is submitted that the appellant is a resident of Gurgaon, having income from other sources camed from bank deposits. The profile address on the portal is that of Gurgaon and the Income Tax Returns (ITR) have been regularly filed at Gurgaon address AY 2010-11 onwards. The notices and order of assessment under section 143(3) of the

P a g e | 73 ITA No. 209/JPR/2024 Naresh Kumar Income Tax Act, 1961 (the Act) as well as the notice and the order of revision under section 263 of the Act were also sent to the Gurgaon address of the appellant. The appellant is neither having any place of business/residence nor any situs of income in Rajasthan. In the case of the appellant, the assessment was completed by the National Faceless Assessment Centre (NFAC). The appellant being a resident of Gurgaon, is outside the territorial jurisdiction of the Ld. Principal Commissioner of Income Tax (PCIT), Jaipur, and, therefore, the order passed by him under section 263 of the Act is beyond his jurisdiction under section 120 of the Act. At this juncture, attention is drawn to the provisions of sections 120(3) and 124 of the Act and are also reproduced below for the sake of convenience: Jurisdiction of income-tax authorities. 120.... (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other income-tax authority authorised by it may have regard to any one or more of the following criteria, namely (a) territorial area; (b) persons or classes of persons. (e) incomes or classes of income, and (d) cases or classes of cases. 124. (1) Where by virtue of any direction or order issued under sub-section (1) or sub-section (2) of section 120, the Assessing Officer has been vested with jurisdiction over any area, within the limits of such area, he shall have jurisdiction (a) in respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and (b) in respect of any other person residing within the area. (2) Where a question arises under this section as to whether an Assessing Officer has jurisdiction to assess any person, the question shall be determined by the Principal Director General or Director General or the Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner: or where the question is one relating to areas within the jurisdiction of different Principal Directors General or Directors General or Principal Chief Commissioners or Chief Commissioners or Principal Commissioners or Commissioners, by thePrincipal Directors General or Directors General or Principal Chief Comisioners of Chief Commissioners or Principal Commissioners or Commissioners concerned or, if they are wit agreement, by the Board or by such Principal Direcive General or Director General or Principal

P a g e | 74 ITA No. 209/JPR/2024 Naresh Kumar Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner as the Bourd may, by notification in the Official Gazette, specify (3) No person shall be entitled to call in question the jurisdiction of an Axxessing Officer- (a) where he has made a return under sub-section (1) of section 115WD or under sub-section (1) of section 139, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 142 or sub-section (2) of section 115WE or sub-section (2) of section 143 or after the completion of the assessment, whichever is earlier; (b) where he has made no such return, after the expiry of the time allowed by the notice under sub-section (2) of section 115WD or sub-section (1) of section 142 or under sub-section (1) of section 115WH or under section 148 for the making of the return or by the notice under the first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgment of the Assessing Officer, whichever is earlier; (c) where an action has been taken under section 132 or section 1324, after the expiry of one month from the date on which he was served with a notice under sub-section (1) of section 1534 or sub-section (2) of section 153C or after the completion of the assessment, whichever is earlier. (4) Subject to the provisions of sub-section (3), where an axsexsee calls in question the jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under sub-section (2) before the assessment is made (5) Notwithstanding anything contained in this section or in any direction or order issued under section 120, every Assessing Officer shall have all the powers conferred by or under this Act on an Assessing Officer in respect of the income accruing or arising or received within the area, if any. over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub-section (1) or sub-section (2) of section 120. According to the provisions of section 120, jurisdiction is determined on territorial basis. This implies that jurisdiction would be determined on the following parameters: 1. Based on the residential address 2. Based on the registered office or principal place of business. The assessee must file their income tax returns with the income tax office that has jurisdiction over their area and any tax assessments, scrutiny, or notices issued by the Income Tax Department will come from the Assessing Officer (AO) with territorial jurisdiction over the assessee's location. In the case of the appellant, the appellant has received order under section 263 of the Act from the Ld PCIT, Jaipur. It is reiterated that the appellant is residing in Gurgaon for more than a decade and has been filing their return of income from Gurgaon only.

P a g e | 75 ITA No. 209/JPR/2024 Naresh Kumar Further, it is understood that an assessee is bereft of the right to question the jurisdiction of the Assessing Officer with respect to the instances mentioned in sub section 3 of section 127 beyond 30 days. However, such instances exclude the one as in the case of the appellant where jurisdiction of the Ld. PCIT is questioned with respect to the order of revision issued under section 263, and therefore the time limit of 30 days for challenging the jurisdiction is not applicable in the case of the appellant. Moreover, by virtue of the provisions of subsection 2 of section 124, Principal Commissioner has been vested with the powers to determine jurisdiction whenever any question arises thereto. However, in this case, the Ld. PCTT has failed to determine his own jurisdiction which is based on geographical proximity of his residence/place of business or any other criteria as provided under section 120 of the Act. It is already explained that the appellant's case doesn't fall on any criteria within the jurisdiction of the Ld. PCIT, Jaipur Further, the assessment in the case of the appellant was completed under the faceless scheme. Once the assessment is completed, it is handed over to the jurisdictional AO. As per the detailed procedure laid down in clause (xxxi) of section 144AB(1), the National e-Assessment Center shall, after completion of the assessment, transfer all the electronic records of the case to the AO having jurisdiction over the said case for such action as may be required under the provisions of the Act. Section 1448 dictates that the faceless assessment unit shifts electronic case records to the AO with territorial jurisdiction post- assessment. Subsequent actions fall under the purview of the AO and PCIT with corresponding territorial jurisdiction. In the extant case, the appellant is neither having any place of business/residence nor any situs of income in Rajasthan and, therefore, the appellant does not fall within the territorial jurisdiction of either the AO or Ld. PCIT at Jaipur. (Hon'ble ITAT Mumbai in RDC Ventures vs. PCIT, [2024] 159 taxmann.com 395, PB page no. 41) Otherwise also, it may have been the case that at the time of issuing of PAN, the appellant might have been residing at Jaipur but, allotment of a PAN from a particular place cannot provide jurisdiction to the Assessing Officer. The jurisdiction of the Assessing Officer over an assessee is decided by the CBDTon the basis of from where the assessee is either carrying the business or where the assessee is residing which is also provided by the provisions of section 120 of the Act. Nowhere in the statute it has been provided that PAN address will decide the territorial jurisdiction of the AO. Section 139A merely provides who are the persons required to obtain PAN having regard to the nature of transaction of business and other conditions laid down that, AO may allot a PAN and other procedure and mechanism of allotment of the PAN. The territorial jurisdiction is decided by the CBDT in terms of Section 120 only. (Hon'ble ITAT Delhi in ACIT vs. M/s. UV Realtors Pvt. Ltd., ITA No.6033/Del/2016, PB Page no. 67-68) In view of the above, it is submitted that an order which is passed without jurisdiction is non est in the eyes of law. Considering the fact that at the time of assessment, the

P a g e | 76 ITA No. 209/JPR/2024 Naresh Kumar appellant was residing, earning income and filing his return of income at Gurgaon, the assumption of jurisdiction by the Ld. PCIT at Jaipur was invalid. (Hon'ble ITAT Mumbai in Jeeri Keerthana Reddy vs. ITO, ITA No. 3224/Mum/2023, PB Page no. 79-80) It is, therefore, Most respectfully prayed that the order of the Ld. PCIT under section 263 of the Act is without proper jurisdiction and, therefore, deserves to be quashed. Your Honours may kindly be pleased to pass such other order as deemed fit.

ld. AR of the assessee filed the copy of the following judicial precedent;

Attachment Particulars Page No. Nos. 1 Hon’ble ITAT Mumbai in RDC Ventures vs. PCIT, [2024] 159 1-45 taxmann.com 395 2 Hon’ble ITAT Delhi in ACIT vs. M/s UV Realtors Pvt. Ltd. ITA 46-69 No. 6033/Del/2016 3 Hon’ble ITAT Mumbai in Jeeri Keerthana Reddy vs. ITO, ITA No. 70-80 3224/Mum/2023

which was raised as additional ground. On that aspect he submitted the fact

that the assessee has filled the ITR from 2011-12 page 2 of submission dated

22.08.2024 wherein the AO was mentioned in the ITR is that ACIT-Circle,

Guragon since then the assessee is filling the return of income at that address

P a g e | 77 ITA No. 209/JPR/2024 Naresh Kumar and therefore, invoking the jurisdiction by the ld. PCIT is wrong and the additional ground be decided based on that facts already on record.

So far as the merits of the dispute she submitted that the case of the assessee was selected for scrutiny wherein the issue of chargeability of interest has been raised vide notice dated 11.06.201 and the assessee filed a detailed reply on the issue on 22.06.2021 vide point no 3 & 4. The ld. AO examined the claim of the assessee and taken a view that the interest received by the assessee falls under the provision of section 10(37) of the Act. Thus, when the ld. AO has verified the issue and applied his mind the ld. PCIT has no jurisdiction to impose upon her view on the issue and that is why the order is neither erroneous nor prejudicial to the interest of the revenue. To drive home to the contention so raised she relied upon the written submission and the judicial precedent cited therein.

P a g e | 78 ITA No. 209/JPR/2024 Naresh Kumar 14. The apple of discord in the case is that when the ld. AO having verified the issue which the ld. PCIT is raising can again be raised as per provision of section 263 of the Act or not.

Record reveals that the issue of chargeability of interest received by the assessee for an amount of Rs. 1,48,69,130/- was verified by the ld. AO. Ld. AO to verify that issue raised a specific query vide point no. 3 & 4 of the notice dated 11.06.2021 [ page 26 of the paper book dated 04.06.2024]. Assessee replied to that questions raised vide letter dated 22.06.2021 [ paper book page 28 ] wherein the assessee submitted that the interest was granted to the assessee as per provision of section 28 of the Land Acquisition Act. The assessee also with that reply submitted the required proof for receipt of compensation and filed copy of the judicial precedent in support of the claim that the interest so received u/s. 28 of the Land Acquisition Act is covered as per provision of section 10(37) of the Act. Having considered the reply with proof ld. AO considered the claim and allowed it as exempt u/s. 10(37) of the Act. Thereby ld. AO completed the assessment by taking a plausible view on the matter. That view taken by the ld. AO is plausible view and that view once taken cannot be considered as erroneous or prejudicial to the interest of the revenue based on the facts available on record.

P a g e | 79 ITA No. 209/JPR/2024 Naresh Kumar 15. Whereas the contention of the ld. PCIT is that the provision of section 145B(1) of the Act states that notwithstanding anything to the contrary in section 145 of the Act, the interest received by an assessee on any compensation or enhanced compensation of land shall be deemed to the income of the previous year in which it is received. As per the provision of section 56(2)(viii) of the Act, income by way on interest received on compensation shall be chargeable to income tax under the head “Income from other sources”. Section 56(2)(viii) of the Act was inserted by the Finance Act, 2009 w.e.f. 01.04.2010. Therefore, ld. PCIT hold that the ld. AO failed to apply his mind on the material available on record and failed to invoke the applicable provision of law. Thus, she noted that this action of the ld. AO resulted into erroneous order and due to non-application of mind it has caused prejudice to the interest of the revenue.

P a g e | 80 ITA No. 209/JPR/2024 Naresh Kumar Commissioner 243 ITR 83 (SC), the Hon’ble Supreme Court held as follows :-

P a g e | 81 ITA No. 209/JPR/2024 Naresh Kumar October, 2019 dismissed the Department’s appeal affirming the view taken by the Bombay High Court in ITA No.1761 of 2016, dated February 11, 2019, wherein the High Court held that the question whether the income should be taxed as business income or has arisen from other source was a debatable issue and the Assessing Officer had taken the plausible view that it was a business income after due enquiries and therefore not open for the Commissioner to take such an order in revision.

If any one of them is absent, i.e., if the assessment order is not erroneous but it is prejudicial to the Revenue, provision of section 263 cannot be invoked. Here since ld. AO has already verified the issue and taken a view which is in accordance with the law, on that aspect provision of section 263 cannot be

P a g e | 82 ITA No. 209/JPR/2024 Naresh Kumar invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, than the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue’ has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to review his own order.

Even in the present case, ITA No.209/JPR/2024 whether the receipt of interest related to the additional compensation granted under Land Acquisition Act, 1894 is a part of exempt income as per provision of section 10(37) of the Act or not was verified by the ld. AO and he has taken a plausible view which was in accordance with the provision of law. Thus, following the ratio laid down by the Hon’ble Supreme Court in Malabar

P a g e | 83 ITA No. 209/JPR/2024 Naresh Kumar Industrial Co. Ltd. vs. Commissioner of Income Tax (supra) and other decisions mentioned above, I am of the considered opinion that the impugned order of the Ld. PCIT is found to be erroneous, accordingly, order impugned of the Ld. PCIT is hereby quashed.

P a g e | 84 ITA No. 209/JPR/2024 Naresh Kumar has passed the order which I would find that the same is in accordance with the law and does not attract the clause ;

(a) i.e. the order is passed without making inquiries or verification which should have been made; or

(b) the order is passed allowing any relief without inquiring into the claim”

to explanation 2 of section 263 of the Act and thus, it is nothing but a change of opinion which is not permitted in the eyes of the law. In the light of the aforesaid discussion, I hold that the order of the PCIT is not in accordance with the provisions of section 263 of the Act.

P a g e | 85 ITA No. 209/JPR/2024 Naresh Kumar Interest under section 28 unlike interest under section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) in section 45(5) by the Finance Act, 2003 with effect from 1-4-2004.” • The order in the case of Manjit Singh (HUF) has been considered in the case of Ghanshyam (HUF). • The order in the case Hari Singh & Others in CA No.1504/2017 dated 15.09.2007 – held – While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer( s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1 (SC) in order to ascertain whether the interest given under the said provision amounts to compensation or not. • The order in the case GovindbhaiMamaiya 367 ITR 498 (SC) dated 04.09.2014 – Reiterated that “it is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act." • In the case of Ghanshyam (HUF), the Hon’ble Supreme Court equated the interest received u/s 28 of LA with compensation. It was held that the interest is accretion to the value of compensation and hence it is a part of compensation. • In the case of Hari Singh (HUF), the Hon’ble Supreme Court reiterated the above proposition.

In the result the appeal of the assessee is allowed.

P a g e | 86 ITA No. 209/JPR/2024 Naresh Kumar Order of the Hon’ble Vice President (Third Member):- The present appeal is directed at the instance of the assessee against the order of ld. Commissioner of Income Tax [in short ‘the CIT’] dated 07.02.2024 passed u/s 263 of the Income Tax Act, 1961 in assessment year 2019-20.

“6.1 In view of the above decisions and discussion, with a view to ensuring consistency and preventing judicial inconsistency that may dilute public confidence, I deem it to be a fit case to seek a reference to the Hon'ble President to constitute a Special Bench on the issue involved and discussed above. "In view of insertion of provisions of section 56(2)(viii) of the Income Tax ACT and enforcement of amendments made as per Finance Act. 2009 w.e.f. 01/04/2010, whether the decision of Hon'ble Apex Court in CIT v Ghanshyam (HUF) [2009] 182 Taxman 368 comes to the rescue of the assessee to claim that amount of interest received on compensation or enhanced compensation is to be dealt with under "Capital gains" or as per provisions of section 56(2)(viii) said amount of interest received on compensation or enhanced compensation is to be dealt under the head 'Income from other sources"? Registry to take steps accordingly in accordance with rules. Sd/- (Narinder Kumar) Judicial Member

P a g e | 87 ITA No. 209/JPR/2024 Naresh Kumar placed before the ld. JM who thereafter put it before the ld. AM. The ld. AM did not concur with the view of the ld. JM and passed a dissenting order. He drafted the question of difference which reads as under : “Since, the order under challenge is not to decide a question as to whether on the facts and circumstances of the case the provision of section 10(37) or that of the provision of section 56(2)(viii) will apply but is to decide the invocation of the provision of section 263 of the Act. Based on that set of facts available on record, I do not agree with the proposal of learned Brother Member to refer the issue before the Hon'ble President to constitute a Special Bench on the issue as framed vide his order dated 02.04.2025 placed before me. Based on this fact I propose a reference to Hon'ble third member through proper channel to decide the question as to: 1. "Whether based on the facts and circumstance of the case when the Id. AO has verified the issue of chargeability of interest in hands of the assessee and taken a plausible view. Whether that view taken by the Id. AO which is one of the plausible view can be subjected to revision as per provision of section 263 of the Act or not."

P a g e | 88 ITA No. 209/JPR/2024 Naresh Kumar 6. First, I take the first question, “whether ld. CIT has rightly taken action u/s 263 of the Income Tax Act or not ? 6.1 The brief facts of the case are that assessee has filed his return of income on 10.07.2019 declaring an income of Rs.9,81,530/-. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) of the Income Tax Act was issued and served upon the assessee. According to the AO, he has issued questionnaire and assessee has filed replies to those questionnaires. Thereafter, AO, without making any discussion, accepted the returned income. The ld. CIT was of the view that Assessing Officer has accepted the return without examining the issue and therefore, his order is erroneous which has caused prejudice to the interests of the Revenue. The ld. CIT was of the view that assessee had received an amount of Rs.1,48,69,136/- which falls in the nature of interest as contemplated in Section 145B(1) read with Section 56(2)(viii) and Section 57(iv) of the Income Tax Act. The ld. CIT thereafter made an elaborate discussion by taking cognizance of the above provisions as well as Section 28 of the Land Acquisition Act, 1894. He has reproduced the submissions made by the assessee. The relevant findings of the ld. CIT read as under : 5. The assessee in his reply has stated that interest on enhanced compensation received under section 28 of the Land Acquisition Act, 1894, is not taxable as per the Income Tax Act, 1961. The assessee has also relied on Board's Circular No.36/2016 dated 25/10/2016 on the subject relating to taxability of compensation received by the land owner for land acquired under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Re-settlement Act, 2013. The assessee has also relied upon various judgments of the Hon'ble Supreme Court and High Courts. The reply of the assessee has been considered and perused carefully but the same was not found tenable.

P a g e | 89 ITA No. 209/JPR/2024 Naresh Kumar 6. The provisions of section 145B(1) of the Act states that notwithstanding anything to the contrary in section 145 of the Act, the interest received by an assessee on any compensation or on enhanced compensation of land shall be deemed to be the income of the previous year in which it is received. As per the provisions of section 56(2)(viii) of the Act, income by way of interest received on compensation shall be chargeable to income tax under the head Income from Other Sources'. Section 56(2)(viii) of the Act was inserted by the Finance Act, 2009 w.e.f. 01/04/2010. Further section 57(iv) of the Act provides that in case of income of the nature referred to in section 56(2)(vii), a deduction of a sum equal to fifty percent of such income shall be allowed. As per the provisions of above section, interest income i.e. 50% of total Rs.1,48,69,136/- is liable to be taxed. Thus there is an error in the assessment order under reference. 7. As discussed above, the Assessing Officer failed to apply his mind on the material available on record and failed to invoke the applicable provisions of law. This in turn has resulted in passing of an erroneous order by the AO in the case due to non-application of mind to relevant material, an incorrect assumption of facts and an incorrect application of mind to the law which is prejudicial to the interest of the revenue and hence liable for revision under section 263 of the Act. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT 243 ITR it has held as under- “……….An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same categoryfall orders passed without applying the principles of natural justice or without application of mind." 8. Considering all the facts and circumstances of the case and for the reasons discussed ai the assessment order dated 08/09/2021 for A.Y. 2019-20 passed by the AO is held to be erroneous in so far as it is prejudicial to the interest of the revenue for the purpose of section 263 of the Act. The said order has been passed by the AO in a routine and casual manner without applying the applicable sections of the Act. The AO has not verified under the details which were required to be verified under scope of scrutiny. The order of the AO is, therefore, liable to revision under the explanation (2) clause (b) and clause (a) of section 263 of the Act. The assessment order is set aside to be made afresh in the light of the observation made in this order. The AO is required to make necessary verification in respect of the observations made in this order after allowing reasonable opportunity to the assessee.

P a g e | 90 ITA No. 209/JPR/2024 Naresh Kumar 7. With the assistance of ld. Representative, I have gone through the record carefully. Before I embark upon an enquiry on the facts and issues agitated before me to find out whether the action u/s 263 of the Act, deserves to be taken against the assessee or not, it is pertinent to take note of this Section. It reads as under:- “263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income Tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) “record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.

P a g e | 91 ITA No. 209/JPR/2024 Naresh Kumar (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.”

P a g e | 92 ITA No. 209/JPR/2024 Naresh Kumar to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. 8.1 A perusal of sub-clause (c) of the above would contemplate that if any order, which is subject matter for revision under section 263 is challenged in appeal, then, on the items which are subject matter of appeal, no power under section 263 could be exercised by the ld. Commissioner. We may elaborate further, for example- an assessment order was passed, it contains five issues, which were challenged before the ld. CIT(A), but ld. Assessing Officer failed to look into few issues, which may arise from the record, then inspite of the assessment order being challenged before the ld. CIT(A), the ld. Commissioner would have jurisdiction on such items, which are not subject matter of appeal in that assessment order. 8.2 At this stage, before considering the multi-fold contentions of the ld. Representatives, I deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon’ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has

P a g e | 93 ITA No. 209/JPR/2024 Naresh Kumar propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.

P a g e | 94 ITA No. 209/JPR/2024 Naresh Kumar 9. In the light of the above, let us examine the facts of the present case. A perusal of the record would indicate that copy of the notice u/s 143(2) dated 31.03.2021 is placed at page 18. Similarly, copy of the notice dated 11.06.2021 issued u/s 142(1) has been placed on page 19. A perusal of this questionnaire would reveal that at Sr.No.3 of the annexures exhibiting the questions asked by the AO would reveal as under : “In your ITR, you have claimed an amount of Rs.1,48,69,130/- exempt income being interest received on enhanced compensation on land acquisition and in this regard, kindly furnish copies of all relevant orders and supporting evidence for receiving the amount so claimed.” 9.1 Apart from this one questionnaire, ld. AO made 9 more queries. The assessee has replied and submitted that since it has received enhanced compensation u/s 28 of the Land Acquisition Act, 1894, it falls within the ambit of compensation, hence it is not taxable. The assessee has filedcopies of Award passed by the Land Acquisition Collector under Section 9 of the Land Acquisition Act 1894. He also placed copy of the letter dated 11.06.2021 exhibiting the fact that this amount was paid @ 9% and 15% u/s 28 of the Land Acquisition Act. The AO was of the

P a g e | 95 ITA No. 209/JPR/2024 Naresh Kumar view that as per the judgement of Hon'ble Supreme Court in the case of Ghanshyam, HUF 315 ITR 1, the alleged interest u/s 28 is akin to compensation, therefore, not taxable. The AO accepted the claim of the assessee, though he has not made any discussion. It is pertinent to observe that assessee has no control over the AO as to in which manner, he would draft the assessment order. But it is discernable from the record that AO has raised a specific query on the receipt of alleged compensation u/s 28 of the Land Acquisition Act. The assesseehas replied. Therefore, it is to be construed that AO must have gone through the questionnaire as well as reply of the assessee and after satisfying himself, did not make addition. 9.2 On the other hand, ld. CIT was of the view that after the amendment by Finance Act, 2009 w.e.f. 01.04.2010, 50% of the alleged interest deserves to be taxed u/s 57(iv) read with Section 56(2)(vii). Thus, he treated the assessment order as erroneous. 10. The ld. counsel for the assessee relied upon her submissions made before the Division Bench as well as before the AO whereas ld. CIT DR, on the other hand relied upon the order of the ld. CIT and put emphasis on the ground that after the amendment by Finance Act,

P a g e | 96 ITA No. 209/JPR/2024 Naresh Kumar 2009, any interest received by the assessee would be taxable. This

amendment was brought only to consider these aspects which has been

resulted due to the decision of the Hon'ble Supreme Court in the case of

Ghanshyam, HUF.

record carefully. I would like to take note of the findings of the Hon'ble

Supreme Court in the case of Ghanshyam, HUF from paragraph No. 22

to 25 and 29 to 36 which read as under :

“22. Section 23(1A) was introduced in the 1894 Act to mitigate the hardship caused to the owner of the land who is deprived of its enjoyment by taking possession from him and using it for public purpose, because of considerable delay in making the award and offering payment thereof [See : Assistant Commissioner, Gadag Sub-Division, Gadag v. MathapathiBasavannewwa and others - AIR 1995 SC 2492]. To obviate such hardship, Section 23(1A) was introduced and the Legislature envisaged that the owner is entitled to 12% per annum additional amount on the market value for a period commencing on or from the date of publication of the notification under Section 4(1) of the 1894 Act upto the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. The additional amount payable under Section 23(1A) of the 1894 Act is neither interest nor solatium. It is an additional compensation designed to compensate the owner of the land, for the rise in price during the pendency of the land acquisition proceedings. It is a measure to offset the effect of inflation and the continuous rise in the value of properties. [See: State of Tamil Nadu and others etc. v. L. Krishnan and others etc. - AIR 1996 SC 497]. Therefore, the amount payable under Section 23(1A)

P a g e | 97 ITA No. 209/JPR/2024 Naresh Kumar of the 1894 Act is an additional compensation in respect to the acquisition and has to be reckoned as part of the market value of the land. Sub-section (1A) of Section 23 was introduced by Land Acquisition (Amendment) Act, 1984. It provides that in every case the Court shall award an amount as additional compensation at the rate of 12% per annum on the market value of the land for the period commencing on and from the date of publication of the notification under Section 4(1) to the date of the award of the Collector or to the date of taking possession of the land, whichever is earlier. In other words sub- section (1A) of Section 23 provides for additional compensation. The said sub-section takes care of increase in the value at the rate of 12% per annum. 23. In addition to the market value of the land, as above provided, the Court shall in every case award a sum of 30% on such market value, in consideration of the compulsory nature of acquisition. This is under Section 23(2) of the 1894 Act. In short, Section 23(2) talks about solatium. Award of solatium is mandatory. Similarly, payment of additional amount under Section 23(1A) is mandatory. The award of interest under Section 28 of the 1894 Act is discretionary. Section 28 applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. The compensation awarded by the Court includes the additional compensation awarded under Section 23(1A) and the solatium under Section 23(2) of the said Act. This award of interest is not mandatory but is left to the discretion of the Court. Section 28 is applicable only in respect of the excess amount, which is determined by the Court after a reference under Section 18 of the 1894 Act. Section 28 does not apply to cases of undue delay in making award for compensation [See: Ram Chand & others etc v. Union of India & Ors. - 1994(1) SCC 44]. In the case of Shree Vijay Cotton & Oil Mills Ltd. v. State of Gujarat - (1991) 1 SCC 262, this Court has held that interest is different from compensation.

P a g e | 98 ITA No. 209/JPR/2024 Naresh Kumar 24. To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34. 25. It is clear from reading of Sections 23(1A), 23(2) as also Section 28 of the 1894 Act that additional benefits are available on the market value of the acquired lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation. It was held by the Constitution Bench of the Supreme Court in Sunder v. Union of India - (2001) 7 SCC 211, that "indeed the language of Section 28 does not even remotely refer to market value alone and in terms it talks of compensation or the sum equivalent thereto. Thus, interest awardable under Section 28, would include within its ambit both the market value and the statutory solatium. It would be thus evident that even the provisions of Section 28 authorise the grant of interest on solatium as well." Thus solatium means an integral part of compensation, interest would be payable on it. Section 34 postulates award of interest at 9% per annum from the date of taking possession only until it is paid or deposited. It is a mandatory provision. Basically Section 34 provides for payment of interest for delayed payment. Taxability of additional compensation and interest under Section 45(5) of the 1961 Act in the context of the provisions of L.A. Act, 1894” x xx “29. From Section 45 it is clear that capital gains are not income accruing from day to day. It is deemed income which arises at a fixed point of time, viz, date of transfer.

P a g e | 99 ITA No. 209/JPR/2024 Naresh Kumar Section 45(5), newly inserted by the Finance Act, 1987, w.e.f. 1.4.88 and subsequently amended, retrospectively w.e.f. 1.4.88, by the Finance Act, 1991, enacts overriding provision and takes care of a situation – where the capital gains arise from the transfer of a capital asset, being a transfer by way of compulsory acquisition and the compensation for such transfer stands enhanced in stages by any court, tribunal or authority. In such a situation, the capital gains so arising is, for and from assessment year 1988-89, has to be dealt with as under : - (i) the capital gains computed with respect to the compensation awarded in the first instance would be chargeable as Income under the head "Capital Gains" of the previous year in which such compensation or part thereof was first received; and (ii) amount by which compensation or consideration is enhanced or further enhanced by the court, tribunal or authority is to be Deemed Income chargeable under the head "Capital Gains" of the previous year in which such amount is received by the assessee. 30. For the said purpose, the cost of acquisition is to be taken as Nil [See: Explanation (i)]. Also, where the enhanced compensation is received by any person, other than the transferor by reason of the death of the transferor or for any reason, the amount of such additional compensation or additional consideration is to be deemed to be the income of the recipient of the previous year in which such amount is received by him. 31. Two aspects need to be highlighted. Firstly, Section 45(5) of the 1961 Act deals with transfer(s) by way of compulsory acquisition and not by way of transfers by way of sales etc. covered by Section 45(1) of the 1961 Act. Secondly, Section 45(5) of the 1961 Act talks about enhanced compensation or consideration which in terms of L.A. Act 1894 results in payment of additional compensation. 32. The issue to be decided before us - what is the meaning of the words "enhanced compensation/consideration" in Section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept of the year of taxability.

P a g e | 100 ITA No. 209/JPR/2024 Naresh Kumar 33. It is to answer the above questions that we have analysed the provisions of Sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, Section 23(1A) provides for additional amount. It takes care of increase in the value at the rate of 12 % per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under Section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) in Section 45(5) by the Finance Act, 2003 w.e.f.1.4.2004. This newly added clause envisages a situation where in the assessment for any year,- -the capital gain arising from the transfer of a capital asset is computed by taking the- -compensation or consideration referred to in clause (a) of section 45(5) or, as the case may be, -enhanced compensation or consideration referred to in clause (b) of section 45(5), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority.

P a g e | 101 ITA No. 209/JPR/2024 Naresh Kumar 34. In such a situation, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. For giving effect to such recomputation, the provisions of the newly inserted (w.e.f. 1.4.2004) section 155(16) by the Finance Act, 2003 (32 of 2003), have been enacted. 35. It was urged on behalf of the assessee that Section 45(5)(b) of the 1961 Act deals only with re-working, its object is not to convert the amount of enhanced compensation into deemed income on receipt. We find no merit in this argument. The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1.4.88 as an overriding provision. As stated above, compensation under the L.A. Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale etc. Hence, the legislature had to step in and say that as and when the assessee-claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1.4.04 and Section 155(16) which refers to a situation of a subsequent reduction by the Court, Tribunal or other authority and recomputation/amendment of the assessment order. Section 45(5) read as a whole (including clause "c") not only deals with re- working as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/paid under 1894 Act at different stages, the receipt of such enhanced compensation/consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the Court/Tribunal/Authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute),

P a g e | 102 ITA No. 209/JPR/2024 Naresh Kumar the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1.4.04, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under Section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under Section 23(1A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification. 36. Having settled the controversy going on for last two decades, we are of the view that in this batch of cases which relate back to assessment years 1991-92 and 1992-93, possibly the proceedings under the L.A. Act 1894 would have ended. In number of cases we find that proceedings under the 1894 Act have been concluded and taxes have been paid. Therefore, by this judgment we have settled the law but we direct that since matters are decade old and since we are not aware of what has happened in Land Acquisition Act proceedings in pending appeals, the recomputation on the basis of our judgment herein, particularly in the context of type of interest under Section 28 vis-`-vis interest under Section 34, additional compensation under Section 23(1A) and solatium under Section 23(2) of the 1894 Act, would be extremely difficult after all these years, will not be done.” 11.1 There is no dispute with regard to the proposition that land of the

assessee was acquired under the Land Acquisition Act of 1894. Hon'ble

P a g e | 103 ITA No. 209/JPR/2024 Naresh Kumar Supreme Court has specifically laid down that compensation awarded to an assessee u/s 28 of the Land Acquisition Act, 1894 would be akin to compensation granted originally by the Land Acquisition Collector. In other words, it is a different matter that nomenclature is used as interestbut actually it is only compensation which is a capital receipt. Thus, ld. AO has taken one of the possible views in the law and ld. CIT has committed an error in taking action u/s 263 of the Income Tax Act. I concur with the view of the ld. AM on this fold of difference. Accordingly, order of the ld. CIT is not sustainable on this aspect. 12. The next question is whether this alleged interest deserves to be assessed in the hands of the assessee or not. This aspect has been considered by the Hon'ble Kerala High Court wherein an identical issue was involved. The ld. counsel for the assessee has placed on record copy of the order of the Hon'ble Kerala High Court dated 11.04.2025 passed in ITA No. 32 of 2023. Since it is identical on the issue, therefore, I deem it appropriate to take cognizance of this order elaborately. The substantial question of law considered by the Hon'ble High Court and the reasoning given thereon reads as under : “5. In the appeals before us, the appellants raise the following substantial questions of law:

P a g e | 104 ITA No. 209/JPR/2024 Naresh Kumar i. In the facts and circumstances of the case, ought not the Tribunal have allowed the claim of exemption on entire additional compensation received as the original compensation received was found to be entitled for exemption under Section 10(37) of the Act. ii. In the facts and circumstances of the case, ought not the Tribunal have allowed the entire additional compensation received by the appellant including 9% interest received and 15% interest received and one received under Section 28 of the Land Acquisition Act, more so in view of certificate issued by the learned Tahsildar. iii. In the facts and circumstances of the case, ought not the Tribunal have allowed the application filed under Section 154 of the Act more so, when the several High Court have taken a view in consonance with the Application filed by the Appellant. 6. We have heard the learned senior counsel Sri. Anil D. Nair, assisted by Adv.Sri.Aaditya Nair for the appellants in these appeals and Sri.P.G.Jayashankar, the learned Standing Counsel for the Income Tax Department. 7. On a consideration of the rival submissions and after perusing the precedents relied upon by the learned counsel, we feel that a discussion of the issue must be preceded by an examination of the relevant statutory provisions under the I.T. Act. "Section 2(28 A): Definitions. 2. In this Act, unless the context otherwise requires,-- (28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised; Section 10(37): Incomes not included in total income.— 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where-- (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2; (ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his; (iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; (iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. Explanation.--For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority; Section 45(5): 45. Capital gains. (5) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:--

P a g e | 105 ITA No. 209/JPR/2024 Naresh Kumar (a) the capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as 2[income under the head "Capital gains" of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received]; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which such amount is received by the assessee: [Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which the final order of such court, Tribunal or other authority is made;] (c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. Explanation.--For the purposes of this sub-section,-- (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil; (ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988; (iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head "Capital gains", of such other person. Section 56(1), (2) (viii): Income from other sources.— 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub- section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely:-- (viii) income by way of interest received on compensation or on enhanced compensation referred to in sub-section (1) of section 145B. Section 57 (iv): Deductions 57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely:- (iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section. Section 145: Method of accounting 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub section (2), be

P a g e | 106 ITA No. 209/JPR/2024 Naresh Kumar computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in subsection (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. Section 145B: Taxability of certain income. 145B. (1) Notwithstanding anything to the contrary contained in section 145, the interest received by an assesseeon any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year." 8. On a conjoint reading of the above statutory provisions, it is clear that amounts received by an assessee as compensation or enhanced compensation for compulsory acquisition of his landed property would be treated as income under the head of 'Capital Gains for the purposes of the I.T. Act. If the said compensation amounts are received in relation to agricultural property, then by virtue of the provisions of Section 10 (37) of the I.T. Act, the amounts would stand excluded from the total income of the assessee for the purposes of the I.T. Act. As for the interest amounts received by an assessee in terms of Section 28 or Section 34 of the LAA, it is debatable as to whether the said interest would qualify as interest for the purposes of the I.T. Act as well going by the definition of the term under Section 2 (28A) of the I.T. Act. This is because there are conflicting precedents on the issue as to whether the interest paid to an assessee for delayed payment of compensation for compulsory acquisition of his land partakes the character of the compensation itself or merely that of an interest payment [[Dr. Sham Lal Narula v. Commissioner of Income-Tax, Punjab, Jammu and Kashmir, Himachal Pradesh and Patiala - [(1964) 53 ITR 151]; Puneet Singh v. Commissioner of Income-Tax - [(2019) 415 ITR 215 (P&H)]; Mahender Pal Narang v. Central Board of Direct Taxes and Others - [(2020) 423 ITR 13 (P&H)]; Mahender Pal Narang v. Central Board of Direct Taxes and Others - [(2024) 462 ITR 498 (SC)]; T.N.K. Govindaraju Chetty v. Commissioner of Income-Tax, Madras - [(1967) 66 ITR 465]; Bikram Singh and Others v. Land Acquisition Collector and Others - [(1997) 10 SCC 243]; Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) - [(2009) 8 SCC 412]; Commissioner of Income-Tax, Faridabad v. Chet Ram (HUF)] - [(2018) 15 SCC 270]; Commissioner of Income Tax, Rajkot v. GovindbhaiMamaiya - [(2014) 16 SCC 449]; Principal Commissioner of Income Tax 10 v. Inderjit Singh Sodhi (HUF) - [MANU/DE/2633/2024]; Manjet Singh (HUF) v. Union of India and Ors. - [MANU/PH/3409/2014] &Manjet Singh (HUF) Karta Manjeet Singh v. Union of India and Ors. -[[MANU/SCOR/55128/2014]]. 9. Going by the nature of the payment of interest under the LAA, we are inclined to hold that the payment of interest on delayed payment of compensation to an assessee, be it under Section 28 or Section 34 of the LAA, would partake the character of the principal

P a g e | 107 ITA No. 209/JPR/2024 Naresh Kumar compensation itself since it is essentially paid to compensate the assessee for the loss he suffered on account of not having the use of the principal compensation amount at the time when it fell due. We cannot lose sight of the fact that compensation amounts paid to a person towards compulsory acquisition of his property traces its roots to the constitutional obligation to pay such compensation under Article 300A of the Constitution. Recent judicial pronouncements have also recognised the right to property as a human right. In Dharnidhar Mishra (D) &Anr. v. State of Bihar & Ors. [(2024) 10 SCC 605] the court pointed out that although the right to property ceased to be a fundamental right by the Constitution (44th Amendment) Act, 1978, it continues to be a human right in a welfare state, and a constitutional right under Article 300A of the Constitution. Accordingly, the State cannot dispossess a citizen of his property except in accordance with the procedure established by law. The court went on to observe that the obligation to pay compensation, though not expressly included in Article 300A, can be inferred from that Article since the court has recognized the right to property as a basic human right. That apart, recently in Kolkata Municipal Corporation &Anr. v. Bimal Kumar Shah & Ors. - [(2024) 10 SCC 533] the court, while rejecting the contention of the Corporation that it had effectively acquired the property of a citizen, drew a distinction between a statutory provision that confers a power of acquisition to the Corporation and other provisions that dealt with the procedure to be followed in the exercise of that power. The court found that Article 300A of the Constitution, that prohibited the deprivation of property of a citizen save as authorized by law, conferred on a citizen seven sub-rights viz. (i) the right to a notice of the proposed acquisition, (ii) the right to be heard on the objections if any to such proposal (iii) the right to a reasoned decision thereon (iv) the right to insist that the acquisition could only be for a public purpose (v) the right to restitution or fair compensation (vi) the right to an efficient and expeditious process and (vii) the right to a conclusion of the proceedings. In essence, the court saw the concepts of substantive and procedural due process as integral aspects of the phrase 'authority of law' in Article 300A of the Constitution. The developed jurisprudence on property rights therefore unambiguously points to the necessity of treating interest payments for delayed payment of principal compensation amounts for compulsory acquisition of property, as an accretion to the compensation amount itself. For a citizen whose property has been compulsorily acquired by the State, the right to receive the compensation in full accrues from the date of his dispossession and any statutory interest paid to him for delayed payment of the principal compensation amounts partakes the character of the compensation itself. This is irrespective of whether the interest that is paid is under Section 28 or Section 34 of the LAA because the interest payments under both of the said provisions are premised on the same rationale [See: The constitution bench decision in Sundar v. Union of India (2001) 7 SCC 211]. 10. In the light of the discussion above, we hold that interest amounts received by an assessee in respect of delayed payment of compensation under the LAA will be treated as accruals to the principal compensation amount and be classified as "Capital Gains' for the purposes of the I.T. Act. Consequently, the interest amounts will also get the benefit10 (37) of the I.T. Act if the land compulsorily acquired is agricultural land. Further, since the interest amounts so received are not in the nature of interest as defined under Section 2 (28A), the provisions of Section 56 of the I.T. Act will not be attracted in such cases. While the provisions of Section 56 (2)(viii) deal with interest on compensation or enhanced compensation, the said reference to compensation or enhanced compensation need not be seen as made in connection with compulsory acquisition of property. The

P a g e | 108 ITA No. 209/JPR/2024 Naresh Kumar applicability of Section 56 (2)(viii) will depend upon whether or not, in the particular factual situation, the interest amount can be treated as different in nature from the principal compensation amount. The upshot of the above discussions is that these appeals are allowed by answering the questions of law raised therein in favour of the assessee and against the revenue 13. I put it specifically to the ld. CIT DR, that is there any contrary decision available from the jurisdictional High Court? but she replied in negative. 14. Considering the above situation, I deem it appropriate to take the decision in favour of the assesseeon the basis of single judgement favourable to the assessee brought to my notice by the ld. counsel for the assessee. Therefore, on the second ground also, I am of the view that alleged compensation of Rs.1,48,69,136/- received by the assessee is not taxable in the hands of the assessee.

P a g e | 109 ITA No. 209/JPR/2024 Naresh Kumar 16. The Registry is directed to place this order before the Division Bench for giving effect to the order of the Third Member. Order pronounced on 05.05.2026. Sd/- (RAJPAL YADAV) VICE PRESIDENT 3. Final Disposal of the appeal:- In accordance with the majority opinion, comprising the opinion of the Hon’ble Accountant Member and the Hon’ble Third Member, the appeals are decided as under:- Hon’ble AM:- “When ld. AO has already considered the claim of the assessee based on the evidence and submission, that view without proving it as contrary to the provision of the Act cannot be subjected to review under the provision of section 263 of the Act.”

Hon’ble Vice President (Third Member):- “Ld. AO has taken one of the possible views in the law and ld. CIT has committed an error in taking action u/s 263 of the Income Tax Act. I concur with the view of the ld. AM on this fold of difference. ……. Therefore, on the second ground also, I am of the view that alleged compensation of Rs.1,48,69,136/- received by the assessee is not taxable in the hands of the assessee.”

P a g e | 110 ITA No. 209/JPR/2024 Naresh Kumar The Ld. CIT(A) could not have taken cognizance u/s 263 of the Act on the issue which is debatable and the AO has taken one of the possible view and the compensation received in the shape of interest u/s 28 of the Land Acquisition Act 1894 cannot be assessed as income of the assessee u/s 10(37), 56(2)(vii) of the Act. 4. Conclusion:- In effect, the appeal of the assessee is allowed. Order pronounced in the open court on 28.09.2026

Sd/- Sd/- (T.R. Senthil Kumar) (Annapurna Gupta) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 28.09.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order, Asst. Registrar ITAT, Jaipur