C I T KOTA vs. H H MAHARAO BHIM SINGH and ORS

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 143 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH & ORS ----Respondent Connected With D.B.INCOME TAX APPEAL No. 109 / 2008 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 750 / 2008 C I T KOTA ----Appellant Versus H H MAHRAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 785 / 2008 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 786 / 2008 C I T KOTA

2 ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 814 / 2008 C I T KOTA ----Appellant Versus H H MAHARO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 815 / 2008 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 1 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 2 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent

3 D.B.INCOME TAX APPEAL No. 3 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 4 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 33 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH & ORS ----Respondent D.B.INCOME TAX APPEAL No. 34 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 35 / 2009 C I T KOTA ----Appellant Versus

4 H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 36 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 112 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 113 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 114 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 115 / 2009 C I T KOTA

5 ----Appellant Versus H H MAHRAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 116 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 117 / 2009 C I T KOTA ----Appellant Versus H H MAHRAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 138 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH & ORS ----Respondent D.B.INCOME TAX APPEAL No. 139 / 2009 C I T KOTA ----Appellant Versus H H MAHRARAO BHIM SINGH ----Respondent

6 D.B.INCOME TAX APPEAL No. 140 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 141 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 142 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 144 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 171 / 2009 C I T KOTA ----Appellant Versus

7 H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 172 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 173 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH & ORS ----Respondent D.B.INCOME TAX APPEAL No. 174 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 340 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 595 / 2009 C I T KOTA

8 ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 597 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 600 / 2009 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 230 / 2011 C I T KOTA ----Appellant Versus H H MAHARAI BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 231 / 2011 C I T KOTA ----Appellant Versus H H MAHARAO SH BRIJ RAJ SINGH ----Respondent

9 D.B.INCOME TAX APPEAL No. 253 / 2011 C I T KOTA ----Appellant Versus H H MAHARAO BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 255 / 2011 C I T KOTA ----Appellant Versus H H MAHARAI BHIM SINGH ----Respondent D.B.INCOME TAX APPEAL No. 258 / 2011 C I T KOTA ----Appellant Versus H H MAHARAO SH BRIJ RAJ SINGH ----Respondent D.B.INCOME TAX APPEAL No. 304 / 2011 C I T KOTA ----Appellant Versus H H MAHARAI BHIM SINGH ----Respondent __________________________________________ For Appellants : Ms Parinitoo Jain For Respondents : Mr. P.K. Kasliwal __________________________________________

10 HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon'ble Jhaveri, J. 14/12/2016 1. All these appeals arise out of the common order of the Tribunal, whereby the tribunal has decided the issue against the department. Since the appeals raise identical questions of law and facts, hence are decided by this common judgment. 2. While admitting the appeal, this Court has framed following substantial questions of law: “(1) Whether under the facts and circumstances of the case and in law the Tribunal was justified in confirming the annulment of assessment order by CIT (A) in the second round of litigation when the issue of notice u/s. 148 had attained finality in order dated 30.9.1999 as the assessee did not file the further appeal? (ii) Whether on the facts and in the circumstances of the case the ld. ITAT is justified in holding that correct status for taxing the compensation received fromdefence on account of let out portion is individual and not the HUF despite the fact that assessee himself was disputing the status as well as the head of income in the original income tax returns filed by him in the individual capacity? (iii) Whether on the facts and in the circumstances of the case the ld. Tribunal is justified in confirming the order of the CIT (A) admitting the additional ground of assessee’s appeal that all material facts were disclosed in the return of income and reopening of the assessment was bad in law consequently annulling the assessment ignoring the fact that returns of the years under consideration were filed by the assessee without showing annual compensation from the defence department hence it could not be said that all material facts were disclosed in the return of income by the assessee? In view of the revenue is supported by the decision of Hon’ble Rajasthan High Court in the case of M/s Aditya Mills Ltd. vs. UOI 214 ITR 669 (1995) in which Hon’ble Court has held that reopening the assessment is valid because the assessee has failed to disclose fully and truly material facts to the department? (iv) Whether on the facts and in the circumstances of the case the ld. Tribunal is justified in holding that annual compensation received from the defence department is assessable under the

11 head income from house property, which is exempt from tax u/s 10 (19A) for ex-ruler ignoring the fact that the compensation was received from open land and the income from vacant plot is not taxable under the head income from house property, the ld. ITAT has totally ignored the decision of Hon’ble Rajasthan High Court in the case of Maharaval Laxamn Singh vs CIT 160 ITR 103 in which it has been held that if a part of the palace is let out if cannot be said that the entire palace was in the occupation of the ruler and on this issue Hon’ble Surpeme Court has also held in the case of Mohd Ali Khan vs CWT 224 ITR 672 that the building or any portion of the building which is in actual possession of a ruler or will only be exempt?” 3. The facts of the case are that the assessee is a former ruler of the State. Originally the assessment in this case was completed at an income of Rs. 42,47,245/- plus agricultural income of Rs. 10,000/-on 25/3/99 u/s 147 of the I.T. Act on protective basis. The above order dated 25/03/99 u/s 147 was set aside by the CIT(A), Raj-II, Jaipur in her common order dated 30/09/99 in appeal Nos. 56,53,54,55,57,58,60,59,61& 62/99-2000 giving therein the following direction to decide the came afresh- (I) question of status be first decided by the AO as to whether the appellant is taxable in his individual capacity or in the HUF status for the asst. years 1986-87 to 1990-91. (ii) Whether the amounts taxable are to be assessed on “receipt basis” or “accrual basis”. (iii) to give a finding whether the income is taxable under the head ‘Income from Other Sources’ or’ Income from House Property’. 4. Notice u/s 143 (2) was issued to the assessee on 29/01/2002 which was duly served on him on 01/02/2002. In compliance to above notice shri M.C. Bhandri, C.A & A/R of the assessee appeared from time to time and the case was discussed with him. 5. The assessee originally filed return in the status of

12 ‘Individual’ on 19/06/91 declaring an income of Rs. 8,75,650/- and the assessment was completed at an income of Rs. 9,72,310/- plus agriculture income of Rs. 10,000/- u/s 143(3) on 26/02/93 of the I.T. Act 1961. In the return filed on 19/06/91 in the “Individual’ capacity the assessee has appended the following note:- “The correct status is of HUF but as per the provision of I.T. Act. 1961 and as per sec. Of I.T. Act, 1961 the return is being filed in “Individual’ capacity”. 6. In a separate sheet enclosed with his return of income the assessee has also appended the following note:- “ The Ummed Bhawan land has requisitioned by the Defence Department of Govt. of India for national use and no rental income has so far been decided till the end of the year. The same may be considered as per laid in the first decision however, the same would also be exempt in like manner as it is a part of Ummed Bhawan Ex- Ruler official residence hence exempt as detailed note given given above.” 7. The assessee has also stated that in the asst. years 1973-74 to 1977-78 the Hon’ble Rajasthan High court has held that the rental income from the portion of the official residence known as Ummed Bhawan was also exempt u/s 10 (19A) of the I.T. Act. 1961. 8. Subsequently information was received that open land in Ummed Bhawan Palace campus admeasuring 902.187 acres has been requisitioned/hired by the ministry of Defence @ Rs. 3,630/- per acre per annum. It was also noticed that following payments have been made by the defence department to the assessee.

13 Amount Date of cheque Rs. 40,00,000/- 17/01/84 Rs.20,00,000/- 26/03/84 Rs.1,25,98,630/- 14/07/86 Rs.3,46,54,218/- 14/09/93 Rs.33,28,303/- 13/01/94 Rs. 33,28,303/ 16/12/94 Rs. 50,97,318/- 26/03/96 9. Since the income received by the assessee referred to above was not covered by the decision of the Rajasthan High court and since the assessee has failed to disclose fully truly all the material facts necessary for his assessment, the Assessing Officer believed that the income of Rs. 32,74,935/- on accrual basis during the period relevant to asst. year 1990-91 has escaped assessment. Accordingly notice u/s 148 was issued to the assessee on 20/03/97 by DCIT Circle, Kota in the ‘Individual’ status on 20/03/97 after obtaining necessary sanction from the Commissioner of Income tax, Jaipur with his satisfaction remarks on the impugned proposals. 10. The assessee originally filed return in the status of ‘Individual’ on 19/06/91 declaring an income of Rs. 8,75,650/- and the assessment was completed at an income of Rs. 9,72,310/- plus agriculture of Rs. 10,000/- u/s 143(3) 26/02/93 of the I.T. Act. 1961. In the return filed on 19/06/91 in the ‘individual’ capacity the assessee has appended the following note:- “The correct status is of the HUF but as per the

14 provisions of I.T. Act, 1961 and as per sec. Of I.T. Act. 1961 the return is being filed in ‘individual’ capacity”. In a separate sheet enclosed with his return of income, the assessee has also appended the following note:- “ The Ummed Bhawan land has requisitioned by the Defence Department of Govt. of India for national use and no rental income has so far been decided till the end of the year. The same may be considered as per laid in the first decision however, the same would also be exempt in like manner as it is a part of Ummed Bhawan Ex-Ruler official residence hence exempt as detailed note given above.” 11 Subsequently, some information was received that open land in Ummed Bhawan Palace campus admeasuring 902.187 acres has been requisitioned /hired by the Ministry of Defence @ Rs. 3,630/- per acre per annum and the following payments have been made by the defence department to the assessee. Amount Date of cheque Rs.40,00,000/- 17/01/84 Rs.20,00,000/- 26/03/84 Rs.1,25,98,630/- 14/07/86 Rs.3,46,54,218/- 14/09/93 Rs.33,28,303/- 13/01/94 Rs.33,28,303/- 16/12/94 Rs.50,97,318/- 26/03/96 12. According to the AO, above income received by the assessee was not covered by the decision of the Rajasthan High Court. The AO thus opined that the assessee has failed to disclose fully truly all the material facts necessary for his

15 assessment and believed that the income of Rs. 32,74,935/- on accrual basis during the period relevant to asst. Year 1990-91 has escaped assessment. Accordingly notice u/s 148 was issued to the assessee on 20/03/97 by DCIT Circle, Kota in the “Individual” status on 20/03/97 after obtaining necessary sanction from the Commissioner of Income tax, jaipur with his satisfaction remarks on the impugned proposals. 13. Identical issue in the case of same assessee was pending before the Supreme Court by way of Civil Appeal No.2812/2015 whereby recently in the decision of the Supreme Court rendered on 05.12.2016, it has been held that the income which has been earned by the former ruler as his income from the requisition of the property is not taxable and in view thereof, the question No.(iv) in relation to taxability of income on requisitioned property is covered by the decision of the Supreme Court. 14. Consequently, the other questions which are framed with regard to section 147 and 148 of the Act in our view have been rendered academic inasmuch as the income which has been derived by the assessee is not taxable and no fruitful purpose would be served by examining the issue. In that view of the matter, the appeals deserve to be dismissed. 15. The appeals are dismissed. A copy of the judgment be placed in each of the file. (DINESH MEHTA)J. (K.S. JHAVERI)J. Bm gandhi/93 to 124