RAJAT MADAAN,HARYANA vs. ITO WARD 1, HARYANA

Since the above captioned two appeals were heard together and the facts in issues are identical except for difference in amounts, both the appeals are being disposed of by this common order for the sake of convenience and brevity. 3. The grounds of appeal raised by the assessee in ITA Nos. 8249 & 8250/Del/2025 are identical mutatis mutandis, except for the change in figures. The grounds read as under: 1. On facts and in law the learned assessing officer is unjustifed in rejecting application under section 154 of the Income Tax Act. 2. On facts and in law the learned assessing officer is unjustified in treating interest received from compensation of Rs.1,01,34,752/- agriculture land covered under section 28 of the compensation act as taxable. 3. On facts and in law the learned assessing officer and CIT (Appeals) is unjustified in rejecting rectification order as it is mistake apparent from records. 4. On facts and in law the learned assessing officer and CIT(Appeals) can pass rectification order resulting out of judicial pronouncements announced later on. The appellant may crave to add, alter or modify any of the grounds of appeal on or before the date of hearing. 5. On facts and in law the rectification order has been passed beyond the time prescribed under section 154(8) is thus illegal and time barred.” 4. Brief facts of the case are that return of Income was filed by the assessee on 29.07.2016 declaring an income of Rs.1,03,23,252/-, which was processed under section 143(1) of the Act. Later on, the assessee filed a rectification letter requesting to rectify the mistake apparent from records that the Compensation received is covered under Section 28 of the Land Compensation Act and thus is a part of compensation and hence exempt from tax being compensation received from acquisition for agriculture land. This view has been formed resulting from various judicial pronouncements favouring the Assessee and thus the request was made to the Learned Assessing Officer to rectify the mistake apparent. The learned Assessing Officer however, rejected the application filed under section 154 through Order under section 154 of the Act. 5. Being aggrieved by the order of the AO, assessee was in appeal before the ld. CIT(A). The ld. CIT(A) dismissed the appeal of the assessee. 6. Aggrieved assessee is now in appeal before us. 7. Before us, ld. Counsel for the assessee contested the rejection order of the ld. CIT(A) rejecting the petition of appeal under section 154 of the Act. It is submitted that the assessee had filed the return declaring an income of Rs.1,03,23,252/- which was processed under section 143(1) of the Act. It is stated that interest income of Rs.1,01,34,752/- was received on compensation for acquisition of agriculture land under section 28 of the Land Acquisition Act, 1894, hence the same should be considered as exempt from taxation. Accordingly, the assessee filed a rectification petition under section 154 of the Act with regard to exemption of interest received as 3 compensation which was rejected by the AO. Against that order of the AO, the assessee filed petition before the ld. CIT(A) claiming the said interest on compensation as exempt from taxation. The ld. CIT(A) dismissed the appeal of the assessee. 8. Per contra, ld. DR relied on the order of the ld. CIT(A). 9. We have heard the rival submissions and perused the material available on record. We find that the assessee has received interest on compensation for acquisition of land by HSIIDC, Karnal u/s 28 of the LAA,1894, amounting to Rs.2,02,69,503/-. The assessee has filed his return of income declaring the income by way of interest received on compensation u/s 56(viii) r.w. 145B(1) and claimed 50% deduction of the total interest on compensation received, as per the provision of section 57(iv) of the Act. This return was processed under section 143(1) of the Act. Subsequently, the assessee filed an application for rectification under section 154 of the Act claiming that the entire interest received on compensation is exempt which was denied by the AO. The ld. CIT(A) similarly held that the issue of interest on compensation received under section 28 of the Land Acquisition Act, 1894 is a controversial and debatable issue, and is not amenable to rectification under section 154 of the Act. The ld. CIT(A) dismissed the appeal of the assessee stating that the said issue is not covered under section 154 of the Act by observing as under: 4 “5.2 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. The appellant during the course of appeal proceedings has submitted that it has been held by the Apex court and many High Courts and CIT (Appeals) rulings as well that Interest on compensation received under section 28 forms part of compensation itself which is exempt from income tax. The appellant contented that the Commissioner (Appeals) in a series of cases after the return was filed has held that interest received on compensation of agriculture land is part of compensation/enhanced compensation and is thus exempt from tax. The appellant also submitted that that earlier Hon'ble Supreme Court in the case of Ghansham Bros. vs. CIT and CIT vs. vs. Gobind Gobind B Bhai Mamaiya 367 ITR 498(SC), Union of India & others vs. Hari Singh and Others has already held that interest received under section 28 of the land compensation act is part of compensation itself and is exempt from tax. 5.3 The appellant submitted that it has been held by the Hon'ble Jurisdictional High Court in CIT v Aruna Luthra, 252 ITR 76(P&H) that rectification of an order/intimation can be carried out on the basis of subsequent judgment of the jurisdictional High Court/Supreme Court provided the mistake sought to be rectified is apparent from the record. The appellant also submitted that similar view has been taken in other judgments also, e.g., MEPCO Industries Ltd v CIT, 319 ITR 208 (SC) in which it has been held that a subsequent judgment of the supreme court laying down a principle of law will be applicable across the board and rectification can be done on that basis. 5.4 I find that the issue here is not whether the enhanced compensation and the interest as received u/s 28 of the Land Acquisition Act is exempt under the Income Tax Act, 1961 as interpreted by Hon'ble Supreme Court of India. In normal and plain words it is reiterated that under the Income Tax Act. Therefore, the law as laid down by the Hon'ble Supreme Court of India in the case of CIT Vs. Ghanshyam (HUF) (2009) 315 ITR 1 (SC) and also in the case of CIT Vs. Chet Ram (HUF) dated 12.09.2017, Civil Appeal No. 13053 of 2017 wherein also the Hon'ble Supreme Court has again reiterated the Proposition as laid down in the case of Ghanshyam (HUF) [Supra] is not applicable in the instant case. The same will be applicable at all only at a later stage when the issue is decided as to when the appellant had not claimed the said exemption in his ITR, whether the appellant can ask for rectification of the same u/s 154 of the Act as mistake apparent from record. 5.5 Section 154 of the Act deals with rectification of mistakes apparent from record. The expression used in section 154 of the Act regarding the mistake apparent from the record will have to be construed to be a mistake which is very clear, distinct and apparent. The said mistake should be manifest and could be identified by a mere look and which does not need a long drawn out process of reasoning. It is also true that an issue which is debatable also cannot be decided under section 154. However, when the mistake is glaring and, in a case, where facts are not in dispute then said mistake being one apparent on the face of the record will have to be rectified under section 154. The Section 154 of the Act is meant only to correct mistakes which are apparent from the records and not to cases involving omissions which are debatable and requires further investigation. Therefore, if the appellant has failed to file revised returns then the same deduction cannot be claimed under section 154. It was never been the intention of the legislature to give two options either under section 139(5) or under section 154 for the appellant to rectify the omission to claim deduction for any expenses. The objects of section 139(5) and section 154 are different. In case of omission, the only remedy available is under section 139(5) by filing revised returns. The Rectification proceedings as contemplated under section 154 cannot be converted into assessment proceedings with a view to making fresh claim, which was not made in return of income filed by appellant. 5.6 The Hon'ble Supreme Court of India in the case of Goetze (India) Ltd. Vs CIT reported at 2006(204 CTR SC 182, 2006, 284 ITR 323 SC has held that it is not open to the assessing officer to entertain fresh claim which was neither been claimed by the assessee in the original return nor by filing a revised return. Therefore, the case laws relied on by the appellant are not applicable to the facts of the case as the issue here is not whether the enhanced compensation and the interest as received u/s 28 of the Land Acquisition Act is exempt under the Act but the issue to be decided is when the appellant had not claimed the said exemption in his ITR, whether the appellant can ask for rectification of the same u/s 154 of the Act as mistake apparent from record. In the instant case, appellant was required to revise his income tax return for claiming the interest received on compensation as exempt but he had failed to do so. Therefore I am of the considered view that the AO was correct in rejecting the application u/s 154 of the Act. The appeal on Ground No 1 to 5 are thus treated as dismissed.” 10. We find that the issue of taxability of interest on enhanced compensation is a debatable issue. There are plethora of cases which have decided the issue in favour of the Revenue as well as the assessee. The instant case falls under the jurisdiction of Punjab and Haryana High Court. The hon’ble Punjab and Haryana High Court has decided the issue against the assessee in the case of Mahender Pal Narang [2021] 415 ITR 13(P&H) and Puneet Singh (2019) 415 ITR 215(P&H). We are therefore of the considered view that since the issue involved is controversial and debatable, there is no reason to interfere with the order of the ld. CIT(A). The ground 1 to 5 are accordingly dismissed. 11. The issue in ITA 8250/Del/2025 for AY 2018-19 involves identical issues, the ratio of the decision herein above, applies mutatis mutandis to the facts of this impugned year also. 12. In the result, appeal filed by the assessee in ITA Nos.8249 & 8250/Del/2025 are dismissed. Order pronounced in the open court on 16.10.2026.