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Income Tax Appellate Tribunal, AHMEDABAD ‘D’ BENCH, AHMEDABAD
By way of this appeal, the assessee-appellant has challenged correctness of the order dated 29th May 2015, passed by the learned CIT(A)-13, Ahmedabad, in the matter of assessment under section 143(3) r.w.s. 148 of the Income-tax Act, 1961, for the assessment year 2009-10.
Grievances raised by the appellant are as follows:-
“1. The learned CIT(A) has erred both in law and on the facts of the case in dismissing the appellant's ground of appeal challenging the validity of notice issued u/s 148 of the Act as regards re-opening the assessment. On the facts and circumstances of the case, learned CIT(A) ought to have held that notice u/s 148 of the Act and the consequential re-assessment proceedings are invalid. The same be held so now.
The learned CIT(A) has erred both in law and on the facts of the case in not appreciating that the Id AO had not provided reasons recorded for reopening which is gross violation of law and therefore the order passed u/s 147 read with 143(3) ought to have been quashed on this short ground only by the Id. CIT(A).
I TA N o. 2 5 0 7/ Ah d 2 01 5 Na r a ns a ng L Pa r ma r V s. I TO Ass e ss me n t Y ea r : 2 0 09 - 1 0 Page 2 of 4 3. The learned CIT(A) and AO has erred both in law and on the facts of the case in not appreciating that the interest on enhanced compensation was received on agriculture land, and therefore, was exempt u/s 10(37) of the Income Tax Act, 1961. Under the circumstances, the Id. CIT(A) has erred in law in confirming the action of Id. AO in making addition of Rs.6,91,470/- in the hands of the Appellant on receipt basis.
Alternatively and without prejudice to above, the learned CIT(A) and AO ought to have appreciated that as per the settled proposition of law the interest on enhanced compensation cannot be taxed on receipt basis but on accrual basis. Under the circumstances, the Id. CIT(A) has erred in law in confirming the action of Id. AO in making addition of Rs.6,91,470/- in the hands of the Appellant on receipt basis in the year under consideration and not on accrual and pro-rata basis in the year under consideration.
Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s 234A/B/C of the Act.
The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s 27I(1)(c) of the Act.”
When this appeal was called out for hearing, learned counsel submitted that the issue in appeal is covered, on merits and in favour of the assessee, by Hon’ble jurisdictional High Court’s judgement in the case of Movaliya Bhkhubhai Balabhai Vs. ITO [(2016) 70 taxmann.com 45 (Guj.)] wherein it has been held that interest received by the assessee under section 28 of the Land Acquisition Act, 1894, is exempt from tax under section 10(37). It was then pointed out that the assessee was granted compensation for land acquired by Sardar Sarovar Nigam Ltd and the assessee was thereafter granted additional compensation along with interest thereon amounting to Rs.6,27,215/- on late payment of compensation. Taking note of Hon’ble Supreme Court’s judgment in the case of CIT Vs. Ghanshyam [(2009) 182 Taxman 368 (SC)], Assessing Officer treated this amount as taxable income. In appeal, this action was confirmed by the CIT(A), and the assessee is thus in further appeal before us.
I TA N o. 2 5 0 7/ Ah d 2 01 5 Na r a ns a ng L Pa r ma r V s. I TO Ass e ss me n t Y ea r : 2 0 09 - 1 0 Page 3 of 4 4. Learned Departmental Representative did not seriously dispute the legal position canvassed by the learned counsel and agreed that the interest granted under section 28, in the light of Hon’ble jurisdictional High Court’s judgment in the case of Movalia Bhikhubhai Balabhai (supra), is exempt from tax, but he contended that there is nothing on record to show that interest was awarded under section 28. He vehemently relied upon the orders of the authorities below.
We find that there is a categorical finding by the CIT(A), at pages 11-12 of his order, that “perusal of the statement issued to the appellant by the prescribed authority shows that this compensation received during the year includes the interest under section 28 of the Land Acquisition Act”. We further note that Hon’ble jurisdictional High Court has, in the case of Movalia Bhikubhai Balabhai (Supra), has observed as follows:-
“13. The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression "interest" as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for non-deduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head "income from other sources" on the interest paid to it under section 28 of the Act of 1894.”
The view so expressed by Their Lordships binds us. Respectfully following the same, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to exclude the impugned amount of Rs.6,91,470/- from taxable income of the assessee. As we have decided the issue on merits, we see no need to deal with other legal issues raised in the grounds of appeal.
In the result, appeal is allowed in the terms indicated above. Pronounced in the open court today on the 16th November, 2018
Sd/- Sd/-
Justice P P Bhatt Pramod Kumar (President) (Vice President) Ahmedabad, the 16th day of November, 2018 **bt
I TA N o. 2 5 0 7/ Ah d 2 01 5 Na r a ns a ng L Pa r ma r V s. I TO Ass e ss me n t Y ea r : 2 0 09 - 1 0 Page 4 of 4
Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File
By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
Date of dictation: .......4 pages manuscripts of hon’ble VP attached– 08.11.2018... 2. Date on which the typed draft is placed before the Dictating Member: .. 11.11.2018..... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: …16.11.2018... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .. 16.11.2018. 5. Date on which the file goes to the Bench Clerk : . …16.11.2018…. 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......