SH. BHARAT BHUSHAN ,SIRSA vs. PR. CIT, HISAR

आदेश/Order

PER ANNAPURNA GUPTA, A.M.

All the above appeals have been filed by different assessees

against separate orders passed by the Principal Commissioner of

Income Tax, Hisar [in short referred to as Pr.CIT] all dated 26.02.2018 u/s 263 of the Income Tax Act, 1961 ( hereinafter referred to as 'the Act') and all relating to assessment year 2013-14.

was common ground, was on account of identical issue relating to taxability of interest received u/s 28 of the Land Acquisition Act,(in

short referred to as “LAA) 1894. Since common issue was involved

in all the above appeals, they were taken up together for hearing

and are being disposed of by way of this common order.

assessee in ITA 597/CHD/2018 and our decision rendered in this

appeal would apply mutatis-mutandis to all the other appeals.

ITA Nos. 597 to 600 & 602/CHD/2018 Page 3 of 9

597/CHD/2018 :

1.1 That order dated 26.2.2018 u/s 263(1) of the Act by learned Principal Commissioner of Income Tax, Hisar has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such. 1.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Principal Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view.

1.2 That various adverse findings and observations made by the learned Pr. Commissioner of Income Tax in order are based on fundamental misconception of facts and law, arbitrary and unjustified and therefore untenable.

1.3 That the finding that "assessment order has not been passed in accordance with the provisions of the Income Tax Act, 1961 and in accordance with the decision rendered by jurisdictional High Court and Supreme Court by rejecting the SLP, therefore the order is erroneous in so far as it is prejudicial to the interest of revenue" is also not based on correct appreciation of facts on record and hence unsustainable.

1.4 That the learned Principal Commissioner of Income Tax otherwise has failed to appreciate that once an order has been made u/s 143(3)/147 of the Act then, no notice can be issued to revise an order u/s u s 143(3) of the Act as order u/s 143(3) of the Act merges with an order u/s 143( 3)/147 of the Act.

ITA Nos. 597 to 600 & 602/CHD/2018 Page 4 of 9

CIT noted from the assessment record of the assessee that during

the impugned year, certain land belonging to it was acquired by the

Land Acquisition Officer, HUDA and compensation, enhanced

compensation and interest thereon were awarded in lieu thereof by

HUDA/various Courts. As a result, the assessee received interest

on enhanced compensation amounting to Rs. 27,23,225/- u/s 28 of

the Land Acquisition Act during the year under consideration and

claimed whole of the interest exempt as capital gains earned from

sale of rural agricultural land, in view of the judgement of the

Hon'ble Apex Court delivered in the case of Ghanshyam, HUF

reported at 315 ITR 1 (2009). The Pr. CIT noted that the Hon'ble

Punjab & Haryana High Court in its judgement in the case of Manjit

Singh Vs Union of India & others in CWP No. 15006 of 2013 had

observed that the benefit of two Judges Bench decision of the Apex

Court in the case of Ghanshyam, HUF could not be derived by the

assessee and held that the said interest awarded by the Court on

enhanced compensation u/s 28 of the Land Acquisition Act fell for

taxation u/s 56 of the Income Tax Act,1961 as 'income from other

sources' in the year of receipt. The ld. Pr. CIT further noted that

SLP against the above order had been dismissed by the Hon'ble

Supreme Court vide their order dated 18.12.2014. The ld. Pr. CIT,

therefore, noted that the issue of taxability of interest awarded u/s

28 of the L.A. Act, 1894 had become final. He, therefore, confronted

the assessee as to why the assessment order passed in the present

case was not erroneous since the AO had not subjected the same to

tax. Detailed reply was filed by the assessee, reproduced at para 3

of the order after considering which the ld. Pr. CIT held that the

ITA Nos. 597 to 600 & 602/CHD/2018 Page 5 of 9

interest received u/s 28 of the L.A. Act, 1894 was taxable as in view

of the amended provisions of Section 56 sub-section (2) sub-clause

(viii), 57(iv)and Section 145A(b) of the Act and in view of the larger

Bench decision of the Apex Court in the case of Dr. Shamlal Narula

Vs CIT (1964) 53 ITR 151, Bikram Singh Vs Land Acquisition

Collector (1997) 224 ITR 551 and Sunder Vs Union of India JT 2001

(8) SC 130 (Constitution Bench) which had held that interest u/s 28

was akin to interest u/s 34 and did not form part of the

compensation but was taxable as revenue receipt. The ld. Pr. CIT

held that these decisions had been followed by the jurisdictional

High Court in the case of Manjit Singh (supra) while holding that the

decision of the Apex Court in the case of Ghanshyam, HUF was not

good law and hence would not apply. The ld. Pr. CIT further held

that the Hon'ble jurisdictional High Court in another case i.e.

Naresh Kumar Jain & Ors. Vs State of Haryana & Ors. in CWP

14728 of 2017 dated 12.07.2017 had again held that no benefit can

be derived by assessees from the decision of the Apex Court in the

case of Ghanshyam, HUF. Considering the same, the ld. Pr. CIT held

that the assessment order passed by the AO u/s 143(3) of the Act,

having failed to add 50% of the interest income as per the provisions

of Section 56(2)(viii), 57(iv) and 145A(b) of the Act under the head

'income from other sources' ,and having not properly examined the

facts of the case and accepted the version of the assessee without

due examination of the issue of interest on enhanced compensation,

was erroneous in so far as it was prejudicial to the interests of the

Revenue. He, therefore, set aside the order passed by the AO

restoring it to the AO for making fresh assessment with the direction

ITA Nos. 597 to 600 & 602/CHD/2018 Page 6 of 9

to add 50% of interest income to the assessed income of the

assessee.

assessee pointed out that subsequent to the decision passed by the

Hon'ble jurisdictional High Court in the case of Naresh Jain

(supra),which was heavily relied upon by the ld. Pr. CIT in his order

for stating that the proposition laid down by the Apex Court in the

case of Ghanshyam, HUF stood overruled, and that interest u/s 28

was liable to tax as 'income from other sources', the Hon'ble Apex

Court had categorically reiterated its decision rendered in the case

of Ghanshyam, HUF in the case of Union of India & Ors. Vs Hari

Singh & Ors. in CA No. 15041/2017 dated 15.09.2017. It was

pointed out that the decision of the jurisdictional High Court in the

case of Naresh Jain was dated 12.07.2017, while the Apex Court

had reiterated the decision rendered in the case of Ghanshyam, HUF

subsequently in September,2017 and therefore, the proposition laid

down by the Apex Court was the law of the land following which

interest u/s 28 of the LAA,1894,was in the nature of enhanced

compensation and not in the nature of interest and therefore, had

been rightly not returned to tax by assessees. It was pointed out

that in view of the same, there was no error in the order of the AO

and the jurisdiction assumed by ld. Pr. CIT, therefore, was

erroneous.

CIT.

contention of the ld. counsel for the assessee. Undoubtedly the ld.

ITA Nos. 597 to 600 & 602/CHD/2018 Page 7 of 9

Pr. CIT had heavily relied on the decision of the jurisdictional High

Court in the case of Manjit Singh (supra) and more specifically in

the case of Naresh Jain (supra) to hold that the proposition laid

down by the Apex Court in the case of Ghanshyam, HUF that

interest received u/s 28 of the Land Acquisition Act, 1894 was part

of the enhanced compensation, was not good law. As rightly pointed

out by the ld. counsel for the assessee the Hon'ble Apex Court has

reiterated the aforesaid proposition in the case of Hari Singh (supra)

subsequent to the decision passed by the Hon'ble High Court in the

case of Naresh Jain (supra).We have gone through the order of the

Apex Court in the case of Hari Singh and find that the Union of

India had come before the Supreme Court against the decision of the

High Court in writ petition filed by the asseseees before the High

Court. The issue before the High Court was that the assessees had

received enhanced compensation on which tax had been deducted at

source as per the provision of Section 194LA of the Act. The

assessee had contended that no tax was deductible on the same as

land was agricultural land and without examining these facts, taxes

had been deducted at source. The Hon'ble High Court had directed

refund of the taxes to the assessees and had directed the Land

Acquisition Officer/Collector to examine whether their lands were

agricultural or not and decide whether taxes were liable to be

deducted therefrom as per the provisions of the Act. The Union of

India had come in appeal before the Hon'ble Supreme Court against

this order of the High Court stating that it was the Assessing Officer

who was capable of determining the nature of land as being

agricultural or not for the purposes of taxability under the Income

Tax Act, 1961. The same was agreed to by the Hon'ble Apex Court

ITA Nos. 597 to 600 & 602/CHD/2018 Page 8 of 9

and they had, therefore, directed the AO to examine this aspect and

further categorically stated that the proposition laid down by it in

Ghanshyam, HUF(supra) vis a vis interest received u/s 28 of the

LAA,1894 be kept in mind to ascertain whether the interest received

amounts to compensation or not. The relevant findings of the

Hon'ble Supreme Court in this regard are as under :

We find force in the submission of the learned Additional Solicitor General insofar as the challenge to the direction given to the Land Acquisition Collector to determine as to whether the land in question is agricultural land or not. Since the Land Acquisition Collector had . already deducted tax at source and deposited with the Income Tax Department, in such circumstances, better course of action, which is in consonance with the provisions of Income Tax Act, is for the respondents to approach the concerned Assessing Officer(s) and to raise the issue that no tax is payable on the compensation/enhanced compensation which is received by them as their land was agricultural land. Once such an issue is raised before the Assessing Officer(s), it is for the Assessing Officer(s) to examine the facts of each case and then apply the law as contained in the Income Tax Act to determine the aforesaid question. Insofar as these cases are concerned, we allow these appeals by setting aside the directions contained in paragraph 7 and substitute the same with the following directions: (1) The respondents shall file appropriate returns before the Assessing Officer(s) in respect of Assessment Years in question within a period of two months from today in case they feel that the compensation in respect of land belonging to them which had been acquired was agricultural land, and claim refund of the tax which was deducted at source and deposited with the Income Tax Department. On the filing of these returns, the Assessing Officer(s) shall go into the aforesaid question and wherever it is found that the compensation was received in respect of agricultural land, the tax deposited with the Income Tax Department shall be refunded to these respondents. (2) 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 'Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF)' [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not. (3) The direction to refund the amount of Tax Deducted at Source (TDS) to the Land Acquisition Collector is, accordingly, set aside. However, in those cases where the amount has already been refunded, no interference is called for and it will be for the Income Tax Department to proceed in accordance with the provisions of Income Tax Act.

(4) Where such notices have not already been issued or assessments have not already been made, if such an action is taken within a period of two months from today, issue of limitation would not come in the way of the Income Tax Department. This order is passed having regard to the fact that the present proceedings were pending in this Court because of which it was not possible for the Income Tax Department to issue these notices earlier.

ITA Nos. 597 to 600 & 602/CHD/2018 Page 9 of 9

down by the apex court in the case of Ghanshyam HUF(supra) ,in its

latest decision in the case of Hari singh (supra), we hold that there

is no error in the order of the AO treating the interest received by

them u/s 28 of the LAA,1894,as compensation following the

proposition laid down by the apex court in Ghanshyam

HUF(supra).The order passed by the Ld.Pr.CIT u/s 263 is therefore

set aside.

rest of the appeals was identical to that in the present appeal, our

decision rendered herein will apply mutatis mundis to the other

appeals also following which we allow the rest of the appeals filed by

the assessees.

Order pronounced in the Open Court on 11th Jan.,2019.

Sd/- Sd/-

(संजय गग�) (अ�नपूणा� गु�ता) (SANJAY GARG) (ANNAPURNA GUPTA) �या�यक सद�य/ Judicial Member लेखा सद�य/ Accountant Member आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar