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Facts
The assessee received compensation of Rs. 6,06,67,714/- for compulsory acquisition of land and claimed it as exempt under Section 10(37) of the IT Act, treating it as agricultural income. The return was processed under Section 143(1) by the CPC, which disallowed the exemption. The CIT(A) upheld the AO's order, stating the land was stock-in-trade and not a capital asset.
Held
The Tribunal held that the assessee's claim for exemption under Section 10(37) was not substantiated as it failed to prove the compensation was received under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The case was remanded to the Assessing Officer for fresh adjudication.
Key Issues
Whether compensation received for compulsory acquisition of land is exempt from income tax under Section 10(37) when the assessee fails to prove it was received under the specific Act, especially when the land was considered stock-in-trade.
Sections Cited
10(37), 143(1), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2019-20 Sanket Kailas Pawar, Vs. ITO, Ward-1(5), RL-191, Krushnakunj Aurangabad. Banglow, G Block, Sambhaji Nagar, Chinchwad, Pune- 411019. PAN : BUGPP3328D Appellant Respondent Assessee by : Shri Prateek Jha & Shri Prayag Jha Revenue by : Shri Amit Bobde Date of hearing : 28.10.2025 Date of pronouncement : 09.12.2025 आदेश / ORDER PER VINAY BHAMORE, JM: Both the above captioned appeals filed by the assessee are directed against the separate orders dated 30.03.2024 and 07.12.2024 passed by Ld. Addl./JCIT(A)-2, Noida [‘Ld. CIT(A)’] for the assessment year 2019-20 respectively.
Since identical facts and common issues are involved in both the above captioned appeals of the assessee, we proceed to dispose of the same by this common order.
First, we shall take up the appeal of the assessee in for adjudication as the lead case.
4. The appellant has raised the following grounds of appeal :-
1. The Ld AddI/JCIT(A) erred in not appreciating that the ADIT, CPC, had made adjustment in the total income returned without issuing intimation to the assessee of his intention do so and the intimation issued is bad in law liable to be set aside.
2. The Ld AddI/JCIT(A) erred in not appreciating that the ADIT, CPC, had carried out adjustment under section 143(1) which was beyond the scope of this section and the adjustment made was bad in law.
3. The Ld AddI/JCIT(A) erred in not appreciating that the land acquired compulsorily was agricultural land and the gain made on such acquisition was exempt from income tax under section 10(37) of the IT Act.
4. The Ld AddI/JCIT(A) erred in not appreciating that the assessee was a farmer not engaged in any business activity during the AY 2019-20 and the asset acquired was agricultural land and the Income Tax Return was prepared by a professional who was not aware of the full facts of the case.
5. The Ld AddI/JCIT(A) erred in not appreciating that the information given in the ITR about the business activity was not Income Tax Professional wrongly. 6. The Ld AddI/JCIT(A) erred in not appreciating that the land acquired under Maharashtra MIDC Act was agricultural land and the assessee, the owner of the said land, was a farmer not carrying out any business activity during the A Y 2019-20. 7. The above grounds of appeal are without prejudice to one another.
8. The appellant craves leave to furnish Additional Evidence which may be relevant to the above Grounds of Appeal in course of the appeal proceedings.
9. The appellant craves leave to amend or alter any of the above Grounds of Appeal or to add new Grounds of Appeal during the course of appeal proceedings.”
5. The appellant has raised the following additional grounds of appeal :- “1. The Ld CIT(A), NFAC, Delhi, erred in confirming the adjustment Rs.6,06,67,714/- made under section 143(1) of the IT Act ignoring the fact that this amount was received as compensation for compulsory acquisition land and was exempt from Income Tax as per the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, Rules and related Notifications.”
6. Facts of the case, in brief, are that the assessee is an individual and has furnished its return of income on total income of Rs.1,35,410/-. In the return of income the assessee shown income of Rs.6,06,67,714/- under the head ‘business and profession’ and claimed exemption u/s 10(37) of the IT Act. The return was processed u/s 143(1) of the IT Act by CPC on 20.05.2020 by Rs.6,08,03,120/- after rejecting assessee’s claim for exempt income u/s 10(37) of the IT Act amounting to Rs.6,06,67,714/-. In response to application for rectification u/s 154 of the IT Act, the Assessing Officer vide order dated 24.01.2022 rejected the rectification application filed by the assessee u/s 154 of the IT Act.
Being aggrieved the assessee preferred an appeal before Ld. CIT(A). After considering the reply of the assessee, Ld. CIT(A) dismissed the appeal filed by the assessee by observing as under :- “5.1 In view of the foregoing discussions, I find no merit in the ground of appeal raised by the appellant. The appellant's contention that the compensation received for compulsory acquisition of land is exempt under section 10(37) of the Income-tax Act, 1961, is not supported by the facts of the case or the current legal position. 5.2 The land in question was clearly held as stock-in-trade of the appellant's real estate business, and not as a capital asset. The income arising from its transfer, even if by way of compulsory acquisition, is taxable as business income and not eligible for exemption under section 10(37) of the Act. 5.3 The Assessing Officer's order rejecting the rectification application under section 154 of the Act is therefore upheld. The appellant is not entitled to the exemption claimed under section 10(37) of the Act for the amount of Rs. 60,667,714/- received as compensation for compulsory acquisition of land. 5.4 In the result, the appeal is dismissed.”
8. It is the above order against which the assessee is in appeal before the Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A) is unjustified. Ld. AR submitted before the bench that in the return of income exemption u/s 10(37) of the IT Act was claimed. Ld. AR also furnished an application before the bench for admission of additional ground with regard to claim of exemption of Rs.6,06,67,714/- received towards compensation for compulsory acquisition of land under the right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act 2013. Ld. AR submitted before the bench that even if in the return of income the income was shown as business income and exemption was claimed u/s 10(37) of the IT Act the assessee is entitled to claim exemption in the light of right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013. In support of this Ld. AR submitted before the bench the copy of right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Rules, 2014 and also furnished CBDT Circular No.36/2016 dated 25.10.2016 wherein it has been clarified that exemption from income tax is available to landowners with respect to agricultural land as well as non-agricultural lands. Accordingly, Ld. AR requested before the bench to allow the exemption on compensation of Rs.6,06,67,714/- received on compulsory acquisition of land under right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013. In support of its contentions Ld. AR relied on the judgement passed by Hon’ble High Court of Chhattisgarh in the case of Sanjay Kumar vs. Income Tax Officer (2025) 178 taxmann.com 446.
Ld. DR appearing from the side of the Revenue relied on the orders passed by the subordinate authorities and requested to confirm the same.
We have heard Ld. counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that it is the claim of the assessee that an amount of Rs.6,06,67,714/- received as compensation on compulsory acquisition of land is exempt under right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013. However Ld. AR fairly accepted that in the return of income due to the mistake of the counsel the amount was shown as business income as well as exempt u/s 10(37) of the IT Act being agricultural land. In this regard, we find that CPC before making the prima-facie adjustments issued communication dated 06.02.2020 bearing DIN No.CPC/1920/G22/1973618210 with regard to proposed adjustment of Rs.6,06,67,714/- u/s 143(1)(a) of the IT Act and subsequently on 20.05.2020 issued the impugned intimation u/s 143(1) of the IT Act determining total income of Rs.6,08,03,124/-. The assessee then furnished an application u/s 154 of the IT Act for rectification. Vide order dated 24.01.2022 the Assessing Officer rejected the application u/s 154 of the IT Act filed by the assessee. The assessee than preferred an appeal before Ld. CIT(A) and after considering the reply Ld. CIT(A) dismissed the appeal filed by the assessee by observing that the assessee himself showing the impugned land as stock in trade against which the compensation was received by the assessee.
Before the bench in the shape of additional ground it was the contention of Ld. counsel of the assessee that the impugned amount of Rs.6,06,67,714/- is exempt since it was received by the assessee Land Acquisition Rehabilitation and Resettlement Act, 2013. In this regard the copy of above Act and CBT Circular No.36/2016 dated 25.10.2016 was produced before the bench according to which the compensation received under the above act against agricultural land as well as received against non-agricultural land both was exempted from income tax. However during the course of hearing Ld. counsel of the assessee was unable to prove that the compensation of Rs.6,06,67,714/- was received under right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013.
Considering the totality of the facts of the case and in the interest of justice, we deem it appropriate to set-aside the order passed by Ld. CIT(A) and remand the matter back to the file of the Jurisdictional Assessing Officer with a direction to decide the issue afresh in view of our above discussion & also in the light of case law Sanjay Kumar vs. Income Tax Officer (supra) relied on by the assessee and as per fact and law after verifying the claim of the assessee that the compensation amount of Rs.6,06,67,714/- was received under right to fair compensation and transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013 after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by the Jurisdictional Assessing Officer in this regard and to produce documents, evidences, submissions, explanations, additional evidences in support of its contentions without taking any adjournment under any pretext otherwise the Jurisdictional Assessing Officer shall be at liberty to pass appropriate order as per law. Accordingly, the additional ground raised
by the assessee is allowed for statistical purposes.
14. Since the additional ground raised by the assessee is admitted and allowed for statistical purposes the other grounds raised by the assessee becomes infructuous and are not adjudicated.
15. In the result, the appeal filed by the assessee in is allowed for statistical purposes.
: 16. Since the facts and issues involved in the appeal of the assessee in