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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ NEW DLEHI
Before: SHRI K. NARASIMHA CHARY & SHRI B.R.R. KUMAR
Aggrieved by the order dated 29/11/2017 in appeal No. 373/2016- 17, passed by the learned Commissioner of Income Tax (Appeals)-2, Gurgaon (“Ld. CIT(A)”) in the case of Sh. Dharamveer (“the assessee”), for the assessment year 2014-15, assessee preferred this appeal challenging the addition of Rs.85 Lacs on account of cash borrowings from agriculturists and Rs. 47, 32, 420/-, the interest received on compensation in respect of agricultural land.
Brief facts of the case are that the appellant is an agriculturist. For the assessment year 2014-15 he has filed return of income on 18.03.2015 declaring income at Rs 1,71,200/- towardsincome fromHouse property along with the agricultural income of Rs 94,64,870/- asinterest on compensation from state Government, DRO-cum- LAC, Gurgaon onagricultural land acquired by Haryana Government andpursuant to the notification for acquiring theland issued in the year 2001-02, assessee received the compensation along with interest in the year 2013-14. Assesseetreated the interest on compensation asadditional compensation and shown as exempt income in his return of income.
Assessment was complete under section 144 of the Income Tax Act, 1961 (for short “the Act”), however, the Assessing Officer assessed an income of Rs 1,34,36,670/-by order dated 20.12.2016 by making an addition of Rs. 85 Lacs on account of cash deposited in Punjab National Bank savings account and Rs. 47, 32, 420/- being 50% of interest received on compensation u/s 56(2)(viii) and Rs 33,049/- as interest received on bank deposit and saving bank interest.
Aggrieved by such additions, assessee preferred appeal before the Ld. CIT(A) and contended that the interest on an enhanced compensation granted under section 28 of the Land Acquisition Act is accretion to the value of land acquired and therefore, are non-taxable; and that the assessee being an illiterate and not conversant with the grievances of the Tax Law did not realise the implications in receiving the loan in cash and to substantiate the loan from one Dharam Singh, BishambarDayal and Shree Ram. The assessee claims to have placed material before the Ld. CIT(A).
Ld. CIT(A) however, entertained the doubt as to whether the interest received under section 28 of the Land Acquisition Act is in the nature of interest or is it part of the enhanced compensation and whether the same is taxable under the head of other sources. Ld. CIT(A), though noticed the decisions of the Hon’ble Apex Court in the case of CIT vs. Ghanshyam (HUF) and CIT vs. GovindbhaiMamaiya not applicable to the facts of the case of the a assessee in view of the decision of the Hon’ble Punjab and Haryana High Court in the case of Jagmal Singh vs. state of Haryana by order dated 2/2/2016 and also the amendment of section 145-A (b) of the Act from April 2010.
In respect of the addition of Rs. 85 Lacs which the assessee claims to have obtained by way of loan from Sh. Charan Singh, Dharam Singh and BishamberDayal, Ld. CIT(A) observed that all these three persons had bank accounts, there were regular transactions reflected therein, there was no explanation from the assessee as to why cash loan was taken from these three persons when they could have easily given loan by cheque and more particularly when the assessee was expecting to receive the compensation amount, there was no need to obtain any loan. Ld. CIT(A) therefore, rejected both the contentions of the assessee and confirmed the additions.
First contention of the assessee before us is that, although the case wasselected for “ limited scrutiny “ under CASS but the Ld AO did not concentrate only onthe reasons for which case was selected for “ limited scrutiny’ but went on asking more& more improved reasons without taking prior approval from the competent authorities. By placing reliance on the CBDT Instruction No 20/2015 dated 29.12.2015, he argued that the assessment order is bad. On merits he argued that the interest received on the enhanced compensation partakes the character of the value of the agricultural property in view of the decisions of the Hon’ble Apex Court in the case of CIT vs. Ghanshyam 315 ITR 1 (SC) and union of India vs. Hari Singh 302 CTR 458 (SC) and in view of the fact that the property acquired happens to be an agricultural property any income chargeable under the had “capital gains” arising from the transfer of agricultural land shall not be included in computing the total income of the assessee of the previous year.
Insofar as the addition of Rs. 85 Lacs is concerned, assessee being a person non conversant with the tax laws and the implications of obtaining loan in cash, obtained the same in cash and the fact of the creditors withdrawing the cash from their bank accounts and paying to the assessee stood demonstrated by way of producing the bank statements of the creditors. Ld. AR further submitted that the said amount of loan was subsequently repaid through the banking channels and such fact is evident from the bank statement of the assessee.
Per contra, it is the submission of the Ld. DR that the reason for selection of the case for scrutiny through CASS was stated to be “low income from other source as compared to larger value of fixed assets and the assessee has also transferred one or more properties during the year”, and the expression “low income from other source” takes into its fold the receipt of Rs. 46,21,066/-towards interest on enhanced compensation from the State Government and, therefore, it cannot be said that enquiry of the learned Assessing Officer into such an aspect cannot be said to be in excess of jurisdiction conferred on the learned Assessing Officer under limited scrutiny. He further submitted that the Ld. CIT(A) is justified in confirming the addition of the receipt towards interest on enhanced compensation under section 28 of the Land Acquisition Act in view of the amendment to section 145-A (b) of the Act, in view of which the effect of the judgement in Ghansham (supra) has been statutory abrogated.
In respect of the addition of Rs. 85 Lacs, Ld. DR submitted that the circumstances discussed by the Ld. CIT(A) in the impugned order, namely, there is no explanation for the cash loans when the creditors themselves are maintaining and operating the bank accounts and there is no immediate necessity for the assessee to obtain any such cash loan, justify the confirmation of such an addition by the Ld. CIT(A). He submitted that though the assessee and the creditors are unaware of the implications of the cash loans under the Income Tax Act, 1961 , though the assessee claims to have repaid the same through banking channels, such a fact is not emanating from any material on record. He submitted that the assessee failed to submit any bank statements to demonstrate such a fact.
In reply, Ld. AR submitted that in view of the provisions under section 10 (37) of the Act, any income chargeable under the head (capital gains) arising from the transfer of agricultural land shall not be included in the income of the assessee and the decision of the Hon’ble Apex Court in the case of Ghansham (supra) is an authority on the principle that when the Court/Tribunal directs payment of enhanced compensation under Section 23(1A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification and there is no change insofar as this proposition is concerned. On the aspect of the repayment of loans relating to the addition of Rs. 85 Lacs, Ld. AR submitted that given an opportunity the assessee is ready to furnish the bank statements establishing such a fact.
We have gone through the record in the light of the submissions made on either side. According to the assessment order, the case of the assessee was selected for scrutiny through CASS with the reasons that “low income from other source as compared to large value fixed deposits and a large cash deposits in saving bank account and assessee has also transferred one or more properties during the year”. Further during the course of order, the learned Assessing Officer referred to the computation of income showing income of Rs. 46,21,066/-from other sources and the details of compensation and interest received from the government and the interest on enhanced compensation. In view of these, we are convinced that any consideration of the details relating to the income from other sources is beyond the scope of this limited scrutiny, inasmuch as the reason for a limited scrutiny includes low income from other sources as compared to large value fixed deposits. This reason takes into its fold the scrutiny of the income from other sources including the receipt of interest on enhanced compensation under section 28 of the Land Acquisition Act. We therefore, hold that the learned Assessing Officer did not step out the scope of enquiry in this matter.
Now coming to the merits of the case on the aspect of addition of the interest on enhanced compensation received for acquisition of the agricultural property, the aspect of the chargeability of tax in respect of the interest on enhanced compensation u/s 28 of the Land Acquisition Act is now fairly settled. In the case of Ghanshyam 315 ITR 1 (SC), the Hon’ble Supreme Court held in unequivocal terms that the additional amount u/s 23(1A), solatium under section 23(2) and interest on enhanced compensation u/s 28 of the Land Acquisition Act form part of enhanced compensation u/s 45(5)(b) and, therefore, is subject to tax u/s 45(5) in the year of receipt. No contrary view is taken by the Supreme Court in the subsequent judgments and as on the date, law is fairly settled that the amount of interest received u/s 28 of the Land Acquisition Act is in the nature of capital gain. It could be seen that Section 45(5) makes no reference to the nature of property that is acquired but it deals with the category of cases which falls in the description of “capital assets”; whereas Section 10(37) exempts specifically an income chargeable under the head “capital gains” arising from the transfer of agricultural land. A reference to the provisions under section 194LA of the Act clearly brings out this distinction. In the case of Hari Singh 302 CTR 458 (SC) while dealing with the similar question under identical set of factsunder section 194LA of the Act, Hon’ble Court set aside the matter to the file of the AO to examine the facts of the case and to apply the law as contained in the Income-tax Act.
Hon’ble Supreme Court specifically directs that in case the learned AO finds that the compensation was received in respect of the agricultural land, the tax deposited with the Income-tax Department shall be refunded to the assessee. Hon’ble Supreme Court gave the above direction after noticing the decision in the case of Ghanshyam (supra). In this set of circumstances, it does not admit of any doubt as to the nature of amount by way of interest u/s 28 of the Land Acquisition Act in the hands of the assessee or the applicability of the Income-tax Act to such amount. We therefore, do not find any reason to sustain the addition on this score in the absence of any dispute as to whether the interest received was under section 28 of the Land Acquisition Act. Such an addition cannot be sustained and the same is directed to be deleted.
Now coming to the addition of Rs. 85 Lacs, when the assessee produced the bank statements of the creditors, the correctness of the same is not disputed and it is basing on such statements only Ld. CIT(A) concluded that the creditors have bank accounts and regular transactions are reflected therein. Ld. CIT(A), however, did not take into consideration the submissions made on behalf of the assessee that being not aware of the implications of receiving cash loans under the provisions of the Act, such a course was resorted to, and the fact of repayment by way of banking channels would lend any amount of support to the contention of the assessee about the genuineness of the loan transactions. It is an admitted fact thatno bank statement of the assessee was produced before the authorities to demonstrate the fact of repayment. Ld. AR now seeks an opportunity of producing such material for the determination of just tax liability of the assessee.
It is a fact that there was no opportunity for the authorities below to consider this fact of the repayment of loan through banking channels. Assessee now deserves to produce the bank statements to establish such a fact. In the circumstances, having regard to the plea that the assessee, only because of their ignorance as to the implications under the Income Tax Act, obtained the cash loans, we are of the considered opinion that this issue needs to be set-aside to the file of the learned Assessing Officer for verification of said fact in the light of the material to be produced by the assessee to prove the fact of repayment.We, accordingly, set aside the findings of the authorities below on this aspect of addition of Rs. 85 Lacs and remand the issue to the file of the learned Assessing Officer for fresh consideration in the light of the material to be produced by the assessee.
In the result, the appeal of the assessee is allowed in part and for statistical purpose.
Order pronounced in the open court on 20/10/2020