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Facts
The assessee filed an appeal against the order of the CIT(A) pertaining to Assessment Year 2013-14, with a delay of 181 days. The delay was attributed to the death of the assessee's Chartered Accountant and the assessee's lack of technological expertise.
Held
The Tribunal condoned the delay in filing the appeal, finding it to be unintentional and for a bona fide cause. The appeal was admitted for adjudication on merits, and the grounds raised were considered.
Key Issues
The primary issues revolved around the taxability of interest on enhanced compensation, the validity of assessment proceedings initiated under Section 147, and the grounds of appeal raised by the assessee.
Sections Cited
147, 144B, 253, 56(2)(viii), 57(iv), 145A(b), 10(37), 28, 234A, 234B, 143(2), 142(1), 145B(1), 34
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िनधा"रती की ओर से/Assessee by : Shri Lalit Mohan, C.A राज" की ओर से/ Revenue by : Shri Manav Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 03/11/2025 उदघोषणा की तारीख/Date of Pronouncement : 10/12/2025 आदेश/Order PER KRINWANT SAHAY, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 30/08/2024 pertaining to Assessment Year 2013-14.
2. At the outset, the Registry has noted a delay of 181 days in filing the present appeal. In response, the assessee has filed a condonation application along with an affidavit seeking the condonation of delay. Both the application and the affidavit have been duly placed on record.
Ld. DR strongly opposed the condonation of delay.
We have carefully considered the application filed by the assessee for condonation of delay of 181 days in filing the appeal against the order of the learned CIT(A) dated 30.08.2024. As per section 253 of the Income-tax Act, the appeal was required to be filed within sixty days from the date of service of the impugned order. However, due to the unfortunate circumstances explained by the assessee namely that his Chartered Accountant, Late Shri Sudhir Kumar Jain, was suffering from cancer during the relevant period and subsequently expired on 03.05.2024, and further, the assessee being an agriculturist and not well-versed with technological procedures, the delay occurred inadvertently and beyond his control. Considering the reasons placed on record along with the supporting affidavit, it is observed that the delay is neither intentional nor due to negligence but is supported by sufficient and bona fide cause. The Hon’ble Supreme Court in N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 and Collector, Land Acquisition v. Mst. Katiji & Ors. 167 ITR 471 (SC) has held that courts should take a liberal view in matters of condonation when sufficient cause is shown, and substantive justice should prevail over technicalities. Respectfully following the above judicial precedents and in the interest of justice, the delay of 181 days in filing the appeal is hereby condoned, and the appeal is admitted for adjudication on merits.
In the present appeal the assessee has raised following grounds:
1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and, completion of assessment under section 147/144B of the Act without appreciating that the same were without jurisdiction and hence deserved to be quashed as such.
2. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre has also erred both in law and, on facts in upholding an addition of Rs. 20,46,383/- of interest received on enhanced compensation on compulsory acquisition of agricultural land received u/s 28 of Land Compensation Act' 1894 and eligible for exemption u/s 10(37) of the Act. 2.1 That while sustaining the aforesaid addition the learned Commissioner of Income Tax (Appeals) has further erred both in law and on fact in not following the binding judgments of Apex Court: i) 315 ITR 1(SC) CIT vs. Ghanshyam (HUF) ii) 367 ITR 498(SC) CIT vs. Govindbhai Mamaiya iii) 400 ITR 23 (SC) CIT vs. Chet Ram (HUF) iv) 302 CTR 458 (SC) UOI vs. Hari Singh and Ors. v) C.A.No. 18475/2017 dated 10.11.2017 ITO v. Muktanandgiri Maheshgiri
3. That the learned Commissioner of Income Tаx (Appeals) has further erred both in law and on fact in sustaining the view taken by learned Assessing Officer of making addition by invoking section 56(2)(viii) read with section 57(iv) of the Act and 145A(b) of the Act to sustain the impugned addition.
4. That even otherwise the learned Commissioner of Income Tax (Appeals) passed the order without granting sufficient proper opportunity to the appellant and therefore the same is contrary to principle of natural justice and hence vitiated.
5. That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding the levy of interest of Rs. 1,00,521/- u/s 234A of the Act, interest of Rs. 6,38,604/- u/s 234B of the Act which are not leviable on the facts of the appellant.
6. In the present appeal, the assessee has filed a petition seeking permission to raise and argue additional grounds, which are purely legal in nature. The proposed additional grounds are reproduced below: 1. "That the order of assessment u/s 147/144B of the Act passed by the National Faceless Assessment Centre is without jurisdiction in as much as notice dated 09.02.2022 u/s 143(2) of the Act and other notices u/s 142(1) of the Act including show cause notice dated 19.03.2022 issued by National Faceless Assessment Centre, Delhi, on the contrary faceless regime for income escaping assessment stood notified only on 29-3-2022
That the notice issued on 09.02.2022 u/s 143(2) of the Act is not in accordance with CBDT notification dated 23.6.2017 vide F. No. 225/157/2017/ITA-II"
Upon careful consideration, we find that all relevant facts necessary for adjudication of these grounds are already available on record, and therefore no further investigation of facts is warranted. It is a well-settled legal position that a legal ground can be raised at any stage of appellate proceedings, provided it arises from the facts already on record. The Hon’ble Supreme Court, in the landmark decision of National Thermal Power Co. Ltd. vs. CIT (229 ITR 383), has held that where the Tribunal is required to consider a question of law arising from facts available in the assessment records, there is no reason to deny admission of such ground if it assists in determining the correct tax liability. Further, the Hon’ble Bombay High Court in CIT vs. Pruthvi Brokers & Shareholders (P) Ltd. (349 ITR 336) has affirmed that appellate authorities possess jurisdiction not only to entertain additional legal submissions but also to consider fresh claims that were not raised before the Assessing Officer, and that such authority must be exercised liberally in the interest of justice. Similarly, the Hon’ble Delhi High Court in DIT(E) vs. Ajay G. Piramal Foundation (228 Taxman 332) reiterated that there is no bar on the powers of the Tribunal to entertain an additional ground which arises from the record and is essential for a just adjudication of the case. In view of these binding precedents and considering that the grounds raised go to the root of the assessment made u/s 147/144B of the Act, we are of the considered opinion that the request of the assessee for admission of the additional grounds deserves to be allowed. Accordingly, the additional grounds of appeal are hereby admitted for adjudication on merits.
8. Briefly the facts of the case are that the Assessee, filed his original Return of Income (ITR) for Assessment Year (A.Y.) 2013-14 on 28.03.2015, declaring a taxable income of Rs. 4,26,650/- and claiming an exempt income of Rs. 86,60,631/-, which included enhanced compensation and interest thereon from the Land Acquisition Officer, Hisar. Crucially, the Assessee received interest income amounting to Rs. 40,92,765/- during the year, on which Tax Deducted at Source (TDS) was effected and reflected in Form 26AS, but this amount was not offered for taxation in the ITR. Consequently, the case was reopened under Section 147 of the Income-tax Act, 1961, and a notice under Section 148 was issued on 24.04.2020. The Assessee subsequently furnished a return declaring the same income and arguing that the interest received under Section 28 of the Land Acquisition Act, 1894, on compulsory acquisition of agricultural land, was a capital receipt exempt from tax, relying primarily on the Hon'ble Supreme Court decision in CIT vs. Ghanshyam Dass HUF (2009) 315 ITR (SC).
8.1 The AO rejected the Assessee's contention, holding that the statutory amendments introduced by the Finance Act, 2009, specifically the insertion of Section 56(2)(viii) and Section 145A(b), superseded the judicial precedent cited by the Assessee. The AO found that, effective from A.Y. 2010-11, interest received on compensation or enhanced compensation is statutorily chargeable to tax under the head 'Income from Other Sources' in the year of receipt, irrespective of the method of accounting. Relying on the subsequent judgment of the Hon'ble Punjab & Haryana High Court in Mahender Pal Narang vs. Central Board of Direct Taxes (CWP No. 17971.2019), which affirmed this position by stating that the newly inserted provisions prevail, the AO held that the interest of Rs. 40,92,765/- was taxable. However, the AO allowed a mandatory deduction of fifty per cent of such interest under Section 57(iv) of the Act, amounting to Rs. 20,46,383/-. Therefore, the AO made an addition of the balance 50%, i.e., Rs. 20,46,383/-, to the Assessee's total income, completing the assessment under Section 147 read with Section 144B at a total taxable income of Rs. 24,73,033/-, and simultaneously initiating penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.
Against the assessment order passed by the Assessing Officer, the assessee preferred an appeal before the Ld. CIT(A). After examining the assessment order as well as the written submissions filed by the appellant, the Ld. CIT(A) observed that the sole issue for consideration pertains to the taxability of interest amounting to ₹68,03,406/- received by the assessee on enhanced compensation awarded under the Land Acquisition Act, 1894. 9.1 The Ld. CIT(A) noted that the issue is no longer res integra and stands squarely covered against the assessee by the binding decisions of the Hon’ble Supreme Court in CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC), Union of India v. Govindbhai Mamaiya (2014) 367 ITR 498 (SC) and Chet Ram (HUF) v. CIT (2017) 407 ITR 83 (SC). In these judgments, the Hon’ble Apex Court has categorically held that interest received on enhanced compensation constitutes a revenue receipt and is chargeable to tax under the head “Income from Other Sources.”
9.2 Further, the Ld. CIT(A) observed that the amendments brought by the Finance (No. 2) Act, 2009 with effect from 01.04.2010, inserting section 56(2)(viii), section 57(iv) and section 145B of the Income-tax Act, 1961, have been held to be constitutionally valid and fully applicable to A.Y. 2013-14 by the Hon’ble Punjab & Haryana High Court in Mahender Pal Narang v. CBDT (CWP No. 17971 of 2019, dated 19.02.2020).
9.3 In light of the above legal position, the Ld. CIT(A) rejected the assessee’s argument that the interest received forms part of the enhanced compensation and is therefore either exempt under section 10(37) or is a non-taxable capital receipt. The Ld. CIT(A) noted that the legislative intent, as evidenced from the Memorandum to the Finance Bill, 2009 and CBDT Circular No. 5/2010 dated 03.06.2010, is to tax such interest in the year of receipt irrespective of the method of accounting adopted by the assessee.
9.4 The Ld. CIT(A) further held that the assessee is eligible for the statutory deduction of 50% of such interest income under section 57(iv) of the Act, which the Assessing Officer has already allowed. Consequently, only the balance 50% has been brought to tax. The Ld. CIT(A) found no infirmity in the action of the Assessing Officer and accordingly confirmed the addition.
9.5 In view of these findings, the Ld. CIT(A) dismissed all the grounds raised by the assessee and the appeal was accordingly dismissed by the Ld. CIT(A).
Feeling aggrieved by the order of the Ld. CIT(A) the assessee preferred in appeal before the Tribunal.
AR submission and arguments are on the line of facts / submission made before the authorities below.
Per contra, the Ld. DR supported the orders of the authorities below and submitted that the issue is squarely covered against the assessee by the decision of the Chandigarh Bench in Ajay Kumar vs ITO (ITA No. 463/Chd/2023), forming part of the consolidated order in land-acquisition matters.
12.1 It was argued that after insertion of sections 56(2)(viii) and 145B(1), all interest received on compensation or enhanced compensation whether under section 28 or 34 is taxable in the year of receipt, and the earlier judgments relied upon by the assessee relate to the pre-amendment position. It was further submitted that the assessee cannot claim TDS credit without offering the corresponding income to tax.
We have carefully considered the rival submissions and examined the record. We observe that the Coordinate Chandigarh Bench, in the case of Ajay Kumar (supra), has already adjudicated identical arguments. The Bench ruled that interest on compensation falls within the ambit of Section 56(2)(viii) and is taxable in the year of receipt pursuant to Section 145B(1). The Bench explicitly rejected the applicability of Section 10(37) to the interest component and clarified that claiming TDS credit is contingent upon the income being offered to tax. The facts in the instant case are materially identical.
13.1 In respectful adherence to the binding precedent of the Coordinate Bench in Ajay Kumar, we affirm the Ld. CIT(A)'s decision to sustain the addition. The assessee has failed to adduce any distinguishing features or contrary legal propositions that would justify a departure from the settled view of this Bench.
In the result, the appeal of the assessee is dismissed.
During the proceedings before us the assessee has taken the additional ground regarding issuance of notice under section 142(1) and 143(2) of the Act by the NFAC, Delhi.
The Ld. AR argued that the notice were issued on 09/02/2022 under section 143(2) was not in accordance with CBDT notification dt. 23/06/2017 vide F. No. 225/157/2017/ITA-II.
We have considered this issue and we find that the notification issued by the CBDT as referred by the Ld. AR is clarificatory in nature. In fact, the Faceless System came into existence in August 2021, therefore, issuance of notice in February 2022 by the Faceless System Unit in our opinion is not an irregularity. Accordingly, the additional ground of appeal is dismissed.
18. In the result, both the appeal of the assessee and the additional ground raised therein stand dismissed.