MUNISH KUMAR LEGAL HEIR LATE SH GURDEEP SINGH,VILL MANAKPUR, YAMUNANAGAR vs. ITO, WARD 5, YAMUNANAGAR

On examination of assessment records, the Ld. Pr. CIT noticed that during the relevant year, the assessee had received an interest amounting to Rs. 1,05,10,592/- on enhanced compensation arising from the acquisition of land. The Assessing Officer had treated the said receipt as exempt and did not bring the same to tax.

According to the Ld. Pr. CIT, in view of the provisions of section 56(2)(viii) read with section 145B(1) of the Act, interest received on compensation or enhanced compensation is chargeable to tax under the head “Income from Other Sources” in the year of receipt, with consequential deduction of 50% allowable u/s 57(iv). It was therefore observed that the Assessing Officer ought to have taxed the interest receipt and allowed a deduction restricted to 50%, instead of accepting the assessee’s claim of full exemption.

Accordingly, a show cause notice u/s 263 dated 02.02.2023 was issued proposing to revise the assessment order on the ground that it was erroneous in so far as prejudicial to the interests of the Revenue.

In response, the assessee filed detailed written submissions contending, inter alia, that interest received u/s 28 of the Land Acquisition Act partakes the character of compensation. The assessee before the PCIT had submitted that there are divergent views of the High Courts and in the absence of a jurisdictional Delhi High Court decision, a view favourable to the assessee ought to be adopted. It was submitted that the receipt of compensation was also covered by section 10(37) and further that the Assessing Officer had taken one of the possible views after due enquiry. Reliance was placed on various judicial precedents, including Faridabad Vs. Ghanshyam (HUF) reported in (2009) 8 SCC 412, CIT Vs. Chet Ram (HUF) [Civil Appeal No.13053/2017 [@ SLP (C) No.751/2009, CIT vs. Vegetable Products Ltd. [(1972) 88 ITR 192 (SC), CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Del), and ITO vs. DG Housing Projects Ltd. 343 ITR 329 (Del).

The Ld. Pr. CIT considered the assessee's submissions but did not find merit in them. He held that by virtue of Finance Act, 2009, specific provisions were introduced in sections 145B(1), 56(2)(viii) and 57(iv) with effect from A.Y. 2011-12, which clearly mandate that interest received on compensation or enhanced compensation shall be deemed to be income of the year of receipt and assessed under the head “Income from Other Sources”, with deduction restricted to 50%. According to him, the statutory language is clear and unambiguous, leaving no scope for alternative interpretation.

The Ld. Pr. CIT further observed that the reliance placed by the assessee on decisions such as Ghanshyam (HUF) and Chet Ram (HUF) was misplaced, as those judgments pertained to the pre-amendment regime dealing with capital gains under section 45(5), whereas the present case is governed by the post-2010 legislative framework under sections 145B and 56(2)(viii). He held that these operate in distinct fields and that the earlier Supreme Court rulings could not override the subsequently enacted specific charging provisions.

Placing reliance on judgments of the Hon’ble Punjab & Haryana High Court, including Mahender Pal Narang vs. CBDT [(2020) 423 ITR 013 (P&H) and Manjeet Singh (HUF) Karta Manjeet Singh v UOI (2016) 237 Taxman 116 (P&H), the Ld. Pr. CIT held that interest received on enhanced compensation is taxable as income from other sources. He rejected the assessee’s plea regarding applicability of section 10(37), holding that the said provision deals with capital gains on transfer of agricultural land and does not govern taxability of interest which is separately brought to charge under section 56(2)(viii).

The contention of the assessee regarding jurisdiction of Delhi High Court on account of faceless assessment was also rejected. The Ld. Pr. CIT held that jurisdiction remained with Chandigarh, where the assessee is assessed, and that faceless assessment merely involved a temporary allocation for completing assessment proceedings.

On facts, the Ld. Pr. CIT concluded that the Assessing Officer had failed to apply the correct statutory provisions and had accepted the claim of exemption without making proper enquiries or verification as mandated by law. He therefore held that the assessment order dated 11.12.2020 was erroneous in so far as prejudicial to the interests of the Revenue within the meaning of section 263 read with Explanation 2(a).

Accordingly, exercising powers u/s 263, the Ld. Pr. CIT set aside the assessment order and directed the Assessing Officer to make a de novo assessment after conducting requisite enquiries and proper verification with regard to taxability of interest on enhanced compensation, after granting adequate opportunity of being heard to the assessee.

Now the assessee is before us, challenging the order passed by the Ld. Pr. CIT on the grounds mentioned hereinabove.

At the outset, Ld. Counsel for the Assessee has drawn the attention of the Bench to the assessment order, where the Assessing Officer has captured the reasons for reopening and on page 1 of the order, the Assessing Officer has mentioned the reasons for reopening for the interest on enhanced compensation. It was submitted that the Assessing Officer for the above- mentioned purposes had issued various notices, which are available at pages 11 (12) of the paper book, 13, page 20, 22, page 25, and 27. On the basis of the above-mentioned document, it was submitted that the Assessing Officer, in the original assessment order, had made elaborate inquiries and, thereafter, the Assessing Officer deemed it appropriate not to tax on interest on enhanced compensation. In view thereof, the subsequent invocation of the jurisdiction u/s 263 by the PCIT is incorrect.

Secondly, it was submitted that the assessment order was passed by the Faceless Assessing Officer and at the time of passing of assessment order by the Faceless Assessing Officer who is situated in Delhi, there is no contrary view available of Hon’ble Delhi High Court so as to make the order prejudicial to the interest of the Assessee and, therefore, the Assessing Officer relying upon the decision of the Hon'ble Gujarat High Court in the case of Movaliya Bhikubhai Balabhai vs ITO, 388 ITR 343 has held that the interest on enhanced compensation is not taxable.

It was submitted that once the view favouring the Assessee is available in respect of a non-jurisdictional High Court, then the view which is favourable to the Assessee is required to be applied and for the above-mentioned purposes, the Ld. Assessing Officer relied upon the decision of the Hon'ble Supreme Crout in the case of CIT vs M/s Vegetable Products Pvt Ltd., 88 ITR 192 .

The Ld. AR, had further submitted that the Delhi High Court in the case of RKKR Foundation vs NAFC vide its order dated 12.5.2021, relying on the decision of the Hon'ble Court in the case of Kusum Ingot has prima facie held that the Delhi High Court is appropriately court for the purposes of deciding the issue and, therefore, the writ petition before the Hon'ble Delhi High Court challenging the assessment order passed by the Assessing Officer is amenable to challenge before the Hon’ble Delhi High Court.

The ld. AR, had further submitted that there are various decisions passed by the Coordinate Bench even after the decision of the Hon'ble Punjab and Haryana High Court deciding the issue in favour of the Assessee and the attention of the Bench was drawn to the decision of Coordinate Bench in case of Shri Balwinder Singh Vs. Pr. CIT in dt. 31/10/2018 wherein, the Coordinate Bench have decided the issue in favour of the Assessee. He referred to pages 15 to 18 of the case law paper book.

It was submitted that a similar view was taken by the Coordinate Bench in case of Shri Satbir Vs. The ITO in dt. 09/07/2018 and our attention was drawn to paragraphs 15 & 16.

It was further submitted that the Delhi Benches while hearing the appeal in the case of Pawan Kumar vs PCIT ,Rohtak in at page 61 of the paper book field on 8.6.2026, have decided the issue in favour of the Assessee and he has drawn our attention to paragraph Nos. 11 to 16 .

The ld. AR had further submitted that the Assessee has also submitted that the interest earned by the Assessee and the compensation granted by the Land Acquisition Collector would partake the similar character as mentioned u/s 10(37) of the Act, and, therefore, the same is exempt, and for the above said proposition, the Ld. AR drawn our attention to the decision of the Bangalore Tribunal of the Tribunal in the case of Income Tax Officer, Bagalkot vs. Shri Prabhayya Basayya Saraganachariaryaha Badshah, it was submitted that the Ld. PCIT, without considering the submissions of the Assessee, has decided the issue against the Assessee and has directed the Assessing Officer to redo the assessment on the basis of the order passed by the PCIT. Besides the above, the ld. AR, has also drawn our attention to the decision of the Hon'ble Supreme Court in the case of Max India, wherein the Hon'ble Supreme court has decided the issue in favour of the Assessee and held the proceedings u/s 263 are not sustainable in the eyes of law as there was ambiguity in law and, therefore, the Assessing Officer was right in taking one of the view and merely because the Ld. CIT(A) had taken a different view; therefore, the order passed by the Ld. PCIT is not correct, as one of the possible views has been taken by the Assessee.

In the present case, the assessee had also filed written submissions in support of its claim, which are reproduced hereinbelow for the sake of completeness of the record.

“Brief Facts of the Case: Filing of ITR:  The “A” is an individual who filed ITR for the year under consideration on 21.07.2018, declaring income of Rs.7,62,120/-. The ITR was further revised on 19.01.2019 declaring income of Rs. 7,81,320/- and claiming exemption of Rs. 1,05,10,592/- being interest received on enhanced compensation of compulsory acquisition of agricultural land. (Copy appended at page 16-18 of APB).  During AY 2012-13 i.e. FY 2011-12, agriculture land of the “A” was acquired under Land Acquisition Act, 1894 by the Land Acquisition Authority, Pkl. Later on during the year in question, “A” received principal amount of enhanced compensation and interest thereon in accordance with the order passed by the Hon’ble Court. Assessment Proceedings:  The case of the “A” was selected for scrutiny under the faceless regime and proceedings were initiated by issuing notice u/s 143(2) on 28.09.2019. Subsequently, a notice u/s 142(1) was issued on 30.07.2020, wherein query was raised regarding the interest on enhanced compensation, calling upon “A” to furnish documentary evidence in support thereof. In response, “A” filed reply on 08.08.2020, explaining that the interest received on enhanced compensation and also as to why said interest is not taxable by placing reliance on the following judicial precedents (Copy appended at page 19-23 of APB): UOI vs Hari Singh 302 CTR 458 (SC) o CIT vs Ghanshyam HUF 315 ITR 1 (SC) o ITO vs Dhanendar Kumar HUF 1591/Chd/2018 (Chandigarh ITAT) o Sham lal vs ITO 364/Chd/2016 (Chandigarh ITAT) o Surinder Kumar vs DCIT 539/Chd/2016 (Chandigarh ITAT) o  Thereafter, another notice u/s 142(1) was issued on 03.12.2020 seeking information with regard to order of enhanced compensation, in response to which “A” filed copy of court order. (Copy appended at page 24-29 of APB).  After considering the facts of the case, submission of “A” and legal position on the issue, the Ld. AO accepted the claim of “A” that the total enhanced compensation including interest u/s 28 of Land Acquisition Act is not taxable. Accordingly, the Ld. AO passed the assessment order u/s 143(3) on 11.12.2020 without making any addition to the returned income. (Copy appended at pg 30-31 of APB).

It is pertinent to mention here that the argument advanced by the Ld. AR during the course of arguments have already been reproduced hereinabove. However, it is also noticed that while filing the written submissions, the Ld. The Ld. AR raised certain additional submissions which were not advanced during the oral hearing.

We do not approve of this practice. It is incumbent upon the parties to confine themselves to the submissions made and decisions reported during the course of hearing, and not to enlarge the scope of arguments merely because an opportunity to file written submissions has been granted by the Bench.

Per contra, the Ld. DR at the outset, submitted that the learned PCIT has validly assumed jurisdiction under section 263 of the Act. The assessment order dated 11.12.2020 was found to be erroneous insofar as it is prejudicial to the interest of the Revenue, as the Assessing Officer accepted the assessee’s claim of exemption of interest on enhanced compensation without applying the mandatory statutory provisions governing such income. The revisionary proceedings were initiated after due examination of assessment records and after granting proper opportunity of hearing to the assessee. The learned DR submits that sections 145B(1), 56(2)(viii) and 57(iv), inserted by the Finance Act, 2009 with effect from A.Y. 2011-12, constitute a complete code for taxation of interest received on compensation or enhanced compensation. These provisions mandatorily require such interest to be: taxed in the year of receipt,  assessed under the head “Income from Other Sources”, and  allowed deduction only to the extent of 50%.  The assessment order does not show any consideration or application of these provisions. The omission is apparent on the face of record and renders the assessment order erroneous in law.

Further, the learned DR submits that reliance placed by the assessee on decisions such as Ghanshyam (HUF) and Chet Ram (HUF) is misplaced. These judgments were rendered in the context of section 45(5) and the legal position prevailing prior to A.Y. 2011-12. Post insertion of sections 145B and 56(2)(viii), the legislative intent is explicit and overrides the earlier judicial position. The Ld. DR further submitted that the decision of the Coordinate Benches either of the Delhi or of the Chandigarh Tribunal cannot overrule the binding precedent of the jurisdictional High Court. In view thereof the Assessing Officer failed to appreciate this statutory shift and mechanically accepted the assessee’s claim. It was further submitted that section 10(37) grants exemption only in respect of capital gains arising from compulsory acquisition of agricultural land. Interest on enhanced compensation is statutorily classified as “income from other sources” and therefore falls outside the scope of section 10(37). The Assessing Officer erred in not examining this basic legal distinction, resulting in incorrect allowance of exemption.

The learned DR submits that this is not a case of inadequate enquiry but a case of complete lack of enquiry. The assessment order is silent on: the head under which interest income was assessed,  the applicability of sections 145B and 56(2)(viii), and  the statutory deduction u/s 57(iv).  Such non-application of mind squarely attracts Explanation 2(a) to section 263(1), which deems an order erroneous where it is passed without making inquiries or verification which should have been made.

The learned DR further submits that the learned PCIT has rightly relied upon decisions of the Hon’ble Punjab & Haryana High Court, including Manjeet Singh (HUF) and Mahender Pal Narang, which hold that interest received under the Land Acquisition Act is taxable as income from other sources. These decisions are binding on authorities within the jurisdiction and were wrongly ignored by the Assessing Officer. The contention of the assessee that jurisdiction lies with the Delhi High Court due to faceless assessment is misconceived. The faceless Assessing Officer exercises delegated authority only for completing assessment proceedings. Jurisdiction continues to vest with the Jurisdictional Assessing Officer and the PCIT having territorial jurisdiction over the assessee. Therefore, the revision order passed by PCIT, Chandigarh-1 is valid in law.

Lastly, the learned DR submits that both the conditions required for invoking section 263 are fully satisfied: the assessment order is erroneous as it is contrary to express statutory  provisions, and the error has caused definite prejudice to the Revenue by non-taxation  of substantial income. The learned PCIT has not substituted his own view but has merely directed the Assessing Officer to make proper enquiries and pass a fresh order in accordance with law.

Mr. Sudhir Sehgal, Ld. Counsel for the assessee in and submitted that the view adopted by the Assessing Officer was one of the possible and plausible views and, therefore, once such a view has been taken, invocation of jurisdiction under section 263 is impermissible. The Ld. AR, while referring extensively to the written submissions and replies placed at pages 22 to 47 of the paper book, drew our attention to paragraphs 4.5 (page 28), 4.7.1 and 4.8 (pages 38 onwards). Relying upon a plethora of judicial pronouncements on the scope and applicability of section 263, it was contended that the assumption of jurisdiction by the Principal Commissioner is unsustainable in law. He relied upon the written submissions filed by him and further sought the liberty to rely upon the written submission to be filed in the lead matter.

The Ld. Counsel, Shri Tej Mohan Singh, appearing for the assessee in Ashok Kumar Thukral and Rakesh Kumar in and 456/Chd/2024 respectively for the assessment year 2015-16, submitted that in the present cases, the reopening of assessment was carried out by the Assessing Officer only after obtaining due approval from the Ld. Principal Commissioner of Income Tax. In support of this contention, he drew our attention to paragraph 2 of the assessment order, wherein the fact of obtaining approval from the Ld. PCIT has been specifically recorded.

The Ld. AR further invited our attention to the paper book, wherein the recorded reasons for reopening are placed at pages 17, 19, 20 and 21. It was submitted that while granting approval for reopening, the Ld. PCIT had relied upon the judgment of the jurisdictional High Court in the cases of Mohinder Singh Narang and Manjeet Singh, and only thereafter accorded approval for issuance of notice under section 148.

It was contended that despite such approval and reopening, the Assessing Officer, upon completion of the reassessment proceedings, neither disagreed with the reasons forming the basis of approval nor made any addition in the hands of the assessee and ultimately accepted the returned income as filed. It was therefore submitted that once the returned income has been accepted by the Assessing Officer after due application of mind, it was not open to the Ld. PCIT to invoke revisionary jurisdiction under section 263 on the very same basis. the Ld. Counsel further submitted that the assessment order itself is non est in the eyes of law, as the Assessing Officer has erroneously recorded therein that no return of income was filed by the assessee. This finding, according to the Ld. ARis factually incorrect. In this regard, reliance was placed on the intimation issued by the Department, available at pages 15 to 20 of the paper book, as well as the notice issued for reopening placed at page 22 of the paper book.

It was submitted that, once the return of income had admittedly been filed and processed, the Assessing Officer's observation that no return was filed is patently incorrect, thereby rendering the assessment order void of legal sanctity and liable to be treated as non est in the eyes of law.

In the written submission it was mentioned as under:

Per contra, the Ld. DR in & 456/Chd/2024 had submitted that the contentions raised by the assessee are misconceived, legally untenable, and based on an incorrect appreciation of the scope of section 263 of the Income-tax Act, 1961. The mere fact that the reassessment proceedings were initiated after obtaining approval of the Ld. PCIT under section 151 of the Act does not, in law or on facts, curtail or fetter the independent revisional jurisdiction conferred upon the Ld. PCIT under section 263 of the Act.

The approval granted by the Ld. PCIT for issuance of notice under section 148 is only a prima facie administrative satisfaction that the case is fit for reopening and does not amount to a final or conclusive determination of the issue on merits. It is settled law that sanction under section 151 is neither a judicial nor a quasi-judicial order and cannot be equated with a conscious examination of the correctness or otherwise of the eventual assessment order.

The Ld. DR submits that reassessment proceedings and revisional proceedings operate in entirely different statutory spheres. While reassessment is initiated on the basis of “reason to believe”, the revisional jurisdiction under section 263 is attracted where the order passed by the Assessing Officer is both erroneous and prejudicial to the interests of the Revenue. Merely because the reassessment was conducted pursuant to approval of the PCIT does not render the reassessment order immune from revision if the statutory conditions of section 263 are otherwise satisfied.

The assessee’s contention that since the Assessing Officer accepted the returned income, the Ld. PCIT is precluded from invoking section 263, is contrary to settled legal principles. It is well established that an order accepting the returned income can also be revised if it is passed without proper enquiry, inadequate enquiry, or incorrect application of law, resulting in prejudice to the Revenue.

In the present case, the Assessing Officer, despite reopening the assessment specifically on the issue of taxability of interest received under section 28 of the Land Acquisition Act, failed to apply the correct statutory provisions governing such income. The AO merely accepted the assessee’s claim without examining the applicability of section 145A(b) read with section 56(2)(viii) and the mandatory deduction mechanism under section 57(iv), as inserted by the Finance (No. 2) Act, 2009. Such non-consideration of binding statutory provisions clearly renders the assessment order erroneous.

The Ld. DR submits that the assessment order is completely silent on the detailed statutory framework governing taxation of interest on enhanced compensation. There is no discussion, reasoning, or finding demonstrating that the Assessing Officer examined the issue in the light of the amended provisions of the Act. A bald acceptance of the returned income, without recording reasons or applying the correct law, cannot be equated with taking a “possible view”.

The assessee’s reliance on the decision in the case of Mahinder Pal Narang is the reasons to reopen was misplaced. Even assuming that the AO referred to the said decision in the reasons for reopening, the assessment order does not demonstrate how the said decision was examined vis-à-vis the statutory provisions applicable to the assessment year under consideration. Jurisprudence is well settled that failure to distinguish facts or to examine the binding effect of later statutory amendments constitutes an error amenable to revision under section 263.

The argument of “change of opinion” raised by the assessee is wholly untenable. For invoking the doctrine of change of opinion, there must be a conscious formation of opinion by the Assessing Officer in the assessment order. In the present case, there is no such opinion discernible from the order. Absence of enquiry or non-application of mind cannot be protected under the guise of change of opinion.

The Ld. DR submits that section 263 does not permit substitution of opinion, but it certainly authorises the Ld. PCIT to revise an order which is unsustainable in law. An order passed in ignorance of mandatory statutory provisions is per se erroneous and prejudicial to the interests of the Revenue, warranting valid assumption of revisional jurisdiction.

Therefore, the Ld. DR respectfully submits that the Ld. PCIT has rightly exercised his jurisdiction under section 263 after recording due satisfaction that the assessment order was erroneous and prejudicial to the interests of the Revenue. The revisional order neither amounts to review nor re-opening of the reassessment proceedings, but is a lawful correction of a patently unsustainable assessment order 49. In the case of Kartar Singh Vs. Pr. CIT, the Ld. AR, who addressed arguments virtually from Hisar in for A.Y. 2018-19, submitted that Explanation 2(d) to section 263 provides that an order shall be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue, if it is not in conformity with any decision rendered by the Hon’ble Supreme Court or the jurisdictional High Court.

It was contended that the Ld. Principal Commissioner failed to appreciate the binding nature of the decision of the Hon’ble Supreme Court in the case of Ghanshyam Dass (HUF), which squarely governed the issue under consideration. According to the Ld. AR, the Ld. PCIT, by completely overlooking the said binding precedent, proceeded to invoke revisionary jurisdiction mechanically.

It was therefore submitted that the order passed by the Ld. PCIT suffers from a fundamental legal infirmity and is not sustainable in the eyes of law.

Shri Suraj Bhan, Ld. Counsel appearing in the case of Anil Tuteja vs PCIT in for AY 2018-19 advanced two-fold submissions, apart from generally adopting the arguments of the other learned counsel, to contend that the assumption of jurisdiction under section 263 by the Ld. Principal Commissioner is not sustainable in the eyes of law.

Firstly, it was submitted that the revisionary proceedings were initiated solely on the basis of an audit objection, which, by itself, cannot form a valid foundation for invocation of jurisdiction under section 263.

Secondly, it was contended that the show cause notice issued by the Ld. PCIT is a verbatim reproduction of the proposal forwarded by the Assessing Officer for initiation of proceedings under section 263, thereby demonstrating complete non-application of mind on the part of the revisionary authority.

Apart from the above, it was further submitted that the circulars issued by the CBDT, being in the nature of binding instructions, are mandatory for the Assessing Officers to follow. Since the Assessing Officer is duty-bound to pass or rectify the order in conformity with such binding instructions, the exercise of revisionary jurisdiction under section 263 on this count was argued to be legally untenable. In support of these propositions, reliance was placed on various judicial decisions.

In the written submissions the Ld. AR in support of the case of the assessee has filed as under:

Per contra, the Ld. DR rebutting the submissions in had submitted that the learned PCIT has validly assumed jurisdiction under section 263 of the Act. The assessment order dated 11.12.2020 was found to be erroneous insofar as it is prejudicial to the interest of the Revenue, as the Assessing Officer accepted the assessee’s claim of exemption of interest on enhanced compensation without applying the mandatory statutory provisions governing such income. The revisionary proceedings were initiated after due examination of assessment records and after granting proper opportunity of hearing to the assessee.

The learned DR further submitted that sections 145B(1), 56(2)(viii) and 57(iv), inserted by the Finance Act, 2009 with effect from A.Y. 2011-12, constitute a complete code for taxation of interest received on compensation or enhanced compensation. These provisions mandatorily require such interest to be:  taxed in the year of receipt,  assessed under the head “Income from Other Sources”, and  allowed deduction only to the extent of 50%.

The assessment order does not show any consideration or application of these provisions. The omission is apparent on the face of record and renders the assessment order erroneous in law.

The learned DR submits that reliance placed by the AR on decisions such as Ghanshyam (HUF) and Chet Ram (HUF) is misplaced. These judgments were rendered in the context of section 45(5) and the legal position prevailing prior to A.Y. 2011-12. Post insertion of sections 145B and 56(2)(viii), the legislative intent is explicit and overrides the earlier judicial position. The Assessing Officer failed to appreciate this statutory shift and mechanically accepted the assessee’s claim.

It was further submitted that section 10(37) grants exemption only in respect of capital gains arising from compulsory acquisition of agricultural land. Interest on enhanced compensation is statutorily classified as “income from other sources” and therefore falls outside the scope of section 10(37). The Assessing Officer erred in not examining this basic legal distinction, resulting in incorrect allowance of exemption.

The learned DR submits that this is not a case of inadequate enquiry but a case of complete lack of enquiry. The assessment order is silent on: a) the head under which interest income was assessed, b) the applicability of sections 145B and 56(2)(viii), and c) the statutory deduction u/s 57(iv).

Such non-application of mind squarely attracts Explanation 2(a) to section 263(1), which deems an order erroneous where it is passed without making inquiries or verification which should have been made.

The learned DR further submits that the learned PCIT has rightly relied upon decisions of the Hon’ble Punjab & Haryana High Court, including Manjeet Singh (HUF) and Mahender Pal Narang, which hold that interest received under the Land Acquisition Act is taxable as income from other sources. These decisions are binding on authorities within the jurisdiction and were wrongly ignored by the Assessing Officer.

The contention of the assessee that jurisdiction lies with the Delhi High Court due to faceless assessment is misconceived. The faceless Assessing Officer exercises delegated authority only for completing assessment proceedings. Jurisdiction continues to vest with the Jurisdictional Assessing Officer and the PCIT having territorial jurisdiction over the assessee. Therefore, the revision order passed by PCIT, Chandigarh-1 is valid in law. Lastly, the learned DR submits that both the conditions required for invoking section 263 are fully satisfied: the assessment order is erroneous as it is contrary to express statutory provisions, and the error has caused definite prejudice to the Revenue by non-taxation of substantial income. The learned PCIT has not substituted his own view but has merely directed the Assessing Officer to make proper enquiries and pass a fresh order in accordance with law. The Ld. DR had adopted similar arguments for the remaining appeal as the issues involved are common and peculiar arguments were addressed by the Ld. AR either in the case of Mr. Sudhir Sehgal and in the case of Kartar Singh Vs. Pr. CIT in ITA No. 335/Chd/2023.

We have carefully considered the rival submissions, perused the material placed on record and examined the voluminous written submissions filed by the assessee. The controversy before us concerns the validity of the order passed by the Ld. Principal Commissioner of Income-tax under section 263 of the Act, whereby the assessment order dated 11.12.2020, passed under section 143(3), was set aside on the ground that it was erroneous and prejudicial to the interests of the Revenue.

The facts, in brief, are that the assessee received enhanced compensation along with interest awarded under section 28 of the Land Acquisition Act, 1894 pursuant to orders of the court. During the course of assessment proceedings, the Assessing Officer issued notice under section 142(1) dated 03.12.2020 seeking details in respect of the enhanced compensation. In response, the assessee furnished a copy of the relevant court order. Thereafter, the Assessing Officer completed the assessment under section 143(3) on 11.12.2020, accepting the returned income and holding the receipt, including interest on enhanced compensation, as not taxable, without any discussion or examination of the statutory provisions governing taxability of such interest.

Subsequently, the Ld. PCIT initiated revision proceedings under section 263 by issuing a show-cause notice on the ground that the interest received on enhanced compensation was taxable under section 56(2)(viii) of the Act and that the Assessing Officer had failed to apply the correct legal position.

At the outset, it is well settled that for invoking jurisdiction under section 263, the twin conditions must be satisfied, namely that the order of the Assessing Officer must be erroneous and that such error must be prejudicial to the interests of the Revenue. An order is erroneous not only when it is passed on an incorrect assumption of facts or incorrect application of law, but also when it is passed without making inquiries or verification which should have been made, or without proper application of mind. Explanation 2 to section 263 further clarifies that an order shall be deemed to be erroneous and prejudicial to the interests of the Revenue where it is passed without making requisite inquiries or not in accordance with decisions rendered by the jurisdictional High Court or the Supreme Court.

In the present case, though the Assessing Officer issued a notice under section 142(1) and obtained a copy of the court order, a perusal of the assessment order reveals that there is no discussion whatsoever on the issue of taxability of interest on enhanced compensation. The assessment order does not refer to section 56(2)(viii) or section 57(iv), nor does it examine the effect of the amendments introduced by the Finance (No.2) Act, 2009. The order is also completely silent on the judicial precedents governing the issue. Mere calling for information and placing it on record does not constitute an enquiry under the law. What is required is a conscious examination of the issue, application of the relevant statutory provisions and formation of a reasoned view. The absence of any such exercise clearly shows a lack of proper enquiry and non-application of mind on the part of the Assessing Officer.

The Finance (No.2) Act, 2009, with effect from 01.04.2010, inserted section 56(2)(viii) which specifically provides that income by way of interest received on compensation or enhanced compensation shall be chargeable to tax under the head “Income from other sources”, subject to deduction under section 57(iv). The legislative intent behind this amendment is explicit and leaves no scope for ambiguity. Once the statute clearly mandates taxability of such interest, the Assessing Officer was duty-bound to apply the said provision. Failure to do so renders the assessment order erroneous in law.

STATUTORY SCHEME AFTER FINANCE (NO.2) ACT, 2009 The Finance (No.2) Act, 2009 inserted section 56(2)(viii) and section 57(iv) with effect from 01.04.2010. Section 56(2)(viii) expressly provides that: income by way of interest received on compensation or enhanced compensation shall be chargeable to income-tax under the head “Income from other sources”.

This amendment was brought in to settle the controversy relating to the taxability of interest on compensation, irrespective of the nomenclature or the provision under which such interest is awarded.

Once the statute itself deems such interest to be taxable as “Income from other sources”, the Assessing Officer had no discretion to treat it as exempt unless supported by binding authority holding otherwise.

Further, the Hon’ble Punjab & Haryana High Court in the cases of Puneet Singh v. CIT and Mahender Pal Narang v. CBDT has categorically held that interest received on enhanced compensation under section 28 of the Land Acquisition Act does not partake the character of compensation and is taxable as income from other sources under section 56(2)(viii). These decisions were binding on the Assessing Officer. Non-consideration of binding jurisdictional High Court judgments squarely attracts Explanation 2(d) to section 263 and renders the assessment order erroneous and prejudicial to the interests of the Revenue.

The contention of the assessee that the issue is debatable and therefore outside the scope of section 263 cannot be accepted. The principle that revision cannot be invoked where two views are possible applies only where the Assessing Officer has adopted one of the permissible views after due enquiry and application of mind. In the present case, the assessment order does not disclose adoption of any view based on reasoning or legal analysis. It does not apply where statutory provisions are ignored and binding judicial precedents are not followed. In fact assessment order is a non-speaking order on a crucial issue involving substantial tax implications. Accordingly, the protection available in cases of debatable issues is inapplicable.

The argument advanced by the assessee that the Delhi High Court should be treated as the jurisdictional High Court merely because the assessment was framed under the faceless assessment scheme is also without merit. The faceless assessment scheme is a procedural mechanism and does not alter the territorial jurisdiction of High Courts. Jurisdiction continues to be determined with reference to the location of the jurisdictional Assessing Officer. Accordingly, the decisions of the Punjab & Haryana High Court were binding and required to be followed by the Assessing Officer. Furthermore, in the return of income, the assessee has given the details of the Assessing Officer and at page 16 of the paper book it is mentioned as under :-

From a perusal of the return of income and the relevant column reproduced hereinabove, it is evident that the assessee himself had declared that the Assessing Officer, Ward 2(3), Chandigarh, had jurisdiction over his case. Therefore, the reliance placed by the assessee on the decision in RKKR Foundation v. NFAC is wholly misconceived. In that case, the Hon’ble Delhi High Court was concerned only with the exercise of writ jurisdiction in circumstances involving an alleged violation of the principles of natural justice by the Faceless Assessing Officer.

Furthermore, it is necessary to briefly notice the statutory framework governing faceless assessments. Under section 144B of the Act, assessment proceedings are conducted through the National Faceless Assessment Centre, which may allocate different functions to specialized units such as the Assessment Unit, Verification Unit, Technical Unit and Review Unit. Where factual verification, examination of records, or legal analysis on specific issues is required, the Assessment Unit is empowered to seek assistance through the faceless mechanism, and the reports so generated form part of the assessment record.

In the present case, the issue sought to be revised under section 263 pertains to the taxability of interest on enhanced compensation. On a perusal of the assessment order, we find that there is no discussion whatsoever on the nature of such interest, its taxability under the Act, or the applicability of sections 56(2)(viii), 57(iv), 145A(b) or the judicial position governing interest on enhanced compensation. The assessment order does not record the issuance of any query, consideration of any reply of the assessee, or examination of the legal and factual aspects relevant to the said issue. In a faceless regime, where all enquiries and responses are mandatorily recorded in the electronic record, the absence of discussion clearly indicates that the issue was not verified or examined at the assessment stage.

The faceless assessment scheme is designed to ensure that all material issues having a bearing on the computation of income are examined in a transparent and traceable manner. When an issue involving substantial tax effect, such as the taxability of interest on enhanced compensation, is not subjected to any enquiry or application of mind, the assessment order cannot be said to be the result of a conscious and informed decision by the Assessing Officer.

We further note that the Assessing Officer, in the course of the same faceless assessment proceedings, had the institutional capability to seek verification or legal inputs through the specialized units provided under section 144B of the Act. The absence of any such exercise in relation to the issue of interest on enhanced compensation, despite its settled statutory treatment and recurring litigation history, supports the conclusion that the assessment was completed without making the requisite enquiry on this aspect.

In such circumstances, the contention of the assessee that the Principal Commissioner exceeded his jurisdiction under section 263 cannot be accepted. The revisional authority is empowered to step in where the assessment order is passed without making enquiries or verification which ought to have been made. The exercise of revisional jurisdiction in the present case is thus founded not on a mere difference of opinion, but on a clear case of lack of enquiry on a material issue.

The reliance placed by the assessee on decisions of the Hon’ble Delhi High Court is also misplaced. The assessee in the present case does not fall within the territorial jurisdiction of the Hon’ble Delhi High Court and, therefore, the said decisions do not have binding force in the present proceedings. In any event, the revisional action herein is justified on the basis of the statutory framework and the absence of enquiry evident from the assessment record itself.

In view of the above discussion, we hold that the assessment order, to the extent it relates to interest on enhanced compensation, was passed without proper enquiry and application of mind, rendering it erroneous insofar as it is prejudicial to the interests of the Revenue. The assumption of jurisdiction by the Ld. Principal Commissioner under section 263 of the Act is therefore upheld.

Even otherwise, the decision in RKKR Foundation has itself been doubted by the Hon’ble Delhi High Court in GPL-RKTCPL v. NFAC by order dated 17.11.2022, wherein the matter was referred to a larger Bench with a request to authoritatively determine the issue of territorial jurisdiction of the High Court in cases where the jurisdictional Assessing Officer is situated outside the NCT of Delhi.

Moreover, in the present case, the assessee has not challenged the assessment order passed by the NFAC. It is only the Revenue which has expressed doubt regarding the correctness of the said order by invoking proceedings under section 263 of the Act. Significantly, the assessee has not questioned the jurisdiction of the PCIT to invoke section 263 on territorial or jurisdictional grounds. The revision proceedings under section 263 are not for the benefit of the assessee but are a power conferred on the Revenue to correct the order passed by the Assessing Officer in case the same is found to be erroneous and prejudicial to the interest of the Revenue.

The plea relating to the jurisdiction of the Hon’ble Delhi High Court has been raised only with a view to contend that, at the time of passing of the assessment order, there was no binding decision of the jurisdictional High Court applicable to the NFAC at Delhi. This contention is clearly an afterthought and does not go to the root of the jurisdiction of the PCIT under section 263 of the Act.

The further contention of the assessee that the Assessing Officer had followed the decision of the Hon’ble Gujarat High Court in Movaliya Bhikhubhai Balabhai v. ITO (TDS) is wholly misplaced and deserves outright rejection. A bare perusal of the assessment order itself , which is as under :

The assessment order clearly demonstrates that the Assessing Officer has neither examined nor discussed the issue relating to the taxability of interest on enhanced compensation, nor has he made any reference whatsoever to the aforesaid decision of Movaliya Bhikhubhai Balabhai (supra). Therefore, relying upon the decision of the Hon’ble Supreme Court in the case of Vegetable Product (supra) is of no help to the assessee as there is no formation of opinion by relying upon the decision in the case of Movaliya Bhikhubhai Balabhai (supra) by the Assessing Officer.

In our view, what is crucial is that the Punjab & Haryana High Court, whose jurisdiction governs the assessee, has in the cases of Puneet Singh v. CIT and Mahender Pal Narang v. CBDT had categorically held that interest received on enhanced compensation is taxable under section 56(2)(viii) and does not form part of compensation. Once such binding judgments exist, the Assessing Officer is obliged to follow them. Non-consideration or non- application of binding jurisdictional High Court decisions renders the order erroneous within the meaning of section 263 read with Explanation 2(d).

The contention of the assessee that certain earlier judgments of the Hon’ble Supreme Court were not considered by the Hon’ble High Court does not advance its case at the stage of proceedings under section 263 of the Act. As noted hereinabove, the Legislature has consciously amended the Income-tax Act by the Finance Act, 2010, whereby interest on enhanced compensation has been specifically brought to tax. In view of this statutory amendment, judicial pronouncements rendered prior to the Finance Act, 2010, cannot be regarded as determinative or binding while examining issues arising in the post-amendment regime. The legal position governing the taxability of interest on enhanced compensation stands altered by legislative mandate, and, therefore, reliance on pre-amendment decisions is misplaced in the context of the present proceedings.

The Assessing Officer is not at liberty to disregard the law laid down by the jurisdictional High Court on the premise that an alternative view may ultimately prevail, as judicial discipline mandates strict adherence to binding precedents. The reliance placed by the assessee on decisions of the Delhi Bench and the Chandigarh Bench of the Tribunal, in cases arising within the territorial jurisdiction of the State of Haryana, while simultaneously overlooking the binding judgments of the Hon’ble Punjab and Haryana High Court, is wholly misplaced and does not advance its case. Firstly, no decision has been brought to our notice which deals with the invocation of section 263 of the Act in the specific context of the taxability of interest on enhanced compensation. Secondly, in the hierarchy of precedents, the decisions of the Hon’ble High Court carry binding precedential value, whereas decisions of Coordinate Benches of the Tribunal have only persuasive authority; consequently, where there is a conflict between the law declared by the jurisdictional High Court and the view taken by a Coordinate Bench, the former must necessarily prevail. Any contention that the Tribunal is nonetheless bound to follow a contrary view of a Coordinate Bench, despite the existence of a binding judgment of the jurisdictional High Court, would be contrary to settled principles of judicial discipline and would undermine the doctrine of precedent, and is impermissible in law.

Judicial discipline, certainty, and predictability in the administration of justice mandate that the decisions of the jurisdictional High Court are scrupulously followed by all Tribunals functioning within its territorial jurisdiction under Article 227 of the Constitution of India. Any deviation from, or disregard of, such binding precedent is wholly impermissible within the scheme of law and strikes at the very foundation of judicial propriety.

The alternative plea of the assessee that interest on enhanced compensation is exempt under section 10(37) of the Act is wholly untenable. Section 10(37) grants exemption only in respect of income chargeable under the head “Capital gains” arising from the compulsory acquisition of agricultural land.

The statutory scheme post insertion of sections 56(2)(viii), 145A(b), and 57(iv) clearly demarcates the tax treatment of interest received on enhanced compensation. Section 56(2)(viii) specifically brings such interest to tax under the head “Income from other sources”. Section 145A(b) mandates the year of taxability of such interest on receipt basis, and section 57(iv) provides for a standard deduction of fifty per cent of such income, thereby constituting a complete and self-contained code governing the taxation of interest on enhanced compensation.

Once the legislature has consciously classified interest on enhanced compensation as income from other sources through a specific charging provision, such income loses the character of capital gains and, consequently, falls outside the ambit of exemption under section 10(37) of the Act. Permitting the assessee to invoke section 10(37) in such circumstances would render the specific charging and computation provisions otiose, which is impermissible in law.

It is a settled principle of statutory interpretation, consistently affirmed by the Hon’ble Supreme Court of India, that where a statute contains both a specific provision and a general provision, the specific provision must prevail. A general exemption provision cannot override an express and specific charging mechanism enacted by Parliament. Therefore, the reliance placed by the assessee on section 10(37), a general exemption provision, in the face of the specific charging framework under sections 56(2)(viii), 145A(b), and 57(iv), is legally unsustainable and deserves to be rejected.

The reliance placed by the assessee on CBDT correspondence, dismissal of SLPs in limine and certain decisions of non-jurisdictional courts does not advance its case. It is well settled that dismissal of an SLP in limine does not amount to declaration of law under Article 141 of the Constitution, and administrative instructions cannot override statutory provisions or binding judicial precedents.

By accepting the claim of exemption without examining the statutory provisions and binding judicial precedents, the Assessing Officer failed to bring to tax income which was clearly chargeable under the Act, thereby causing definite prejudice to the interests of the Revenue. Both the conditions for invocation of section 263 are thus satisfied in the present case.

In view of the foregoing discussion and the totality of facts and circumstances, we hold that the assessment order dated 11.12.2020 passed under section 143(3) was erroneous and prejudicial to the interests of the Revenue and that the Ld. PCIT was fully justified in invoking jurisdiction under section 263 of the Act. Accordingly, the revisionary order passed by the Ld. PCIT is upheld and the appeal filed by the assessee is dismissed.

Having dismissed the lead appeal, now we will deal with the individual cases argued by different AR representing different assessee. 102.

Besides that the core issue for our consideration in addition to the argument raised in the lead case, the Ld. AR has raised the several technical and legal submission which are delat hereinbelow.

With respect to the argument of the assessee that Ld. Pr. CIT had granted the approval under section 151 of the Act and therefore no 263 proceedings can take place is without any basis. We find no merit in the contention of the assessee that once approval under section 151 has been granted by the Ld. PCIT for reopening of assessment, the revisional jurisdiction under section 263 stands impliedly barred.

In our view, the scope and object of sections 148/151 and section 263 are distinct and independent statutory fields. Approval for reopening is only a prima facie administrative / quasi judicial exercise to enable assumption of jurisdiction by the Assessing Officer and does not amount to a final or conclusive determination of the issue on merits. We further note that mere acceptance of the returned income by the Assessing Officer does not, by itself, confer immunity from revision under section 263. An assessment order can be revised if it is passed without making proper enquiries or without applying the correct legal provisions, resulting in prejudice to the interests of the Revenue.

In the present case, the assessment order is conspicuously silent on the applicability of sections 145A(b), 56(2)(viii) and 57(iv) of the Act, which specifically govern the taxability of interest on enhanced compensation. There is nothing on record to demonstrate that the Assessing Officer examined the issue in the light of the statutory framework applicable for the assessment year under consideration. A mere reference to judicial decisions in the reasons for reopening, without application of the relevant statutory provisions at the stage of assessment, cannot be regarded as a conscious or reasoned view taken by the Assessing Officer. Similarly, the plea of “change of opinion” raised by the assessee is also devoid of merit. For the doctrine of change of opinion to apply, there must be a conscious formation of opinion by the Assessing Officer after due examination of facts and law. In the absence of any discussion or reasoning in the assessment order, it cannot be said that the Assessing Officer had formed any such opinion. Lack of enquiry or non-application of mind cannot be protected under the guise of a possible view.

In view of the above facts and legal position, we are of the considered opinion that the assessment order suffered from a clear error due to non- consideration of mandatory statutory provisions, and such error has resulted in prejudice to the interests of the Revenue. The twin conditions required for invocation of section 263, namely that the order is erroneous and prejudicial to the interests of the Revenue, stand duly satisfied in the present case. Accordingly, we uphold the order passed by the Ld. PCIT under section 263 of the Act. The grounds raised by the assessee in is dismissed. besides following the decision in the lead case whereby se have dismissed the contention of the assessee we have also considered the rival submissions and perused the material available on record of the specific issue raised by the assessee in the present appeal. It is a settled position of law that an order passed by the Assessing Officer can be regarded as non est in the eyes of law only when it is so declared either by the Assessing Officer himself or by a competent superior authority in appropriate proceedings. In the absence of any such declaration, the order continues to subsist on record and remains operative for all legal purposes.

In the present case, it is not the claim of the assessee that the assessment order has been set aside or declared nonest by any appellate or supervisory authority. It is also not the case of the assessee that the said order has been challenged before any judicial forum seeking a declaration that it is void ab initio. Merely alleging certain errors or infirmities in the order passed by the Assessing Officer does not, ipso facto, render the order non est in the eyes of law. In our view an order, howsoever erroneous it may be, continues to have legal existence unless it is annulled or declared void by a competent authority in accordance with law and within the time period prescribed. Further, the legality or validity of the assessment order cannot be examined in a collateral/ incidental/ revisional proceeding before the Tribunal. Such validity can be tested only when the assessment order itself is directly under challenge before us. Any observation on the assessment order when it is not the subject matter of the proceedings would amount to travelling beyond the scope of the lis and the jurisdiction vested in the Tribunal. Therefore, the contention of the assessee that the assessment order is non est merely on account of alleged defects is devoid of merit and cannot be accepted. Accordingly, the argument advanced by the assessee on this issue stands rejected. In the light of the above, the is dismissed. besides respectfully following the decision rendered in the case of Baljinder Singh Vs. Pr. CIT in (lead case), we have independently examined the submissions advanced before us. In our considered view, the statutory expression “prejudicial to the interests of the Revenue” must be understood in its correct legal context. The decision of the Hon’ble Supreme Court in Ghanshyam Dass (HUF), having been rendered prior to the Finance Act, 2010, was, during the relevant assessment year, favourable to the assessee and, therefore, cannot be said to have caused any prejudice to the assessee or to the Revenue at that point of time.

On the contrary, the decisions of the Hon’ble jurisdictional High Court in the cases of Mahinder Singh Narang and Manjit Singh, which squarely dealt with the issue of taxability of interest on enhanced compensation, were holding the field and were binding on the Assessing Officer at the time of passing the assessment order. The failure of the Assessing Officer to follow the binding precedents of the jurisdictional High Court, while framing the assessment, renders the order erroneous insofar as it is prejudicial to the interests of the Revenue. Accordingly, the conditions for invocation of jurisdiction under section 263 of the Act stood satisfied. In the result is dismissed.

Now we will deal with the besides respectfully following the decision rendered in the case of Baljinder Singh Vs. Pr. CIT in (lead case), we have independently examined the submissions advanced before us and perused the material available on record, and examined the impugned order passed by the Ld. Principal Commissioner under section 263 of the Act. The core issue requiring adjudication is whether the Ld. PCIT validly assumed revisionary jurisdiction under section 263 of the Act in the facts and circumstances of the present case.

The primary objections raised by the assessee are twofold: firstly, that the revisionary proceedings were initiated merely on the basis of an audit objection, and secondly, that the show cause notice issued by the Ld. PCIT is a verbatim reproduction of the proposal forwarded by the Assessing Officer, allegedly evidencing non-application of independent mind. Ancillary arguments were also advanced regarding the binding nature of CBDT circulars and the invalidity of revision proceedings initiated on the proposal of the Assessing Officer.

As regards the first limb of the assessee’s argument that the assumption of jurisdiction under section 263 is vitiated as it was triggered by an audit objection, we find that mere receipt of an audit objection does not, by itself, invalidate the exercise of revisionary powers. What is relevant for the purposes of section 263 is whether the Ld. PCIT, upon examination of the record, independently arrived at a satisfaction that the assessment order is erroneous insofar as it is prejudicial to the interests of the Revenue. An audit objection may constitute information or a trigger point, but the jurisdiction under section 263 flows from the Commissioner’s own satisfaction and not from the audit objection per se.

In the present case, the record reveals that the Ld. PCIT issued a detailed show cause notice specifying the precise error in the assessment order, namely, the failure of the Assessing Officer to apply the mandatory statutory provisions governing taxation of interest on enhanced compensation. The impugned order also demonstrates that the Ld. PCIT examined the assessment records and the applicable legal provisions before arriving at his conclusion. Therefore, the contention that the revision was initiated mechanically or solely at the behest of the audit party cannot be accepted.

Coming to the second limb of the assessee’s objection, namely that the show cause notice issued under section 263 is a verbatim reproduction of the proposal sent by the Assessing Officer, we are unable to persuade ourselves to accept this contention as fatal to the assumption of jurisdiction by the Ld. PCIT. Mere similarity or overlap in reasoning between the proposal of the Assessing Officer and the show cause notice issued by the Ld. PCIT does not, by itself, lead to an inevitable inference of non-application of mind. What is material and determinative is whether the Ld. PCIT has independently examined the assessment records and formed a prima facie satisfaction that the assessment order is erroneous in so far as it is prejudicial to the interests of the Revenue.

On a careful and close scrutiny of both the proposal of the Assessing Officer and the show cause notice issued by the Ld. PCIT, we find a clear and discernible distinction between the two. The allegation of the assessee that the show cause notice is a verbatim reproduction of the proposal is factually incorrect and devoid of merit. Accordingly, the assessee's objection is rejected.

Section 263 does not prohibit the Commissioner from acting on information received from the Assessing Officer or any other source. The statutory requirement is that the Commissioner must “call for and examine the record” and thereafter form the requisite satisfaction. In the present case, the assessment records were before the Ld. PCIT, and the impugned order reflects due consideration of the same. Therefore, the mere fact that the proposal originated from the Assessing Officer does not render the proceedings void or jurisdictionally infirm.

The reliance placed by the Ld. AR on various decisions holding that revision proceedings cannot be initiated merely on the basis of an audit objection or proposal from the Assessing Officer is distinguishable on facts. In those cases, the courts found a complete absence of independent application of mind by the Commissioner. In the present case, however, the impugned order clearly brings out the reasons for which the Ld. PCIT found the assessment order to be erroneous in law.

On merits, we find substantial force in the submissions of the Ld. DR. The assessment order dated 11.12.2020 is conspicuously silent on the applicability of sections 145B(1), 56(2)(viii) and 57(iv) of the Act, which constitute a complete statutory scheme for taxation of interest received on compensation or enhanced compensation with effect from A.Y. 2011-12.

The assessment order does not record any enquiry or consideration of these provisions, nor does it indicate the head under which the interest income was assessed or exempted. This omission cannot be characterised as a mere case of inadequate enquiry; rather, it is a case of complete lack of enquiry on a vital and mandatory statutory issue. Such an order squarely falls within the deeming fiction contained in Explanation 2(a) to section 263(1).

The reliance placed by the assessee on decisions rendered in the context of section 45(5), including Ghanshyam (HUF), is misplaced in view of the subsequent legislative amendments. Post insertion of sections 145B and 56(2)(viii), the legal position stands materially altered, and the Assessing Officer was duty-bound to apply the amended provisions. Failure to do so renders the assessment order erroneous in law.

The contention that interest on enhanced compensation is exempt under section 10(37) is also untenable. Section 10(37) grants exemption only in respect of capital gains arising from compulsory acquisition of agricultural land. Interest on enhanced compensation has been statutorily classified as “Income from Other Sources” and therefore lies outside the scope of the said exemption. The Assessing Officer’s failure to appreciate this fundamental distinction has resulted in prejudice to the Revenue.

In view of the foregoing discussion, we hold that both the jurisdictional conditions for invoking section 263 are satisfied in the present case. The assessment order is erroneous as it is contrary to express statutory provisions, and the error has caused definite prejudice to the interests of the Revenue. The Ld. PCIT has not substituted his own view but has merely set aside the assessment with a direction to the Assessing Officer to make proper enquiries and pass a fresh order in accordance with law.

Accordingly, we find no infirmity in the impugned order passed under section 263 of the Act. The same is upheld and the grounds raised by the assessee are dismissed.

The remaining Counsels, who appeared on behalf of the others, merely followed the arguments of the Ld. luminaries and have not made and have not made any other submissions. Therefore our findings given in the lead case shall apply mutatis mutandis in all the other case and therefore all the appeals filed by the respective assessees are dismissed.

In the result, all the above appeals filed by the respective assessee’s are dismissed. Order pronounced in the open Court on 11/02/2026