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Income Tax Appellate Tribunal, DELHI BENCH “D” NEW DELHI
Before: SHRI G.D. AGRAWAL & SHRI AMIT SHUKLA
The aforesaid appeal has been filed by the Revenue and Cross Objection by the assessee against the impugned order dated 31.12.2015, passed by ld. CIT (Appeals)-XII, New Delhi in relation to penalty proceedings u/s.271(1)(c) for the Assessment Year 2009-10. The Revenue is mainly aggrieved by deletion of penalty of Rs.10,50,380/- on account of addition made on enhanced compensation on acquisition of land.
2. The facts in brief are that an AIR information was received that the assessee has invested an amount of Rs.45,06,250/- in the Bonds and the source of such investment requires examination. In response to the show cause notice, the assessee submitted that during the year under consideration he has received sum of Rs.45,46,473/- as enhanced compensation of land acquired by Delhi Metro Rail Corporation. In the revised computation of income filed before the Assessing Officer under the head ‘capital gain’ assessee has claimed exemption in the following manner: Compensation amount received Rs.45,46,473/- Less Legal expenses etc Rs. 50,000/- Purchases NABARD bonds on 6.3.2009 Rs.45,06,250/- Net Capital Gain Nil
The assessee also filed the copies of NABARD bonds on which exemption was claimed. Regarding the receipt of enhanced compensation, the assessee has given the detailed note as to how the enhanced compensation was received by the assessee as a 1/3 owner of the property. In sum and substance, it was contended that the property belonging to the three co- owners was acquired by DMRC u/s.4 of Land Acquisition Act and the declaration u/s.6 was issued on 17.05.2006. Consequent to this, award was passed. 1/3rd share of the said award was duly disclosed in the Income Tax return for the Assessment Year 2007-08. Against the quantum of said award, the assessee had went to the Hon'ble Delhi High Court, vide its order dated 16th February, 2009, whereby the Hon’ble Court ordered the release of 50% of the amount as determined by LAC, but stayed the operation of the award. Due to misunderstanding of the facts and law, this amount was erroneously added under the head ‘Long Term Capital Gain’ on the ground that the operation of the award has been stayed by the Hon'ble High Court and further set aside by the same High Court vide order dated 7th April, 2008. Accordingly, a revised computation was filed before the Assessing Officer. The Assessing Officer however held that the assessee had failed to furnish the qualifying document for claiming exemption of capital gain and such revised computation cannot be entertained, because assessee was required to file revised return u/s.139(5) which time has also elapsed. Accordingly, he denied the claim of exemption of Long Term Capital Gain and taxed the entire receipt of Rs.45,46,473/-.
In the first appeal, the appeal of the assessee was dismissed. In the penalty proceedings, in response to show cause notice, the assessee submitted that the entire receipts as well as the investment was duly disclosed in the Income Tax Return and there can be no case of furnishing of inaccurate particulars of income. However, the Assessing Officer held that assessee was liable for penalty and accordingly imposed penalty of Rs.10,50,380/-.
3. Before the ld. CIT (A), the assessee made detailed submission which has been dealt and incorporated in the impugned order including various decisions relied upon. After considering the entire gamut of facts, ld. CIT (A) has deleted the penalty on the ground that the issue of taxability of compensation and enhanced compensation on acquisition of land was a debatable issue and the same get settled only by Hon'ble Supreme Court in the case of CIT vs. Ghanshyam (HUF), reported in 35 ITR 1 (SC), wherein the controversy of the year of taxability of enhanced compensation was settled. He further noted that Hon'ble Delhi High Court had stayed the operation of the award of LAC and matter was still not finalize though the assessee had received the amount of Rs. 45,46,473/- on account of enhanced compensation. Even the LAC had not deducted tax while releasing the enhanced tax in view of the direction of the Hon'ble Delhi High Court. After referring to the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs. Bharat, Lal Dagar (HUF), reported in 355 ITR 345 (P&H), wherein it was held that penalty u/s. 271(1)(c) was not sustainable on compensation amount which was not offered by the assessee as taxable on the ground of further proceedings. Here in this case also, assessee has not offered the amount of enhanced compensation as the award of LAC was disputed before the Hon'ble Delhi High Court which had stayed the operation of the award of LAC. Apart from that, there are various conflicting judgments of various High Courts on the issue of year of taxability of compensation and enhanced compensation. Thus, following ratio laid down by Hon'ble Punjab & Haryana High Court, he deleted the penalty.
Before us, learned DR strongly relied upon the order of the Assessing Officer and submitted that the enhanced compensation should have been offered for the taxation by the assessee and the claim made by the assessee for seeking exemption from Long Term Capital Gain was not in accordance with law as it was not claimed in the revised return of income and therefore, penalty has rightly been levied by the Assessing Officer.
On the other hand, learned counsel for the assessee relied upon the order of the ld. CIT(A) and also pointed out to the various chronology of events and facts as given before the ld. CIT(A) in the written submission and pointed out that when the assessee has received the amount of Rs.45,46,473/- on 03.02.2009 on the basis of direction by the Hon'ble High Court, but later on stayed, then at the time of finalizing the return of income, the assessee was under a bona fide belief that such compensation was only on inchoate right due to pending litigation in High Court and hence it is not taxable. At that time, there were many decisions of the Hon'ble High Court wherein it was held that no income by way of enhanced compensation accrues to the assessee on the date of award if it is in dispute. Thus, under these facts penalty has rightly been deleted by Ld. CIT (A).
After considering the rival submissions and on perusal of the relevant material placed on record and the finding given in the impugned orders, we find that the assessee along with other co-owners were awarded compensation of Rs.3,87,47,652/- on 22.04.2008 u/s.11of LAA. The assessee not satisfied with such an award, filed a writ petition before the Hon'ble Delhi High Court for release of the amount awarded by the Collector with respect to the property as compensation for acquisition of land. The Hon'ble High Court vide order dated 24.11.2008 had directed the DMRC to release the amount of compensation awarded by the Collector. Later on, the Division Bench of the Hon'ble Delhi High Court vide its order dated 12.12.2008 had stayed the operation of the impugned award subject to the condition that 50% of the amount deposited be released by LAC to the assessee. Accordingly, on 03.02.2009, an amount of Rs.1,36,39,418/- (being 50% of the amount deposited by the DMRC was released by the Hon'ble Delhi High Court order dated 12.12.2008) and 1/3rd share of the assessee of such compensation was determined at Rs.45,46,473/- which was received by the assessee on 03.02.2009. This was on the basis of interim release order by the Hon'ble High Court. Later on such an interim order dated 12.12.2008 was made absolute during the pendency of the writ petition. At the time of finalizing the return of income for the year ending 31st March, 2009, the assessee had claimed that it is not taxable due to pending litigation and also LAC at the time of releasing the payment did not deduct tax at source. It was based on these circumstances that the assessee had not shown any income under the head ‘Long Term Capital Gain’. Thus, it can be inferred that the assessee was under a bona fide impression that once the Hon'ble Delhi High Court has stayed the operation of the LAC’s award, the same cannot be brought to tax under the head ‘capital gain’ under the relevant year. Apart from that the investment in the NABARD bond was also duly disclosed in the return of income and for which the assessee had duly furnished the document for such a claim of exemption though made by way of revised computation of income. Thus, the assessee at the first instance has not offered the enhanced compensation amount as Long Term Capital Gain under a bona fide belief that matter is in dispute before the Hon'ble Delhi High Court; and then later on without prejudice, he has filed a revised computation claiming exemption on the ground that an investment has been made in the NABARD bonds for which entire details were provided before the Assessing Officer. Even if the revised statement has not been accepted or acted upon by the Assessing Officer, then in that case Assessing Officer has to see the original return of income filed by the Assessing Officer where in the original return of income itself, the NABARD bond was duly disclosed. It was only in the revised computation that without prejudice claim was made. Under these facts, it cannot be held that, firstly, at the time of filing of original return of income assessee’s claim for non taxability of Long Term Capital Gain was not bona fide as already a dispute was going on; and secondly, the investment in NABARD bonds was duly disclosed at the time of original return of income.
Thus, it cannot be held that assessee has concealed any particulars of income or has furnished inaccurate particulars of income. We agree with the observation of the ld. CIT (A) that prior to judgment of Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) there were many decisions of the Hon'ble High Court wherein the year of taxability of enhanced compensation was highly debatable. This judgment of Hon'ble Supreme Court had come after the closure of the financial year 31st March, 2009. Thus, at the time of filing of return of income assessee did have a bona fide belief and therefore, we do not find any infirmity in the order of the ld. CIT (A) in deleting the penalty. Accordingly, the appeal filed by the Revenue is dismissed.
7. In the Cross Objection, the assessee has stated that Assessing Officer has not specified the charge before issuing the show cause notice and therefore, such penalty proceedings is bad in law. Since, we have already confirmed the deletion of penalty, therefore, the grounds raised in the Cross Objection have become purely academic and hence same is dismissed as infructuous.
Order pronounced in the open Court on 25th June, 2018.