DCIT, NEW DELHI vs. SH. DINESH SHRAMA, NEW DELHI

PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER

(A). The present appeal has been filed by the Revenue against the order

dated 31.10.2012 of CIT(A)-XXVI, Delhi pertaining to A.Y. 2008-09.

Grounds of appeal are as under:-

I.T.A .No.-226/Del/2013 DC IT vs DINESH SHRAMA

Page 2 of 19 (B). The assessee filed original return of income on 10.02.2009 showing

total income of Rs.91,48,470/-. This was a belated return u/s 139 (4) of

the I.T.Act, 1961 (in short “Act”) and not a return filed by due date, u/s

139(1) of the Act. The assessment order dated 30.11.2010 was passed by

the Assessing Officer (in short “AO”) u/s 143(3) of the Act wherein total

income was assessed at Rs.1,12,09,885/- and the following additions were

made:-

(a) Addition to income from other sources Rs.20,60,810/- (b) Addition to long term capital gains Rs.1,32,608/-

(B.1). The assessee filed appeal against the aforesaid assessment order

dated 30.11.2010 before the Ld.CIT(A) on the following grounds:-

"1) That on the facts and in the circumstances of the case, the Id. ACIT, Circle-32(l), New Delhi (hereinafter called the Assessing Officer for short) has erred in holding that Rs.20,60,810/-received as interest from compulsory acquisition is taxable income. 2) That on the facts and in the circumstances of the case, the Id. Assessing Officer has erred in not allowing a relief of Rs,79,32,289/- wrongly shown as taxable income in the return of income. 3) That on the facts in the circumstances of the case, even if for the sake of argument though not conceding it, the interest income is considered as taxable, Id. Assessing Officer has erred in taxing the interest income on receipt basis instead of accrual basis. 4) That on the facts and in the circumstances of the case the Assessing Officer has erred in disallowing a sum of Rs.1,32,608/- u/s 48 of the IT Act, 1961 being the indexed cost of acquisition."

(B.2). Vide order dated 31.10.2012 the Ld.CIT(A) deleted the aforesaid

addition of Rs.20,60,810/-. Further, in respect of addition of

Rs.1,32,608/- on account of long term capital gains, the Ld.CIT(A)

directed the AO to re-compute the long term capital gains. In respect of

Ground No.2 of appeal filed by the assessee before Ld.CIT(A) was regarding I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 3 of 19 Rs.79,32,289/-, the Ld.CIT(A) allowed the ground directed the AO to

reduce the taxable income by Rs.79,32,289/-. This ground was taken by

the assessee, though the AO had not made any addition in respect of the

aforesaid Rs.79,32,289/- and instead, the assessee himself had included

thus amount as taxable income as per (belated) return filed u/s 139(4) of

I.T.Act. Till the completion of assessment order, the assessee had not

given any intimation to the AO excluding this amount from taxable

income.

(E). The Revenue has filed this appeal against aforesaid order of Ld.CIT(A)

dated 31.10.2012. The first ground in the appeal filed by the Revenue is

in respect of the addition of Rs.20,60,810/-. This addition was made by

the AO on the ground that this was interest income u/s 34 of the Land

Acquisition Act. Ld.CIT(A) deleted this addition. The relevant portion of

the order of Ld.CIT(A) is reproduced as under:-

5.1. “The brief facts of the case are that the appellant received an amount of Rs.1,96,37,642/- as compensation from the Land Acquisition Officer, Urban Estate, Faridabad for compulsory acquisition of agricultural land of the appellant in village, Chandawali, Tehsil Ballabhgarh, District Faridabad in the financial year 1998-99. Aggrieved with the amount received, the appellant went before the higher appellate authorities for enhancement of compensation. The appellant got substantial enhancement in the compensation amount in the court of the ADJ and subsequently the High Court in different years. On perusal of the details filed, the AO noted that the appellant received the amounts mentioned below as additional compensation, including interest, solatium and enhanced compensation in different years: • Assessment year 2002-03 Rs.95,30,6697- • Assessment year 2004-05 Rs.95,72,1897- • Assessment year 2008-09 Rs.1,96,37,1427-

I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 4 of 19 It was observed by the AO that during the year under consideration, the appellant received an amount of Rs.99,16,799/- as interest u/s.34 of the Land Acquisition Act, on the delayed payment of enhanced compensation along with Rs.97,20,344/- which was received as additional compensation u/s.23 (1-A), 23(2) and 28 of the Land Acquisition Act. After considering the facts of the case, the AO observed that the appellant was eligible to avail the benefits u/s. 10(37) of the Act as the enhanced compensation was received by the appellant after 1/4/2004 and on fulfilling the other conditions, the enhanced additional compensation received by the appellant does not form a part of the total income and was not subjected to capital gains as per the specific provisions laid down u/s. 45(5) of the Income-tax Act, 1961. It was also observed by the AO that no benefit would be available to the appellant in respect of interest received u/s.34 of the Land Acquisition Act on the delayed payment of enhanced/additional compensation and that the same was chargeable to tax as income from other sources. It was also noted by the AO that the entire interest income of Rs.99,16,799/- received by the appellant was interest on delayed payment u/s.34 of the Land Acquisition Act and was to be treated as income for the assessment year 2008-09. It was also noted by the AO that the appellant reflected only Rs.78,55,969/- in the return of income. Relying on the judgement by the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam Dass HUF (2009) 315 ITR 1, the AO brought to tax the difference in the interest income received by the appellant on enhanced compensation amounting to Rs.20,60,810/- as income from other sources and added the same to the income returned by the appellant.

5.2. In the course of the appellate proceedings, the AR of the appellant filed the following submissions: "The facts of the case are that during the assessment year the assessee received certain sums of money towards enhanced compensation on the agricultural lands acquired by the government. The AO added Rs.20,60,810/- as interest income u/s 34 of the land acquisition Act, 1894 chargeable to tax under income from other sources. The said addition was made ignoring the fact that the interest received by the assessee is u/s 28 of the land acquisition Act AND NOT u/s 34 of the Land Acquisition Act, 1894 as mentioned by the AO. Your Honour Sir, with due regards I would like to draw your benign attention to the three land mark judgements by the Hon'ble Supreme Court: CIT vs Ghanshyam (HUF) [2009] 315 ITR 'l Rama Bai vs CIT [1990] 181 ITR 400 I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 5 of 19 Gurpreet Singh vs union of India [2006] PLJ 593

In the case of CIT vs Ghanshyam (HUF), also referred to by the AO, while making the addition, it has been very clearly stated that interest is different from compensation. However, interest paid on the excess amount under section 28 of the 1894 Act depends upon claim by the person whose land is acquired whereas interest under section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under section 28is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34. The court further goes on to say that interest under section 28 unlike interest under section 34 is an accretion to the value" hence it is a part of enhanced compensation or consideration which is not the case with interest under section 34 of the 1894 Act. The court very clearly has laid the guideline that only interest under section 34 of the 1894 Act is taxable received under section 28. When we took our submissions on 22nd November, 2010 explaining that the interest received by us was under section 28, the letter was refused to be accepted on the pretext that the order has already been passed whereas the order has been passed on 30th November, 2010. The supreme court has very clearly discussed in the case of Gurpreet Singh vs. Union of India as to when the interest will be considered u/s 28 and when it shall be considered u/s 34 of the Land Acquisition Act, 1894. Para 27 of the order says going by the principle and for the moment keeping out the scheme of the Land acquisition Act, it appears to us that on payment or deposit of the amount awarded by the collector in terms of section 11 read with section 31 of the Act, the claimant can not thereafter claim any interest on that part of the compensation paid to him or deposited for the payment to him once notice of deposit is given to him. Thereafter, when the reference court enhances the compensation with consequential enhancement in solatium and interest under section 23(1A) of the Act and further awards interest on the enhanced compensation in terms of section 28 of the Act, the claimant/decree holder can seek an appropriation of the amounts deposited pursuant to that award decree, only towards the enhanced amount so awarded by the reference court. While making the appropriation, he can apply the amount deposited, first towards the satisfaction of his claim towards interest on the enhanced amount, the costs, if any awarded and the balance towards the land value, solatium and the payment under section 23(1A) of the Act and if, there is a shortfall, claim that part of the compensation with interest thereon as provided in section 28 of the Act and as covered by the award I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 6 of 19 decree. The mandate of section 34 and section 28 that interest would run from the date the collector takes possession till the particular amount is deposited as provided in those sections ensures that the claimant is recompensed adequately. Section 28 ensures such recompense at each stage of enhancement of compensation. In the light of the above two judgements it is very clear that interest under section 34 arises only at the first stage of compensation, when the collector takes possession of land and pays the compensation. In all other stages, where enhancement is decreed, interest is paid under section 28 of the 1894, Act. Even if for the sake of argument, though not conceding it, it is agreed that whole of the interest received is under section 34 of the 1894 Land Acquisition Act, then also going by the Rama Bai's case, only 6 years interest accrued to the assessee is taxable. Where the compensation awarded under the Land acquisition Act is enhanced by the order of court interest on enhanced compensation cannot be taxed all in lump sum as having accrued on the date on which the court passes the order for enhanced compensation; the interest has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the court on a time basis - KS Krishna Rao vs. CIT [1990] 181 ITR 408 (SC). The Rama Bai's case and Ghanshyam HUF are quite apart in the sense that whereas Ghanshyam HUF talks of taxing the capital amount received under land Acquisition Act on receipt basis, Rama Bai's case talks of taxing interest under section 34 of the Act. Whereas, hitherto assessees in the cases of dispute, were not paying tax on the amount of land compensation which was taken care of by the Ghanshyam HUF case."

5.3 In the course of the appeal proceedings, the AR of the appellant filed the following on 8/5/2012 as under: "The Assessing Officer has gone ahead and decided on her own that the interest received by us is under section 34 of the land Acquisition Act, 1894 without giving us any reasonable opportunity of being heard or even asking us whether the interest received by us was under 28 or 34." In order to give an opportunity the undersigned put forth a query to the AR of the appellant to file categorically the fact as to whether interest on enhanced additional compensation was received u/s.34 or u/s.28 of the Land Acquisition Act. Vide letter dated 8/5/2012, the AR stated that an amount of Rs.99,16,799/- was interest received during the year u/s.28 of the Land Acquisition Act. Since there arose a dispute between the AO where interest received on compensation was brought to tax u/s.34 of the Land Acquisition Act and the appellant's plea that such interest was received u/s.28 of the Land Acquisition I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 7 of 19 Act, the reply dated 8/5/2012 of the appellant was forwarded to the AO to examine the facts of the case and to comment on the taxability of interest income on enhanced compensation. Vide letter dated 4/9/2012, the AO submitted a reply wherein after considering the facts reiterated the stand taken by the AO in her order dated 20/11/2012.

5.4. I have considered the assessment order and remand report of AO as well as the arguments and written submissions and the rejoinder to remand report filed by the AR of the appellant. The AO made an addition of Rs.20,60,810/- as income of the appellant on the pretext that this is the interest income u/s 34 of the Land acquisition Act. The appellant relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. Rama Bai 131 ITR 400 in which it was held that where compensation is enhanced by the order of District Court/High Court on reference or on further appeals, interest on compensation awarded cannot be taxed all in a lumpsum on the date on which the court passes an order for enhanced compensation but that it has to be spread over on an accrual basis right from the date of delivery of possession till the date of order of the Court on a time basis. The AO in her order dated 20/11/2010 made a reference to the judicial pronouncement in the case of CIT Vs. Ghanshyam Dass HUF (2009) 315 ITR 1 (SC). Whereas the submission of the AR of the appellant is that the interest income received on enhancement of compensation was received u/s.28 of the Land Acquisition Act 1894 and hence it is exempt from income tax. The AR also strongly contended that the AO did not provide any reasonable opportunity before concluding that the interest received on enhanced compensation was under section 34 of the Land Acquisition Act.

5.4.1. In order to provide an opportunity to the appellant, the submission dated 8/5/2012 was forwarded to the AO for his comments. Vide report dated 4/9/2012, the AO opted to keep silent on the issue of not providing an opportunity to the appellant before concluding that interest was received u/s.34 of the Land Acquisition Act. Besides, on the other hand, the appellant filed a copy of the judgement passed by the Hon'ble Punjab & Haryana High Court in his own case. A perusal of the order revealed that the interest income was received u/s.28 of the Land Acquisition Act. Hence the finding of the AO that interest was received on enhanced compensation was u/s.34 of the said Act is incorrect.

5.4.2. The next issue involved is whether the interest income received u/s 28 of the Land Acquisition Act is taxable or exempt. The Hon'ble Supreme Court of India in the case of CIT vs. Ghanshyam HUF (2009) I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 8 of 19 315 ITR 1, held that interest received u/s 28 of the Land Acquisition Act, 1894 is exempt from Tax. Respectfully following the decision of the Hon'ble Apex Court in case of Ghanshyam HUF supra, I hold that the interest received by appellant u/s 28 of the Land acquisition Act is exempt and the addition made by the AO amounting to Rs.20,60,810/- is hereby deleted.”

(C.1). At the time of hearing before us, the Ld. Departmental

Representative (in short “DR”) relied on the order of the AO. However, he

was unable to point out any infirmity or defect or error in the order of

Ld.CIT(A). On the other hand, the Ld. counsel appearing for the assessee

strongly supported the order of the Ld.CIT(A). He also filed a copy of letter

of Land Acquisition Officer Urban Estates, Faridabad, the relevant portion

which is reproduced as under:-

“It is informed that interest of enhanced compensation paid in the above noted case in the year 2007-08 has been calculated u/s 28 of the Land Acquisition Act. It is further submitted that interest in all enhancement cases is given under the provisions of section 28 of the Land Acquisition Act. No interest u/s 34 of the Land Acquisition Act, 1894 on enhanced compensation has been paid in the above said L.A. case No.84/99 during the year 2007-2008.”

(C.1.1). We find that the order of Ld.CIT(A) is based on binding precedent

in the case of CIT vs Ghanshayam HUF 315 ITR 1 (SC). In view of the

factual clarification issued by the Land Acquisition Officer, Urban Estate,

Faridabad, as aforesaid and in view of the binding precedent of Hon’ble

Apex Court in the case of CIT vs Ghanshayama HUF (supra), we decline to

interfere with the order of the Ld.CIT(A) as far as first ground of appeal

before us, regarding addition of aforesaid Rs.20,60,810/- is concerned.

I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 9 of 19 Therefore, first ground of appeal in the appeal filed by the Revenue is

dismissed.

(C.2). The second ground of appeal is in respect of the direction of the

Ld.CIT(A) in para 6.1 of her appellate order dated 31.10.2012 wherein the

Ld.CIT(A) directed the AO to reduce the taxable income by Rs.79,32,289/-.

As a result of this direction of the Ld.CIT(A), the assessed income of the

assessee becomes even lower than the returned income. In the second

ground of appeal, the Revenue has objected to the direction of the

Ld.CIT(A) by pointing out that period specified u/s 139(5) of I.T.Act had

expired and the assessee had not filed any revised return. The aforesaid

amount of Rs.79,32,289/- was shown by the assessee as taxable income

in the return filed by the assessee u/s 139(4) of the I.T.Act. The assessee

did not plead before the AO till the completion of assessment proceedings,

that the aforesaid amount was not Rs.79,32,289/- taxable income. The

assessee had not given any intimation to the AO, till finalization of the

assessment order, excluding this amount from taxable income; and the

aforesaid amount continued to be offered as taxable income by the

assessee till the assessment order was passed. In any case, the assessee

was not eligible to revise the return u/s 139(5) of I.T.Act as the return filed

by the assessee was a belated return u/s 139(4) of the Act. It was for the

first time before Ld.CIT(A) that the assessee took the plea that the

aforesaid amount of Rs.79,32,289/- was not taxable income. The

Ld.CIT(A) directed the AO to reduce the taxable income by aforesaid I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 10 of 19 Rs.79,32,289/-. The relevant portion of the appellate order of Ld.CIT(A) is

reproduced as under:-

6.1. “In the course of the appellate proceedings, the appellant inter alia objected the action of the AO for non computing the Income as per latest decision of Apex Court in the case of CIT vs. Ghanshyam Dass HUF, while filing the return of income the appellant included interest income of Rs.79,32,289 as taxable. The AO accepted the Income declared by the appellant and made an addition of Rs.20,60,810/- which is deleted by me in my this order. The grievance of the appellant is that due to the ignorance of law the appellant offered the exempt income for tax and paid the income tax on exempt interest income, which was received U/s 28 of the land acquisition act, 1894. In the remand report the AO has stated that the appellant voluntarily offered the interest amount for taxation and since the AO was of the view that this is taxable income hence the question of re-computing the income does not arise. I have considered the facts of the case carefully. The Hon'ble Supreme Court of India in the case of Ghanshayam HUF supra has held that the interest received u/s 28 of the Land Acquisition Act is exempt from tax. Admittedly the interest received by appellant is u/s 28 of the Land Acquisition Act, hence is exempt from tax. This is also an admitted fact that the appellant has offered this amount for taxation before the decision of Hon'ble Apex Court in the case of Ghanshyam dass HUF. After this decision the situation has changed and the amendment made in statute by Finance Act, 2010 is applicable from the Assessment year 2010-11. Hence amended provision is not applicable n this case since appeal relates to assessment year 2008-09. It is settled law that the appellant is entitled to raise an additional claim before the AO or the appellate authority which was not raised earlier. Useful reference can be made to the decision of Hon'ble Delhi High Court in the case of CIT vs. Parabolic springs Ltd. 306 ITR 42 (Del). The Hon'ble Apex Court of India, CIT vs. Mahalaxmi Sugar Mill Co. Ltd. (1986) 58 CTR 138 (SC) held that there is duty cast on the AO to apply the relevant provisions of the Income Tax Act 1961 for the purpose of determining the true figure of taxable income and consequential tax liability. That the appellant fails to claim the benefit cannot relieve the AO of his duty to apply the relevant provision of the Act. From the above observation of Hon'ble Apex Court it is clear that the AO is duty bound to determine the correct taxable income irrespective of the facts whether the appellant has claimed the benefit or not. As I held in the earlier part of my order that the interest received by appellant is received U/s 28 of the land Acquisition Act therefore is exempt from tax. The amount of Rs.79,39,289 was also received U/s 28 of the land Acquisition Act, I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 11 of 19 and is exempt from Tax. Merely not making a claim cannot be basis to deprive the appellant from a legitimate claim. In view of above, the AO is directed to allow the relief to the appellant and reduce the taxable income by Rs.79,32,289/- which is already included in income assessed by the AO. Accordingly this ground of appeal is allowed.”

(C.2.1). Before us, at the time of hearing, the Ld. DR supported the

second ground of appeal and relied on the assessment order. On the

other hand, Ld. Counsel for the assessee strongly supported the order of

Ld.CIT(A) and relied on the order of Ld.CIT(A). We have heard both sides

patiently. We have also considered all materials on record. We have

noticed that the return that was filed u/s 139 of the Act by the assessee

was, being a belated return, a return filed u/s 139(4) of the Act. Had the

assessee filed the return by due date, it would have been a return filed u/s

139(1) of the Act. Provisions regarding filing of revised return are

contained in section 139(5) of the Act and its perusal shows that, while

the assessee is permitted to file a revised return, if the original

return was filed u/s 139(1) of the Act or was filed in response to

notice u/s 142(1) of the I.T.Act. However, there is no permission u/s

139(5) for the assessee to file a revised return if the original return

was filed belatedly u/s 139(4) of the Act. Thus, the return filed by

the assessee u/s 139(5) of the Act is final qua the assessee, as far as

claims beneficial to the assessee are concerned. While Revenue is

authorized to scrutinize and examine the claims of the assessee by

taking action u/s 143 or 147 of the I.T.Act; the assessee has no

I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 12 of 19 authority under law to make a claim before the Assessing Officer

beneficial to the assessee subsequent to filing of (belated) return u/s

139(4) of the I.T.Act. As the assessee is barred from making any

claims even before the Assessing Officer beneficial to him after filing

of (belated) return u/s 139(4) of the Act; right of making any such

claims at a later stage such as in appellate proceedings have to be, by

necessary implication, interpreted as not available to the assessee. It

is to be appreciated that even for the instances when an assessee has

been permitted to file revised return u/s 139(5) of the Act; such as

when the original return was filed u/s 139(1) of the Act within due

date or when it was in response to notice u/s 142(1) of the Act; even

then the permission to file a revised return is available to the

assessee only upto time before the expiry of one year from the end of

the relevant assessment year or before the completion of the

assessment, whichever is earlier. In the instant case, the claim by the

assessee regarding the aforesaid amount of Rs.79,32,289/- was made well

after the time prescribed for filing of revised return u/s 139(5) of the Act.

This matter was considered by the Hon’ble Supreme Court in the case of

Goetze (India) Ltd. V CIT [2006] 157 Taxman 1 (SC) in which the Hon’ble

Apex Court held that the assessing authority has no power after filing

original return otherwise than by filing revised return. Despite these facts

and circumstances, the legal position and the precedent in the case of

Goetze (India) Pvt. Ltd. (supra), if the claim of the assessee regarding I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 13 of 19 aforesaid amount of Rs.79,32,289/- is to be considered favourably on

merits, as the Ld.CIT(A) has done in the impugned order, it results in an

extra-ordinary situation wherein the assessed income (after considering

the aforesaid claim of the assessee amounting to Rs.79,32,289/-) turns

out to be even less than the returned income. We have given our anxious

consideration to this extra-ordinary situation and examined the statutory

position whether income can be assessed at an income lower than the

returned income. The provisions regarding initiation of assessment

proceedings are contained in section 143(2) of the Act. The provisions u/s

143(2) of the Act, as they stood at the relevant time before amendment by

Finance Act, 2016 w.e.f 01.06.2016, are reproduced below:-

143(2). “Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.”

(C.2.2). From a perusal of the aforesaid provisions of section 143(2) of

the Act, it is noticed that the purpose of assessment proceedings is to

ensure that the assessee had not understated the income or has not

computed excessive loss or has not under paid the tax in any manner. I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 14 of 19 It can be readily inferred that the assessment proceedings are meant

for scrutinizing the claims made by the assessee and not for

entertaining any claims which have not been made by the assessee.

The assessment proceedings are not meant for the benefit of the

assessee and cannot be carried out to confer a benefit to the

assessee, specially when such claim for benefit was not made by the

assessee by due date or even by the time of completion of assessment

proceedings. The filing of return by the assessee u/s 139(1) or u/s

139(4) or in response to notice u/s 142(1) of the I.T.Act, is on the

basis of “self-assessment” by the assessee in accordance with section

140A of the I.T.Act. The “self-assessment” by the assessee can be

altered by the Revenue to the disadvantage of the assessee if the case

is selected for scrutiny by issue of notice u/s 143(2) of the Act which

results in assessment order u/s 143(3) or u/s 144 of the I.T.Act.

Revenue does not select all the returns filed by the assessee for scrutiny

by issue of notice u/s 143(2) of I.T.Act. It is common knowledge and a

well-known fact that a very small percentage of returns filed by the

assessee are selected for scrutiny by issue of notice u/s 143(2) of the Act.

Unless the return is selected for scrutiny by issue of notice u/s

143(2) of the Act resulting in an assessment order u/s 143(3) or u/s

144 of the Act, the return filed by the assessee in accordance with

“self-assessment” made by the assessee is final (barring exceptional

circumstances when notice u/s 148 or u/s 153A or u/s 153C or u/s I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 15 of 19 158BC or u/s 158BD etc. is issued subsequently). The selection of a

case for scrutiny by issue of notice u/s 143(2) of the Act cannot put the

assessee in a more advantageous position than had the case not been

selected for scrutiny, in which case the “self-assessment” made by the

assessee and return filed by the assessee would have become final

(barring exceptional circumstances when notice u/s 148 or u/s 153A or

u/s 153C or u/s 158BC or u/s 158BD etc. is issued subsequently). In the

instant case, the consequence of favourably considering the claim of the

assessee regarding aforesaid amount of Rs.79,32,289/-, is that the

assessed income of the assessee becomes much lower than the returned

income and puts the assessee in a much more advantageous position than

had the return of the assessee not been selected for scrutiny in which case

the “self-assessment” made by the assessee and return filed by the

assessee would have become final. As we have discussed earlier such a

situation is not permissible under law on careful perusal of section 143(2)

of the I.T.Act. Reference to order of Hon’ble Apex Court in the case of CIT

vs Sun Engineering Works (P.) Ltd.[1992] 198 ITR 297 (SC) is useful

wherein Hon’ble Supreme Court held that since the proceedings under

section 147 of the Act are for the benefit of the Revenue and not for an

assessee, and are aimed at gathering the ‘escaped income’ of an assessee.

Though the decision of Hon’ble Supreme Court in the case of CIT vs Sun

Engineering Works (P) Ltd. [supra] was in the context of proceedings u/s

147 of the Act, the principle is applicable even for proceedings u/s 143(2) I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 16 of 19 of the Act because, as we have seen before, on perusal of provisions u/s

143(2) of the Act, it can be readily inferred that the assessment

proceedings u/s 143(2) of the Act are not meant for the benefit of the

assessee but are for the benefit of Revenue only so that the AO is able

to ensure that the assessee has not understated the income or has

not computed excessive loss or has not under paid the tax in any

manner.

(C.2.3). We have already noticed that the aforesaid claim of

Rs.79,32,289/-, was made by the assessee after the time limit prescribed

u/s 139(5) of the Act for revision of return. We have also noticed that, in

any case the assessee was not eligible to revise the return because the

return filed by the assessee was not returned filed u/s 139(1) of the Act by

prescribed due date but was a belated return under section 139(4) of the

Act for which there is no statutory permission u/s 139(5) of the Act to

revise the return. We have also noticed that the claim of the assessee

for the aforesaid amount of Rs.79,32,289/- having been favouarbly

considered by the Ld.CIT(A) has resulted in the extra-ordinary

situation, not tenable in law on perusal of section 143(2) of the Act,

wherein the assessed income of the assessee turns out to be lower

than the returned income thereby placing the assessee in a much

advantageous situation, contrary to law, as compared to the likely

situation if the return filed by the assessee had not been selected for

scrutiny by issue of notice u/s 143(2) of the Act. We are aware of I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 17 of 19 certain precedents wherein it has been held that appellate authorities can

admit a legal ground taken by appellant at any stage of appellate

proceedings provided all relevant facts are on record and fresh

investigation of facts is not necessary. However, in the instant case a

fresh investigation of facts on merits of the claim made by the assessee

was necessary, the opportunity for which was not given by the Ld.CIT(A) to

the AO. In any case, in view of the clear legal position under sections

143(2), 139(1), 139(4) and 139(5) of the Act as discussed earlier in detail;

and in view of the facts and circumstances as discussed earlier in detail;

and in view of precedents of Hon’ble Supreme Court in the cases of

Goetze (India) Pvt. Ltd. [supra] and CIT vs Sun Engineering Works (P)

Ltd. [supra], we hold that the Ld.CIT(A) erred in favourably considering the

claim of the assessee for the aforesaid amount of Rs.79,32,289/-.

Accordingly, we set aside the order of the Ld.CIT(A) on this issue and

reverse his direction given to the AO to reduce the taxable income by

Rs.79,32,289/-. We direct that this amount of Rs.79,32,289/- will

continue to be included as income of the assessee in accordance with

return filed by the assessee u/s 139(4) of the I.T.Act. Thus, second

ground of appeal filed by the Revenue is allowed.

(D). Third ground of appeal is regarding the benefit of indexation in

respect of long term capital gain. The assessee had inherited a property

which devolved on the assessee in F.Y.1987-88. The property was

acquired by the previous owner in an earlier year. The relevant facts have I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 18 of 19 been stated in paragraphs 5 to 5.5 of the assessment order and

paragraphs 7 to 7.3.6 of the impugned order of Ld.CIT(A). The property

has been sold by the assessee in this year and long term capital gain has

arisen to the assessee. The dispute is whether the benefit of indexation,

for the purpose of computation of long term capital gain, is allowable to

the assessee from the F.Y. 1987-88 (as held by the AO) or from 1981-82

[as claimed by the assessee and allowed by the Ld.CIT(A) in the impugned

order]. The Ld.CIT(A) has discussed the facts of the case and the legal

position in detail in her impugned appellate order. She has relied on the

order of the Hon’ble Delhi High Court in the case of Arun Shungloo Trust

vs CIT [2012]. At the time of hearing, the Ld.DR appearing for the Revenue

relied on the order of the AO. However, he was unable to point out any

infirmity or defect or illegality in the order of Ld.CIT(A). The Ld. counsel

for the assessee strongly supported the order of the Ld.CIT(A) and

contended that the same should be upheld in view of the order of the

Delhi High Court in the case of Arun Shungloo Trust (supra). We have

heard both sides attentively. We have also considered all materials

carefully. We are of the view that the order of Ld.CIT(A) on this issue is a

well-reasoned order and in accordance with law in the facts and

circumstances of this case. Ld. DR has failed to make out a case for any

interference with the order of Ld.CIT(A) on this issue. The order of the

Ld.CIT(A) is also based on precedent of Hon’ble Delhi High Court in the

case of Arun Shungloo Trust (supra). In view of the foregoing, we decline I.T.A .No.-226/Del/2013 DCIT vs DINESH SHRAMA

Page 19 of 19 to interfere with the order of the Ld.CIT(A) on this issue and dismiss third

ground of appeal filed by the Revenue. Accordingly, the order of Ld.CIT(A)

on this issue is upheld.

(E). In the result, the appeal of the Revenue is partly allowed for

statistical purposes.

The order pronounced in the open court on 21st April 2017.

Sd/- Sd/- (SUDHANSHU SRIVASTAVA) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Date:-21st April, 2017 *Amit Kumar*