SH. BANT SINGH,SIRSA vs. PR. CIT, HISAR

आदेश/Order

PER BENCH:

All the above appeals have been filed by different assessee against the order of the Pr. CIT, Haryana.

1 That order dated 26.2.2018 u/s 263(1) of the Act by learned Principal Commissioner of Income Tax, Hisar has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such.

1.1 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Principal Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view.

1.2 That various adverse findings and observations made by the learned Pr. Commissioner of Income Tax in order are based on fundamental misconception of facts and law, arbitrary and unjustified and therefore untenable.

1.3 That the finding that "assessment order has not been passed in accordance with the provisions of the Income Tax Act, 1961 and in accordance with the decision rendered by jurisdictional High Court and Supreme Court by rejecting the SLP, therefore the order is erroneous in so far as it is prejudicial to the interest of revenue" is also not based on correct appreciation of facts on record and hence unsustainable.

1.4 That the learned Principal Commissioner of Income Tax otherwise has failed to appreciate that once an order has been made u/s 143(3)7147 of the Act then, no

notice can be issued to revise an order u/s 143(3) of the Act as order u/s 143(3) of the Act merges with an order u/s 143(3)7147 of the Act.

3.1 That while making the aforesaid addition the learned Principal Commissioner of Income Tax has erroneously relied on the judgment of Hon'ble Punjab and Haryana High Court in the case of Manjit Singh v. UOI CWP No. 15506/2013 dated 14.1.2014 and overlooking the following judgments of Apex Court: i)315 ITR 1 (SC) CIT vs. Ghanshyam (HUF) (dated 16.7.2009) ii)367 ITR 4 98(SC) CIT vs. Govindbhai Mamaiya (dated 4.9.2014) iii)C.A. No, 13053/2017 CIT vs. Chet Ram (HUF) (dated 12.9.2017) iv)C.A. No. 15041/2017 Union of India and ORS vs. Hari Singh and ORS v) C.A. No. 18475/2017 Income Tax Officer TDS-2 Rajkot vs. Muktanandgiri Maheshgiri

3.2 That the learned Principal Commissioner of Income Tax has further erred both in law and on fact in invoking section 56(2)(vii) read with section 57(iv) of the Act to make the impugned addition.

It is therefore prayed that, impugned order made under section 263(1) of the Act dated 26.2.2018 be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed. Furthermore addition so made be deleted and appeal of the appellant be allowed.

Return declaring an income of Rs. 4,66,040/- plus agri. Income at Rs. 2,00,000/- was filed by assessee on 29.03.2014 for the Assessment Year 2013-14. Apart from it, assessee has also shown the exempt income of Rs. 1,61,14,384/- in Schedule El of the Income-tax return (enhanced compensation of Rs. 85,54,074/- and interest thereon at Rs. 75,60,310/-). and claimed exemption at Rs. 75,60,310/- u/s 10(37) of the Income-tax Act, 1961. The assessment proceedings u/s 143(3) of the Act were finalized by the AO vide order dated 24.11.2015 assessing total income on returned income.

2.1 In this connection, division Bench of the Hon'ble Punjab & Haryana high Court in its judgment dated 14.01.2014 in the case of Manjeet Singh (HUF) Karta Manjeet Singh Vs. Union of India & Others, CWP No. 15006 of 2013, after considering the decision of the Hon'ble Supreme Court in the case of CIT Vs

Ghanshyam (HUF)(supra), observed that the benefit of two Judges Bench's decision of the Hon'ble Supreme Court in the case of CIT Vs Ghanshyam (HUF) cannot be derived by the assessee u/s 28 of the Land Acquisition Act and held that the element of interest awarded by the Court on enhanced compensation u/s 28 of the Land Acquisition Act, 1894 falls for taxation u/s 56 of the Income-tax Act, 1961 as "Income from Other Sources"in the year of receipt. 2.2. Further the Special Leave Petition No. 34642 of 2014 filed against the above order of Hon'ble Punjab and Haryana High Court has also been dismissed by the Hon'ble Supreme Court vide order No.34642 of 2014 dated 18.12.2014 and thus issue of taxability of interest awarded u/s 28 of the L.A. Act, 1894 has become final.

2.3. Further, as per the amended provision of the Income-tax Act, 1961, introduced by Finance (No. 2) Act, 2009 as clause (viii) in sub section 2 of section 56, clause (iv) in Section 57 and Clause (b) in Section 145A inserted w.e.f. 01.04.2010, the interest received u/s 28 of the Land Acquisition Act, 1894, on the amount of compensation or enhanced compensation is eligible to tax as "Income from Other Sources" after allowing deduction of a sum equal to 50% of such income in the year of receipt.

2.4 In view of the above, the interest of Rs. 75,60,310/- received by assessee during the year under consideration u/s 28 of the L.A. Act, 1894 on compensation/enhanced compensation is taxable as income from other sources, after deduction @ 50% of the said interest. However, the A.O. has failed to tax the same in the assessment order under section 143(3). Such failure on the part of the A.O prima facie renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue and the same is, therefore, required to be modified/cancelled u/s 263 of the Act. Therefore, show cause notice was issued to the assesseee on 01.02.2018 as to why an appropriate order under section 263(1) should not be passed. 3. In response thereto, Sh. S.K. Jain, CA and AR of the assessee appeared and filed written submission as under :-

3.1 That assessee has furnished return of income on 29.03.2014 declaring an income of Rs. 4,66,040/- and agriculture income of Rs. 2,00,000/- for the instant year. That perusal of the return of income would show that assessee has duly disclosed that, he has received exempt income of Rs. 1,61,14,384/- in schedule El (Exempt Income) of the Income tax return, which comprises of enhanced compensation of Rs. 85,54,0747-on compulsory acquisition of agricultural land and interest thereon amounting to Rs. 75,60,310/-on it. 3.2 Thereafter during the assessment proceedings u/s 143(3) of the Act, in response to the query of learned Assessing Officer, assessee furnished reply where in detail regarding enhanced compensation on compulsory acquisition of agriculture land has been submitted before learned Assessing Officer. 3.3 That on 24.11.2015, after considering the above said reply return of income filed by the assessee stood accepted as such vide order of assessment u/s 143(3) of the Act. (Thereafter, a notice was issued under section 148 of the Act by recording reasons as have also been extracted in the show cause notice. 3.4 That in response thereto assessee has filed his objections to the validity of the 1 initiation of proceedings u/s 147 of the Act in terms of the judgement of Hon'ble Supreme ; Court in the case of M/s G.K.N. Driveshafts (India) limited vs. ITO reported in 259 ITR 19(SC). 4 At the outset, it is respectfully submitted that once an order has been made u/s 143(3)/147 of the Act then, no notice can be issued to revise an order u/s 143(3) of the Act as order u/sl43(3)~of the Act merges with an order u/s 143(3)/147 of the Act. It is thus submitted that notice u/s 263 of the Act cannot be issued to modify/cancel an order u/s 143(3) of the Act as the same stands merged with an order made u/s 143(3)7147 of the Act on the same issue for which notice u/s 263 has been issued. Reliance is placed on the judgement of Hon'ble Allahabad High Court in the case of L.G. Electronics India (P) Ltd. vs. PCIT reported in 388 ITR 135.

5 In any case and without prejudice, the factual matrix remains that now the claim stands accepted and allowed after due enquiry in two separate orders, one u/s 143(3) of the Act and another u/s 147/143(3) of the Act. A copy of the order u/s 143(3)7147 of the Act is placed at page 54 ofAnnexure to this Reply, wherein it has been stated as under: "Proceedings u/s 147 of the Income Tax Act, 1961 for the assessment year 2013-14 are hereby dropped. 5.1 It is also evident from the impugned notice it has not been alleged that the claim has been allowed without examination of the issue. It is thus neither a case of lack of enquiry by the Assessing Officer or inadequate enquiry during the proceedings. Infact in the objection u/s 147 of the Act assessee had objected to reopening of the assessment on the ground that since issue has been examined and allowed u/s 143(3) of the Act as the issue is squarely covered by the judgments of Hon'ble Apex Court. 6 It is next submitted that when the reasons recorded for reopening the assessment were the very same reasons for which notice u/s 263 of the Act then invocation of section 263 of the Act is not tenable. It is submitted that in support of the above submission assessee seeks to place reliance on following judgements: i) 2 taxmann.com 260 (Del.) CIT vs. Suresh Paul Bansal ii) 287ITR 286 (Del) CIT vs. Vikram Aditya and Associated iii) ITA 170/2017 (Del) CIT vs. Prudent Advisory Services (P) Ltd. 7 That in the impugned notice it has been alleged that element of interest awarded by the Court on enhanced compensation u/s 28 of the Land Acquisition Act, 1894 falls for taxation u/s 56 of the Income Tax Act, 1961 as "Income from Other Sources" 7.1 It is submitted that aforesaid allegation is based on the judgement of Hon'ble Punjab and Haryana High Court in its judgement dated 10.01.2014 in the case of Manjeet Singh (HUF) Karta Manjeet Singh Vs. Union of India and Others, CWP No. 15006 of 2013. It is submitted that aforesaid judgement has been distinguished by Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai vs. Income-tax Officer-TDS-1-Surat, dated 31.3.2016 reported in 388 ITR 343 (Guj). 7.2 That, assessee also seeks to rely on the following judgements: i) C.A No. 13053/2017 (SC) dated 12.09.2017 CIT Vs. Chet Ram (HUF) ii) 315 ITR 1(SC) dated 16.07.2009 CIT vs. Ghanshyam HUF iii) 367 ITR 498(SC) dated 04.09.2014 CIT vs. Govindbhai Mamaiya iv) C.A. No, 15041/2017 Union Of India And ORS. vs. Hah Singh And ORS. v) C.A. No, 18475/2017 Income Tax Officer TDS-2 Rajkot. vs. Muktanandgiri Maheshgiri vi) CR No. 2509 of 2012 (P&H) dated 29.11.2013 HSIDC Ltd. Vs. Savitri vii) CR No. 7953 of 2013 (P&H) dated 21.12.2013 HUDA vs. Mandir Nar Singh Puri and anothers viii) ITA No. 160/ CHD/2015 dated 14.07.2015 CIT Hisar vs. Vaibhav Choudhary ix) ITA No. 437/CHD/2015 dated 14.07.2015 CITHisarvs. Nishant Choudhary x) ITA No. 405/CHD/2013 dated 2.8.2013 ITO vs. Pawan Girl xi) ITA No. 313/CHD/2015 dated 20.02.2016 Baldev Singh vs. ITO xii) ITA No. 131/CHD/2016 dated 30.06.2016 The DCIT (TDS), Ludhiana vs. Dedicated Freight Corridor Corporation Ltd. xiii) ITA No. 100/HYD/2016 dated 07.12.2016 Smt. P. Susheela vs. ITO xiv) 83 taxmann.com 304 dated 21.04.2017 DCIT vs. Dinesh Sharma

8.1 The provisions of section 56(2)(viii) of the Act, the provisions of section 145A and the provisions of section 57 of the Act amended by Finance (No. 2) Act 2009. From the reading of the provisions, memorandum and notes to clause of the above amendment it is evident that aforesaid amendments are introduced to mitigate the hardship that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis as held by Apex Court in the case of Rama Bai vs. CIT reported in 181 ITR 400. The amendments are for arrears of interest computed on delayed or enhanced compensation shall be taxable

on accrual basis. Thus by making amendment in section 56(2), 57 and 145A, legislation makes the arrear of interest computed on delayed or enhanced compensation shall be taxable in the year of receipt, which does not have any effect on the binding decision of Apex court in the case of CIT Vs. Ghanshyam Dass (HUF) reported in 315 ITR 1 further affirmed in CIT vs. Govindbhai Mamaiya reported in 367 ITR 498 (SC) wherein it has been held that the interest earned under Section 28 of Land Acquisition Act, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation. 8.2 In view of the aforesaid it is thus submitted that claim of the assessee is in accordance with law.

"Income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A."

"In the case of income of nature referred to in clause (viii) of sub section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section."

"Interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received."

In view of the above amended provisions introduced w.e.f. 01.04.2010, 50% of the interest on enhanced compensation is assessable as interest income under the head of income from other sources in the year the interest is received by the assessee. In this regard, the contention of the AR that the amendments were introduced to tax the interest on compensation and enhanced compensation in the year of receipt to mitigate the hardships consequent to decision Hon'ble Apex Court in the case of Rama Bai (supra), is not relevant in the instant issue. Earlier, there was no specific provision in 56 to tax interest received on compensation or on enhanced compensation. In view of the above specific provision introduced by the Finance Act, 2009, interest on enhanced compensation is clearly taxable under the Act in the year it is received.

"8. Learned counsel for the respondents placed reliance on the following observations of this Court in Commissioner of Income Tax. Faridabad v. Ghanshyam (HUF) -(2009) 8 SCC 412:

'The additional amount payable under Section 23(1 A) of the 1894 Act is neither interest nor solatium. It is an additional compensation designed to compensate the owner of the land, for the rise in price during the pendency of the land acquisition proceedings. It is a measure to offset the effect of inflation and the continuous rise in the value of properties. Therefore, the amount payable under Section 23(1 A) of the 1894 Act is an additional compensation in respect to the acquisition and has to be reckoned as part of the market value of the land.'

The learned counsel for respondents submitted that as this court has treated additional amount under Section 23(1 A) as part of the market value, additional amount is payable on the solatium. There is no logic in the contention as the decision nowhere holds that solatium is part of market value nor holds that additional amount under Section 23(1 A) is payable on the solatium amount. Be that as it may. More importantly, what requires to be noticed is that the entire consideration and analysis in that decision was with reference to the question whether solatium, additional amount and interest are part of 'enhanced compensation' for the purposes of Section 45(5) (b) of the Income Tax Act, 1961. The observations therein should be understood in the context of the provisions of the Income Tax Act. For example the decision also holds that interest payable under Section 28 of the Act is 'enhanced compensation' for the purposes of Section 45(5) (b) of Income Tax Act, which if taken as the interpretation with reference to the Land Acquisition Act, 1894, will be contrary to the Constitution bench decision in Sunder (supra). We may also note that the decision clearly holds that additional amount is awardable only against the market value and not solatium: 'It is clear from reading of Sections 23(1 A), 23(2) as also Section 28 of the 1894 Act that additional benefits are available on the market value of the acquire lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation.'

(i) Hon'ble Apex Court in its three judge bench in the case of Bikram Singh (supra) held :

"the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would not be eligible to income-tax?

It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under Section 28 or 31 of the Acquisition Act is a taxable event."

(ii) Hon'ble Apex Court in its three judge bench in the case of Dr. Sham Lai Narula (supra) held :

Therefore, the interest awarded under s. 28 of the Act, just like under s. 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner." 7. In view of the authoritative pronouncements of the Apex Court in the case of Dr. Shamlal Narula vs. CIT (Supra), Bikram Singh vs. Land Acquisition Collector, (Supra), Sunder vs. Union of India (Supra) and State of Punjab vs. Amarjit Singh (Supra), Hon'ble Punjab & Haryana High Court in Manjet Singh (Supra)held that the benefit of two Judges Bench's decisionin the case of Ghanshyam (HUF) cannot be derived by the assessee u/s 28 of the Land Acquisition Act and held that the element of interest awarded by the Court on enhanced compensation u/s 28 of the Land Acquisition Act, 1894 falls for taxation u/s 56 of the Income-tax Act, 1961 as "Income from Other Sources"in the year of receipt. The observation of Hon'ble Punjab & Haryana High Court in the case of Manjet Singh (Supra) is re- produced as under :-

"12. Adverting to the case law on the subject, inevitably, reference is made to the judgment by the three Judges bench of the Supreme Court in the case of Dr. Shamlal Narula v. CIT , [1964] 53 ITR 151, which had considered the issue regarding award of interest under the 1894 Act. Interest under Section 28 of the 1894 Act was considered akin to interest under Section 34 thereof as both were held to be on account of keeping back the amount payable to the owner and did not form part of compensation or damages for the loss of the right to retain possession. It was noticed as under:-

"As we have pointed out earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under s. 28 of the Act, just like under s. 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner."

The principle of Dr. Shamlal Narula's case (supra) had subsequently been applied by three Judges Bench of the Apex Court in a later decision in T.N.K.Govindaraju Chetty v. CIT, (1967) 66 ITR 465.

"'interest' means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised."

The expression 'interest' occurring in sub-section (28A) of Section 2 of the Act widens the scope of the term 'interest' for the purposes of the Act.

"The controversy is no longer res integra. This question was considered elaborately by this Court in Dr. Shamlal Narula vs.Commissioner of Income-tax, Jammu [51 ITR 151]. Therein, K. Subba Rao, J., as he then was, considered the earlier case law on the concept of "interest" laid down by the Privy Council and all other cases and had held at page 158 as under: "In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the

term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income tax Act."

This position of law has been consistently reiterated by this Court in the case of TMK Govindaraju Chetty vs. Commissioner of Income-tax, Madras [66 ITR 465], Rama Rai & Ors. vs. CIT, Andhra Pradesh [181 ITR 400] and K.S.Krishna Rao vs. CIT, A. P. [181 ITR 408]. Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is a revenue receipt eligible to income tax. It is true that in amending the definition of "interest" in Section 2(28A) interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word "interest" for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. That was explained by the Board in the circular referred to hereinbefore. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would not be eligible to income-tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under Section 28 or 31 of the Acquisition Act is a taxable event."

"To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a 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 28 is 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 the enhanced value of the land which is not the case in the matter of payment of interest under Section 34."

We do not find any legal and valid ground for Interference. The Special Leave Petitions are dismissed." 9. In this regard, reliance placed by the AR of the assesseee in the cases of (i) Movaliya Bhikhubhai Balabhai (supra) (ii) C.A No. 13053/2017 (SC) dated 12.09.2017 CIT Vs. Chet Ram (HUF) (iii) CIT Vs. Govindbhai Mamaiya (2014) 367 ITR 0498 (SC),

(iv) C.A. No, 15041/2017 Union Of India And ORS. vs. Hah Singh And ORS., (v) C.A. No, 18475/2017 Income Tax Officer TDS-2 Rajkot. vs. Muktanandgiri Maheshgiri, (vi) CR No. 2509 of 2012 (P&H) dated 29.11.2013 HSIDC Ltd. Vs. Savitri,(vii)CR No. 7953 of 2013 (P&H) dated 21.12.2013 HUDA vs. Mandir Nar Singh Puri and anothers, (viii)ITA No. 160/ CHD/2015 dated 14.07.2015 CIT Hisar vs. Vaibhav Choudhar, (ix)ITA No. 437/ CHD/2015 dated 14.07.2015 CIT Hisar vs. Nishant Choudhary, (x)ITA No. 405/CHD/ 2013 dated 2.8.2013 ITO vs. Pawan Giri, (xi) ITA No. 313/CHD/2015 dated 20.02.2016 Baldev Singh vs. ITO, (xii)ITA No. 131/CHD/2016 dated 30.06.2016 The DCIT (TDS), Ludhiana vs. Dedicated Freight Corridor Corporation Ltd., (xiii) ITA No. 100/HYD/2016 07.12.2016 Smt. P. Susheela vs. ITO, (xiv) 83 taxmann.com 304 dated 21.04.2017 DCIT vs. Dinesh Sharmaare also not sustainable in view of the decision of Hon'ble Punjab & Haryana High Court in the case of Naresh Kumar Jain & others Vs. State of Haryana and others in CWP No. 14728 of 20T7 dated 12.07.2017. In all the above decisions relied upon by the AR, the judgement in Ghanshyam HUF (Supra) case was followed, for the reason of which the above judgements would be of no advantage on the issue of taxability of interest on enhanced compensation as held by Hon'ble Punjab & Haryana High Court in Naresh Kumar Jain & others (Supra) as under:-

"9. In view of the above and also the amendments made by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2010 noticed hereinbefore, no advantage can be derived by the petitioners from the judgment in Ghanshyam's case (supra).

10.Similarly, the judgment in Govindbhai Mamaiya's case (supra) relied upon the by the learned counsel would be of no help to the petitioners as in the said case, the judgment in Ghanshyam's case (supra) was followed.

"11. In this view of the matter, the interest component on enhanced compensation under Section 28 is liable to be taxed under Section 56 of the Act even when compensation is treated as agricultural income and is not covered by Section 45(c) of the Act. We thus answer the questions in favour of the revenue and modify our order dated 5.7.2010 accordingly. The amount of interest on enhanced compensation is held to be taxable in the year of receipt irrespective of pendency of proceedings against award of enhanced compensation. 12. Adverting to the judgment of the Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra), it may be noticed that since the Jagmal Singh's case (supra) on the basis of which the said case was decided, has

been overruled by this Court in CWP No. 10125 of2015(Attar Singh and others v. State of Haryana and others) decided on 3.9.2015 to which one of us (Ajay Kumar Mittal, J.) was a member, with the following observations:-

"The judgment of learned Single Judge in Jagmal Singh's case (supra) (Annexure P-5) on which reliance has been placed by the petitioners being contrary to theafore said pronouncements cannot be taken to be interpreting the legal provisions correctly and is, thus, overruled."

Thus, we are unable to concur with the view expressed by the Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra).

"8. This Court, in Income Tax Appeal No. 209 of 2004, decided on 27.10.2010 (Commissioner of Income Tax, Faridabad v. Bir Singh (HUF), Ballabgarh) had held that interest paid to the assessee under Section 28 of the Land Acquisition Act, 1894 (for brevity, "1894 Act") on enhanced amount of compensation in respect of the acquired land falls for taxation under Section 56 of the Act as "income from other sources"and is exigible to tax in the year of receipt under cash system of accountancy. It had also been observed that where the assessee is not maintaining books of accounts by adopting any specific method, it shall be treated to be cash system of accountancy. In the present case, the interest received by the petitioner was on account of delay in making the payment of enhanced compensation and, therefore, would fall under Section 28 of the 1894 Act. Such payment could not par-take the character of compensation for acquisition of agricultural land and, thus, was not exempt under the Act. Once that was so, the tax at source had been rightly deducted by the payer."

from the date of regular order of the assessment. In the instant case, the assessment was made on 24.11.2015 and limitation for order u/s 263 is yet to expire.

12.1 Further contention of the AR is that the claim of exemption stands accepted and allowed after due enquiry in two separate orders, one u/s 143(3) of the Act and another u/s 147/143(3) of the Act. AR contended that it is thus neither a case of lack of enquiry by the Assessing Officer or inadequate enquiry during the proceedings. The above contention of the AR is also not sustainable. As in the assessment made u/s 143(3), the AO erroneously allowed the exemption u/s 10(37) to the assessee on the basis of decision in the case of Ghanshyam (supra), therefore, the AO initiated proceedings u/s 147 which was dropped subsequently after objection by the assessee. As AO was of the view that issue could not be resolved u/s 147, therefore, proposal was sent for revision u/s 263 of the Income Tax Act, 1961. Although the proposal was received from the AO, the notice u/s 263(1) was issued by the undersigned after examining the record and after being satisfied that the assessment order u/s 143(3) passed by the AO is prima facie erroneous in so far as it is prejudicial to the interest of revenue and it is a fit case to issue notice u/s 263. There is no provision under the Income Tax Act, 1961 which prohibits initiation of proceedings u/s 263 on the basis of proposal from the AO. There is also no provision under the Income Tax Act, 1961 that prohibits action u/s 263 after dropping the proceedings u/s 147 of the Income Tax Act, 1961. In this context, it is not material whether AO could have proceeded to complete the assessment u/s 143(3)/147 instead of dropping the proceedings. As proceedings u/s 147 were dropped and escapement of income could not be brought to tax by the AO by recourse to action u/s 147, therefore, proposal for action u/s 263 was sent by the AO. The action u/s 263 is called for, not because of lack of enquiry but because the assessment order was not passed in accordance with the provisions of the Income Tax Act, 1961 and in accordance with the decision rendered by jurisdictional High Court and Supreme Court by rejecting the SLP. Therefore, legal and valid action u/s 263 was warranted in the instant issue and accordingly proceedings u/s 263 were initiated as per law. 12.2 The decisions Suresh Paul Bansal (supra), Vikram Aditya and Associates (supra) and Prudent Advisory Services (P) Ltd. (supra) relied on by the AR are also not applicable in the instant case. The above decisions are related to different views taken by the CIT in the order u/s 263 as against the order u/s 147/143(3) made by the AO. In the instant case, there is no difference in views taken by the AO while dropping the proceedings u/s 147 and the action taken u/s 263. As discussed above, in view of the objection by the assessee, the proceedings u/s 147 were dropped and as the escapement of income could not be brought to tax by the AO by recourse to action u/s 147, therefore, proposal for action u/s 263 was sent by the AO. 13. The order u/s 143(3) passed by the AO is in clear violation of the legal provision with IT. Act as well as the judicial position laid down. It is evident that the »ing Officer had not properly examined the facts of the case and accepted the version of the assessee without due examination of the issue of interest on enhanced compensation as discussed above. Had the consequent additions been made, there would have been substantial tax effect and thus the cause of the revenue has suffered. Therefore, I am of therefore considered view that the assessment order under consideration passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue and, therefore, it needs to be suitably revised. Therefore, the assessment order passed by the AO u/s 143(3) of the IT. Act for the AY 2013-14 is set-aside u/s 263(1) of the IT. Act, 1961 and restored to the AO for making fresh assessment with direction to add the interest income of Rs. 37,80,155/- being 50% of total interest at Rs. 75,60,310/-, to the assessed income of the assessee.

iii. Amended provisions of Income Tax Act,1961, introduced by Finance (No.2) Act, 2009 as clause (viii) in sub section2 of section 56, clause (iv) in Section 57 and Clause(b) in Section 145A inserted w.e.f 01/04/2010. iv. Tried to differentiate the Apex Court judgment in the case of Ghanshyam (HUF) with reference to Section 28 and 34. v. Relied on pronouncement of Apex Court in the case of Shyam Lal Narula Vs. CIT, Bikram Singh Vs. Land Acquisition Collector(LAC), Rama Bhai Vs. CIT, K.S. Krishna Rao Vs. CIT vi. Explanation 2 of Section 263 of Income Tax Act,1961.

This similar issue has been dealt in number of cases by this Tribunal after following the developments over the period of time. The various cases are as under:

We have heard the rival contentions. It is pertinent to note here that interest under the Land Acquisition Act can be awarded under section 28 or/and under section 34 of the Land Acquisition Act, 1894. Interest awarded under section 28 of Land acquisition Act, 1894 is the interest on the excess amount of compensation awarded by the court over the amount awarded by the collector. It is awarded by the Court payable by the collector from the date on which the collector took the possession of the land to the date of payment of such excess into Court. Whereas interest under section 34 of the Land Acquisition Act, 1894 is given when the amount of compensation awarded by the collector is not paid or deposited on or before taking possession of land, such interest is payable from the time of so taking possession till the date of payment of compensation. In the case in hand, the Ld. CIT (Appeals) vide his order dated 14.3.2016 had allowed the appeal of the assessee following the decision in case of Ghanshyam (HUF) (supra), wherein it has held Interest u/s 28 of the Land Acquisition Act 1984, unlike interest u/s 34 is an accretion to the value of the land , hence it is part of enhanced compensation or consideration which is not the case with interest u/s 34A. So also additional amount u/s 23(1A) and solatium u/s 23(2) form part of enhanced compensation.

“In so far as the second question is concerned, that is also covered by another judgment of this Court in Commissioner of Income Tax, Faridabad vs. Ghanshyam (HUF) reported in (2009) 8 SCC 412, 6 albeit, in favour of the Revenue. In that case, the court drew distinction between the “interest” earned under Section 28 of the Land Acquisition Act and the “interest” which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of

the Income Tax Act. The question was whether it will cover “interest” and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

“49. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

“(2) While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in 'Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF)' [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not.”

The said decision as rightly pointed out by the Ld. counsel for assessee have been rendered by the Hon'ble Apex Court subsequent to the decision passed by the Hon'ble Jurisdictional High Court in the case of Manjeet Singh(HUF) (supra) which had dealt with the decisions of the Hon'ble Apex Court in Ghanshyam, HUF (supra). Therefore, in view of the same, the proposition laid down in Ghanshyam, HUF (supra) remains and which having been laid down by the Hon'ble Apex Court is the law of the land and has to be followed by all lower authorities. In view of the above, we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable

under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable.

Sd/- Sd/- संजय गग� डा. बी.आर.आर, कुमार, (SANJAY GARG) (DR. B.R.R. KUMAR, AM) �या�यक सद�य/ Judicial Member लेखा सद�य/ Accountant Member AG Date: 31/10/2018

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :