RAJENDRAKUMAR ICHUBHAI KOTHARI,BHARUCH vs. ITO, WARD-1(1), BHARUCH

The assessee, in his quantum appeal, has raised the following grounds of appeal:

The brief facts of the case are that the assessee is an individual and had not filed his income tax return for assessment year 2013-14, as per the provisions of section 139 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). On the basis of information available on AIMS database, during the relevant period of time, the assessee had received interest income amounting to Rs.29,91,901/- but failed to file his income-tax return. Accordingly, assessment proceedings u/s 147 of the Act were reopened with issuance of notice u/s 148 of the Act on 30.03.2021. In response thereto, the assessee filed its ITR on 15.09.2021 declaring total income of Rs.7,71,880/-. During the course of assessment proceedings, the assessee was asked to furnish the reasons for not offering the interest income on enhanced compensation for taxation. In response to the notices, the assessee vide its reply dated 02.02.2022 submitted that the said interest income was awarded by the court for compensation of agricultural land and the interest income in ITA Nos.835 & 836/SRT/2025 Asst. Year : 2013-14

However, the Assessing Officer (AO) did not accept the aforesaid reply of the assessee and observed that assessee had not submitted any proof regarding the ownership of other members in the property. He further observed that the whole amount had been credited in the bank account of the assessee, which clearly established that the said interest income pertained to the assessee only. He, accordingly, treated the entire interest income to the tune of Rs.22,43,934/- as assessee's income from other sources u/s 56 of the Act and added back the same to the income of the assessee. He also initiated penalty proceedings u/s 271(1)(c) of the Act and levied the impugned penalty.

During the assessment proceedings before the Ld. CIT(A), the assessee produced land records/7/12 abstract and the property deed to show that there were 4 co-owners of the property. However, the Ld. CIT(A) observed that the said documents were additional evidences and the assessee has not given plausible reason for not furnishing the same before the AO. He, therefore, rejected the additional evidences filed by the assessee and confirmed the impugned addition made by the AO.

Before us, the Ld. Counsel for the assessee has made two-fold submissions. Firstly, that the property was co-owned by the assessee along

Secondly, the Ld. Counsel for the assessee has relied upon the provisions of section 56(2)(viii) of the Act which refers to income way of interest received on compensation or on enhanced compensation to be treated as income from other sources and further as per the provisions of section 57(iv) of the Act which states that in case of income of the nature referred to in clause (viii) of section 56(2), a deduction of a sum of equal to 50% of such income will be allowed. The Ld. Counsel therefore has submitted even otherwise the assessee is entitled to the deduction @ 50% on ITA Nos.835 & 836/SRT/2025 Asst. Year : 2013-14

We find force also in the above contention raised by the assessee. The issue relating to the 1/4th share of the assessee needs to be examined at the hands of the AO and the AO is also required to give statutory deduction on the above income earned by the assessee as provided u/s.57(iv) of the Act.

We, therefore, set aside the impugned order of the Ld. CIT(A) and restore the matter to the file of the AO for decision afresh on the above issues. Needless to say, that the AO will give proper and adequate opportunity to the assessee to present his case and furnish the necessary documents and thereafter the AO will give finding on both the issues as noted above by way of a speaking order and assess the income of the assessee accordingly.

So far as the penalty appeal is concerned, since we have already set aside the matter for assessment afresh to the file of the AO, therefore, the impugned penalty, at this stage, has no legs to stand and the same is, accordingly, ordered to be deleted. It is made clear that if the AO in the freshly passed assessment order will be of the view that the case of the assessee is fit for levy of penalty, he will be at liberty to initiate fresh penalty proceedings in accordance with law.

In the result, quantum appeal of the assessee in ITA No.835/SRT/2025 is treated as allowed for statistical purposes, whereas, assessee’s penalty appeal in ITA No.836/SRT/2025 stands allowed.

( ) / The CIT(A)- 5. िवभागीय "ितिनिध आयकर अपीलीय अिधकरण सूरत /AR,ITAT, Surat/Ahmedabad. , , 6. गाड" फाईल / Guard file.