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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: SHRI I. C. SUDHIR & SHRI L. P. SAHU
Date of hearing: 12.04.2016 Date of Pronouncement: 20.05.2016 ORDER
PER L. P. SAHU, AM:
This is the appeal filed by the assessee against the order of Ld. CIT, Hisar (Haryana) dated 28th March, 2013 on the following grounds of appeal:
1. On the facts and in the circumstances of the case and in law the order u/s 263 of the Income-tax Act, 1961 passed by the Commissioner of Income-tax, Hisar is devoid of jurisdiction as no error prejudicial to the interest of the Revenue has neither been identified nor brought on record and so must be quashed.
2. Additionally the order u/s 263 of the Income-tax Act, 1961 based on doubts, suspicion, assumptions, presumptions and conjectures and not on the material on record of the proceedings is erroneous and vitiated and not being according to law must be quashed.
3. That the order of revision passed u/s 263 of the Income-tax Act, 1961 proposing a redoing of the 2 I.T.A.No.2771./Del/2013 assessment merely because certain material connected with the issues in assessment are not on record and so, in the opinion of the Commissioner, necessary or proper enquiry/Verification has seemingly not been made is untenable on facts and law and unsustainable as such, and must be quashed.
4. That the finding u/s 263 of the Income-tax Act, 19610f the Commissioner of Income- tax that the assessment needs be redone because Assessing Officer had completed the assessment based on Return Form-1 filed by the assessee and not in Return Form-2 and that, therefore, the assessee had not disclosed the exempted capital gains for assessment is per se erroneous and untenable and must be quashed.
5. That the opinion of the Commissioner of Income- tax that the capital gains were not exempt u/s 10 (37) of the Act and that, therefore, he had to intercede u/s 263 of the Act is ab-initio erroneous and unsustainable because the point at issue having already merged into the order of the CIT (Appeals) was statutory barred from his consideration and further then on merits also the CIT's observations are erroneous and untenable and so must be quashed.
That the issue regarding exemption of interest from taxation having already been considered by the CIT (Appeals) was statutorily beyond the powers of the Commissioner u/s 263 of the Act and so his intervention on this ground is ab-initio illegal and invalid and must be quashed.
That the action of the Commissioner of Income- tax in calling for various extraneous documents and material for examination and investigation during the course of the proceedings u/s 263 of the Income-tax Act, 1961 and in thereafter holding that the assessment is erroneous and prejudicial to the 3 I.T.A.No.2771./Del/2013 interest of the Revenue is erroneous and bad and must be quashed.
8. That the direction of the Commissioner of Income-tax to determine if any part of the compensation/interest is assessable in the hands of the assessee in the capacity of legal heir of her husband and take necessary action as per law being superfluous and unnecessary must be quashed.”
The brief facts of the case are that the assessee filed her return of income on 31.07.2008 declaring income of Rs.73,36,840/- by using Form No. ITR-1. The same was processed u/s143(1) of the I.T. Act, 1961 (hereinafter to be referred as ‘the Act’). The case of the assessee was selected for scrutiny and statutory notices were issued which were duly served and complied with. 2.1 The Assessing Officer noted in the assessment order that Certain land belonging to the assessee was acquired by the Land Acquisition Collector of State Government and in lieu thereof compensation, enhanced compensation and interest thereon has been received by the assessee during the financial year, relevant to the A Y 2008-09 on furnishing of bank guarantee. The assessee disputed the amount of compensation, enhanced compensation and interest thereon at various stages and the amounts were enhanced by various courts. The receipt of compensation, enhanced compensation and interest thereon has been received during the year under consideration on account of decision of the Hon'ble Punjab & Haryana High Court dated 12.07.2006. Being still dissatisfied, the assessee
4 I.T.A.No.2771./Del/2013 has filed SLP against the order of the Hon'ble High Court before the Hon'ble Supreme Court of India, which is still pending. The assessee has claimed exempt income on account of compensation and enhanced compensation U/s 10(37) of the Act. Since the aforesaid compensation and enhanced compensation have been received by the assessee during the financial year 2007-08 i.e. after 01.04.2005, hence the same has rightly been claimed to be exempt U/s 10 (37) of the Act. However, the assessee has also not declared the interest income in her return of income on the plea that in view of the judgement of the Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Hardwari Lal HUF & Others wherein it has been held that interest on enhanced compensation does not accrue till the issue of enhanced compensation is finally decided and thereafter on attaining the finality of determination of enhanced compensation by the court, the interest accrues to the assessee and has to be spread over on an annual basis right from the date of delivery of possession till the date of order of the Court on time basis in the case of, the same will be declared on receipt of finality. 2.2 The appellant received as interest of Rs.7,10,04,144/- for 144 month including the financial year 2007-08 of Rs.4,93,334/- (7,10,04,144 /144). As Land Acquisition Act 1854 u/s 35, interest received on compensation and enhanced compensation is to be taxed on accrual basis, therefore, the Assessing Officer has calculated the above amount and disallowed the interest
5 I.T.A.No.2771./Del/2013 for one month at Rs.4,93,334/-. The Assessing Officer has also added Rs.15,000/- on account of low house hold expenses. The above assessment order was passed on 23.12.2010 by the Assessing Officer. 2.3 Aggrieved by the assessment order, the assessee filed appeal before Ld. CIT(A), Rohtak who allowed the appeal vide vide order dated 01.02.2012.
3. On 03.01.2013, Ld. CIT, Hisar issued notice u/s 263(1) of the Act vide letter dated 03.01.2003, contents of which are reproduced as under: “CIT/HSR/263/2012-13/ 3514 Dated: 03.01.2013. Smt. Vidyawati, 617, Green Kothi, Sudama Nagar, Jhaj Pul, Hisar.
Madam,
Sub:- Notice u/s 263(1) of the Income tax Act, 1961 for the Assessment year 2008-09 - Regarding- Reference may please be made to the assessment order dated 23.12.2010 passed the DCIT, Hisar u/s 143(3) of the I.T.Act, 1961 for the captioned assessment year.
2.1 It is seen from record that during the relevant financial year, you have received enhanced compensation of Rs.4,08,27,617/- in respect of land owned by you. As per section 45(5), the enhance compensation shall be deemed to be income chargeable under the head 'Capital gains' of the previous years in which the same is received. Hence, the same is liable to be taxed in the Assessment Year
6 I.T.A.No.2771./Del/2013 2008-09. However, you have not reflected the same is your return of income and A.O. has failed to bring the same to tax.
2.2 From further perusal of record, it is seen that Return of Income for the captioned assessment year has been filed in Form No. ITR-1. As per Rule 12 of Income Tax Rules, 1962, as applicable from 1-04- 2008, return of income in Form No. ITR-1 is to be filed in case of an individual where the total income includes income chargeable to income tax under the Head "Salary" or income in nature of family pension as defined in the explanation to clause (iia) of section 67 but does not include any other income except income by way of interest chargeable to income tax under the head" Income from other source". In case of assessee being an individual who does not have income under the head "Profits or Gains of business or profession" and his/her case not covered as aforesaid, the income tax return will be filed in Form No. ITR-2, Meaning thereby that person filing return of income in Form No. ITR-1 does not have any income under the heads (i) 'Profits or Gains of business or profession' (ii) 'Capital Gains'. Therefore, by virtue of filing Return of Income in Form No. ITR-1, you have declared that you have no income under the head, "Capital gains". This Return of Income has never been 'revised'. As per decision of Hon'ble Supreme Court in case of Goetze (India) ltd. Vs. CIT(2006) 284 ITR 323, it has been laid down that A.O. has no power to entertain fresh claim of a deduction otherwise than by way of revised return. Therefore, claim of exemption of capital gains under section 10(37) accepted by the A.O: in her order U/s 143(3) dated 23-12-2010 (reference para 2&2.1) is erroneous and of course, prejudicial to the interest of revenue.
2.3 It is also a settled position of law that exemption is not automatic. It is to be earned. Assessee is supposed to discharge onus of showing that attached conditions are fulfilled in his/her case. The exemption under section u/s 10(37) is allowable only if certain
7 I.T.A.No.2771./Del/2013 conditions mentioned therein are fulfilled. Assessee was obliged to produce evidence(s) (including documents) to discharge her onus that such conditions are fulfilled in her case. However, there is nothing on record to show that such onus was discharged by the assessee. A.O.has accepted this claim without appreciating the correct position of law and hence the order is erroneous and prejudicial to interest of revenue.
The above mentioned failures of the AO render the assessment order passed by him as erroneous and prejudicial to the interest of revenue and the same is, therefore, required to be modified / cancelled u/s 263 of the Act. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) should not be passed. In this connection, hearing in your case has been fixed in the office of undersigned at Hisar on 09.01.2013 at 11 :00 A.M. You may send your written reply so as to reach this office before the stipulated date. In case you wish to avail of the opportunity of being heard in person, you may do so by attending the office of the undersigned personally or through duly authorized representative on the above said date and time.
4.1 It has been mentioned in the assessment order that you have received an interest of Rs.7,1 0,40,144 in connection with the enhanced compensation. It is also mentioned that you have filed an SLP in the Supreme Court of India which is pending. Therefore, it (the interest received) has not attained the finality and hence you have taken a plea that it is not taxable. The support of ratio of jurisdiction high court in case of CIT Vs. Hardiwari Lal HUF and others, (2008) 7 DTR 76 P&H has been claimed by you. In this connection, you are requested to let this office know whether judgement of Supreme Court has been delivered in this respect. If yes, copy of the same may be provided. Otherwise the following information/copies of documents may be provided: (i) SLP Number, (ii) copy of petition filed along with annexures, (iii) name,
8 I.T.A.No.2771./Del/2013 Telephone, e-mail and postal address of Advocate appearing on your behalf, (iv) name, Telephone No., e- mail and postal address of Advocate appearing on behalf of State of Haryana, and (v) present status of the case.
4.2 You are also requested to furnish the following details / information:
(i) Details of FDRs during the pendency of litigation about quantum of compensation / as to who would received how much part of compensation, including the following details :- a) Name & Branch of the Bank b) FOR No., c) Date of purchasing the FOR, d) Amount, e) Rate of Interest, f) Maturity period, g) Name(s) in which FOR was there, h) Date on which encashed, . i) Amount of encashment, j) Mode / instrument by which the amount is received after matutiy / termination i.e. Pay order / cheque / transfer to bank account etc. k) Application of the said money (ii) Chronology of the relevant events since process of land acquisition was started, along with copies of relevant judgments and other documents.
(iii) Date wise receipt/accrual of money, giving its nature/description i.e. initial compensation/enhanced compensation / further enhanced compensation / interest on FOR / interest under section 28 of Land Acquisition Act/Interest under section 34 of Land Acquisition Act/Others (please specify), Amount, mode of receipt, # & date of instrument through which received and bank, branch & account number in which deposited .
9 I.T.A.No.2771./Del/2013 (iv) Copies of documents to show that you have reflected "Capital gains" arising out of said acquisition of land and compensation / enhanced compensation received. Also indicate where you have reflected (in your Returns of Income) corresponding interest received.
5. In case of no reply / non-attendance as per above, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice / intimation to you."
On the basis of above notice, the appellant submitted written reply dated 06.02.2013 and 25.03.2013. The submissions of the assessee before Ld. CIT, is available at page 15-83 of the Paper Book. Ld. CIT passed the order on 28.03.2013 and the case was restored to the Assessing Officer for fresh assessment in the light of discussion made by Ld. CIT in his order.
Aggrieved by this order dated 28.03.2013 of CIT, Hisar, the appellant came before the Tribunal vide the present appeal. 6. Ld. A.R. submitted that the appellant had filed correct return of income. When the Assessing Officer found any mistake in the return filed, it should be communicated within a specified time as prescribed u/s 139(9) of the Act but no information has been sent to the assessee regarding any mistake / incorrectness in the return filed by the assessee, which means the return filed by the assessee was correct. He relied on the judgement
10 I.T.A.No.2771./Del/2013 of Hon'ble Jurisdictional High Court in the case of CIT Vs New Delhi Television Ltd. 39 taxmann.com, 135 (Del.).
7. The assessee had received compensation and enhanced compensation along with interest thereon during the financial year 2007-08 on furnishing of bank guarantee. This compensation has been received by the assessee under the directions of Hon'ble Punjab & Haryana High Court’s order dated 12.07.2006. Being still dissatisfied with the compensation, enhanced compensation and interest thereon, assessee filed SLP before Hon'ble Supreme Court, which is still pending. He claimed exemption u/s 10(37) of the Act on the compensation, enhanced compensation and interest thereon received by the assessee. He relied upon the judgement of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs Hardwari Lal (HUF) and others, 7 DTR 76 (312 ITR 151), wherein it has been held that interest on enhanced compensation does not accrue during the issuance of enhanced compensation, is finally decided. He also relied upon the judgement of Hon'ble Supreme Court in case of CIT Vs Ghanshyam (HUF) and ITO, Faridabad Vs Shri Chiranjilal in passed by ITAT ‘B’ Bench New Delhi. Ld. A.R. further submitted that the case has already been decided by CIT(A), therefore, it cannot be taken up u/s 263(1) of the Act by CIT.
Ld. D.R. relied upon the order of CIT passed u/s 263(1) of the Act and CIT has made good order and does
11 I.T.A.No.2771./Del/2013 not require any interference. He also placed reliance on the judgement of Hon'ble Supreme Court in case of Goetz India Ltd. 284 ITR 323 (2006) (S.C.). He also referred para 3.2.1 of CIT order.
After hearing both the parties, perusing the material placed on record and going through the case law cited by both the parties, we observe that the issue has already been decided by Ld. CIT(A) vide order 01.02.2012 appeal No.404/HSR/2010-11. The case law cited by Ld. D.R. in the case of Goetz India Ltd. (supra) is distinguishable on facts of the present case. 9.1 The provisions of Section 263(1)(c) are reproduced as under: “where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal (filed on or before or after the 1st day of June, 1988), the powers of the Commissioner under this sub-section shall extend (and shall be deemed always to have extended) to such matters as had not been considered and decided in such appeal.”
Ld. CIT(A) in appeal no.404/Hisar/2010-11 observed as under: “3. The above action of the AO was contested in grounds no. 2 to 4 of appeal. The submissions by the AR before me are summarized as under:- The interest awarded u/s 34 of Land Acquisition Act is not taxable till the compensation has become final. In the present case, the compensation has not become final as both the appellant and the LAO are in appeal before Hon'ble Supreme Court. It has been held by Hon'ble Punjab & Haryana High Court in the case of CIT Vs Hardwari Lal (HUF) and others (supra) that 12 I.T.A.No.2771./Del/2013 interest awarded u/s 34 is taxable only when the compensation becomes final. Without prejudice to the above, the AR contended that the AO mistakenly calculated the interest accruing in the year under consideration of one month was Rs. 4,93,334/- as it has to be calculated only for 11 days since the interest was paid on 11.04.2007 which comes to Rs.1,78,411/-.
4. I have carefully considered the issue and the submissions made by the AR. The main contention of the appellant is that interest awarded u/s 34 of Land Acquisition Act is not taxable till the compensation becomes final in view of the ratio laid down by jurisdictional High Court. In the case of CIT Vs. Hardwari Lal (HUF) (supra). Hon'ble Apex Court in the case of CIT Vs Ghanshyam (HUF) (supra) held that interest received under various sections except section 34) of the Land Acquisition Act is in the nature of compensation/ enhanced compensation and therefore has to be brought to tax under the head capital gains on receipt basis. As regards the interest received u/s 34, it is liable to be taxed under the head income from other sources on accrual basis as held in the case of Rama Bai Vs CIT [1990] 181 ITR 400 (sq. Interest received U/s 34 has been brought to tax under the head income from other sources on receipt basis by Finance Act, 2009 w.e.f. 1.4.2010 by amending section 145A of the IT Act. Therefore, till the AY 2010- 11, interest received u/s 34 is liable to be brought to tax on accrual basis. The jurisdictional High Court in the case of CIT Vs Hardwari Lal (HUF) & Ors. (supra) held that interests on enhanced compensation does not accrue till the issue of enhanced compensation is finally decided and thereafter on attaining the finality of determination of enhanced compensation by the court, the interest accrues to the assessee and has to be spread over. on an annual basis right from the date of delivery of possession till the date of order of the court on time basis. The above mentioned ratio of the jurisdictional High Court is squarely applicable to the facts of the appellant as the issue of enhanced
13 I.T.A.No.2771./Del/2013 compensation is pending in Hon'ble Supreme Court and therefore it has not attained finality. The action of the AO in bringing to tax the interest received on accrual basis, before the attainment of finality of the compensation, is against the ratio laid down by the jurisdictional High Court. The addition made by the AO of Rs 4,93,334/ - is therefore deleted and the grounds of appeal are allowed.”
11. In view of above, action of CIT is not tenable in the eyes of law, when the case has already been decided by CIT(A). Secondly, when Hon'ble Punjab & Haryana High Court has directed compensation, enhanced compensation and interest thereon against bank guarantee and the assessee being dissatisfied, has filed SLP before Hon'ble Supreme Court, which is still pending, it cannot be considered as income. Respectfully following the judgement of Hon'ble Jurisdictional High Court in the case of CIT Vs New Delhi Television Ltd. 39 Taxmann.com 135 (Del.), relied upon by the Ld. A.R. and on the basis of facts and circumstances of the present case, the reopening made by Ld. CIT u/s 263(1) of the Act is not sustainable in the eyes of law.
12. In the result, both the grounds raised by the assessee on legal as well as merits, are allowed and the appeal filed by the assessee stands allowed. Order pronounced in the open court on 20th May, 2016. Sd./- Sd./- (I. C. SUDHIR) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Date: 20.05.2016
14 I.T.A.No.2771./Del/2013