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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri K. Narasimha Chary
Per Shri P.M. Jagtap, A.M.: This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 26.03.2013, whereby he deleted the addition of Rs.1,00,00,000/- made by the Assessing Officer to the total income of the assessee on account of his share of ad hoc damages received from Delhi Administration.
The assessee in the present case is an individual, who is the joint owner (one-fourth share) of house property situated at 3, Tilak Marg, New Delhi. The said property was acquired by Delhi Administration in 1987 and when the assessee challenged the acquisition proceedings initiated by the Delhi Administration, Hon’ble Delhi High Court quashed the said acquisition proceedings and also held the assessee to be entitled to damages to be determined by an Arbitrator. Thereafter the Delhi ./2013 Assessment year: 2005-2006 Page 2 of 6 Administration filed an appeal before the Division Bench of the Hon’ble Delhi High Court, which stayed the proceedings on the condition that the Delhi Administration should deposit Rs.4,00,00,000/- as damages and also permitted the assessee to withdraw his share of Rs.1,00,00,000/- from the said deposit. The assessee accordingly withdrew a sum of Rs.1,00,00,000/- in the financial year 1995-96 relevant to assessment year 1996-97. Subsequently the Division Bench of the Hon’ble Delhi High Court dismissed the appeal filed by the Delhi Administration and even the SLP filed by the Delhi Administration against the same was dismissed by the Hon’ble Supreme Court in the F.Y. 2004-05 relevant to A.Y. 2005-06. In the return of income filed for the year under consideration originally on 31.07.2005, which was processed under section 143(1) of the Act, the amount of Rs.1,00,00,000/- received as his share of damages was not offered to tax by the assessee. According to the Assessing Officer, the said amount was chargeable to tax in the hands of the assessee in the previous year relevant to A.Y. 2005-06 as the matter regarding acquisition proceeding had attained finality in that year by virtue of the order of the Hon’ble Supreme Court and there was escapement of income of the assessee from assessment to that extent. He, therefore, reopened the assessment for the year under consideration and issued a notice under section 148 on 28.08.2010 after recording the reasons. In reply, a letter was filed by the assessee on 08.02.2010 requesting the Assessing Officer to treat the return originally filed on 31.07.2008 as the return filed in response to notice under section 148. During the course of reassessment proceedings, there was no compliance on the part of the assessee to the notices issued by the Assessing Officer fixing his case for hearing from time to time. The Assessing Officer, therefore, presumed that the assessee had nothing to say in the matter and proceeded to bring to tax the amount of Rs.1,00,00,000/- received by the assessee as his share of damages in his hands vide assessment completed under section 144/147 of the Act vide order dated 08.12.2010. ./2013 Assessment year: 2005-2006 Page 3 of 6
Against the order passed by the Assessing Officer under section 144/147, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the addition of Rs.1,00,00,000/- made by the Assessing Officer on account of his share of damages and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the said addition made by the Assessing Officer for the following reasons given in paragraph no. 3 of his impugned order:- “3. The submissions of the Appellant have been considered and it is seen that the identical issue was considered in my order in the case of another joint owner of the same property, Sudarshan Prasad Bagaria for Assessment Year 2005-06 in Appeal No. CIT(A)-XXX/Cir-43/10-11.Further the issue has been discussed in detail in the order dated 29.08.2011, the operational part of the above order is reproduced as under:
"Thus it has been held by the Special Bench after considering the decisions of various High Courts on the issue including the contrary views of Hon Madras High Court in P. Marriappa Gounder (147 ITR 676), that compensation damages received by the assessee for wrongfuI occupation of property was capital receipt and not liable to tax. The High Court Order in the case of the disputed property is very clear and the Hon'ble single Judge while delivering the order has clearly held that the notification issued by Delhi Administration is illegal and bad in law. She went on to hold that "the possession of the petitioner's property by Delhi Administration through its office is illegal and is in the nature of trespass on the property". It has been further held that the petitioners are entitled to damages from 18.3.1987 till payment and an Arbitrator was appointed to determine the damages payable by the Delhi Administration. From the above it is clear that the nature of the amount in question was in the form of damages awarded by the Hon 'ble Court for "illegal possession" and therefore the decision of the Hon'ble Kolkata High Court in CIT Vs. Smt. Lila Ghosh is directly applicable and the amount is a capital receipt and not liable to tax.
Although it has been held that as above that the damages awarded were in the nature of capital receipts However regarding the year of taxability, it is seen that the AO has not addressed the issue correctly. The AO has himself issued notice u/s. 148 in Assessment Year 2009-10 on the basis of the damages received by the appellant in Financial Year 2008-09 of the amount of ./2013 Assessment year: 2005-2006 Page 4 of 6 damages awarded by the Arbitrator. Therefore his stand is contradictory, on the one hand he is taxing the ad-hoc amount of damages on the basis of the Supreme Court's dismissal of the SLP in the current year and on the other he is issuing notice for taxation of the damages received by the appellant in 2008 from the Delhi Administration, whereas the amount was awarded by the Arbitrator in 2006 and thus the damages accrued to the Appellant in this Financial Year. The AO was therefore not justified in considering the ad-hoc payment of damages Rs 1 Crore (the appellant's share) for taxation in this year. Accordingly, considering all the above the addition made by the AO of Rs. 1 Crore is deleted."
Therefore considering the above decision it is held that income is not taxable in Assessment Year 2005-06 and the addition made by the AO of Rs.1 Crore is deleted.(Relief Rs.1,00,00,000/-).
As a result the appeal is allowed”.
Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
At the outset, it is noticed that there is a delay of 11 days on the part of the Revenue in filing this appeal before the Tribunal. In this regard, the Revenue has moved an applied seeking condonation of the said delay and keeping in view the reasons given therein, we are satisfied that there was a sufficient cause for the delay on the part of the revenue in filing this appeal before the Tribunal. Even the ld. counsel for the assessee has not raised any objection in this regard. We, therefore, condone the said delay and proceed to dispose of this appeal of the Revenue on merit.
We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. counsel for the assessee, ad hoc payment of Rs.4,00,00,000/- was made by the Delhi Administration on account of damages to the four joint owners of the property including the assessee as per the direction of the Hon’ble Delhi High Court and each of them was allowed to withdraw their respective ./2013 Assessment year: 2005-2006 Page 5 of 6 shares of Rs.1,00,00,000/- each. The issue relating to the quantum of damages to be paid, however, was decided by the Arbitrator finally in the previous year relevant to A.Y. 2009-10 awarding total damages of Rs.24.36 crores and after adjusting the ad hoc payment of Rs.4,00,00,000/- made in advance, the balance amount of Rs.20.36 crores was paid by the Delhi Administration to all the four co-owners of the property. The assessee’s share in the total damages as quantified finally by the Arbitrator was Rs.6.09 crores and the same was declared by him in the return of income filed for A.Y. 2009-10 claiming exemption for the same on the ground that it constituted capital receipt not chargeable to tax. As pointed out by the ld. counsel for the assessee, the said claim of the assessee was accepted by the Assessing Officer in the order dated 28.12.2011 passed under section 143(3) and although the ld. CIT under section 263 set aside the said order passed by the Assessing Officer, the Assessing Officer in the fresh order passed under section 143(3)/263 on 27.03.2015 again accepted the claim of the assessee that the amount in question received as his share of damages from Delhi Administration was exempt from tax being in the nature of capital receipt. Even the appeal filed by the assessee against the order passed by the ld. CIT under section 263 was allowed by the Tribunal setting aside the order passed by the ld. CIT under section 263 vide its order dated 28.05.2015 passed in ITA No. 923/KOL/2014. A copy of the said order is also placed on record before us by the ld. counsel for the assessee and perusal of the same shows that the Tribunal has specifically noted in paragraph no. 21 therein that the claim of the assessee on account of his share of damages received from the Delhi Administration being capital receipt exempt from tax was accepted by the Assessing Officer himself after due examination except to the extent of Rs.14,18,806/- which the assessee himself had accepted to be revenue receipt being in the nature of interest. The nature of the amount in question received by the assessee as his share of damages from Delhi Administration thus has been finally accepted by the Assessing Officer himself as capital receipt not chargeable to tax and the Tribunal also by implication has approved the said view taken by the Assessing ./2013 Assessment year: 2005-2006 Page 6 of 6 Officer. The issue involved in this appeal of the Revenue thus is squarely covered in favour of the assessee and this position is accepted even by the ld. D.R. at the time of hearing before us. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) deleting the addition of Rs.1,00,00,000/- made by the Assessing Officer on account of his share of ad hoc damages received from the Delhi Administration and upholding the same, we dismiss this appeal filed by the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on October 04, 2016.