CHANDRAKANT GORDHANBHAI PATEL HUF ,DABHOI vs. THE DY. COMMISSIONER OF INCOME TAX CIRCLE-1(3), VADODARA, VADODARA

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Shri Ramit Kochar, Accountant Member ITA No.485/Ahd/2024 Assessment Year 2012-13

Shri Chandrakant The D.C.I.T, Gordhanbhai Patel Circle-1(3), HUF, Aayakar Bhavan, At Bhikhankui, v. Race Course, PO Dabhoi, Vadodara- Dabhoi-391110 390007 , Gujarat District Vadodra, Gujarat. PAN:AADHC6657E (Respondent) (Appellant)

Assessee by: None(Written Submission filed by the assessee) Revenue by: Shri Sanjay Jain, Sr. D.R.

Date of hearing : 10-07-2024 Date of pronouncement : 31-07-2024 आदेश/ORDER This appeal in ITA No.485/Ahd/2024 for assessment year 2012-13 filed by the assessee with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad has arisen from the

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appellate order dated 24-01-2024 passed by ld. CIT(A/ NFAC, Delhi u/s.250 of the Income-tax Act,1961 in DIN & Order No. ITBA/NFAC/S/250/2023-24/1060081272(1), which has in turn arisen from the assessment order dated 23-12-2019 passed by the Assessing Officer u/s. 147 r.w.s. 144 of the Income-tax Act 1961.

“...Under the facts and circumstances of the case CIT Appeal has erred in (a) confirming the assessment order which is bad in law as the assessment was reopened on wrong reasons and facts (b) Assessment was made without issuing statutory notice required to be issued U/s 143(2) of the IT Act and (c) also bad in law on facts and without adjudicating the issues raised and not following binding judicial decisions relied upon by the appellant. The appellant reserves his right to add or vary the grounds of appeal before the final hearing of this appeal petition…”

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number 058280313050302 dated 28.03.2013, but the Revenue has disputed the filing of the said return of income) . The case of the assessee was reopened by Revenue, and notice u/s.148 dated 31.03.2019 was issued by the AO to the assessee . In response to the said notice , the assessee filed its reply on 01.11.2019 stating that earlier return of income filed u/s 139 for the year under consideration may be considered as return of income in response to notice issued by the AO u/s 148. The reasons recorded by the AO for reopening of the assessment were furnished to the assessee on 03.06.2019. Statutory notices were issued by the AO u/s.142(1) of the Act to the assessee,from time to time, during the course of reassessment proceedings, but the assessee only filed part reply. The AO invoked provisions of section 144 in able to proceed to frame best judgment assessment , and Show Cause notice dated 10/12/2019 was issued by the AO to the assessee as to why reassessment should not be concluded u/s.144 of the Act ex-parte on the basis of material available on record. The assessee filed written submissions before the AO in response to SCN , as under : “ i. Reasons of reopening of assessment dated 03.06.2019 has not been received to it at that time. However, it further stated that reasons of reopening have been seen by him online. ii. The reopening of assessment is based on the belief that he has not submitted return of income and assessed as per same. He

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has disclosed all facts regarding receipts of income & TDS and there is no failure of the part of the assessee. iii. The amount in question is received for the land owned by the HUF of all the brothers and all the co-owners have been filed their return of income and have been assessed on their respective shares. iv. The interest receipts should be taxed in the hands of the respective beneficiary even TDS was deducted in the name of the assessee. Therefore, there is absolute no jurisdiction both in fact and law of taxing receipts in my name. He has claimed that the TDS refund received by him, has been given to them equally, He further argued that there are various judicial decisions of High court and Supreme Court that interest awarded by the Court orders in acquisition of land is part of award or compensation, so it is capital receipts and not revenue receipts. Hence, not taxed here. He also cited the decision of Hon'ble ITAT Delhi Bench G in the case of Opender Singh Virkparvesh Kumar Sharma Vs ITO Wd-2. Karnal in support of his claim and a copy of said judgment of the ITAT was enclosed with its reply.”

3.2 The AO rejected the contention of the assessee vide reassessment order dated 23.12.2019 passed u/s 147 read with Section 144 of the 1961 Act, by holding as under:

i. On perusal or records, it is observed that reasons of reopening have been provided to the assessee vide this office letter dated 03.06.2019 and same was sent to the assessee on the same day by online. Hence, reasons for reopening has been provided to the assessec. ii. I have checked the return of income of the assessee on the system and it is observed that no such return of income filed by the assessee for the year under consideration. Hence, argument of the assessee is not correct. Hence, it is held that no return of income was filed by the assessee for the A.Y. 2012-13, iii. The assessee claimed that it has received the interest income in form of compensation of the land and interest on the compensation/

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enhanced compensation cannot be taxed because the Hon'ble ITAT Delhi has held that interest received by the assessee on enhanced compensation for acquisition of the agriculture land by Government is Exempt from tax u/s 10(37) of the I.T. Act, 1961 because it is a capital receipts and not the revenue receipts. On this issue, it is stated that the asseasce did not file copy of sale deed/court orders from which it can be verified that said amount of interest is nature of receipts or otherwise. Whether the said amount of interest was actually received from the compensation / enhanced compensation on the sale of land. In absence of sale deed, court order or any other evidence, it is not proved that said interest income of Rs. 29,87,378 was received from the interest of compensation or otherwise. Even no iota of the evidence is available on the records from which it can be ascertained that what land in question was sold and on which land the compensation was received by the assessee. In absence of complete details and evidences it is not proved the so called amount of interest was actually compensation or enhance compensation or otherwise. Further, the assessee claimed that respective shares in compensation was shown by the other co-owners in their return of income. But neither the details of the co-owners were given nor copy of their return of income was filed in support of his claim. Hence, claim of the assessee is not proved. I have gone through the decision of Hon'ble ITAT cited by the assessee and it is relating to the taxation of the compensation/ enhanced compensation. But, instant case there is no evidence in respect of compensation / enhanced compensation of the land. Facts of the cited case and instant case are entirely different from each other. Hence, not applicable here. Considering the above facts, it is held that said interest income is not related to any compensation of land and the assessee did not declare the interest income of Rs. 29,87,378/-in its return of income and said amount is required to be added. Therefore, I make an addition of Rs.29,87,378/- on account of concealed interest income and same is added in the total income of the assesee.

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7.1 The only Ground of the appellant pertains to the addition of Rs.29,87,378/- made by AO on account of interest received on enhanced compensation after acquisition of land. The Ld. AO vide passing other order u/s 147 r.w.s. 144 of the Act, 1961 on 23.12.2019 noticed that appellant has received the interest of the said amount from Sardar Sarover Narmada Nigam Limited. The Ld. AO further noted that the said amount was shown under the HUF status but no return was filed. The appellant replied the quarries of the AO on 13.12.2019, After going through these replies the Ld. AO gave his findings in Para 3 of his order, the same is reproduced as under: "3. I have carefully considered the written submission of the assessee as well as facts of the case and my observations on the issue involved are as under- 1. On perusal of records, it is observed that reasons of reopening have been provided to the assessee vide this office letter dated 03.06.2019 and same was sent to the assessee on the same day by online. Hence, reasons for reopening has been provided to the assessee. (ii) I have checked the return of income of the assessee on the system and it is observed that no such return of income filed by the assessee for the year under consideration. Hence, argument of the assessee is not correct. Hence, it is held that no return of income was filed by the assessee for the A.Y. 2012-13. (iii) The assessee claimed that it has received the interest income in form of compensation of the land and interest on the compensation/ enhanced compensation cannot be taxed because the Hon'ble ITAT, Delhi has held that interest received by the assessee on enhanced compensation for acquisition of the agriculture land by Government is exempt from tax u/s 10(37) of the IT Act 1961 because it is a capital receipts and not the revenue receipts. On this issue, it is stated that the assessee did not file copy of sale deed/ court orders from which it can be verified that said amount of interest is nature of receipts or otherwise. Whether the said amount of interest was actually received from the compensation / enhanced compensation on the sale of land . In absence of sale deed, court order or any other evidence, it is not proved that said interest income of Rs.29,87,378/- was received from the interest of compensation or otherwise. Even no iota of the evidence is available on the records from which it can be ascertained that what land in question was sold and on which

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land the compensation was received by the assessee . In absence of complete details and evidences it is not proved the so called amount of interest was actually compensation or enhance compensation or otherwise. Further, the assessee claimed that respective shares in compensation was shown by the other co-owners in their return of income. But neither the details of the co-owners were given nor copy of their return of income was filed in support of his claim. Hence, claim of the assessee is not proved. I have gone through the decision of Hon'ble ITAT cited by the assessee and it is relating to the taxation of the compensation/enhanced compensation. But, instant case there is no evidence in respect of compensation/enhanced compensation of the land. Facts of the cited case and instant case are entirely different from each other. Hence, not applicable here. Considering the above facts, it is held that said interest income is not related to any compensation of land and the assessee did not declare the interest income of Rs. 29,87,378/- in its return of income and said amount is required to be added. Therefore, I make an addition of Rs. 29,87,376/- on account of concealed interest income and same is added in the total income of the assessee" 7.2 During the appellate proceedings, the appellant raised three issues. The first issue relate to the re-opening of the case on wrong reasons (as claimed by him) by saying that the Ld. AO has made error by saying that the return was not filed, hence, the basic premise of the reasons recorded was void. I have gone through the issue and hold that the notice u/s 147 cannot be set aside on this ground as it is a bona- fide mistake which has no bearing on the merits of the case, the main issue is the concealment of above said amount which was not reflected by the appellant in his return filed under HUF status. The second issue raised by the appellant is that the said interest amount pertains to all four brothers of the appellant and hence, cannot be added in one head as done by the AO. The appellant claimed that the said interest has been shown in the respective returns of all brothers but no proof in this regard was submitted by him, though the appellant claimed that the proof was submitted. The Ld. AO has rightly made addition in the hands of HUF as the said land of the appellant pertains to HUF not to the individuals. The third issue raised by the appellant regarding the non-taxability of the said amount. For this purpose, the appellant relied upon various decisions and one decision namely Smt. Kamla Devi vs. ITO ITA No. 1418/Delhi/2022 of A.Y. 2012-13 is enclosed by him. In the said judgment various other judgements are also mentioned before the date of pronouncement of this order on 21.09.2022. I have gone through this order and noticed that facts

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are not clearly mention of the said case and is difficult to co-relate with the case of the appellant. Even if the facts are relatable, the decision of the Hon'ble ITAT is not very clear wr.t. the provisions of section 145B(1) and section 56(2)(viii) of the Act, 1961. The appellant fails to furnish any decision of the Hon'ble Apex Court on this issue. The addition made by the AO is confirmed and the ground taken by the appellant is dismissed.

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basis of return filed by me is bad in law. Till date I have not been informed regarding change of the jurisdiction. 5) The interest income received by me on enhanced compensation for compulsory acquisition of agricultural land by Government for Sardar Sarovar Nigam was exempt from tax as held by various courts. 6) Both the assessment order and CIT Appeals order are made without following binding decisions. Your appellant therefore prays that considering the Compilation of documents and return submissions the present assessment order which is prima facie perverse and lopsided may be quashed. I shall remain ever grateful for your sympathetic approach natural justice. in the interest of natural justice.”

The assessee has also relied upon the judgment and order of Hon’ble Gujarat High Court in the case of Sunrise Education Trust v. ITO(E), reported in (2018) 92 taxmann.com 74(Guj. HC) , appellate order dated 07.02.2018 passed by ITAT, Jaipur Bench, in Narain Dutt Sharma v. ITO , reported in (2018) 91 taxmann.com 463(Jaipur Trib.) , judgment and order of Hon’ble Madras High court in the case of Fives India Engineering & Projects Private Limited v. ITO , reported in (2024) 161 taxmann.com 79(mad. HC), Hon’ble Gujarat High Court judgment and order in the case of CIT v. Sukhini P. Modi, reported in (2014) 52 taxmann.com 50(Guj HC) , Appellate Order dated 13.07.2021 pronounced by ITAT, Ahmedabad in the case of SBG Infrastructure LLP v. DCIT, reported in (2021) 130 taxmann.com 319(Ahd. Trib.), Hon’ble Gujarat High Court judgment and order in the case of Jivraj

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Tea Limited , reported in (2020) 116 taxmann.com 27(Guj), Appellate order passed by ITAT, Chandigarh Bench, in the case of ITO v. Chawli Devi, reported in (2021) 62 CCH 0130(Chd. Trib.) and ITAT, Raipur decision in the case of Chwaram Dhiwar v. ITO , reported in (2023) 37NYPTTJ 5(Raipur ITAT) in ITA no. 31/RPR/2022, dated 28.12.2022.

5.2 On the other hand the Ld. Sr. DR submitted that the assessee has not filed return of income originally u/s.139 of the Act. The assessee has not declared interest income earned from the enhanced compensation , and hence the same was rightly added by the AO to the Income. The reassessment was rightly framed by the AO and confirmed by ld. CIT(A), and prayers were made to dismiss the appeal filed by the assessee. The ld. Sr. DR relied upon the judgment and order of Hon’ble Delhi High Court in the case of PCIT v. inderjit Singh Sodhi(HUF) in ITA no. 769/2023 & CM Appeal No. 65057 /2023, dated 08.04.2024.

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139 of the 1961 Act , for the impugned assessment year(this is a disputed issue as to that the assessee is claiming that he duly filed return on income for the impugned assessment year u/s 139 on 28.03.2013). The information was received by the AO from the ITO Ward 1(2)(1) , Vadodra endorsed by ITO, Ward 14(1)(1), Vadodara on 12.03.2019 that the assessee has received interest of Rs. 29,87,378/- u/s 194A and TDS of Rs. 2,98,737/- was also deducted from the said interest income by the Executive Engineer, Sardar Sarovar Narmada Nigam Limited . The case of the assessee was reopened by the AO by invoking provisions of Section.147/148 of the Act on the ground that the assessee has not filed its return of income u/s 139, and assessee has not declared such interest income of Rs.29,87,387/- received from Sardar Sarovar Narmada Nigam Limited in the return of income although the tax was deducted by Sardar Sarovar Narmada Nigam Ltd. . The reasons were recorded by the AO for re-opening of the assessment u/s 147 on 03.06.2019, and it is claimed by the AO that said reasons recorded for reopening of the assessment were duly communicated to the assessee, but the assessee has disputed that said reasons recorded for reopening of the assessment by the AO u/s 147 were never communicated by the AO to the assessee , and were rather seen online by the assessee. The AO issued notice u/s 148 of the 1961 Act,to the assessee. The assessee on its part submitted that the original return of

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income filed by the assessee u/s 139 be treated as return of income filed in response to notice issued by the AO u/s 148. The AO has disputed that no return of income was originally filed by the assessee u/s 139, while the assessee submitted before the AO that the return of income was originally filed by the assessee u/s 139 on 28.03.2013 in physical mode vide acknowledgment number 058280313050302. The assessee claimed that, the assessee is in USA while reassessment proceedings were going on by the AO u/s 147/148, and the matter been old , he is unable to trace the return of income originally filed u/s 139 on 28.03.2013. The AO after verification stated that no such return of income is available on the record, This was later confirmed by ld. CIT(A) also in appellate proceedings that on verification, it is found that no return of income was originally filed by the assessee u/s 139. Even ld. Sr. DR also made statement before me that no return of income was originally filed by the assessee u/s 139 on 28.03.2013, as claimed by the assessee. Before me, the assessee has claimed that return of income is enclosed in Paper Book at Page No. 7-16, but no acknowledgment of return of income (or complete set of return of income) are filed in the paper book, and only computation of income of the assessee as well of HUF of brothers are filed . Thus , this is a disputed issue. I have also observed that the AO in its reassessment order dated 23.12.2019 passed u/s 147 read

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with Section 144 while computing total income , referred to return of income filed by the assessee on 28.03.2013(OLD ROI) , as under:

Particulars In Rs. Return income filed on 2,61,400/- 28.03.2013(OLD ROI) Addition on Interest income 29,87,378/- Total Income Assessed 32,48,778/- Round Off 32,48,778

Be that it may be , let me proceed further. Statutory notices were issued by the AO u/s 142(1) from time to time during the course of reassessment proceedings, but only part-reply was furnished by the assessee. The AO issued SCN invoking provisions of Section 144 with a view to proceed to frame best judgment re-assessment against the assessee.The assessee challenged reopening u/s 147 on the grounds that there is a factual error in reopening proceedings as the assessee has duly filed its return of income u/s 139, while AO reopened the assessment on the premise that no return of income was originally filed u/s 139. It is also claimed that the interest on enhanced compensation of agricultural land was granted by Government of Gujarat on the compulsory acquisition of agricultural land(claimed to be situated near Dabhoi-survey no.1536) which land was co-owned by the assessee along with his three brothers , and who have given their power of attorney in favour of assessee to represent the matter before the

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authorities and also to receive interest on enhanced compensation on compulsory acquisition of their share of agricultural land by the assessee in his name, and later distribute the respective shares of three brothers to the said three brothers (who have claimed to be the co-owners of the land compulsorily acquired along with the assessee ) The AO as well ld. CIT(A) rejected the claim of the assessee , as no documents to substantiate the same were filed by the assessee. Before me, the assessee has filed part copy of judgment of District Court , Vadodra dated 14/03/2007 , and power of attorneys claimed to be executed by the co-owners of the aforesaid property which was subject matter of compulsory acquisition by Government of Gujarat for constructing Sardar Sarover Narmada Dam. Further, it is claimed that the other three co-owners have also filed their return of income originally u/s 139 and declared their share of interest earned on enhanced compensation for acquisition of their share of agricultural land claimed to be situated near Dabhoi(survey no. 1536), in their respective return(s) of income filed by them with Revenue. The assessee in its paper book filed with ITAT has duly filed respective computation of income with respect to other 3 brothers claimed to be co-owners of the acquired land , but copy of acknowledgment of ITR’s /return of income are not filed. The assessee has submitted before the AO, the acknowledgment numbers of the filing of the return of income

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by the other three co-owners, and claim is made that the other three co-owners have duly declared their share of interest on enhanced compensation. The claims and contentions of the assessee requires verification by the authorities below as to the ownership pattern of the acquired land under consideration and other factual matters such as award of interest on enhanced compensation and its taxability. If the contentions of the assessee are true that the land under consideration which was compulsory acquired was co-owned by 4 brothers including the assessee, and merely power of attorney were executed by the other three co-owners in favour of the assessee to represent before authorities and to receive the interest on enhanced compensation on their behalf and later hands them over their respective share of interest on enhanced compensation on compulsory acquisition of land, then the interest income to the extent of the share of three other co-owners never belonged to the assessee, and principles of diversion by over-riding title will come into play, and the entire interest income (i.e. including the share of other co- owners) cannot be brought to tax in the hands of the assessee, as the said interest income to the extent of share of three other co-owners never belonged to the assessee and is required to be brought to tax in the respective hands of the other three co- owners. These factual aspects requires verification and inquiry by the authorities below. The assessee has filed additional

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evidences in the paper book , which also requires verification and inquiry. Proceeding further, there is an amendment in Section 56(2)(viii) by Finance Act, 2009 w.e.f. 01.04.2010 , and if the same is read with Section 145B(1), the interest income on enhanced compensations is taxable in the previous year in which it is received. Presently, I am concerned with assessment year 2012-13, and amended provisions shall apply, and the said interest on enhanced compensation on acquisition of land is chargeable to tax in the previous yer in which it is received. The ld. Sr. DR has rightly relied upon the judgment and order of Hon’ble Delhi High Court in the case of Inderjit Singh Sodhi(HUF(supra). Thus, the reliance of the assessee on orders passed for earlier years are not relevant, keeping in view amendment in the statute by Finance Act, 2009 w.e.f. 01.04.2010.I have also observed that the assessee has made claims as to filing of return of income originally u/s 139 for the impugned assessment year, and details such as acknowledgment number , date of filing , computation of income etc. are furnished by the assessee, but the same is disputed by the authorities below as well by by ld. Sr. DR. I have also observed that the assessee has also claimed to have uploaded responses before the authorities below as well the assessee has claimed that reasons for re-opening were never communicated to the assessee but the assessee saw it online.On the one hand the AO is saying that no return of

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income was originally filed and on the other hand , the AO is referring to the return of income originally filed while computing total income. Further, the AO has taken the income of Rs. 2,61,400/- as claimed to be declared by the assessee in return of income being its share of interest on enhanced compensation on acquisition of land after adjusting for relief u/s 57 etc, and thereafter the entire interest income is added, which has led to double additions to that effect. This aspect shall also be looked into by the authorities, so that the assessee do not suffer from double taxation of the same income, which is not permissible. Suffice to say that authorities are vested with powers and they must use their powers with great care and caution and with fullest honesty, so that the bonafide and honest tax-payers do not suffer owing to a callous approach of the authorities. The More the authority and powers are vested in the Statutory authorities , there is more the need to be humble and to exercise such powers cautiously and carefully and with utmost honesty, so that innocent, honest and bonafide tax-payer should not suffer or face any undue harassment. There is no iota of doubt that the dishonest tax-payers and evaders of taxes are to be brought to justice in a manner that it becomes deterrent for others to take such course, and also that even the last rupee of taxes , interest and penalties etc. should be collected promptly from such tax-evaders and dishonest tax-payers, but

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in the process , the honest , bonafide and innocent tax-payers should not be made to suffer.Thus, the grain is to be removed from the chaff. It is reiterated by GOI time and again that tax- payers are one of the important pillars in the nation building and in achieving the goal of making India a developed nation. The GOI is encouraging ease of doing business , and Indian Economy is moving rapidly towards digitisation and increased use of technology in all sphere’s of economic life, which if efficiently and effectively used can achieve the desired goals of collecting legitimate taxes within the framework and mandate of the 1961 Act .The ultimate object and mandate of the 1961 Act is to collect correct taxes in the hands of the correct tax- payers and for the correct assessment year at the correct rates, as mandated by Statutory provisions as are contained in the statute itself. In this context , it will be relevant here to refer to department circular No. 14(XL-35) dated 11.04.1955. Keeping in view facts and circumstances of the case as enumerated above and in the interest of justice as well that additional evidences will require verification and inquiry , I am setting aside the re-assessment order passed by the AO and the appellate orders passed by ld. CIT(A), and restoring the matter back to the file of the AO for denovo re-assessment. All the contentions are kept open including legal as well factual challenge made by the assessee. The evidences filed by the assessee in its support/defence , shall be admitted by the AO,

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and adjudicated on merits in accordance with law . The AO shall give proper and adequate opportunity of being heard to the assessee during denovo reassessment proceedings. The AO is directed to pass speaking and reasoned order . The assessee on its part is also directed to comply with the notices of the AO, and submit the required information/evidences as called for by the AO during denovo reassessment proceedings. I clarify that I have not commented on the merits of the issue. The appeal of the assessee is allowed for statistical purposes. I order accordingly.

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