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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI J. S. REDDY
Sh. Haripal Singh Vs. ACIT 11, K.G. Marg Circle-31(1), New Delhi. New Delhi. PAN: AAAPS5889F (ASSESSEE) (RESPONDENT) Assessee by: Shri. V.K. Garg, Adv. & Sh. Anil Chopra, FCA Revenue by: Shri. Robin Rawal, Sr.DR. ORDER PER J. S. REDDY, AM:
This is an appeal filed by the assessee directed against the order of CIT(Appeals)-XXVI, New Delhi for the assessment year 2009-10.
Facts of the case are that the assessee is an individual and filed his return of income for the AY 2009-10 on 30.7.2009 declaring an income of Rs.45,86,530/- The case was processed u/s 143(1). Later on, the assessee revised his return of income, declaring a total income of Rs.6,73,55,350/- on 30.9.2009. The reasons for revising the return of income were stated by the assessee that, while filing the original return of income, long term capital gain, amounting to Rs.7,09,00,039/- and a part of income from other sources amounting to Rs.3,90,84,891/- were not declared. Thereafter, the case was selected for scrutiny under CASS and statutory notice u/s 143(2) dated 21.8.2010 was issued and duly served upon the assessee. Thereafter fresh notices u/s 142(1) of IT Act along with a questionnaire was issued and Sh. Haripal Singh served upon the assessee. In response to the same, the AR of the assessee attended the proceedings from time to time and filed written submissions. Required details were called for. These were examined and case was discussed with him and assessment was completed u/s 143(3) on 29.12.2011.
3. The assessee is an individual and a co-owner of 12.5% share, in an undivided property bearing no. 8, Jantar Mantar, New Delhi, admeasuring approximately 10800 square metre. The property was acquired by Land Acquisition Collector (LAC) New Delhi, in the financial year 2000-01 for Delhi Metro Rail Project. The Land Acquisition Collector determined a compensation of Rs.3,48,19,915/-, the capital gain on which was returned by the assessee in assessment year 2003-04. The assessee filed an appeal before the Additional District Judge (ADJ) for enhancement of compensation. The Additional District Judge (ADJ) passed an order dated 18/08/2008 pursuant to which the compensation has been enhanced by Rs.14,90,69,822/- which included an interest income of Rs.7,81,69,783/- for the period to 03/10/2000 to 02/10/2008. The assessee and also the Delhi Metro Rail Corporation filed an appeal before the Hon’ble Delhi High Court which, vide its interim order dated 22/23/09/2008 had asked the assessee to furnish a bank guarantee of Rs.14,90,69,822/- for the release of the compensation amount. The assessee declared a sum of Rs.7,09,00,039/- as capital gain in the assessment year 2009-10. The assessee also declared an interest of Rs.7,81,69,783/- as income from other sources in accordance with amended provisions of section 56(vii) read with section 145A(b) which were introduced by the Finance Act 2009 w.e.f. 01/04/2010. The assessee Sh. Haripal Singh claimed deduction of 50% against interest income under section 57(v) amounting to Rs.3,90,84,892/-. This was disallowed by the assessing officer as the amendment of section 57(iv) which is made effective only from 01/04/2010 i.e. assessment year 2010-11. The assessing officer assessed the income of the assessee by disallowing the deduction of 50% claimed by the assessee against interest on compensation, by stating that section 57(iv) was introduced by the Finance Act, 2009 w.e.f. 01/04/2010, in view of which the provision was not applicable for the assessment year 2009-10.
4. On appeal the Ld.CIT(A) held that the enhanced compensation is to be taxed in the year of receipt, irrespective of the fact that such enhanced compensation was received on furnishing security/bank guarantee or any other conditions with regard to payment of additional compensation. She relied on the decision of the Cochin Bench of the ITAT in the case of CIT vs. Trilok Singh (HUF) (2004) SOT 561 (Delhi).
5. Aggrieved the assessee is in appeal before us.
The ld. counsel for the assessee submitted that there is no estoppel against law. He submitted that even if the assessee has filed a return of income, declaring income against the proposition of law laid down by various Courts, due to ignorance or otherwise, the AO is duty bound to follow the law and not bring to tax, such amounts which is not income at all. He relied on certain case laws, which we would be discussing in due course.
On the issue as to when, the granting of enhanced compensation and interest thereon is pending before a Court, can be taxed, he submitted that it can be taxed only on the compensation being finally determined in the Court of law. He relied on the following case laws.
Sh. Haripal Singh (i) CIT vs. Hardwari Lal 312 ITR 151 (P & H) (ii) CIT vs. Smt. T. Girija Ammal 282 ITR 614((Mad) (iii) CIT vs. Padam Parkash (HUF) 104 ITD 1 (Del) (SB) (iv) CIT vs. Hindustan Housing & Land Development Trust Ltd. 161 ITR 524 (SC)
He also relied on the explanatory notes introducing to the provisions of the Finance No. 2 Act, 2009 and Circular No. 5/2010/[F.No. 142/13/2010-SO(TPL)] dated 3.6.2010 for the proposition that, interest income should be computed on accrual basis as held by the Hon’ble Supreme Court in the case of Smt. Rama Bai vs. CIT 181 ITR 400. Hence he argued that, as the compensation and interest thereon is sub-judice before the Hon’ble Delhi High Court, the question of taxing the same as income in the current year does not arise.
The ld. DR Mr. Robin Rawal on the other hand, opposed the contentions of the assessee and submitted that the assessee filed an appeal with the help of professionals and has offered the income in question to tax voluntarily. He submitted that the AO cannot be blamed at all, for the reason that, he has no other information on the file, other than what the assessee has furnished. He relied on the order of the first appellate authority and argued the same should be upheld. 10. Rival contentions heard, on a careful consideration of the facts and circumstances of the case and perusal of the papers on record, case laws cited we hold has follows. 11. The undisputed fact is that are as follows:
Sh. Haripal Singh “1. The assessee is an individual and has income from salary, House property, capital gain and other sources.
2. The assessee was a co-owner having 12.5% share in undivided property bearing No. 8, Jantar Mantar, New Delhi admeasuring 10,800 square meter. The said property was acquired by the Office of Land Acquisition Collector (LAC), New Delhi in the financial year 2000-01 for Delhi Metro Railway Project (DMRC).
The Land Acquisition Controller (LAC) vide award no 13/2001-2002 determined total compensation amounting to Rs.3,48,19,915/- and capital gain thereon was worked out and returned in assessment year 2003-04.
Aggrieved by the order of LAC the assessee filed an appeal before the Additional District Judge (ADG) of Delhi for enhancement of compensation. As per the order of the Ld. ADG dated 18.08.2008, assessee received gross enhanced compensation of Rs.14,90,69,822/- which comprised of enhanced compensation of Rs.7,09,00,039/- and interest on enhanced compensation of Rs.7,81,69,783/- for the period 3.10.2000 to 2.10.2008.
Against the enhanced compensation order of the Ld. ADJ, both the assessee and the DMRC filed appeals before the Hon’ble Delhi High Court. Pending the said appeals, as per interim order of Delhi HC dated 23.9.2008, enhanced compensation of Rs.14,90,69,822/- was released on furnishing of bank guarantee of equivalent amount from Axis bank. (PB Pages-53 to 61) 6. Entire enhanced compensation including interest is subjudice before the Delhi HC and in fact nothing was finally received by the assessee during the year as the entire amount of enhanced compensation including interest as directed by the Hon’ble Delhi HC was kept in FDRs for bank guarantee. (PB Page-62)”
Sh. Haripal Singh 12. The only issue that is agitated before us, is whether the Ld.AO and the Ld.CIT(A) have erred in not excluding from taxable income the disputed interest, on enhanced compensation. No other issue is argued before us. Hence we confine ourselves only to the issue of taxability or otherwise, of the interest on compensation, which is admittedly subjudice before the Hon’ble Delhi High Court.
In this case the assessee has filed a return of income, wherein he declared income from interest on enhanced compensation. Such a declaration of interest income on disputed enhanced compensation, under the facts and circumstances of the case, is against the propositions of law laid down by various Courts. Such disputed interest income cannot be taxed in the impugned Assessment Year.
13.1. This is clear from the following case laws which have laid down the law on this issue. 1). CIT vs. Hindustan Housing & Land Development 161 ITR 524: “Business – dealing in land – compulsory acquisition of land – additional compensation fixed by arbitrator – appeal by government against award – amount deposited in Court – assessee permitted to withdraw only on furnishing security – additional compensation does not accrue and not taxable as profit at that state. Income – accrual – compulsory acquisition of land – right to enhanced compensation is an inchoate right – additional compensation does not accrue when amount awarded is disputed by government by filing appeal.” Held, affirming the decision of the High Court, that although the award was made by the arbitrator on July 29, 1955, enhancing the amount of compensation payable to the respondent, the entire amount was in dispute in the appeal filed by the State Govt. And the dispute was regarded by the Court as real and substantial because the respondent was not permitted to Sh. Haripal Singh withdraw the amount deposited by the State Government without furnishing a security bond for refunding the amount in the event of the appeal being allowed. There was no absolute right to receive the amount at that stage. If the appeal were allowed in its entirety, the right to payment of enhanced compensation would have fallen altogether. The extra amount of compensation of Rs.7,24,914 was not income arising or accruing to the respondent during the previous year relevant to assessment year 1956-57. By the Court: There is a clear distinction between cases such as the present case, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles.”
2). CIT vs. Padam Parkash (HUF) 104 ITD 1 (Del) (SB) :Section 255 of the Act – Appellate Tribunal – procedure of A.Y. 1995-96, 1998-99 and 1999-2000 – whether majority decision in Third Member case is entitled to as much weight and respect as a decision of a Special Bench and it should be followed and applied by regular Benches and cannot be disregarded – Held Yes – Whether decision of Special Bench even of three members is entitled to all weight and must have precedence over decision of a Third Member – Held Yes – Whether regular Benches are required to follow and act upon decision of Special Bench and in case its views are contradictory to views of Third Member, preference is required to be given to S.B. Held Yes.
Sh. Haripal Singh Sec.45 of the Act – Capital gains – year in which assessable AYs 1995-96, 1998-99 and 1999-2000 – whether enhanced compensation is to be taxed on receipt basis and it would not make any difference whether compensation is received as per interim order or on certain conditions or without any condition Held Yes – whether assessee’s land was acquired under provision of Land Acquisition Act, 1894 and enhanced compensation was granted to assessee by Appellate Court, enhanced compensation was to be taxed in the year of receipt, notwithstanding that order under which compensation and interest was received, was challenged before higher courts and litigation was pending Held Yes. Sec.5 of the Act Income accrual of AY 1995-96, 1998-99, 1999-2000 – whether where a dispute relating to interest payable to assessee under provisions of Land Acquisition Act, 1894 and enhanced compensation was pending before a Court of law and had not attained finality, same would not accrue and could be subjected to tax only after it was finally determined Held Yes.” 3) Dy.CIT vs. Shri Bhim Singh Lather, Karnal: 2005-TIOL-97-ITAT-DEL: “The assessee had received the additional compensation in the year under consideration pursuant to the judgment of the Addl. District Judge, Karnal and, therefore, it would be chargeable to tax in the year of receipt as per the provisions of sec. 45(5) of the Act irrespective of the fact that the additional enhanced compensation is subject matter of further litigation, (Para 28) The interest though would be chargeable on year to year basis but only when the right disputed by the parties is finally settled by the court (Para 30).
As regards the second question, the facts are little different. There is not specific provision for making assessment of interest on cash basis. The assessee had been given a right to adopt the system of accounting by section 145. Undisputedly that system adopted by the assessee is accrual system of Sh. Haripal Singh accounting. Since the award of the Addl. District Judge Karnal was subject matter of appeal to the High Court, there was no accrual thereof and consequently interest would also not accrue to the assessee. In view of decision of the Supreme Court in the cases of Smt Ram Bai (supra) and P. Mariappa Gounder (supra). The director sought on the basis of the decision of the decision of Supreme Court in the case of Ms. Khorshed Shapoor Chennai (supra) is misplaced. There the question was the assessability of the value of compensation receivable by the assessee which was to be charged as value of the estate passing on death. The court held that where the lands are compulsorily accrued under Land Acquisition Act there are no two rights, one a right to receive the compensation and the other a right to receive extra or further compensation. The 'claimant has only one right which is to receive compensation of the land on the market value on the date of relevant Notification and it is this right which is quantified by the Collector u/s. 11 and by the Civil Court u/s. 26 of the Act. The collector's award u/s., 11 is nothing more than an office of compensation made by the government to the claimant whose property is acquired. If the offer is acquiesced by the total acceptance of the right of compensation will not survive but if the officer is not accepted under protest and a reference is sought by the claimant u./s, 18 the right to receive compensation must be regarded as having survived and kept alive which the claimant prosecutes in civil court. It is not correct to say that no sooner had the collector made the first award u/s 11 than the right to compensation is destroyed or ceases to exist or is merged in the award or what is left after the award with the claimant is a mere right to litigate the correctness of the award, The claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remains active, which he prosecutes in the civil court. This, however, does not meant that the valuation of this right done by the civil court subsequently would be its valuation as age the relevant date of the purpose of either the E.D. Act or the W.T. Act. It is the duty of the Assessing authority under either of those enactments to evaluate the property (the right to receive compensation at market value on the date of the relevant notification) as on the relevant date (i.e. the date of death under the E.D. Act or the valuation date under the W.T.
Sh. Haripal Singh Act. Act No such situation is appearing in this case for estimating the right or compensation and, therefore, reliance on the decision of Supreme Court in the case of Mrs. Khorshed Shapoor Chennai (supra) is misplaced and is of no help to the Revenue. In may opinion, therefore, the interest though would be chargeable on year to year basis but only when the right disputed by the parties is finally settled by the court, Tribunal or any authority and since in this case the matter is pending in the High Court in the relevant year no right to receive compensation or to interest accrued to the assessee and consequently, no assessment can be made in the year under consideration until the matter is finally settled by the court.”
13.2. We have now to examine as to whether such filing of a return of income, wherein such income has been declared against the propositions of law laid down, can be held against the assessee.
13.3. The legal position in such cases is that there is no estoppel in law. In coming to such conclusion, we draw strength from the following case laws.
(i) In the case of CIT vs. DKB & Co. Reported in 243 ITR 618, the Hon’ble Kerala High Court held that “It is the settled position in law that there cannot be estoppels against a statute. There is no provision in the statute which permits a compromise assessment. The above position was indicated by the Apex Court in UOI vs. Banwari Lal Agarwal (1999) 238 ITR 461. It cannot be laid down as a principle of universal application that whenever an assessment has been completed by accepting the offer of an assessee, no penalty can be imposed. It has not been so observed by the Apex
Sh. Haripal Singh Court in Sir Shadilal Sugar and General Mills Ljtd. Vs. CIT (1987) reported in 168 ITR 705, as the Tribunal held. Its conclusion has been arrived at by a clear misappreciation of the ratio laid down in the said case.” (ii) In the case of Mayank Poddar (HUF) vs. WTO reported in 262 ITR 633 the Hon’ble Calcutta High Court has held as under. “Even if the assessee had included the same in his return, that would not preclude the assessee from claiming the benefit of law. There cannot be any estoppel against the statute. A property, which is not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. either there can be any waiver of the right by the assessee. The Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable. (Emphasis ours)
This question was dealt with by this court in Bhaskar Mitter's case [1994] 73 Taxman 437, at paragraph 8 at page 442. In this decision, this court observed:
An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the Income-tax Officer to assess the income of an assessee according to law and determine the tax payable thereon. In doing so, he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law.
Sh. Haripal Singh 3). In the case of Nirmala L Mehta vs. A Balasubramaniam, CIT and others reported in 269 ITR p.185, the Hon’ble Bombay High Court has held as under. “The problem arose because the petitioner in her return for the assessment year 1988-89 filed on June 30, 1988, offered the prize money of the lottery to tax rather a fundamental error of law on the part of the assessee, but that error of law once detected by the petitioner, it was urged before the Commissioner of Income Tax that the prize money earned by the Petitioner could not be taxed under the Income Tax Act, 1961. It is true that it was at a later stage that such contention was raised by the Petitioner, but the said contention was a pure question of law and the CIT ought to have entertained it on the ground of delay. There cannot be any estoppel against the statute, article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. The Constitution Bench of the Supreme Court in Amalgamated Coalfields Ltd. Vs. Janapada Sabha, AIR 1961 SC 964, held thus (page 965): “It may be stated at the outset that the tax now impugned has been imposed by the local authority from March 12, 1935, and that the first occasion when its validity was attached was in only 1957, though if the petitioners are right in their submissions their acquiescence might not itself be a ground for denying them relief. Before however we set out the points urged by the Ld.Attorney General in support of the petition, it would be convenience if we narrate briefly the history of the levy of this tax.” The Supreme Court thus, held that acquiescence to an illegal tax for a long time is not a ground for denying the party the relief that he is entitled to.” 14.1. Vide Circular No.5/2001-02(F.No.142/13/2010-SO-PPL) dt. 3.6.2010, the Board explained the rationalisation of the provision by insertion of S.56(2)(viii). Income shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. There is no gainsaying that the department circulars are Sh. Haripal Singh binding on the assessee. Admittedly the assessee followed mercantile system of accounting. Under these circumstances, the interest income in question cannot be brought to tax during the year.
Following the propositions laid down in all the above case laws to the facts of the case we have to hold that the interest income in question cannot be brought to tax in the hands of the assessee. In the result we allow ground no.3 of the assessee. 15.1. No other ground is argued before us.
In the result the appeal of the assessee is allowed in part. Order pronounced in the open Court on 07th October, 2015.