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2022 (3) TMI 1010 - AT - Income TaxExempted capital gain wrongly shown in the belated return as taxable - Revision of ITR on allowed being belated return - Capital gain from the compensation received pursuant to compulsory acquisition of land - assessee's land which is residential has been acquired by the Bihar State Govt. for development of National High Way by virtue of notification dated 7.5.2014 of Govt. of India - whether the action of the CPC in accepting the tax returned by the assessee dated 07.02.2017 (belatedly filed on 2.2.2017) declaring total income wherein the assessee had inadvertently shown the capital gain from the compensation received pursuant to compulsory acquisition of its land is legally sustainable or not? - HELD THAT:- We have carefully gone through the Section 96 as well as Section 46 of the RFCTLARR Act and we find that the assessee's case does not fall in the ken of Section 46 of RFCTLARR Act; and therefore the compensation received by the assessee to the tune is exempt as per Section 96 of the RFCTLARR Act even though the land in question is residential and since it is exempt from tax it and consequently need not have to be included in the total income of the assessee. We note that inadvertently the assessee had filed the return of income declaring this amount as capital gain. So the CPC while processing the ROI filed by the assessee, accepted the capital gain offered by the assessee. However we note that the Ld. CIT(A) while passing the impugned order against the action of CPC has not considered the claim of the assessee that it has inadvertently reflected the same as capital gain in ROI and the whole amount it received as compensation was exempt from tax as per Section 96 of the RFCTLARR Act as well as the CBDT Circular. We do not countenance such an action of the Ld. CIT(A). We note that the Ld. CIT(A) denied the claim to the assessee by misdirecting himself that assessee's claim u/s. 10(37) of the Act cannot be allowed because the land acquired of assessee was not agricultural land, so has sustained the taxation on it. We note that just because the assessee inadvertently or by ignorance has shown the exempt income as exigible to tax, the AO/CPC ought not to have treated the same as taxable income and thereby taxed the exempt income because Article 265 of the Constitution, title reads " Taxes not to be imposed saved by authority of law'' and the Article reads 'No tax shall be levied or collected except by authority of law'. Here in this case the Parliament has exempted this compensation (for acquiring land) from taxation as per Section 96 of RFCTLARR Act. So the CPC/AO ought not to have taxed the same at the first place. Thus we hold that the capital gain shown by the assessee in its original ROI need not to be taxed being exempt. - Decided in favour of assessee.
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