TMI Blog1994 (3) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... on 5-8-1986 which should have been brought to tax for the assessment year under appeal. He therefore recorded reasons for reopening the assessment for the assessment year under appeal and issued notice under section 148. In response thereto, the assessee filed return of income showing income as assessed originally and pointed out that the enhanced compensation was not included in the original return since the matter had not acquired finality. 2. The ITO did not accept the assessee's contention. According to him, both the enhanced compensation as well as the interest on the compensation were taxable in the year under appeal. Regarding the enhanced compensation, the ITO also took the view that the same was taxable as capital gains under section 45(5) of the Act, which according to him was applicable even for the assessment year under appeal. In this view of the matter, the compensation of Rs. 5,29,744 and the interest for the period from 1967 up to 1986 being Rs. 11,56,008 were brought to tax. 3. The assessee questioned the reassessment both on the grounds of jurisdiction as well as on merits. The CIT(A) was of the view that the compensation amount which was received during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submitted that the ITO informed himself that capital gains were omitted to be assessed in the assessment year under appeal, when he took up the assessment for the assessment year 1988-89. He further contended that section 45(5) being purely procedural provision had retrospective application and was applicable from the assessment year 1987-88. In this connection he relied on Explanation (ii) to the section. He also referred to the judgment of the Bombay High Court in Kudilal Govindram Seksaria v. CIT [1964] 54 ITR 653 and that of the Calcutta High Court in CIT v. P.M. Bagchi Co. [1951] 20 ITR 33. On the merits of the addition, Mr. Das relied on the Bombay High Court judgment in M.B. Karmarkar and D.L. Gokhale v. CIT [1984] 154 ITR 234 (sic). 6. On a consideration of the rival contention, we are of the view that the contentions of Mr. Jain have to prevail. There is no dispute that the particulars regarding the enhanced compensation were given by the assessee in the covering letter filed along with the return on 12-8-1987. This fact is seen adverted to in the assessment order itself. It was also the stand of the assessee in that letter that the amount cannot be brought to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst time provided for the assessment of the additional compensation on compulsory acquisition in the year of receipt, as stated by the Board in Circular No. 495, dated 22-9-1987 [168 ITR (Statutes) 100] is as under :--- "24.5 Under the existing provisions where capital gains accrue or arise by way of compulsory acquisition of assets, the additional compensation is taken into consideration for determining the capital gain for the year in which the transfer took place. To provide for rectification of assessment of the year in which the capital gain was originally assessed, section 155(7A) was introduced. The additional compensation is awarded in several stages by different appellate authorities and necessitates rectification of the original assessment at each stage. This causes great difficulty in carrying out the required rectification and in effecting the recovery of additional demand. Another difficulty which arises is in cases where the original transferor dies and the additional compensation is received by his legal heirs. In the latter type of cases, proceedings have to be initiated against the legal heirs. Repeated rectification of assessments on account of enhancement of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Courts have to find out the true intention of the Legislature in inserting the Explanation to find out whether it was intended to widen the scope of the main section. Now it is well settled that the law as on the first day of the assessment year may relate to substantive rights or procedural matters. The assessability, the method of computation, the exemptions or the rebates admissible, rates of taxes, right of appeal, etc. are all matters conferring substantive rights and they can neither be abridged nor enlarged retrospectively unless the intention to give retrospective effect is expressly provided for by the Legislature. However, procedural matters can be modified or changed with retrospective effect since there is no vested right in procedure or procedural matters. Section 45(5) is concerned with the assessment of the additional or enhanced compensation. It provides for a substantive matter. Section 45 itself has been held by the Supreme Court in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 as the charging section for capital gains. When the additional compensation is brought to charge by section 45(5) in the year of receipt thereby making a departure from the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsider the claim for deduction of salary paid to N.P. Kotriwal. These grounds become academic since we have cancelled the re-assessment itself. 11. Mr. Jain made a submission that the directions of the CIT (Appeals) to the ITO to re-open the assessments for the earlier years to consider the interest income in those years should be expunged. The submission is contested by Mr. Das by relying on the provisions of section 153(3)(ii) of the Act and on the judgment of the Supreme Court in Kapurchand Shrimal v. CIT [1981] 131 ITR 451. We must uphold the submission of Mr. Jain. The finding or direction contained in the order of the CIT (Appeals) must be a finding or direction necessary for the purpose of disposing of the appeal before him. The only question before the CIT (Appeals) was whether the assessment of the entire interest of Rs. 11,56,008 in the year under appeal was right in law. The CIT (Appeals) found that the judgment of the Supreme Court in Rama Bai v. CIT [1990] 181 ITR 400 was in favour of the assessee and as per the said judgment the assessment of the entire interest cannot be upheld. That would have been sufficient for the disposal of the appeal. The further direction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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