TMI Blog2005 (12) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... layed payment of compensation received from the State Government in respect of land acquisition." 4. The following two common grounds have been taken by the assessee on record in all the nine cross-objections (CO Nos. 72 to 80/Rjt./04). (i) The ld. CIT(A) erred on facts as also in law in holding that d proceedings initiated by issue of notice under section 148 were legal. It may kindly be held that notice issued under section 148 was illegal and invalid and assessment made on the basis of such illegal and invalid notice is void ab initio and may kindly be quashed. (ii) The ld. CIT(A) erred on facts and in law on holding that assessment made in the status of AOP was justified and correct. It may kindly be held that assessment made in status of AOP was not justified. 5. In the assessment year 1999-2000 the cross-objection of the assessee was: "The learned CIT(A) erred on facts and in law in holding that interest received as a result of court decision is taxable in the year in which court decision is received irrespective of the period for which the interest is allowed. It may kindly be held that interest income is taxable proportionately year to year." 6. Rival contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of the opinion that the income to the extent of interest assessable in their hand for assessment year 1999-2000 had escaped assessment. He therefore, issued notice under section 148 for the assessment year 1999-2000 on 25-5-2001 after recording the reasons. Simultaneously notices under section 148 for assessment years 1991-92 to 1999-2000 were also issued as the interest was pertaining to different years. The basis of issue of notice under sections 148 was that the assessee earned interest of Rs. 55,48,561 on the amount of award in case of acquisition of land by the Government for Ishwaria Irrigation Scheme. In response to this the returns for all years were filed on 8-6-2001. In these returns the income was worked out on the same basis as in the original return for assessment year 1999-2000 in which refund was claimed, the assessee distributed the interest over a period of 13 years and worked out the average interest per year Rs. 4,26,812. The Assessing Officer has made the assessment in the status of AOP assessing the entire income from interest of Rs. 55,48,561 in the assessment year 1999-2000 and also taxed year-wise income of Rs. 4,58,715 each in assessment years 1991-92 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that it will be fallacious to say that right to receive additional compensation was already vested in the land holder and only its quantification or valuation was pending. Not only this, even right to receive additional compensation as per court order is not vested or absolute if the Government files appeal to the Supreme Court against High Court orders. It will remain only contingent right even after the District Court and the High Court orders, till the appeal filed by the Government is subjudice before the Supreme Court. For this purpose, he relied on the judgment of the Hon'ble Supreme Court in the case of CIT v. Hindustan Housing Land Development Trust [1986] 161 ITR 524. On the basis of this judgment of the Hon'ble Supreme Court, the CIT(A) stated that if any right is in dispute before High Court, it does not give any absolute right to parties to dispute till the matter is subjudice. Comparing the facts of the instant case with the case of Hon'ble Supreme Court in the case of Hindustan Housing Land Development Trust's case the CIT(A) stated that where such receipts are disputed, the same cannot be brought to tax. As the amount ordered to be paid by the High Court, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as actually received by them without any condition. Therefore, there was no cogent reason for excluding interest income from the tax net only on the plea that an appeal has been filed against the order of the High Court. The learned DR further submitted that the CIT(A) has also grossly erred in directing the Assessing Officer to exclude such interest income from the tax net even during the assessment years 1991-92 to 1999-2000. 14. On the other hand, the learned Senior Authorized Representative Mr. J.C. Ranpura, CA, strongly objected the action of the CIT(A) for not allowing the spread over of interest income among the years to which such interest actually pertains. He cited various judgments of High Court and Supreme Court in support of proposition that interest income received on unpaid amount of enhanced compensation even though received in lump sum in one year, is not liable to be included entirely in the year of receipt but the same should be spread over the years falling between the year of dispossession till the year of actual payment. He submitted that interest is paid on the outstanding compensation not actually paid to the assessee and is also calculated by the disbursi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the relatives specified in class-I of this Schedule. The schedule (Class-1) contains details of relatives, which first include son, daughter, widow, mother etc. Under rule 4, under section 10, widow, surviving sons and daughters get equal shares. However, the department has taxed the interest awarded to these three brothers in the hands of AOP. In the present case, there is no person like AOP. The issue as to what constitutes AOP came up for consideration before the Hon'ble Supreme Court in the case of CIT v. Indira Balkrishna [1960] 39 ITR 546 wherein it was observed that: "An association of persons is one in which two or more persons join in a common purpose or common action, and as the words occur in a section, which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains." The above decision is referred to and relied on by the various High Courts such as Hon'ble Punjab Haryana High Court in the case of CIT v. Hari Prashad [1989] 178 ITR 591 and Hon'ble Delhi High Court in the case of CIT v. S.A.E. Head Office Monthly Paid Employees Welfare Trust [2004] 271 ITR 159. 17. As may be seen from the definition of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e derived from a process in which the AOP has some control facilitating contribution to its members for earning the income, profits or gains for which it is formed. The compulsory acquisition of land by Government is not contingent on the skill or enterprise of the individual brothers. Thus there was no scope for the individual brothers to control/monitor over the acquisition process of land by the Government consequent to which the compensation and interest was awarded to the brothers. Admittedly, there was no written agreement amongst the brothers to form an AOP to surrender the land in favour of Government or to light for compensation or additional compensation or interest thereon. No tangible evidence is available to establish any such intention. Keeping in view the primary and essential ingredients of an AOP outlined by the Apex Court it is crystal clear that for an income to be assessed in the hands of an AOP, it must be derived from a process in which the AOP has some control facilitating contribution of its members for earning the income, profits or gains, for which it is formed. Logically, keeping in view the entire process of compulsory acquisition of land by Government a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and Babhutmal Raichand Oswal v. Laxmibal R. Tarte AIR 1975 SC 1297, that the State authorities should not rise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt'." In view of the above, we are inclined to agree with the learned Senior AR Shri J.C. Ranpura that the CIT(A) was legally and factually not justified in treating the status as AOP. We, therefore, reverse the finding of the CIT(A) and direct the Assessing Officer to frame the assessment in respect of all the three brothers in their individual capacities in respect of 1/3rd interest income received by each of them. 22. Now let us examine the taxable event for enhanced compensation and interest thereon, paid by Government in respect of compulsory acquisition of land by Government as per provisions of Income-tax Act, 1961 vis-a-vis as per procedure of the Land Acquisition Act, 1894. The land acquisition proceedings begin p with issue by Land Acquisition Officer (normally Collector) a public Notification under section 4 of the Land Acquisition Act, 1894 (LA Act) pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual payment. 23. Right to receive additional compensation arose to the assessee as soon as the court of Extra Assistant Judge, Gondal vide its order dated 7-10-1997 has awarded the additional compensation. The court also ordered for payment of interest up to the date of payment of additional award. Hon'ble Gujarat High Court vide its order dated 7-9-1998 confirmed the additional award and interest granted by the lower court. The additional award along with interest was also paid to the assessee in October/November 1998 without any condition of furnishing any security bond etc. Thus in the previous year 1998-99 relevant to assessment year 1999-2000 the assessee received the actual payment of additional award along with interest due on such outstanding amount from the year of dispossession of land till the year of actual payment. Thus income both from additional compensation and interest thereon was received by the assessee in the assessment year 1999-2000. 24. Now, it is crystal clear from the above factual position that right to receive additional award arose in the previous year 1997-98 relevant to assessment year 1998-99, whereas actual payment of award was received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be contingent income. Similarly, notional income is one which is not real but is treated so due to book entry. Advance income is the income which is received in advance prior to its accrual and may be required to be repaid if the assessee does not get right of its accrual subsequently. Thus the CIT(A) was not justified in alleging the Assessing Officer that he has wrongly taxed the notional income/contingent income/advance income. 26. There was no material on record to suggest that the very foundation of the claim made by the assessee was in serious jeopardy insofar as the claim made by the assessee in respect of enhanced compensation and interest thereon was accepted by the Lower Court and further affirmed by the High Court and both the amounts were actually paid to the assessee without any condition or qualification of whatsoever the nature may be. An appeal was filed to the Supreme Court in which only quantification of award amount was disputed. The dispute of Government was with reference to amount of compensation payable in respect of Eucalyptus trees which was paid at the rate of Rs. 120 per tree. The Government was of the view that amount of Rs. 120 per tree was hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of an earlier or subsequent year. The attribution of the whole of the interest to the year of receipt is not, therefore, possible. 29. Let us now examine the reasoning given by the CIT(A) for reaching the conclusion that interest income even though actually received by the assessee on outstanding amount of compensation was not taxable during the year of actual receipt nor in the earlier years to which such interest pertains. In the instant case, there is no dispute about the fact that additional compensation and interest was awarded to the assessee by the Lower Court and which was confirmed by the High Court in the financial year 1998-99. There is also no dispute that interest income is always revenue in nature. There is also no dispute to the fact that assessee got not only absolute right to receive the interest but also received the interest unconditionally during the financial year 1998-99 relevant to assessment year 1999-2000 under consideration. The amount was also actually paid to the assessee without any condition of furnishing any security bond etc., so to make the assessee liable to refund the money on happening of any contingency whatsoever. The disbursing authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal was allowed in its entirety, right to payment of enhanced compensation would have fallen altogether. The very foundation of the claim made by the assessee was in serious jeopardy and nothing would be due if the appeal was decided against the assessee. Thus, the Hon'ble Supreme Court held that assessee's case falls under the first category wherein right to receive the payment itself was in dispute and not merely quantification of amount of compensation. 33. However, the facts and circumstances of the case before us are entirely different, which comes under the second category of cases as discussed above by the Hon'ble Supreme Court. In the instant case not only enhanced compensation but interest was awarded by the Lower Court and further confirmed by the High Court. The said amount of additional compensation along with interest was duly paid by Government and received by the assessee without any condition of furnishing any security bond for refunding amount in event appeal being filed and allowed against order of the High Court. Thus, we find that the CIT(A) was totally misconceived and has not applied the correct proposition categorically and very clearly laid down by the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensation. In the further appeal filed, the dispute was with regard to rate of trees for which compensation was to be awarded to the assessee. Right of the assessee to receive compensation for the trees acquired by the Government grown on the assessee's land was not at all disputed and it was only the rate of tree at Rs. 120 per tree which was stated to be high. From the record, we find that the Hon'ble Supreme Court vide its order dated 25-8-2004 had dismissed the Government appeal by observing that the amount of compensation per tree fixed at the rate of Rs. 120 was based on concurrent findings on appreciation of evidence and no interference was required. 37. It is pertinent to mention here that if the CIT(A) had taken little pain in seeing the grounds of further appeal filed by the Government he could have easily come to know that it was only quantification of award which was disputed and not the right of assessee to receive the award itself. It is also not the case of CIT(A) that payment was released to the assessee only on furnishing security bond and in case Government appeal allowed the security bond will be forfeited and assessee was liable to refund the additional comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. 41. Furthermore, the Hon'ble Supreme Court in the case of CIT v. T.N.K. Govindarajulu Chetty [1987] 165 ITR 231 have held that interest on compensation, for compulsory acquisition of land should be spread over the respective years in which it could be deemed to have accrued and hence assessable in the respective assessment years. 42. The Allahabad High Court in the case of Ashwani Dhingra v. Chief CIT [2005] 275 ITR 72 had observed that it is well-settled that the amount of interest paid on the enhanced amount of compensation accrues every year and is taxable in the year in which it has accrued and no adverse inference can be drawn from the fact that the returns for earlier assessment years were not filed. 43. Furthermore, Hon'ble Supreme Court in the case of K.S. Krishna Rao v. CIT [1990] 181 ITR 408 held that interest on enhanced compensation accrues year after year right from the date of delivery of possession till the date of order of the court on time basis. The same cannot be taxed all in lump sum on the date on which the court passes orders for enhanced compensation. Thus only proportionate interest was assessable in the relevant assessment year. It was further hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, the decision of Hon'ble Supreme Court is Law of Land which is binding on every one. While deciding an issue the CIT(A) can't disregard the verdict of Hon'ble Supreme Court which is directly on the issue, and can't act arbitrarily as per his sweet will. Even the clear provisions of Income-tax Act which governs the issue under consideration has to be dealt with while reversing or upholding the order of Assessing Officer. Even while reversing the order of Assessing Officer if he rely on any document or proposition for coming to a different conclusion, he is supposed to record his clear finding in respect of document relied by him and give justification for arriving at a conclusion different from that of the Assessing Officer. The plenary powers given under section 251 are to be exercised judiciously and in the interest of justice. The CIT(A) is not having unbridled powers to decide whatever he wants and in the manner he likes by disregarding the verdict of Hon'ble Supreme Court and clear provisions of the Income-tax Act. In the instant case if the CIT(A) wanted to reverse the action of Assessing Officer for bringing into tax net the interest income of Rs. 55.48 lakhs, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the legal ground taken by the assessee regarding validity of re-opening, it was submitted by the learned AR that in the notice under section 148 issued on 25-5-2001 no status of the person who was required to file return was mentioned. Hence, the notice without specifying the status was invalid. Secondly, it was submitted that at the time when notice under section 148 was issued, a valid return already filed by the assessee on 8-6-2000 was on record and assessment could have been made on the basis of said return till 31-3-2002. Therefore, as per learned AR there was no escapement of income under section 147. 49. We have considered the rival contentions and found from record that notice issued by the Assessing Officer under section 148 was addressed to the three brothers jointly. In the format of notice under section 148 there is no place for mentioning status. The name in which the notice is issued automatically implies the status of the said person. 50. As per our considered view we can assume jurisdiction for holding the reassessment invalid only when the notice on the face of it is illegal. We cannot adopt a hyper-technical approach to quash a notice because it does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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