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Sh. Haripal Singh Versus ACIT, New Delhi

2015 (10) TMI 1898 - ITAT DELHI

Enhanced compensation and interest - whether the AO and the Ld.CIT(A) have erred in not excluding from taxable income the disputed interest, on enhanced compensation? - Held that:- 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 depart .....

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h. Anil Chopra, FCA For the Respondent : 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. 2. 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 ₹ 45,86,530/- The case was processed u/s 143(1). Later on, the assessee revised his return of income, declaring a total in .....

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s 142(1) of IT Act along with a questionnaire was issued and 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 approxim .....

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ursuant to which the compensation has been enhanced by ₹ 14,90,69,822/- which included an interest income of ₹ 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 ₹ 14,90,69,822/- for the release of the compensation amount. The assessee declared a sum of ₹ 7, .....

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hich 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, .....

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n 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. 7. 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 .....

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hat, 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. 9. 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 profession .....

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uted fact is that are as follows: 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). 3. The Land Acquisition Controller (LAC) vide awar .....

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nd interest on enhanced compensation of ₹ 7,81,69,783/- for the period 3.10.2000 to 2.10.2008. 5. 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 ₹ 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 .....

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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. 13. 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 interes .....

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axable 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 t .....

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as 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 principle .....

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ird 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. 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 condit .....

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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, t .....

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nt 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 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). .....

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ra 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 compensa .....

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igate 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 .....

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hough 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 ret .....

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n 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 Court in Sir Shadilal Sugar and General Mills Ljtd. Vs. CIT (1987) reported in 168 ITR 705, as the Tribunal held. Its conclusion .....

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anding 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' .....

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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. 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 a .....

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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 Amalg .....

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