TMI Blog2022 (3) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of hearing of appeal. 3. Brief facts of the case are that the assessee is an HUF which received compensation on compulsory acquisition of land by State Government for the purpose of widening of NH-28A between Pipra Kothi to Raxaul, Bihar. The assessee declared [inadvertently] the said compensation received as income from capital gain amounting to ₹ 1,26,58,595/- in the return of income filed on 07.02.201, although later it realized that it was exempt from tax as per circular of CBDT Circular no. 36 of 2016 dated 25/10/2016 and Section 96 of Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013 (in short 'RFCTLARR Act'). The CPC while processing the original return vide intimation u/s. 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 29/05/2017, subjected the compensation from acquisition to tax as it was reflected by the assessee though inadvertently in its return. 4. Aggrieved by the action of CPC, the assessee preferred an appeal before the Ld. CIT(A) who dismissed the appeal vide order dated 12.02.2020. 5. Meanwhile realizing the mistake of showing capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated supra are not repeated for the sake of brevity. The short question in this appeal is 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 of ₹ 1,33,24,420/- wherein the assessee had inadvertently shown the capital gain from the compensation received pursuant to compulsory acquisition of its land to the tune of ₹ 1,26,58,595/- is legally sustainable or not. According to Ld. Senior Counsel for the assessee, the RFCTLARR Act came into force on 1.1.2014 and the notification for acquiring the land of the assessee was dated 7.5.2014 which is after the RFCTLARR has come into force. The Ld. Counsel drew our attention to pages 10 to 14 of PB wherein is placed the relevant Gazette of India and the Ministry of Road Transport Highways wherein it has notified the lands to be acquired and from a perusal of the same it is seen that the assessee's land has been shown at page no. 11 as Raxaul taluk, Kannai Persolimpur village and the type of land is shown as private and the nature of land is shown as residential property. According to Ld. Counsel, the Ld. CIT(A) has erred in denying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of this Act, the Collector shall pass individual awards covering Rehabilitation and Resettlement entitlements as per the provisions of this Act. (4) No land use change shall be permitted if rehabilitation and resettlement is not complied with in full. (5) Any purchase of land by a person other than specified persons without complying with the provisions of Rehabilitation and Resettlement Scheme shall be void ab initio: Provided that the appropriate Government may provide for rehabilitation and resettlement provisions on sale or purchase of land in its State and shall also fix the limits or ceiling for the said purpose. (6) If any land has been purchased through private negotiations by a person on or after the 5th day of September, 2011, which is more than such limits referred to in sub-section (I) and if the same land is acquired within three years from the date of commencement of this Act, then, forty per cent. of the compensation paid for such land acquired shall be shared with the original land owners. Explanation - For the purpose of this section, the expression- (a) original land owner refers to the owner of the land as on the 5th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax. 3. As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961. 4. The above may be brought to the notice of all concerned. 5. Hindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is exempt from tax it and consequently need not have to be included in the total income of the assessee. 12. 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 (supra). 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. 13. 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 tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer is to complete the assessments in accordance with law. It is all the more so in the light of the mandate under article 265 of the Constitution that no tax shall be levied or collected except by authority of law. In the instant case, the assessee has not filed a revised return when he was made to understand that he has no liability to pay tax on the capital gains resulting from the acquisition of land. The reason is obvious that the time prescribed under the Act for submission of revised return had expired by that time. The case of the assessee, in the circumstances, is only that he shall not be penalised for having paid tax in terms of his return, on account of ignorance, on an income not exigible to tax. When the materials on record are analysed in the above background, have no hesitation to hold that the order, which is impugned in the writ petition, is a clear case where the first respondent has penalised the assessee for having paid tax on an income which is not exigible to tax. The said order, in the circumstances, is liable to be interfered with. [Para 11] In the circumstances, the writ petition is allowed. Judgment: 1. Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under Section 143 the Act. The said writ petition was admitted on 24.07.2017. This Court also passed an interim order in the said case on 24.07.2017 restraining the first respondent from continuing the proceedings. 3. While so, the petitioner was served with Ext. P12 order dated 14.07.2017, by which the first respondent has completed the proceedings initiated in terms of Ext. P3 notice raising a demand for ₹ 9,95,070/- on the basis that the cost indexation of the land made by the petitioner cannot be accepted and that the fair market value of the land as on 01.04.1981 can be reckoned only at ₹ 1,400/- per cent for the purpose of cost indexation. According to the petitioner, after Ext. P6 notice, the first respondent had issued Ext. P11 notice also to the petitioner directing him to appear before him on 20.07.2017 for the hearing proposed in furtherance to Ext. P3 notice. The case of the petitioner is that in the light of Ext. P11 notice, Ext. P12 order dated 14.07.2017 can only be a pre-dated one issued maliciously with a view to defeat W.P.(C). No. 23113 of 2017 instituted by the petitioner before this Court. It is also the case of the petitioner that at any r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition challenging Ext. P12 order even while the petitioner has an alternative remedy by way of appeal against the same, I am of the view that it may not be appropriate now to relegate the petitioner to avail the alternative remedy available to him against Ext. P12 order. In the circumstances, I propose to examine the correctness of Ext. P12 order in this proceedings itself. 8. As noted above, the impugned order is challenged on the ground that the proceedings under Section 143(2) of the Act, which culminated in Ext. P12 order, is without jurisdiction, in the light of Section 96 of the Land Acquisition Act. 9. The learned Standing Counsel for the first respondent does not dispute the fact that in the light of Section 96 of the Land Acquisition Act, no tax is leviable on the capital gains resulting from the acquisition of land under the said statute. The learned Standing Counsel also does not dispute the fact that the only point on which Ext. P12 order has been issued is that the fair market value of the land as on 01.04.1981 adopted by the petitioner for cost indexation cannot be accepted. Nevertheless, it was contended by the learned Standing Counsel that in so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Article 265 of the Constitution that no tax shall be levied or collected except by authority of law. I am fortified in the aforesaid view by the observations made by the Apex Court in CIT v. Shelly Products [2003] 129 Taxman 271/261 ITR 367. Paragraph 36 of the judgment of the Apex Court in the said case reads thus: 36. We cannot lose sight of the fact that the failure or inability of the Revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than in what he would have been if a fresh assessment was made. In a case where an assessee chooses to deposit by way of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of assessment proceeding. He can certainly make such a claim also before the authority concerned calculating the refund. Similarly, if he has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income tax, or is not income within the contemplation of law, he may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act merely for the reason that the petitioner has included in his return an amount which is exempted from payment of tax and that he could not file a revised return to rectify the said mistake in the return. The decision of the Apex Court in Goetze (India) Ltd. (supra) has, therefore, no application to the facts of the present case. In the circumstances, the writ petition is allowed and Ext. P12 order is quashed to the extent it assesses the petitioner to capital gains resulting from the acquisition of land mentioned therein. 14. In the light of the aforesaid decision as well as the CBDT Circular (supra) which is binding on the income tax authorities, we find the claim of the assessee has to be allowed and therefore we hold that the capital gain shown by the assessee in its original ROI to the tune of ₹ 1,26,58,595/- need not to be taxed being exempt. So the assessee succeeds at ITA No. 28/Pat/2020 so it is allowed. 15. Now let us take up assessee's appeal (ITA No. 27/Pat/2020). Having heard both parties, we note that the AO (ITO, Ward-1(3), Motihari) has passed the order dated 19.11.2018 wherein he has dropped the proceedings which action has been sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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