TMI Blog2022 (2) TMI 1344X X X X Extracts X X X X X X X X Extracts X X X X ..... ang Vs. CBDT [ 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT ] the consistent view of Hon ble Punjab and Haryana High Court has been that interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. Certainly judicial decision subsequent to the assessment order may not be the valid basis for exercising the revisionary powers. However, in the case in hand the assessment order is infact silent as to the fact that if the Ld. AO had made any enquiry into the issue and if Ld. AO had taken into consideration the judicial pronouncements, relied on behalf of the assessee, then for what substantial reasons the judgments of jurisdictional High Court, i.e Hon ble Punjab and Haryana High Court in favour of Revenue have not been relied. The Hon ble Bombay High Court in the case of Subramaniam vs. Siemens India Ltd. [ 1983 (4) TMI 3 - BOMBAY HIGH COURT ] has held that the AO is supposed to follow a decision of the Supreme Court and of the High Court of the State within whose jurisdiction he is functioning and in the case where there is conflict of views between different High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals have been preferred by the Assessee against the order u/s 263 the Income Tax Act, 1961 (hereinafter referred as the Act ) dated 29.03.2022 of Ld. Pr. CIT, Faridabad (hereinafter referred as Ld. Revisional Authority) arising out of an the assessment order dated 14.11.2019 passed u/s 143(3) of the Act by the Assessing officer, ACIT, Circle-4(1), Gurgaon (hereinafter referred as the Ld. AO). As they involve similar questions of facts and law therefore to avoid repetition and contradictory findings they are taken up together for adjudication. 2. Facts in brief are that the respective assessee had filed their original return u/s 139(4) of the Act for Assessment Year 2017-18 which was revised u/s 139(5) of the Act. The computation of income of the original return the assessee had shown interest on enhanced compensation of land at Harsaru, Gurugram, Haryana and claimed deduction on the same @50% u/s 57 of the Act while in the revised return the assessee has not shown this income of interest received on enhanced compensation during the year under consideration. The ld Revisional Authority observed that there was no entry of this amount either to show as income or to claim any de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronounced after considering the judgements of Hon ble Supreme Court and statutory provisions of law] and need not to discuss or mention such issue and reasons for not following it in the assessment records or assessment order and whether such order is erroneous and prejudicial to the interest of revenue? f) Whether the interest received on enhanced compensation is taxable as income under the head Income from Other Sources under the provisions of Income Tax Act, 1961 in the A.Y. 2017-18? g) Whether an assessment order which is passed without inquiry and following the valid applicable judgements of jurisdictional High Court of Punjab Haryana, Supreme Court ignoring the statutory provisions and read with explanation 2 of section 263, can be held as erroneous and prejudicial to the interest of revenue by Principal Commissioner of Income Tax under section 263? 6. It believed that the ld AO had not conducted enquiry to examine whether the conditions necessary for exemption u/s 10(37) were fulfilled. Accordingly, show cause notice issued u/s 263 was issued to the assessee. On behalf of the assessee written submissions were submitted before ld Revisional Authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al income of the assessee. The Tribunal upheld the order of the Commissioner (Appeals). The High Court also dismissed the revenue's appeal. However, the Hon ble Supreme Court in the judgement in the last para held that the civil appeals filed by the Department stand allowed with no order as to costs. It shows that the action of the Assessing Officer has been upheld of taxation of interest on enhanced compensation. The ratio decidendi is very clear and upheld the taxation of interest on enhanced compensation. It is the ratio decidendi which has a binding force. 8. Ld Revisional Authority relied on the judgment of Hon'ble Supreme Court in case of Mehendra Pal Narang Vs. CBDT (2021) 279 taxmann 74 wherein, the assessee s SLP was dismissed and the order of Punjab and Haryana High court was upheld. Ld Revisional Authority further referred to judgment of Punjab and Haryana High Court in case of Karta Manjeet Singh (HUF) Vs. Union of India (2016) 65 taxmann.com 160 (Punjab and Haryana) and observed in para 38 as follows:- 38, A writ was filed before Hon ble Punjab and Haryana High Court claiming that the interest received on enhanced land compensation u/s 28 of the Land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 28 of Land Acquisition Act, 1894, on enhanced compensation paid for acquisition of his land, 50 per cent of said interest was taxable as income from other sources as per provision of section 56(2)(viii) read with section 57(iv) and 145A(b) in year of receipt. It held as follows: - 19. The cumulative effect of Section 145A(b) and Section 56(2) (viii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head 'income from other sources' in the year of receipt. 20. However, by Section 27 of the 2009 Act, a new clause (iv) in Section 57 has been inserted w.e.f. 01.04.2010 which lays down that in the case of income of the nature referred to in Section 56(2)(viii), a deduction of a sum equal to 50% of such income would be allowable thereunder and no deduction would be allowed under any other clause of Section 57 . 10. In the same context it relied on the judgment of Punjab and Haryana High Court Karnail Singh (2010) 326 ITR 501 and Sant Ram Vs. Union of India in (2010) 328 ITR 77, Tuhi Ram Vs. Land Acquisition Collector (1993) 66 taxman 127. Ld Revisional Authority was also referred to order of ITAT in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation amount is determined, the interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34. The Hon ble Supreme Court has nowhere held that interest received on section 28 of Land Acquisition Act, 1894 is not taxable under Income Tax Act, 1961. It is being held with humility that the view which states that the interest received u/s 28 of Land Acquisition Act, 1894 because of the judgement of Hon ble Supreme Court in the case of Ghanshyam (HUF) is not taxable as income under Income Tax Act, 1961 is wrong and not tenable. Otherwise, also in the case of Hari Singh, the only question was deduction of TDS by the collector on the land being acquired. The Hon ble Supreme Court very clearly and categorically held to follow the case of Nalini v. Dy. Collector, Land Acquisition 2006 (4) ILR Kerala 229 (para 6) wherein it has been laid down by Hon'ble Kerala High Court that the Land Acquisition Court has no jurisdiction to decide that issue and that is a matter to be decided by the Income- tax Officer, hence the order passed by the court below is correct and the remedy available to the petitioner is to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay hamper the implementation of the provisions of Income Tax Act in true and correct manner. The Commissioner u/s. 263 has been assigned the duty in the interest of justice to review such kinds of order. The order of the Commissioner of Income Tax itself is subject to judicial scrutiny and order of the Assessing Officer made u/s 143(3) in furtherance to the order u/s 263 is further subject to judicial scrutiny, thereby giving the full opportunity to the assessee to express its views before the appropriate authorities. The Department will not have an opportunity if this wrong order has to be accepted although erroneous and prejudicial to the interest of revenue because the Assessing Officer has expressed his opinion although it may be on wrong assumption of facts and application of law. 12. Thus, the ld Revisional Authority observed that in the light of amended provisions of section 263 the order passed is erroneous and prejudicial to the interest of revenue and liable to interfered u/s 263 of the Act. Accordingly, referring to the various judicial citations to exercise powers of Revision u/s 263 of the Act in case of lack of enquiry, the ld Revisional Authority directed the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 263 of the Act. 6. That on the facts and circumstances of the case and in law, the PCIT erred in exercising jurisdiction under section 263 in respect of the issue of taxability of interest of enhanced compensation, which was duly supported by judicial precedents and at best, therefore, could be said to be debatable ousting the jurisdiction under section 263 of the Act. 7. That on the facts and circumstances of the case and in law, the PCIT erred in exercising jurisdiction under section 263 without appreciating the original assessment order was passed under the supervision of Commissioner, therefore, it cannot be re-stated by the PCIT that the assessment order passed was without any application of mind. [Hari Iron Trading v. CIT: 263 ITR 437 P H] 8. That the PCIT erred on facts and in law in not appreciating the nature of receipt of interest received on enhanced compensation under section 28 of the Land Acquisition Act 1894, is of capital in nature and therefore not taxable as interest. Ergo, the PCIT erred in setting - aside the assessment order without recording the prima facie finding on merits. 9. That the PCIT erred on facts and in law in not app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is jurisdiction to hold that there was no enquiry. Ld. Counsel specifically referred to the fact that lack of enquiry and inadequate enquiry are different and the facts brought on record by assessee in fact show there was sufficient enquiry, so the order cannot be regarded as erroneous on the basis of lack of the enquiry. It was specifically submitted that the twin condition for invoking provisions of section 263 of the Act must cumulatively be satisfied and reliance in this regard was placed on the judgment:- Malabar Industrial Co. Ltd. v. CIT : 243 ITR 83 (SC) CIT vs. Max India Limited: 268 ITR 128 (P H) [affirmed in 295 ITR 282 (SC)] CIT vs. Kwality Steel Suppliers Complex: 395 ITR 1(SC) Hari Iron Trading Co. vs. CIT: 263 ITR 437 (P H) Vimgi Investment (P) Limited: 290 ITR 505 (Del) CIT vs. Gabriel India Limited: 203 ITR 108 (Bom) 17. Ld Counsel submitted that merely because the ld AO has not specifically mentioned that he had examined/ verified particular issue in the assessment order would not ipso facto mean that there was none application of mind on the part of the Ld. AO on such issue and reference was made on following judgments:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable under the head 'capital gains' arising from the transfer of agricultural land. It is, therefore, clear that once the Hon ble Supreme Court directed the Assessing Officer in the case of UOI vs. Hari Singh: 254 Taxman 126 (SC) that after examining the facts to apply the provisions contained in the Act with a specific reference to the agricultural land stating that in case if it is found that the compensation was received in respect of the agricultural land, the tax deposited with the Department shall be refunded to these depositors. 21. It was submitted that provisions of section 2(28)A read with section 56(2)(vii), 57(iv) and section 145A of the Act were not applicable as the assessee has received interest u/s 28 of the Land Acquisition Act, 1894. 22. It was specifically submitted that the judgment of P H High Court in case of Mehendra Pal Narang V. CBDT (2020) 120 Taxman.com 400 (P H) is dated 19.02.2020 while the assessment were concluded on 14.11.2019. Thus, the ld AO had rightly considered the provisions of law as applicable then and benefitted the assessee. 23. It was submitted even otherwise when the two view are possible and datable that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed enhanced compensation to the tune of Rs. 23457253/- and interest of enhanced compensation of Rs. 35910400/- u/s 28 of Land Acquisition Act which is exempt from tax . The validity to this claim was drawn from the decision of Hon ble Supreme Court of India in the case of Union of India and ors Vs. Hari Singh and ors in Writ No. 15041/2017 and following the decision of CIT(A)-1, Gurgaon in the case of Virender Singh, S/o. Chattar Singh, Village Hassaru in appeal No. 460/2016-17 order dated 06.02.2018 for AY 2014-15. Hence, revised return was filed declaring interest income as exempt income. 28. Further in reply to the notice u/s 142(1) available at page no 14-17 of PB, again it was submitted as under:- 22.23 Regarding Difference in Income Tax Return and 26AS and reason for revising the return. The assessee received Interest on Enhanced Compensation to the tune of Rs. 35910400/- on which TDS was deducted to the tune of Rs. 3591040/-. The Income was claimed Exempt hence Difference in Total Income and 26AS-194A. Earlier while filing the Original Return, the Interest received on Enhanced Compensation was offered for taxation under section 56 (2)(viii) in income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on compensation. Copy of original ITR, Computation of income is attached at Page No. 1 to 6 of the paper book. Then revise return has been filed on 29.09.2018 declaring interest income is exempt (copy enclosed at Page No. 9 to 13) which is to the tune of Rs. 12406303/- following the decision of Hon ble Supreme Court of India and C1T(A)-R Gurgaon in the case of co-owner. Hence, it is once again requested that assessment be framed on revise return and interest received on enhanced compensation be treated as exempt income. 29. There upon the assessment was concluded. The assessment order is somehow silent of the fact of what specific enquires were raised in regard to this claim and how they were addressed by the assessee or on what basis the same were accepted by the Ld. AO. Expeditious will be to reproduce the assessment order itself in lead case ITA No. 1063/Del/2022, assessee Subhash Chand Dhingra:- Original return of the income for AY 2017-18 was electronically furnished on 31.01.2018 with Acknowledgement Number 381145450310118, declaring an income of Rs. 3,01,05,170/-. Further a revised return of the income for AY 2017-18 was electronically furnished on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. 32. In regard to this controversy, which Ld AR, claims is a debatable point with divergent views, a coordinate bench in ITA No. 499/Del/2021 Shri Pranav Saran Vs. ACIT, relied by Ld. AR, took notice of the same and after discussing the checkered history of litigation and judicial pronouncements, held as under:- 16. By the Finance Act (Number 2) Act 2009 with effect from 1 April 2010 there is an amendment Under the provisions of Section 56 (2) (viii) which provided that income by way of interest received on compensation or on enhanced compensation referred to in clause (B) of Section 145A is an income. A corresponding provision was also introduced u/s 57 (iv) providing for deduction of a sum equal to the 50% of the income chargeable to tax under the above provision. The provisions of Section 145A (B) was also introduced providing that interest received by the assessee shall be deemed to be the income of the year in which it is received. Subsequently with retrospective effect from 1.4.2017 The Finance Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g all the decisions of the various courts disagreed with the view taken by the Hon ble Punjab and Haryana High Court and held that interest received u/s 28 of the income tax act is part of the compensation and is not an interest as contemplated u/s l45A of the income tax act and therefore same is not taxable u/s 56 (2) of the act. 19. An interesting fact was noted by the Hon ble Gujarat High Court that Hon ble Punjab and Haryana High Court in case of Jagmal Singh versus State of Haryana in civil revision number 7740 of 2012 on 18 Jul 2013 has clearly held that the interest u/s 28 is part of the compensation unlike u/s 34 of the act which is income. This was the solitary judgment of the Hon ble Punjab and Haryana High Court taking a view that interest on compensation u/s 28 of the land acquisition act is not an income chargeable to tax as interest but is part of compensation. However, in the latest decision of Hon ble Punjab Haryana High Court in the case Mahindra Pal Narang vs. CBDT (2020) 423 ITR 13 dated 19/2/2020 wherein the Hon ble High Court considered the provisions of Section 10 (37), 56 (2) (viii), 57 (iv), 145A (b) of the income tax act. It rejected the reliance by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Manjeet Singh and in the case of Sunderlal and Anr. Dated 21.09.2015 (Supra) and in the case of Jagmal Singh and Ors. (Supra) being the latest decisions of Hon'ble Jurisdictional Punja b and Haryana High Court on this issue and these decisions having considered the decision of the Hon'ble Supreme Court in the case of CIT vs. Ghanshyam (Supra) and also considering the fact that the Hon'ble Supreme Court has dismissed the SLP filed in the case of Manjit Singh (HUF) (Supra), it is held that the interest received u/s 28 of the Land Acquisition Act is not exempt under the act as it could not partake the character of compensation for acquisition of agricultural land. It is held that the interest received on enhanced compensation in the appellant's case is liable to tax under the head income from other sources. Accordingly, the grounds of appeal raised by the assessee are dismissed. 34. The bench is of considered opinion that certainly judicial decision subsequent to the assessment order may not be the valid basis for exercising the revisionary powers. However, in the case in hand the assessment order is infact silent as to the fact that if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That not being done, the Ld. Revisional Authority was right to conclude that Ld. AO has not taken into consideration the relevant and prevalent principles of law as laid by Jurisdictional High Court in favour of Revenue. Assessment in the absence of such reasoning is certainly erroneous and prejudicial to the interest of the Revenue. 37. Thus, without any doubt the matter in dispute was one which had divergent views. Certainly in one of the connected cases one of the CIT(A) has also given benefit to brother of the assessee but the matter of fact is that as far as the Hon ble jurisdictional Punjab and Haryana High court s view is concerned the consistent view was that it is an income to be treated under the head income from other sources . The co-ordinate benches at Delhi have also recognized the same. So the ld AO, while exercising powers in regard to compensation for the land falling in the State of Haryana, was supposed to follow the same. If he intended to distinguish it should have been reflected in the order. A case of lack of enquiry by the Ld. AO, as held by the Ld. Revisional Authority, needs to be sustained. This discussion thus distinguished all the case laws cited ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
