Land Acquisition Act: High Court allows writ petition challenging income tax assessment on compensation.

The High Court set aside the order of the Chief Commissioner and Commissioner of Income-tax, allowing the writ petition challenging the income tax assessment on compensation received under the Land Acquisition Act. The court upheld the spread over of interest income over different years, emphasizing adherence to accounting methods and the petitioner's right to pursue the writ petition despite alternative remedies. The court highlighted the importance of following High Court decisions until overruled by the Supreme Court, even with pending appeals, ultimately ruling in favor of the petitioner after a 19-year legal battle.

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Issues:
Challenge to order of Chief Commissioner regarding income tax assessment based on compensation received under Land Acquisition Act. Interpretation of interest income accrual and tax liability. Consideration of spread over income over multiple years. Validity of judgment from Madras High Court and Supreme Court. Alternative remedy of appeal versus writ petition.

Analysis:
The petitioner challenged the order of the Chief Commissioner (Admn.) regarding the income tax assessment on compensation received under the Land Acquisition Act. A notice under section 263 of the Income Tax Act was issued for enhancing tax due to compensation received for plot acquisition. The petitioner argued for bifurcation of interest income on accrual basis over several assessment years, but the Chief Commissioner disagreed, citing the immediate tax liability upon receiving the interest. The Commissioner referred to a judgment from the Madras High Court allowing spread over of interest income over different years, but the Chief Commissioner did not rely on it due to a pending appeal before the Supreme Court.

The High Court emphasized that administrative or quasi-judicial tribunals must adhere to High Court decisions unless overruled by the Supreme Court, even if an SLP is pending. The judgment from the Madras High Court, upheld by the Supreme Court, supported the spread over of income in respective years, especially under the mercantile system of accounting. The High Court noted the petitioner's adherence to the mercantile system and the department's failure to rebut this claim despite notice, leading to acceptance of the petitioner's averments.

Regarding the availability of alternative remedies, the High Court addressed the objection raised by the Income-tax department's counsel about the petitioner not availing the appeal remedy before filing the writ petition. The court justified the writ petition's continuation for over 19 years with an interim stay order, emphasizing the court's consideration of the matter and the period of pendency. Citing a previous Division Bench decision, the High Court found no justification to require the petitioner to pursue an appeal, as it deemed further extension of the proceedings unnecessary.

Ultimately, the High Court set aside the impugned order of the Chief Commissioner and Commissioner of Income-tax, allowing the writ petition based on the reasons discussed, including the interpretation of tax liability, adherence to accounting methods, and the appropriateness of the writ petition despite the availability of alternative remedies.

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