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Issues: (i) Whether there was material on record to justify initiation of revision proceedings under section 263 of the Income-tax Act, 1961; (ii) Whether the date on which possession of the acquired land was taken under section 17(1) of the Land Acquisition Act was the material date for taxing the capital gains in assessment year 1974-75.
Issue (i): Whether there was material on record to justify initiation of revision proceedings under section 263 of the Income-tax Act, 1961.
Analysis: The chronology of the acquisition proceedings showed that the declaration under section 6 read with section 17 was followed by notice under section 9(1), and possession was ultimately taken on 12 October 1973. On those undisputed facts, the Income-tax Officer had treated the capital gains as falling in different assessment years, while the Commissioner formed the view that the order was erroneous and prejudicial to the interests of the Revenue. The material before the Commissioner was sufficient to found revisional action.
Conclusion: The initiation of revision proceedings under section 263 was justified and the finding is against the assessee.
Issue (ii): Whether the date on which possession of the acquired land was taken under section 17(1) of the Land Acquisition Act was the material date for taxing the capital gains in assessment year 1974-75.
Analysis: Section 17 enabled possession to be taken after the prescribed notice period and, upon such taking, the land vested absolutely in the Government free from encumbrances. The Court declined to treat the delayed taking of possession as if it were possession under section 16, and also declined to read the delay as altering the legal effect of the section 17 notification within the confines of the reference jurisdiction. The vesting date remained the operative date for determining the assessment year in which the capital gains arose.
Conclusion: 12 October 1973 was the material date for assessment, and the capital gains were rightly brought to tax in assessment year 1974-75; the answer is against the assessee.
Final Conclusion: The reference was answered in favour of the Revenue on the two issues decided, while the remaining questions were left unanswered as unnecessary in view of the comprehensive remand and the absence of necessary facts.
Ratio Decidendi: Where acquisition under the urgency provisions results in vesting of the land in the Government upon lawful taking of possession, that date governs the accrual and assessment of the resulting capital gains, and contemporaneous material showing an erroneous split assessment can validly support revision under section 263.
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