AO's plausible view on taxability of interest on enhanced compensation under Land Acquisition Act upheld against section 263 revision

ITAT Delhi held that revision u/s 263 was not justified where AO had conducted elaborate enquiry regarding interest on enhanced compensation under Land Acquisition Act, 1894 and adopted a plausible view on its taxability. The tribunal found that whether such interest falls under exemption u/s 10(37) was a debatable issue, and AO had not failed to conduct enquiry but had examined the matter thoroughly. Following SC precedent in Malabar Industrial Co. Ltd., the tribunal quashed PCIT's revision order and allowed assessee's appeal.

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Issues Involved:
1. Jurisdiction and validity of the order under section 263 of the Income Tax Act, 1961.
2. Taxability of interest received under section 28 of the Land Acquisition Act, 1894.
3. Whether the Assessing Officer's (A.O.) actions constituted a plausible view.

Summary:

Issue 1: Jurisdiction and Validity of the Order under Section 263 of the Income Tax Act, 1961

The appeal was filed by the Assessee against the order of the Learned Pr. Commissioner of Income Tax, Faridabad (Ld. PCIT) dated 30/12/2022 for the Assessment Year 2018-19. The Ld. PCIT held that the assessment order dated 24/03/2021 was erroneous and prejudicial to the interest of the Revenue, directing the Assessing Officer to make a fresh assessment de novo. The Assessee contended that the order was without jurisdiction, arbitrary, misconceived, erroneous, and unlawful.

Issue 2: Taxability of Interest Received Under Section 28 of the Land Acquisition Act, 1894

The Assessee argued that the interest related to the additional compensation under section 23(1A) of the Land Acquisition Act was declared as exempt income in the return filed and relied on the Judgment of the Apex Court in CIT Vs. Ghanshyam (HUF) and Union of India Vs. Hari Singh. The Assessee maintained that the interest under section 28 is in the nature of capital and not interest simplicitor, thus exempt under section 10(37) of the Income Tax Act, 1961.

Issue 3: Whether the Assessing Officer's Actions Constituted a Plausible View

The A.O. examined the issue of refund claim, including the amount received under the Land Acquisition Act, and concluded that the amount was not taxable. The Tribunal observed that the A.O. conducted an elaborate enquiry and adopted one of the two plausible views. Citing the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, the Tribunal noted that if the A.O. adopted a permissible course in law, it cannot be treated as erroneous or prejudicial to the interests of the Revenue.

The Tribunal also referred to the Supreme Court's dismissal of the Department's appeal in Pr. CIT vs. Canara Bank Securities Ltd., affirming that a debatable issue cannot be revised by the Commissioner if the A.O. has taken a plausible view after due enquiries.

In conclusion, the Tribunal found the order of the Ld. PCIT to be erroneous and quashed it, allowing the appeal filed by the Assessee.

Order pronounced in open Court on 24th January, 2024.

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