2024 (1) TMI 1076 - AT - Income Tax

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 ... Revision u/s 263 - assessee received interest of enhanced compensation u/s 28 of the Land Acquisition Act, 1894 and the A.O. did not conduct enquiry on the said issue - HELD THAT:- After considering the reply given by the assessee, A.O. satisfied that the amount so received under the Land Acquisition Act, 1894 has not been brought to the tax. By going through the above facts and circumstances, it is found that in the original assessment proceedings, the A.O. has already examined the issue of the refund claim which includes the issue of amount received by the assessee under the Land Acquisition Act. From the above, it is observed that it is not a case wherein the AO failed to conduct enquiry rather it is the case wherein the AO has conducted an elaborate enquiry and adopted one of the two views which was plausible view. The question would be as to whether in such circumstances the power u/s 263 of the Act would be invoked or not. The above said question is no longer res-integra and the said issue is well settled in several decisions. In the case of Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, [2000 (2) TMI 10 - SUPREME COURT] Hon’ble Supreme Court in the case of Pr. CIT vs. Canara Bank Securities Ltd. [2019 (10) TMI 1512 - SC ORDER] dismissed the Department’s appeal affirming the view taken by the Bombay High Court [2019 (2) TMI 2020 - BOMBAY HIGH COURT] wherein the High Court held that the question whether the income should be taxed as business income or has arisen from other source was a debatable issue and the Assessing Officer had taken the plausible view that it was a business income after due enquiries and therefore not open for the Commissioner to take such an order in revision. Even in the present case, whether the receipt of interest related to the additional compensation granted under Land Acquisition Act, 1894 is a part of exempt u/s 10 (37) of the Act or not is a debatable issue, therefore, following the ratio laid down in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] and other decisions mentioned above, we are of the considered opinion that the impugned order of the Ld. PCIT is found to be erroneous, accordingly, order impugned of the PCIT is hereby quashed. Appeal filed by the Assessee is allowed. 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, 1961The 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, 1894The 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 ViewThe 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.