Enhanced compensation can trigger rectification and recomputation of capital gains when received within the statutory time limit.

Enhanced compensation received after the original assessment was held taxable through rectification, because section 155(7A) deems the earlier capital gains computation to have been wrongly made when compensation is later increased by a court or other authority. The provision operates through section 154, and the four-year period runs from the end of the previous year in which the additional compensation is received. As the enhancement order was made after 1-4-1974 and the rectification was completed within time, the enhanced amount was correctly brought into capital gains computation for the relevant assessment year.

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Issues: (i) Whether the enhanced compensation received after the original assessment could be brought to tax by rectification under section 154 read with section 155(7A) of the Income-tax Act, 1961 for assessment year 1972-73.

Analysis: Section 155(7A), inserted by the Finance Act, 1978 with retrospective effect from 1-4-1974, deems the earlier computation of capital gains to have been wrongly made where compensation is enhanced by a court or other authority and authorises recomputation under section 48 with the enhanced amount as the full value of consideration. The provision expressly applies the machinery of section 154, with the four-year period running from the end of the previous year in which the additional compensation is received. The enhancement order of the District Judge was made after 1-4-1974, and the rectification was made within the prescribed period. The principle that a later finding or enhancement can validly trigger rectification of an earlier completed assessment was applied.

Conclusion: The rectification under section 154 was valid, and the enhanced compensation was rightly included in computing capital gains for assessment year 1972-73.

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