TaxTMI 
TaxTMI 
2024 (7) TMI 501
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....sessing officer for a fresh hearing of the assessment already judiciously made, which is again the law and is therefore not tenable. 2. That the Ld. AO after careful considerations in original proceedings u/s 143(3) 143(3A) & 143(3B) of the Income-tax Act, 1961 allowed the assessee claim u/s 28 of the Land Acquisition Act, 1894 and the Ld. PCIT erred in revising the order which is wrong and not warranted by law. 3. That the decision in case of Mahender Pal Narang v. CBDT [2020] by Punjab and Haryana High Court is not applicable. 4. That order of the Ld Pr. CIT is illegal, bad in law and in violation of the contemporary principles of natural justice as well as established judicial pronouncements. No reasonable opportunity was given. 5. That the interest awarded u/s 28 of the Land Acquisition Act, 1894 on account of deprivation of land which amounts to compensation though called interest, would not be taxable. 6. That the appellant craves leave to add, amend, alter, vary and/ or withdraw any or all grounds of appeal at the time of or before the hearing of the appeal." Additional grounds of appeal: - "1. That the Assessing Officer after great enquiries and deep explanatio....
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....ion to pass an order afresh, after due consideration of the facts and in accordance with law after making requisite enquiries & proper verification with regard to issue mentioned above. The assessee is at liberty to adduce the facts as relevant before the AO at the time of assessment proceedings in consequence to this order. The AO shall allow the assessee, adequate & reasonable opportunity of being heard & make relevant submissions. It may be ensured that assessment order u/s 143(3) is passed within the prescribed time limit as per the Income Tax Act." Aggrieved, the appellant/assessee preferred appeal before the Tribunal. 4. The Ld. Counsel argued that the assessment order was neither erroneous nor prejudicial to the revenue. It was contended by the Ld. Counsel that the AO had not taxed the interest on compensation (enhanced compensation and delayed payment of compensation) after detailed investigation of the case being satisfied with the appellant/assessee's submission; hence, the PCIT's view on the same issue was due to change in the opinion as there could be two views on this issue. To buttress his arguments, the Ld. Counsel placed reliance on the decision of the Hon'ble Sup....
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.... Act. 4.3 The Ld. Counsel submitted that the interest received under section 28 of the Land Acquisition Act had been held to be part of compensation by the Apex Court in the case of Ghanshyam HUF (supra). Thus, the same being exempt under section 10(37) of the Act was not included in the assessee's income in the ITR, which was also accepted by the AO. The Hon'ble Supreme Court affirmed its decision of Ghanshyam HUF's in the case of Hari Singh (2018) 91 taxmann.com 20 (SC). Further, the Ld. Counsel submitted that the SLP filed by the Revenue in the case of Hari Singh's had been withdrawn by it. Hence, it was argued this issue had now attained certainty. Thus, it was submitted that the issue of chargeability of interest on enhanced compensation was debatable issue; being two views were possible, and the AO accepted one of the views. Thus, the PCIT was not justified in setting aside the assessment order under section 263 of the Act. In support of his arguments, the Ld. Counsel placed reliance on the decisions in the cases of Chander Kalan v. NEAC, Delhi (ITA No. 1619/Del/2017),Virender Rathee (ITA No. 693/Del/2023) and GovindbhaiMamaiya [2014] 52 taxmann.com 270. 5. The Ld. DR, plac....
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....aw, as on date. There is no question with respect to the vires of the amendment before us or regarding any ambiguity in the language of the amendment. The only concern is regarding the enunciation of the applicable law and we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax." 30. We, accordingly, answer the substantial question of law which has arisen in the instant appeal in affirmative and in favour of the Revenue. We, thus, hold that the ITAT has erred in relying upon the decision of Ghanshyam (supra), ignoring the changes brought about by Finance (No.2) Act, 2009, which came into effect in the year 2010." submitted that the Hon'ble High Court of Delhi had categorically held that after 2010 amendment, two differing views or interpretation were not possible with regard to taxability of interest on compensation or enhanced compensation under the provision of the Act. 5.2 Post amendment w.e.f. 2010, position under the law is clear and such interest would be taxable as Income from other Sources. The Hon'ble High Court of Delhi had em....
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....ued by the Board under section 119, or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." The Ld. DR submitted that the assessment order dated 11.02.2021, wherein the decisions of the Hon'ble Jurisdictional High Court/Punjab & Haryana High Court in the cases of Mahender Pal Narang (Supra) and Puneet Singh (Supra) not followed was erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act. Therefore, it was contended that the Ld. PCIT had rightly set aside the assessment under section 263 of the Act. Further, the Ld. DR contended that the case laws relied upon by the Ld.Counsel were distinguishable on facts and thus these were of no help to the appellant/assessee. 6. We have heard both the parties at length and considered the material available on the record. The core issue involved in the case in hands is whether the PCIT was justified in holding the assessment order passed by the AO as erroneous and prejudicial to the interest of revenue if the interest on compensation or....
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....the time of so taking possession until it shall have been so paid or deposited. Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry." 9. Section 28 of the Land Acquisition Act deals with the interest on enhanced compensation awarded by the Collector in consequence to the court order or otherwise. Whereas, Section 34 of the Land Acquisition Act deals with the interest on the delayed payment of compensation or enhanced compensation. 10. Section 10(37) of the Act reads as under: - "Incomes are not included in total income. 10(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where- i. such land is situated in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2; ii. such la....
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....am HUF (supra) has held that interest paid on excess amount under section 28 of the Land Acquisition Act depends upon a claim by a person whose land is acquired whereas interest under section 34 of the Land Acquisition Act is for delay in making the payment. The interest under section 28 of the Land Acquisition Act is a part of enhanced value of the land which is not the case in matter of payment of interest under section 34 of the Land Acquisition Act. 14. The issue in this case is whether after insertion of section 56(2)(viii) and 57(iv) of the Act w.e.f 01.04.2010, the assessee can claim that interest received under section 28 of the Land Acquisition Act will part take the character of the compensation and will fall under the head "Capital Gains" and not "income from other sources". 15. The Hon'ble Punjab & Haryana High Court, in the case of Mahender Pal Narang (supra),had held categorically that the interest received on compensation or on enhanced compensation is taxable under the head "Income from other sources" in the year of receipt. Therefore, the tax authorities within the territorial jurisdiction of Punjab & Haryana have to follow this decision being binding in nature. ....
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....by dismissed." 17. The word 'record' defined in Section 263 of the Act reads as under: "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner;" Thus, the record for the purpose of Section 263 of the Act is not limited with the assessment record up to the date of the assessment only. Hence, the plea of the Ld. Counsel that the Ld. PCIT had relied upon the case law subsequent to the assessment is of no relevance. 18. The Hon'ble Punjab and Haryana High Court in the case of Mahender Pal Narang (supra) held that the interest received on compensation or enhanced compensation under the Land Acquisition Act is to be treated as 'income from other sources' and not under the head 'capital gains'. Central Board of Direct Taxes Circular No. 5 of 2010 was brought to remove the hardships created by the decision of the Supreme Court in Rama Sai (supra) for taxing the income in preceding years, which besides tax will entail interest and penalties under the Act. This Circu....
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....ion Act and such interest does not form part of the compensation. It is worth to reproduce the relevant part of the said decision as under: - "9. ---As we have pointed out, earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under Section 28 of the Act, just like under Section 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner.---" 22. It is evident from the plain reading of the above judgment that the interest received under Section 28 and 34 of the Land Acquisition Act is not compensation received in lieu of compulsory acquisition of land under the Land Acquisition Act. The decision in Sham Lal Narula (supra) was subsequently followed by the Hon'ble Supreme Court in the case of Bikram Singh [(1997) 10 SCC 243], wherein, it was held that interest u....
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....t incurred or enumerated analogous transaction would be deemed interest. That was explained by the Board in the circular referred to hereinbefore." 23. In view of the decision of three-Judges Bench of the Hon'ble Supreme Court in the case of Sham Lal Narula (supra), the finding of two-Judges Bench of the Hon'ble Supreme Court in the case of Ghanshyam HUF (supra) does not come to the rescue of the appellant/assessee to claim that the interest received under Section 28 and 34 of the Land Acquisition Act is to be treated as compensation and to be dealt with under "Capital gains". The fact that there is no amendment carried out under section 10(37) of the Act will also not change the position. The argument raised by the Ld. Counsel is not well founded. 24. The decisions of the coordinate benches of the ITAT relied upon by the Ld. Ld. Counsel are based upon the reasoning propounded in the case of Ghanshyam HUF (supra). The coordinate benches of the ITAT had not been made aware of an earlier judgment in the case of Sham Lal Narula (supra). Hence, the decisions were in favour of the assessees and not a good law. Therefore, in view of the decision in the case of Sham Lal Narula (supra), ....