TaxTMI 
TaxTMI 
2026 (8) TMI 1631
X X X X Extracts X X X X
X X X X Extracts X X X X
....IET KUMAR, JM AND SHRI. KRINWANT SAHAY, AM For the Assessee : Shri Tejmohan Singh, Advocate For the Revenue : Shri Manav Bansal, CIT, DR ORDER PER BENCH: These appeals are filed by the different assessee against the separate orders passed by the Pr. CIT at various stations against the common legal ground mentioned in the respective appeals. Since all the appeals were heard together, they are being disposed of by this consolidated order for the sake of convenience and brevity. 2. It has been brought to our notice that, in certain appeals, there is a delay in filing the same before the Tribunal as pointed out by the Registry. Considering that the issue involved is purely legal in nature, and respectfully following the ratio laid down by the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)], which emphasizes that substantial justice should prevail over technical considerations, we condone the delay in filing these appeals. 3. We shall take appeal of the assessee in ITA No. 167/Chd/2023 for A.Y 2018-19 as a lead case for discussion wherein assessee has raised the following effective grounds: 1. That on l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wed a deduction restricted to 50%, instead of accepting the assessee's claim of full exemption. 7. Accordingly, a show cause notice u/s 263 dated 02.02.2023 was issued proposing to revise the assessment order on the ground that it was erroneous in so far as prejudicial to the interests of the Revenue. 8. In response, the assessee filed detailed written submissions contending, inter alia, that interest received u/s 28 of the Land Acquisition Act partakes the character of compensation. The assessee before the PCIT had submitted that there are divergent views of the High Courts and in the absence of a jurisdictional Delhi High Court decision, a view favourable to the assessee ought to be adopted. It was submitted that the receipt of compensation was also covered by section 10(37) and further that the Assessing Officer had taken one of the possible views after due enquiry. Reliance was placed on various judicial precedents, including Faridabad Vs. Ghanshyam (HUF) reported in (2009) 8 SCC 412, CIT Vs. Chet Ram (HUF) [Civil Appeal No.13053/2017 [@ SLP (C) No.751/2009, CIT vs. Vegetable Products Ltd. [(1972) 88 ITR 192 (SC), CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Del), and ITO vs. D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....11.12.2020 was erroneous in so far as prejudicial to the interests of the Revenue within the meaning of section 263 read with Explanation 2(a). 14. Accordingly, exercising powers u/s 263, the Ld. Pr. CIT set aside the assessment order and directed the Assessing Officer to make a de novo assessment after conducting requisite enquiries and proper verification with regard to taxability of interest on enhanced compensation, after granting adequate opportunity of being heard to the assessee. 15. Now the assessee is before us, challenging the order passed by the Ld. Pr. CIT on the grounds mentioned hereinabove. 16. At the outset, Ld. Counsel for the Assessee has drawn the attention of the Bench to the assessment order, where the Assessing Officer has captured the reasons for reopening and on page 1 of the order, the Assessing Officer has mentioned the reasons for reopening for the interest on enhanced compensation. It was submitted that the Assessing Officer for the abovementioned purposes had issued various notices, which are available at pages 11 (12) of the paper book, 13, page 20, 22, page 25, and 27. On the basis of the above-mentioned document, it was submitted that the As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Vs. The ITO in ITA No. 1413/Chd/2016 dt. 09/07/2018 and our attention was drawn to paragraphs 15 & 16. 22. It was further submitted that the Delhi Benches while hearing the appeal in the case of Pawan Kumar vs PCIT,Rohtak in ITA No. 1655/Del/2023 at page 61 of the paper book field on 8.6.2026, have decided the issue in favour of the Assessee and he has drawn our attention to paragraph Nos. 11 to 16 . 23. The ld. AR had further submitted that the Assessee has also submitted that the interest earned by the Assessee and the compensation granted by the Land Acquisition Collector would partake the similar character as mentioned u/s 10(37) of the Act, and, therefore, the same is exempt, and for the above said proposition, the Ld. AR drawn our attention to the decision of the Bangalore Tribunal of the Tribunal in the case of Income Tax Officer, Bagalkot vs. Shri Prabhayya Basayya Saraganachariaryaha Badshah, ITA No. 858/Banglore/2018, it was submitted that the Ld. PCIT, without considering the submissions of the Assessee, has decided the issue against the Assessee and has directed the Assessing Officer to redo the assessment on the basis of the order passed by the PCIT. Besides th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... o Surinder Kumar vs DCIT 539/Chd/2016 (Chandigarh ITAT) * Thereafter, another notice u/s 142(1) was issued on 03.12.2020 seeking information with regard to order of enhanced compensation, in response to which "A" filed copy of court order. (Copy appended at page 24-29 of APB). * After considering the facts of the case, submission of "A" and legal position on the issue, the Ld. AO accepted the claim of "A" that the total enhanced compensation including interest u/s 28 of Land Acquisition Act is not taxable. Accordingly, the Ld. AO passed the assessment order u/s 143(3) on 11.12.2020 without making any addition to the returned income. (Copy appended at pg 30-31 of APB). Proceedings u/s 263: * Then revision proceedings u/s 263 were initiated by issuing SCN on 02.02.2023 alleging that the interest on enhanced compensation claimed as exempt is taxable u/s 56(2)(viii) and for this, the Ld. PCIT placed reliance on Mahender Pal Narang vs CBDT (423 ITR 13) (P&H HC), wherein it was held that "13...interest received on compensation or enhanced compensation is to be treated as "income from other sources" and not under the head "capital gains" & Puneet Sin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gments, all of co-equal strength. * List of few cases in favour of assessees : Year of Judgement Name of the Case Citation Tribunal/Court 2009 CIT vs Ghanshyam (HUF) 315 ITR 1 SC 2013 HSIDC Ltd vs Savitri CR No. 2509 of 2012 P&H HC 2014 Ajay Kumar v. State of Haryana CR No. 3236 of 2014 P&H HC 2016 Movaliya Bhikhubhai Balabhai v. ITO (TDS) 388 ITR 343 Gujarat HC Muktanandgiri Maheshgiri vs District Development Officer SLP 16453 of 2016 SC 2017 CIT vs. Chet Ram (HUF) CA No. 13053/2017 SC Union of India vs Hari Singh CA No. 15041 of 2017 SC 2019 ITO vs. Shri Prabhayya Basayya 858/Bang/2018 Bangalore ITAT 2020 Ram Kishan vs ITO 5391/Del/2017 Delhi ITAT 2021 Paramjeet Singh vs. ACIT 1393/Del/2017 Delhi ITAT ITO vs Smt Chawli Devi 63 & 64/Chd/2020 Chandigarh ITAT 2022 Swarn Singh vs ITO 264/Chd/2022 Chandigarh ITAT Shri Umang Sitani vs. ITO 3843/DEL/2018 Delhi ITAT 2023 Bhoop Singh Yadav vs. ITO 1589/Del/2023 Delhi ITAT Nitin Kumar vs. ITO 56/Del/2023 Delhi ITAT 2024 Sanjay Kuma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 57(iv) "deduction of 50% is allowed". d. Dtd. 31.03.2016 Movaliya Bhikhubhai Balabhai v. ITO (TDS) (388 ITR 343) (Guj. HC) held that "14......However, since the amount paid under section 28 of the Act of 1894 forms part of the compensation and not interest, the second respondent was not justified in deducting tax at source under section 194A of the I.T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act." (Copy appended at page 18-28 of AJC) e. Dtd. 29.11.2016 Muktanandgiri Maheshgiri vs District Development Officer (SLP 16453 of 2016), in which it was held that "9. In view of above and for the reasons stated hereinabove, more particularly for the reasons stated in the binding decision of this Court in case of Movaliya Bhikhubhai Balabhai v. Income Tax Officer [Supra], the present petition succeeds. The impugned action of the respondent no. 1 in deducting and depositing a sum of Rs. 45,20,257/- towards TDS on the amount of compensation and interest received thereon pursuant to judgment and award of the Land Acquisition Reference is hereby quashed and set-aside....." i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Delhi ITAT) in favour of "A". p. Dtd. 22.06.2023 Bhoop Singh Yadav vs. ITO (1589/Del/2023) (ITAT Delhi) in favour of "A". q. Dtd. 23.06.2023 Nitin Kumar vs. ITO (56/Del/2023) (ITAT Delhi) in favour of "A". r. Dtd. 29.11.2013 HSIDC ltd. vs Savitri (CR No. 2509 of 2012) (P&H HC) in favour of "A". (Copy appended at page 51-61 of ws) s. Dtd. 24.01.2024 Sanjay Kumar Sharma vs PCIT (357/Del/2023) (Delhi ITAT) in favour of "A". t. Dtd. 24.01.2024 Pawan Kumar vs PCIT (1655/Del/2023) (Delhi ITAT) in favour of "A". (Copy appended at page 61-72 of AJC) u. Dtd. 29.01.2024 Smt. Purnima Sareen Vs. Pr. CIT (892/Del/2023) (Delhi ITAT), in favour of "A". v. Dtd. 13.02.2024 Gulshan Kumar vs PCIT (1676/Del/2023) (Delhi ITAT) in favour of "A". w. Dtd. 15.04.2024 Jai Parkash vs. PCIT (1675/Del/2023) (Delhi ITAT) in favour of "A". x. Dtd. 28.04.2024 PCIT vs Inderjit Singh Sodhi (HUF) (ITA 769/2023) (Delhi HC) held that "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 deci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udgment of the High Court is affirmed, at least, with short reasoning, the same would not amount to bindings precedent." * The above series of decisions clearly show that the issue is not at all settled even till date. There have been decisions from Supreme Court holding it in favour of assessee and those decisions have been followed by Courts like Gujarat High Court and then also by Chandigarh ITAT, Delhi ITAT and many others. But then there are decisions on other side also like from P&H HC and Delhi HC. Infact, even within P&H HC, there have been decisions on both sides. Further, it is not that decisions favouring assessee are old and decisions favouring revenue is the recent trend. Infact, decisions on both sides have been coming regularly and Delhi ITAT has given in favour of assessee even in 2025 and that too in cases of assessees whose jurisdictional High Court was P&H. Further, even the Chd ITAT has also given decision in favour of assessee in 2026. This shows that the issue is highly debatable even as on date, it was debatable when the AO passed the order and it was debatable when the PCIT passed the order u/s 263. It is a settled law that proceedings u/s 263 is no....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... initiated review petition proposal to be submitted before the Hon'ble Supreme Court against this order and hence, they are dismissing the claim petitions. The Assessing Officers in my view clearly flouted the order of the Supreme Court and are liable for contempt. As long as the order of Supreme Court is in force, the department should give effect to the directions of the Hon'ble Supreme Court at any cost and filing of a review petition is no ground to deny the relief to the taxpayers. Fortunately, the taxpayers have not filed any contempt petitions before the Supreme Court otherwise the Court might have issued contempt notices to the concerned Officers as it is clear violation of the order of the Supreme Court and hence liable for contempt. Mr. A.N.S. Nadkarni learned ASG has submitted to the Hon'ble Court that the concerned Assessing Officers before whom the returns of income have been filed and refund claim applications are filed may be allowed to pass fresh orders in accordance with law. The respective Assessing Officer before whom return of income are filed or applications for claim of refund of TDS are filed, may be instructed first to ascertain and give a finding a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he transfer of agricultural land will be exempt u/s 10(37), provided all 4 stipulated conditions are cumulatively satisfied, by an individual or HUF. * Particular emphasis is placed on clause (iv) of sec. 10(37), which provides that the income should have arisen from "compensation or consideration" received on account of such transfer. The expression "compensation or consideration" is of wide import and is not confined merely to the principal amount of compensation awarded for the transfer of land. Rather, it encompasses all receipts intrinsically connected with and arising from such compensation. * Consequently, any income accruing by way of interest on compensation or enhanced compensation, being inextricably linked to the consideration received for the compulsory acquisition or transfer of agricultural land, falls within the ambit of the expression "such income has arisen from compensation or consideration." Accordingly, where the original compensation or enhanced compensation itself qualifies for exemption u/s 10(37) of the Act, the interest thereon awarded u/s 28 would likewise be exempt. * In a recent decision in the case of Anvar Ali Poolakkodan vs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act, the High Court within whose jurisdiction the AO has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under s. 127 for the same assessment year(s)." Further, if the AO is at Delhi, even if the assessee is at Chandigarh and also the JAO is at Chandigarh, it would be the Hon'ble Delhi HC which should be the Jurisdictional HC. Infact, this issue of determination of High Court, when the assessment order has been passed by NFAC, Delhi in case of Non-Delhi assessees, came up multiple times before the Hon'ble Delhi HC when such type of assessees filed writs. At this moment, there stands 2 divergent views from the Hon'ble Delhi HC and the matter is pending before the Larger Bench in the case of RKKR Foundation vs NFAC dtd.17.11.2022 W.P.(C) 9307/2022, wherein it was held that "16. Keeping in view the complexity of the legal issues involved and since we have doubted the correctness of the view expressed by a coordinate bench of this Court in RKKR Foundation (supra) wherein this Court had decided to exercise its jurisdiction in a similar matter where the jurisdictional assessing officer was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Hon'ble ITAT still chose to quash the proceedings u/s 263: Number of assessee's who are identically placed, they are also from Haryana and whose High Court is also P&H and in their cases also, AO accepted the interest u/s 28 as exempt while passing order u/s 143(3) but then the PCIT passed similar order u/s 263 by relying upon Mahendra Pal Narang. The Hon'ble Delhi ITAT in last 3-4 years have come across multiple cases u/s 263 of this nature and even after taking note of decision in Mahendra Pal Narang, they noted that the issue is debatable and therefore, power u/s 263 cannot be assumed. Some of those decisions are: (Copy appended a page 194-245 of ws) o Gulshan Kumar vs. Pr. CIT (1676/Del/2023) (Del11hi ITAT) o Sanjay Kumar Sharma vs. Pr. CIT (357/Del/2023) (Delhi ITAT). o Pawan Kumar vs. Pr. CIT (1655/Del/2023) (Delhi ITAT) o Smt. Purnima Sareen vs. Pr. CIT Rohtak (892/Del/2023) (Delhi ITAT) o Jai Parkash v. Pr. CIT Rohtak (1675/Del/2023) (Delhi ITAT). * Explanation 2 below s. 263 defines certain situations which, if exist, would make the subject order amenable to power u/s 263. One of such situations, which may be r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....following SC view and not following P&H HC view in their decisions in Smt Chawli Devi (Supra) and Swarn Singh (Supra), Gujarat HC in favour of assessee, revenue itself filing MA before SC in case of Rajendra, the letter from L&R wing of deptt saying that benefit may be granted even in proceedings u/s 154, number of decisions in favour of assessee from Delhi ITAT. Then there is issue of determination of Jurisdictional HC whose decision would be binding on parties, since the assessment is by NFAC, Delhi. All this goes to show AO had so many views, may be divergent. He took one of the possible views in favour of the assessee and in this situation, the taking of that view cannot be said to be absolutely absurd. When the AO passed the order, the Higher judiciary of Chd ITAT even when having decision adverse to assessee from P&H HC chose to apply decision from SC. This definitely acted as guidance for the AO and hence he passed the order u/s 143(3). He has taken one of the possible views and hence, the CIT has erred in assuming jurisdiction u/s 263. * If the jurisdictional HC is Delhi HC since assessment was framed by NFAC, Delhi, there was no decision adverse to assessee when A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t from this decision is as under: "We find no merit in the said contentions. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word "profits" in that section. The problem with s. 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of s. 263 particularly when as stated above we have to take into account the position of law as it stood on the date when the Commissioner passed the order dt. 5th March, 1997, in purported exercise of his powers under s. 263 of the Income-tax Act.". * In view of the totality of facts and circumstances of the case, the submissions advanced, the statutory provisions, and the judicial precedents relied upon, the assumption of jurisdiction under s. 263 of the Act on a debatable issue-merely on the basis of an alternative possible view, when the Assessing Officer had adopted one of the permiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....errides the earlier judicial position. The Ld. DR further submitted that the decision of the Coordinate Benches either of the Delhi or of the Chandigarh Tribunal cannot overrule the binding precedent of the jurisdictional High Court. In view thereof the Assessing Officer failed to appreciate this statutory shift and mechanically accepted the assessee's claim. It was further submitted that section 10(37) grants exemption only in respect of capital gains arising from compulsory acquisition of agricultural land. Interest on enhanced compensation is statutorily classified as "income from other sources" and therefore falls outside the scope of section 10(37). The Assessing Officer erred in not examining this basic legal distinction, resulting in incorrect allowance of exemption. 29. The learned DR submits that this is not a case of inadequate enquiry but a case of complete lack of enquiry. The assessment order is silent on: * the head under which interest income was assessed, * the applicability of sections 145B and 56(2)(viii), and * the statutory deduction u/s 57(iv). Such non-application of mind squarely attracts Explanation 2(a) to section 263(1), wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The Ld. Counsel, Shri Tej Mohan Singh, appearing for the assessee in Ashok Kumar Thukral and Rakesh Kumar in ITA Nos. 455 and 456/Chd/2024 respectively for the assessment year 2015-16, submitted that in the present cases, the reopening of assessment was carried out by the Assessing Officer only after obtaining due approval from the Ld. Principal Commissioner of Income Tax. In support of this contention, he drew our attention to paragraph 2 of the assessment order, wherein the fact of obtaining approval from the Ld. PCIT has been specifically recorded. 34. The Ld. AR further invited our attention to the paper book, wherein the recorded reasons for reopening are placed at pages 17, 19, 20 and 21. It was submitted that while granting approval for reopening, the Ld. PCIT had relied upon the judgment of the jurisdictional High Court in the cases of Mohinder Singh Narang and Manjeet Singh, and only thereafter accorded approval for issuance of notice under section 148. 35. It was contended that despite such approval and reopening, the Assessing Officer, upon completion of the reassessment proceedings, neither disagreed with the reasons forming the basis of approval nor made any ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. * In these circumstances, the subsequent invocation of revisional jurisdiction under section 263 of the Act by the Principal Commissioner of Income Tax on the very same issue is wholly without jurisdiction. Once the Assessing Officer has taken a possible and legally sustainable view after due enquiry, the assessment order cannot be treated as erroneous and prejudicial to the interests of the Revenue merely because the Principal Commissioner holds a different opinion. Section 263 does not permit substitution of the Commissioner's view for that of the Assessing Officer, nor can it be used to indirectly reopen an issue which could not be sustained in reassessment proceedings. * The impugned revision proceedings are thus based on a mere change of opinion and constitute an impermissible exercise of revisional power. The order passed under section 263, therefore, deserves to be quashed as being void ab initio. * It is, therefore, prayed that the impugned order u/s 263 of the Act may kindly be quashed. Additional Arguments in the case of Rakesh Kumar in ITA No. 456/Chd/2024 * In continuation of the submissions made in the connected appeals, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mely the taxability of interest received u/s 28 of the Land Acquisition Act. After considering the replies and material placed on record, the Assessing Officer accepted the returned income and did not make any addition on this issue. In other words, the issue for which the assessment was reopened was examined and consciously closed at that stage. * It is in this background that the subsequent action of the Principal Commissioner of Income Tax in invoking s. 263 requires consideration. The notice issued under section 263 again proceeds on certain factual assumptions, including that tax was deducted at source under section 194A by the Land Acquisition Officer while making payment of interest under section 28 of the Land Acquisition Act. This assumption is also incorrect. No tax was deducted at source by the Land Acquisition Officer while disbursing the interest income to the assessee. * Once an issue has been examined during reassessment proceedings and the Assessing Officer, after due application of mind and with the approval of the higher authorities, has accepted the assessee's explanation, the matter ordinarily reaches finality at that level. Section 263 is not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... quasi-judicial order and cannot be equated with a conscious examination of the correctness or otherwise of the eventual assessment order. 41. The Ld. DR submits that reassessment proceedings and revisional proceedings operate in entirely different statutory spheres. While reassessment is initiated on the basis of "reason to believe", the revisional jurisdiction under section 263 is attracted where the order passed by the Assessing Officer is both erroneous and prejudicial to the interests of the Revenue. Merely because the reassessment was conducted pursuant to approval of the PCIT does not render the reassessment order immune from revision if the statutory conditions of section 263 are otherwise satisfied. 42. The assessee's contention that since the Assessing Officer accepted the returned income, the Ld. PCIT is precluded from invoking section 263, is contrary to settled legal principles. It is well established that an order accepting the returned income can also be revised if it is passed without proper enquiry, inadequate enquiry, or incorrect application of law, resulting in prejudice to the Revenue. 43. In the present case, the Assessing Officer, despite reopening t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Ld. PCIT has rightly exercised his jurisdiction under section 263 after recording due satisfaction that the assessment order was erroneous and prejudicial to the interests of the Revenue. The revisional order neither amounts to review nor re-opening of the reassessment proceedings, but is a lawful correction of a patently unsustainable assessment order 49. In the case of Kartar Singh Vs. Pr. CIT, the Ld. AR, who addressed arguments virtually from Hisar in ITA No. 335/Chd/2023 for A.Y. 2018-19, submitted that Explanation 2(d) to section 263 provides that an order shall be deemed to be erroneous in so far as it is prejudicial to the interests of the Revenue, if it is not in conformity with any decision rendered by the Hon'ble Supreme Court or the jurisdictional High Court. 50. It was contended that the Ld. Principal Commissioner failed to appreciate the binding nature of the decision of the Hon'ble Supreme Court in the case of Ghanshyam Dass (HUF), which squarely governed the issue under consideration. According to the Ld. AR, the Ld. PCIT, by completely overlooking the said binding precedent, proceeded to invoke revisionary jurisdiction mechanically. 51. It was therefore ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ice of CIT(Audit), Chandigarh has sent a letter dated 12.01.2023 (PB-Page 83) requesting to convey the outcome of action u/s 263 of the Act to settle the audit objection. * Thereafter, the Ld. PCIT has initiated proceedings u/s 263 of the Act by issuing notice u/s 263 of the Act dated 16.01.2023 (PB-pages 84-85) merely based on the audit objection without applying his independent mind and without considering the subsequent decisions of Hon'ble Supreme Court in the cases of (i) CIT Rajkot vs. Govindbhai Mamaiya [2014] 52 taxmann.com 270 (SC); (ii) UOI & Ors. vs. Hari Singh & Ors. [2018] 91 taxmann.com 20 (SC); and (iii) ITO, TDS-2 Rajkot vs. Muktanangiri Maheshgiri in Civil Appeal No. 18475 of 2017 decision dated 10.11.2017, wherein the ratio of the decision of CIT vs. Ghanshyam (HUF) [2009] 181 Taxman 368 (SC) has been affirmed. It has been held in several decisions that where Pr. CIT had exercised his power to invoke the provisions of section 263 of the Act merely based on the audit objection by the Audit Wing of the Department, the order of Pr. CIT was not valid. In this regard, reference is made to the following decisions: * Ajay Grover vs. Pr. CIT, Faridabad (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onsiders that any order passed therein by the AO is erroneous in so far as prejudicial to the interest of the revenue, he may after giving opportunity of being heard to the assessee pass orders as prescribed under the Act. Thus, the process of revision u/s 263 of the Act initiates only when the CIT calls for and examines the record of any proceeding under this Act and considers that any order passed by the AO is erroneous and prejudicial to the interests of the revenue. The twin conditions of - (i) the CIT calling for and examining the record; succeeded by (ii) his considering the assessment order as erroneous etc. - are sine qua non for the exercise of power under this section. The use of the word `and' between the expression `call for and examine the record ....‟ and the expression `if he considers that any order ... is erroneous ...‟ abundantly demonstrates that both these conditions must be cumulatively fulfilled by the CIT and in the same order, that is, the first followed by the second. In other words, the trigger point for invoking jurisdiction u/s 263 is calling for and examining the record of any proceedings under the Act by the CIT leading him to consider the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ld. Pr. CIT. Therefore, the very invocation of revisional jurisdiction on the proposal of Assessing Officer itself is bad in law. * In this regard, reliance is placed on the following decisions wherein it has been held that revision proceedings under section 263 must be initiated by the Commissioner of Income Tax only and revision proceedings on basis of proposal from Assessing Officer is not valid: * Alfa Laval Lund AB vs CIT (1287/PUN/2017) (Pune ITAT) * Volkswagen India Pvt. Ltd. vs. PCIT (147 & 148/PUN/2019) (Pune ITAT) * M/s Thalia Akshar Developers vs. Pr. CIT (634/Mum/2022) (Mumbai ITAT) * Shantai Exim Ltd. v. CIT (2017) (88 taxmann.com 361) (Ahmedabad - Trib.) * Sinhotia Metals & Minerals Pvt. Ltd. Vs. PCIT (889/Kol/2017) (Kolkata ITAT) * PCIT Vs. M/S. Sinhotia Metals and Minerals Pvt. Ltd. IA No. GA/1/2019 in ITAT/104/2019 judgment dated 07.01.2022 (High Court of Calcutta) * M/s. Rupayan Udyog vs. CIT (1073/Kol/2012) (Kolkata ITAT) * CIT (E) v. Gujarat State Lion Conservation Society (2024) (166 taxmann.com 430) (Gujarat) In view of the above, since in this case, the revision proceed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... classified as "income from other sources" and therefore falls outside the scope of section 10(37). The Assessing Officer erred in not examining this basic legal distinction, resulting in incorrect allowance of exemption. 62. The learned DR submits that this is not a case of inadequate enquiry but a case of complete lack of enquiry. The assessment order is silent on: a) the head under which interest income was assessed, b) the applicability of sections 145B and 56(2)(viii), and c) the statutory deduction u/s 57(iv). 63. Such non-application of mind squarely attracts Explanation 2(a) to section 263(1), which deems an order erroneous where it is passed without making inquiries or verification which should have been made. 64. The learned DR further submits that the learned PCIT has rightly relied upon decisions of the Hon'ble Punjab & Haryana High Court, including Manjeet Singh (HUF) and Mahender Pal Narang, which hold that interest received under the Land Acquisition Act is taxable as income from other sources. These decisions are binding on authorities within the jurisdiction and were wrongly ignored by the Assessing Officer. 65. The contention of the assessee that juris....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT initiated revision proceedings under section 263 by issuing a show-cause notice on the ground that the interest received on enhanced compensation was taxable under section 56(2)(viii) of the Act and that the Assessing Officer had failed to apply the correct legal position. After considering the reply of the assessee and the material on record, the Ld. PCIT concluded that the assessment order was erroneous and prejudicial to the interests of the Revenue and directed the Assessing Officer to reframe the assessment in accordance with law. 69. At the outset, it is well settled that for invoking jurisdiction under section 263, the twin conditions must be satisfied, namely that the order of the Assessing Officer must be erroneous and that such error must be prejudicial to the interests of the Revenue. An order is erroneous not only when it is passed on an incorrect assumption of facts or incorrect application of law, but also when it is passed without making inquiries or verification which should have been made, or without proper application of mind. Explanation 2 to section 263 further clarifies that an order shall be deemed to be erroneous and prejudicial to the interests of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....retion to treat it as exempt unless supported by binding authority holding otherwise. 74. Further, the Hon'ble Punjab & Haryana High Court in the cases of Puneet Singh v. CIT and Mahender Pal Narang v. CBDT has categorically held that interest received on enhanced compensation under section 28 of the Land Acquisition Act does not partake the character of compensation and is taxable as income from other sources under section 56(2)(viii). These decisions were binding on the Assessing Officer. Non-consideration of binding jurisdictional High Court judgments squarely attracts Explanation 2(d) to section 263 and renders the assessment order erroneous and prejudicial to the interests of the Revenue. 75. The contention of the assessee that the issue is debatable and therefore outside the scope of section 263 cannot be accepted. The principle that revision cannot be invoked where two views are possible applies only where the Assessing Officer has adopted one of the permissible views after due enquiry and application of mind. In the present case, the assessment order does not disclose adoption of any view based on reasoning or legal analysis. It does not apply where statutory provisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n a perusal of the assessment order, we find that there is no discussion whatsoever on the nature of such interest, its taxability under the Act, or the applicability of sections 56(2)(viii), 57(iv), 145A(b) or the judicial position governing interest on enhanced compensation. The assessment order does not record the issuance of any query, consideration of any reply of the assessee, or examination of the legal and factual aspects relevant to the said issue. In a faceless regime, where all enquiries and responses are mandatorily recorded in the electronic record, the absence of discussion clearly indicates that the issue was not verified or examined at the assessment stage. 80. The faceless assessment scheme is designed to ensure that all material issues having a bearing on the computation of income are examined in a transparent and traceable manner. When an issue involving substantial tax effect, such as the taxability of interest on enhanced compensation, is not subjected to any enquiry or application of mind, the assessment order cannot be said to be the result of a conscious and informed decision by the Assessing Officer. 81. We further note that the Assessing Officer, in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egarding the correctness of the said order by invoking proceedings under section 263 of the Act. Significantly, the assessee has not questioned the jurisdiction of the PCIT to invoke section 263 on territorial or jurisdictional grounds. The revision proceedings under section 263 are not for the benefit of the assessee but are a power conferred on the Revenue to correct the order passed by the Assessing Officer in case the same is found to be erroneous and prejudicial to the interest of the Revenue. 87. The plea relating to the jurisdiction of the Hon'ble Delhi High Court has been raised only with a view to contend that, at the time of passing of the assessment order, there was no binding decision of the jurisdictional High Court applicable to the NFAC at Delhi. This contention is clearly an afterthought and does not go to the root of the jurisdiction of the PCIT under section 263 of the Act. 88. The further contention of the assessee that the Assessing Officer had followed the decision of the Hon'ble Gujarat High Court in Movaliya Bhikhubhai Balabhai v. ITO (TDS) is wholly misplaced and deserves outright rejection. A bare perusal of the assessment order itself, which is as un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he meaning of section 263 read with Explanation 2(d). 91. The contention of the assessee that certain earlier judgments of the Hon'ble Supreme Court were not considered by the Hon'ble High Court does not advance its case at the stage of proceedings under section 263 of the Act. As noted hereinabove, the Legislature has consciously amended the Income-tax Act by the Finance Act, 2010, whereby interest on enhanced compensation has been specifically brought to tax. In view of this statutory amendment, judicial pronouncements rendered prior to the Finance Act, 2010, cannot be regarded as determinative or binding while examining issues arising in the post-amendment regime. The legal position governing the taxability of interest on enhanced compensation stands altered by legislative mandate, and, therefore, reliance on pre-amendment decisions is misplaced in the context of the present proceedings. 92. The Assessing Officer is not at liberty to disregard the law laid down by the jurisdictional High Court on the premise that an alternative view may ultimately prevail, as judicial discipline mandates strict adherence to binding precedents. The reliance placed by the assessee on decisio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reby constituting a complete and self-contained code governing the taxation of interest on enhanced compensation. 96. Once the legislature has consciously classified interest on enhanced compensation as income from other sources through a specific charging provision, such income loses the character of capital gains and, consequently, falls outside the ambit of exemption under section 10(37) of the Act. Permitting the assessee to invoke section 10(37) in such circumstances would render the specific charging and computation provisions otiose, which is impermissible in law. 97. It is a settled principle of statutory interpretation, consistently affirmed by the Hon'ble Supreme Court of India, that where a statute contains both a specific provision and a general provision, the specific provision must prevail. A general exemption provision cannot override an express and specific charging mechanism enacted by Parliament. Therefore, the reliance placed by the assessee on section 10(37), a general exemption provision, in the face of the specific charging framework under sections 56(2)(viii), 145A(b), and 57(iv), is legally unsustainable and deserves to be rejected. 98. The reliance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ereinbelow. 105. With respect to the argument of the assessee that Ld. Pr. CIT had granted the approval under section 151 of the Act and therefore no 263 proceedings can take place is without any basis. We find no merit in the contention of the assessee that once approval under section 151 has been granted by the Ld. PCIT for reopening of assessment, the revisional jurisdiction under section 263 stands impliedly barred. 106. In our view, the scope and object of sections 148/151 and section 263 are distinct and independent statutory fields. Approval for reopening is only a prima facie administrative / quasi judicial exercise to enable assumption of jurisdiction by the Assessing Officer and does not amount to a final or conclusive determination of the issue on merits. We further note that mere acceptance of the returned income by the Assessing Officer does not, by itself, confer immunity from revision under section 263. An assessment order can be revised if it is passed without making proper enquiries or without applying the correct legal provisions, resulting in prejudice to the interests of the Revenue. 107. In the present case, the assessment order is conspicuously silent....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... present case, it is not the claim of the assessee that the assessment order has been set aside or declared nonest by any appellate or supervisory authority. It is also not the case of the assessee that the said order has been challenged before any judicial forum seeking a declaration that it is void ab initio. Merely alleging certain errors or infirmities in the order passed by the Assessing Officer does not, ipso facto, render the order non est in the eyes of law. In our view an order, howsoever erroneous it may be, continues to have legal existence unless it is annulled or declared void by a competent authority in accordance with law and within the time period prescribed. Further, the legality or validity of the assessment order cannot be examined in a collateral/ incidental/ revisional proceeding before the Tribunal. Such validity can be tested only when the assessment order itself is directly under challenge before us. Any observation on the assessment order when it is not the subject matter of the proceedings would amount to travelling beyond the scope of the lis and the jurisdiction vested in the Tribunal. Therefore, the contention of the assessee that the assessment order i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd secondly, that the show cause notice issued by the Ld. PCIT is a verbatim reproduction of the proposal forwarded by the Assessing Officer, allegedly evidencing non-application of independent mind. Ancillary arguments were also advanced regarding the binding nature of CBDT circulars and the invalidity of revision proceedings initiated on the proposal of the Assessing Officer. 115. As regards the first limb of the assessee's argument that the assumption of jurisdiction under section 263 is vitiated as it was triggered by an audit objection, we find that mere receipt of an audit objection does not, by itself, invalidate the exercise of revisionary powers. What is relevant for the purposes of section 263 is whether the Ld. PCIT, upon examination of the record, independently arrived at a satisfaction that the assessment order is erroneous insofar as it is prejudicial to the interests of the Revenue. An audit objection may constitute information or a trigger point, but the jurisdiction under section 263 flows from the Commissioner's own satisfaction and not from the audit objection per se. 116. In the present case, the record reveals that the Ld. PCIT issued a detailed show caus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proposal from the Assessing Officer is distinguishable on facts. In those cases, the courts found a complete absence of independent application of mind by the Commissioner. In the present case, however, the impugned order clearly brings out the reasons for which the Ld. PCIT found the assessment order to be erroneous in law. 121. On merits, we find substantial force in the submissions of the Ld. DR. The assessment order dated 11.12.2020 is conspicuously silent on the applicability of sections 145B(1), 56(2)(viii) and 57(iv) of the Act, which constitute a complete statutory scheme for taxation of interest received on compensation or enhanced compensation with effect from A.Y. 2011-12. These provisions mandatorily require such interest to be taxed in the year of receipt under the head "Income from Other Sources" with a deduction restricted to 50 percent. 122. The assessment order does not record any enquiry or consideration of these provisions, nor does it indicate the head under which the interest income was assessed or exempted. This omission cannot be characterised as a mere case of inadequate enquiry; rather, it is a case of complete lack of enquiry on a vital and mandatory....