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2013 (12) TMI 138 - AT - Income TaxValidity of order u/s 263 Enhanced compensation - Held that - Following CIT Vs Prem Singh 2010 (12) TMI 460 - PUNJAB AND HARYANA HIGH COURT - Whenever the possession of the land has been taken before 6.1.1994 then such land is to be treated as agricultural land - Enhanced compensation could not be brought to taxation The reading of the assessment order passed u/s 143(3) read with section 147 on 26.12.2008 shows that proceedings were kept pending because the assessee was directed to file the intimation regarding outcome of the decision regarding compensation before the Additional Session Judge Panchkula - Compensation of the land belonging to the assessee was taken on 17.6.1992 - Before issue of Notification No. 9447/F.No. 163/3/87 dated 6.1.1994 therefore enhanced compensation on the same is not taxable - Interest u/s 28 of the Land Acquisition Act was also part of the compensation Following the decision of Hon ble Apex Court in the case of CIT v G.M. Mittal Stainless Steel P. Ltd 2002 (12) TMI 13 - SUPREME Court - Once the Assessing Officer has followed a decision of jurisdictional High Court then there was no jurisdiction to revise such assessment order. The power of the Commissioner under section 263 had to be exercised on the basis of the material that was available to him when he exercised the power - The satisfaction of the Commissioner was therefore not based on material either legal or factual which alone would give him the jurisdiction to take action under section 263 Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Justification for initiating and passing the order under section 263 of the I.T. Act. 3. Determination of whether the assessment order passed by the Assessing Officer (AO) was erroneous and prejudicial to the interest of the revenue. 4. Taxability of enhanced compensation and interest on enhanced compensation. 5. Validity of the proceedings under section 148 of the I.T. Act. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed late by 140 days. The assessee argued that the delay was due to a severe accident resulting in temporary memory loss. The Tribunal, after considering the affidavit and submissions, found sufficient cause for the delay and condoned it. 2. Justification for Initiating and Passing the Order under Section 263 of the I.T. Act: The Commissioner of Income Tax (CIT) initiated proceedings under section 263, deeming the assessment order erroneous and prejudicial to the revenue. The CIT's primary contention was that the AO had erroneously accepted the return without taxing the enhanced compensation and interest, despite the pending dispute in the judicial court. 3. Determination of Whether the Assessment Order Passed by the AO was Erroneous and Prejudicial to the Interest of the Revenue: The CIT argued that the AO's order was erroneous because it did not tax the enhanced compensation and interest. The Tribunal, however, found that the AO had followed the jurisdictional High Court's decision in CIT v. Prem Singh, which held that land acquired before a certain notification date remained agricultural and thus not taxable. The Tribunal concluded that since the AO's order was based on a binding High Court decision, it could not be deemed erroneous or prejudicial to the revenue. 4. Taxability of Enhanced Compensation and Interest on Enhanced Compensation: The AO had initially added the interest portion to the assessee's income but did not tax the enhanced compensation due to the pending dispute. The Tribunal noted that the AO's decision was consistent with the Supreme Court's ruling in CIT v. Hindustan Housing and Land Development Trust Ltd., which stated that compensation is not taxable until the dispute is resolved. The Tribunal also referenced the Supreme Court's decision in CIT v. Ghanshyam (HUF), which clarified that interest on enhanced compensation forms part of the compensation and is taxable only when the dispute is settled. 5. Validity of the Proceedings under Section 148 of the I.T. Act: The AO reopened the assessment under section 148, suspecting escaped income due to untaxed enhanced compensation. The Tribunal found that the reopening was valid as it was based on recorded reasons and due approval. However, the Tribunal upheld that the final assessment, which accepted the return without taxing the disputed compensation, was correct given the pending litigation. Conclusion: The Tribunal quashed the revisionary order passed under section 263, affirming that the AO's order was neither erroneous nor prejudicial to the revenue. The Tribunal emphasized that the AO's decision was in line with the jurisdictional High Court's ruling and the Supreme Court's precedents, thus protecting it from revision under section 263. The assessee's appeal was allowed, and the order was pronounced in the open court on 28.11.2013.
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