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2022 (2) TMI 1344 - AT - Income TaxRevision u/s 263 - interest received on enhanced compensation - interest earned u/s 28 of the Land Acquisition Act - as per CIT AO had not conducted enquiry to examine whether the conditions necessary for exemption u/s 10(37) were fulfilled - controversy, which Ld AR, claims is a debatable point with divergent views - HELD THAT - Interest received on compensation or enhanced compensation under the Land Acquisition Act, 1894 is to be treated as income from other sources and not under the head capital gains the ld CIT(A) while exercising revisionary powers has primarily relied on the judgment of various judgments of Hon ble Punjab and Haryana High Court in Karta Manjeet Singh (HUF) Vs. Union of India 2015 (12) TMI 1123 - PUNJAB HARYANA HIGH COURT , Sant Ram Vs. Union of India 2009 (10) TMI 494 - PUNJAB AND HARYANA HIGH COURT AND Tuhi Ram Vs. Land Acquisition Collector 1991 (12) TMI 22 - PUNJAB AND HARYANA HIGH COURT Thus it can be reasonably concluded that even before the judgment of Mahender Pal Narang Vs. CBDT 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT the consistent view of Hon ble Punjab and Haryana High Court has been that interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. Certainly judicial decision subsequent to the assessment order may not be the valid basis for exercising the revisionary powers. However, in the case in hand the assessment order is infact silent as to the fact that if the Ld. AO had made any enquiry into the issue and if Ld. AO had taken into consideration the judicial pronouncements, relied on behalf of the assessee, then for what substantial reasons the judgments of jurisdictional High Court, i.e Hon ble Punjab and Haryana High Court in favour of Revenue have not been relied. The Hon ble Bombay High Court in the case of Subramaniam vs. Siemens India Ltd. 1983 (4) TMI 3 - BOMBAY HIGH COURT has held that the AO is supposed to follow a decision of the Supreme Court and of the High Court of the State within whose jurisdiction he is functioning and in the case where there is conflict of views between different High Courts, AO must follow the decision of the High Court within whose jurisdiction he is functioning. The Hon ble Rajasthan High Court in the case of CIT vs. Sunil Kumar 1994 (7) TMI 42 - RAJASTHAN HIGH COURT has further held held that the decision of the Jurisdictional High Court is binding on the Income tax Authorities and the Tribunal within the jurisdiction of the Court and the contrary decision of another High Court is not relevant, and that a point decided by the Jurisdictional High Court can no longer be considered to be a debatable issue. The questions of fact may not require much reasoning and can be collated and correlated by reading the notice and replies, but how a legal controversy is dealt with by Ld. AO, needs to be exhibited and reflected in the form of reasons recorded in the assessment order. That not being done, the Ld. Revisional Authority was right to conclude that Ld. AO has not taken into consideration the relevant and prevalent principles of law as laid by Jurisdictional High Court in favour of Revenue. Assessment in the absence of such reasoning is certainly erroneous and prejudicial to the interest of the Revenue. Without any doubt the matter in dispute was one which had divergent views. Certainly in one of the connected cases one of the CIT(A) has also given benefit to brother of the assessee but the matter of fact is that as far as the Hon ble jurisdictional Punjab and Haryana High court s view is concerned the consistent view was that it is an income to be treated under the head income from other sources . The co-ordinate benches at Delhi have also recognized the same. So the ld AO, while exercising powers in regard to compensation for the land falling in the State of Haryana, was supposed to follow the same. If he intended to distinguish it should have been reflected in the order. A case of lack of enquiry by the Ld. AO, as held by the Ld. Revisional Authority, needs to be sustained. Grounds raised by the assessee have no substance.
Issues Involved:
1. Taxability of interest received on enhanced compensation under the Land Acquisition Act, 1894. 2. Applicability of Section 10(37) and other provisions of the Income Tax Act, 1961. 3. Adequacy of the Assessing Officer's (AO) enquiry during the assessment. 4. Jurisdictional High Court's binding effect on the AO. 5. Validity of the Principal Commissioner of Income Tax's (PCIT) revisionary jurisdiction under Section 263 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Taxability of Interest Received on Enhanced Compensation: The primary issue was whether the interest received on enhanced compensation for land acquisition is taxable as "Income from Other Sources" or exempt under any provisions of the Income Tax Act, 1961. The Revisional Authority observed that the interest on enhanced compensation is taxable as income from other sources, referencing multiple judgments from the Punjab and Haryana High Court and the Supreme Court. It was noted that the interest received under Section 28 of the Land Acquisition Act, 1894, is taxable, and this view is consistently upheld by the jurisdictional High Court. 2. Applicability of Section 10(37) and Other Provisions: The assessee claimed exemption under Section 10(37) of the Act, arguing that the interest received under Section 28 of the Land Acquisition Act should be treated as part of the compensation and thus exempt. However, the Revisional Authority distinguished this claim, stating that the interest on enhanced compensation is taxable under Section 56(2)(viii) read with Section 57(iv) and Section 145A of the Income Tax Act, 1961. The authority referred to various judgments, including the Supreme Court's decision in CIT v. Ghanshyam (HUF), to support this position. 3. Adequacy of the AO's Enquiry: The Revisional Authority found that the AO had not conducted a proper enquiry into the taxability of the interest received on enhanced compensation. It was noted that the AO issued a standard questionnaire without specifically addressing the issue. The assessment order was considered erroneous and prejudicial to the interest of the Revenue due to the lack of detailed examination and reasoning regarding the taxability of the interest. 4. Jurisdictional High Court's Binding Effect: The Revisional Authority emphasized that the AO is bound to follow the decisions of the jurisdictional High Court. The Punjab and Haryana High Court had consistently held that interest received on enhanced compensation is taxable as income from other sources. The AO's failure to consider these binding judgments rendered the assessment order erroneous. The authority cited multiple cases, including Mahendra Pal Narang v. CBDT and Puneet Singh v. CIT, to reinforce this point. 5. Validity of PCIT's Revisionary Jurisdiction under Section 263: The Revisional Authority exercised its powers under Section 263 of the Income Tax Act, 1961, to revise the AO's order. It was observed that the AO's order was passed without proper enquiry, making it erroneous and prejudicial to the interest of the Revenue. The authority directed the AO to make further enquiries as per the observations in the impugned order. The assessee's appeal against the PCIT's order was dismissed, with the tribunal holding that the AO's failure to follow jurisdictional High Court judgments justified the revision under Section 263. Conclusion: The tribunal upheld the Revisional Authority's decision to revise the AO's order under Section 263, confirming that the interest received on enhanced compensation is taxable as income from other sources. The AO's lack of enquiry and failure to follow binding jurisdictional High Court judgments were key reasons for deeming the assessment order erroneous and prejudicial to the interest of the Revenue. The appeals by the assessee were dismissed.
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