2020 (10) TMI 1360 - AT - Income Tax

Reopening of assessment u/s 147 - as per assessee notice was not properly served - service of notice u/s 148 issued through notice server, assessee refused to receive the notice, subsequently, notice was sent through speed post which was not received back - HELD THAT - No infirmity in the order of the lower authorities in rejecting the contention of the assessee that notice was not properly served. The revenue has made three different attempts to serve the notice. Firstly, by notice server on 22.03.2007 which was not accepted by the assessee. This is not disputed by assessee. Secondly, notice was sent through speed post which is not received back by the AO. Thirdly through fixtures on 30.03.2007. Same is also not disputed by the assessee. There is no reason given to us that whether all the three actions of the ld AO were not correct. Accordingly, we dismissed ground No. 1 of the appeal. Taxation of interest on enhanced compensation - assessee has not produced any evidence whether the interest on enhanced compensation is received u/s 34 or u/s 28 of the Land Acquisition Act - HELD THAT - Interest u/s 28 is unlike interest u/s 34 is accretion to the value, hence, it is part of enhanced compensation whereas the interest u/s 34 of the Act is interest. As no information is available on record, we set aside the whole issue back to the file of the ld AO with a direction to the assessee to show that with reference to various order, under which section of the Land Acquisition Act interest is received by the assessee. AO may examine the whole issue with respect to taxability of the same and decide it afresh. The assessee is directed to submit the complete information before the ld AO within 3 months from the date of this order and thereafter the issue may be decided on the merits of the case. Accordingly, ground No. 2 and 3 of the appeal are allowed with above direction.

Summary

Issues involved:
1. Service of notice u/s 148 of the Income Tax Act, 1961.
2. Taxation of enhanced compensation under different heads.
3. Taxability of interest on enhanced compensation.
4. General grounds of appeal.

Issue 1: Service of notice u/s 148:
The appeal was filed against the order of the ld CIT(A) for the Assessment Year 2000-01, challenging the service of notice u/s 148. The notice was issued on 22.03.2007 but was refused by the assessee. Subsequent attempts were made through speed post and affixture on 30.03.2007. The Tribunal found no infirmity in the lower authorities' actions as the revenue made multiple attempts to serve the notice, which were not disputed by the assessee. Therefore, the Tribunal dismissed the appeal on this ground.

Issue 2: Taxation of enhanced compensation:
The assessee contended that the enhanced compensation should be taxed under the head 'Income From Other Sources' and not as part of 'Long Term Capital Gains.' However, the Tribunal upheld the taxability of the enhanced compensation as long term capital gains based on the provisions of section 45(5) of the Income Tax Act, which deal with compulsory acquisition of assets. The Tribunal held that the capital gain arising from enhanced compensation is taxable in the year of receipt, as per legal precedents and statutory provisions.

Issue 3: Taxability of interest on enhanced compensation:
The Tribunal directed the issue of taxation of interest on enhanced compensation back to the ld AO for further examination. It was noted that the nature of the interest received (whether u/s 28 or u/s 34 of the Land Acquisition Act) was not clearly established by the assessee or the lower authorities. The Tribunal emphasized the distinction between interest u/s 28 (considered part of compensation) and interest u/s 34 (for delay in payment). The ld AO was instructed to reevaluate the taxability of the interest based on the section under which it was received, and the assessee was given three months to provide necessary information for a fresh decision.

Issue 4: General grounds of appeal:
The general ground of appeal was dismissed as it was considered to be of a general nature and not impacting the substantive issues raised in the appeal. The Tribunal allowed the appeal partly for statistical purposes, emphasizing the need for a reevaluation of the taxability of interest on enhanced compensation based on the specific section under which it was received.

In conclusion, the Tribunal's judgment addressed the issues of notice service, taxation of enhanced compensation, and taxability of interest on enhanced compensation, providing detailed analysis and directions for further examination where necessary.