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2016 (9) TMI 1186 - AT - Income TaxReopening of assessment - Held that - There is no bar under the I.T. Act, 1961 regarding issue of notice u/s 148 of the Act after completion of assessment u/s 143(1) of the Act. The Assessing Officer had satisfied the ingredients of section 147 of the Act and therefore, it was open to the Assessing Officer to exercise that power, not with-standing the fact that there were other remedies open to him under the Act. Taxability on amount received - relevant assessment year - amount admittedly pertains to more than fifteen earlier years - credit of tds - Held that - The Hon ble Supreme Court in Rama Bai VS CIT (1989 (11) TMI 2 - SUPREME Court ) has held that Interest on enhanced compensation awarded under the Land Acquisition Act accrues year after year and not on the date of granting enhanced compensation. In view of this articulation of law by the Hon ble Apex court, there can be no question of charging the entire amount of interest to tax in the year of receipt as has been done by the authorities below. Tthus CIT(A) was not justified in charging to tax the amount of interest received in the year, which obviously did not relate to the year in question. A careful perusal of the provision indicates that the credit for TDS can be allowed only for the assessment year for which the corresponding income is offered for taxation. There can be no question of allowing credit for the TDS in the assessment of a year for which the matching income is not offered for taxation. In other words, both the income and credit for TDS go hand in hand and cannot be disassociated from each other. As the amount of interest on which tax has been withheld is not chargeable to tax in the instant year, the assessee cannot equally be allowed credit for TDS on such interest income against other income. When confronted with this position, the ld. AR contended that since the AO allowed credit for such TDS, the Tribunal cannot disallow the same. We are not convinced with the submission. The patent reason for not disallowing credit for such TDS by the AO is that he charged to tax the entire interest income in the year in question and impliedly following the prescription of section 199, allowed the credit for TDS. As the interest income is held to be not chargeable to tax in the year under consideration, the assessee cannot be allowed to avail credit for TDS on such interest income against tax on his other income. To sum up, the interest income of Rs.Rs.13,91,472/ - is not chargeable to tax and further no credit for TDS of Rs.l,41,825 on such interest can be allowed in the instant year.
Issues Involved:
1. Validity of reassessment proceedings initiated by the Assessing Officer (AO). 2. Taxability of interest received on enhanced compensation. 3. Consideration of revised returns filed for earlier assessment years. 4. Allegation of double taxation of the same income. 5. Credit for Tax Deducted at Source (TDS) on interest income. Detailed Analysis: 1. Validity of Reassessment Proceedings: The assessee challenged the reassessment proceedings initiated by the AO under Section 148 of the Income Tax Act, 1961, arguing that the proceedings were against statutory provisions and lacked new information post-filing of the return. The AO issued notice under Section 148 after processing the return under Section 143(1). The Tribunal upheld the reassessment proceedings, citing that there is no bar under the Income Tax Act regarding the issuance of notice under Section 148 after completion of assessment under Section 143(1). The Tribunal referenced the Punjab & Haryana High Court's decision in Punjab Tractors Ltd. vs. ACIT, which established that the absence of an order under Section 143(3) does not bar the AO from initiating reassessment proceedings. 2. Taxability of Interest on Enhanced Compensation: The assessee received interest on enhanced compensation for agricultural land, which was spread over multiple years. The AO added the entire interest amount to the income for the year of receipt. The Tribunal referenced the Supreme Court's decision in Rama Bai vs. CIT, which held that interest on enhanced compensation accrues year after year and not on the date of granting enhanced compensation. Consequently, the Tribunal ruled that the entire interest amount could not be charged to tax in the year of receipt, as it pertained to multiple previous years. 3. Consideration of Revised Returns: The assessee had filed revised returns for earlier assessment years, disclosing the interest income. The AO and CIT(A) did not consider these revised returns. The Tribunal noted that the assessee had revised its returns voluntarily and spread the interest income over the relevant years as per the jurisdictional High Court's mandate in Tuhiram vs. Land Acquisition Collector. The Tribunal found that the CIT(A) erred in not considering the revised returns and ruled in favor of the assessee. 4. Allegation of Double Taxation: The assessee argued that taxing the entire interest amount in the year of receipt would result in double taxation, as the interest income had already been accounted for in earlier years. The Tribunal agreed, emphasizing that the interest income should be spread over the years it pertains to, as per the Supreme Court's ruling in Rama Bai vs. CIT. Therefore, the addition made by the AO in the year under consideration was unsustainable. 5. Credit for TDS on Interest Income: The assessee claimed credit for TDS deducted on the interest income in the year of receipt. The Tribunal noted that Section 199(1) of the Income Tax Act provides that credit for TDS can only be allowed for the assessment year in which the corresponding income is offered for taxation. Since the interest income was not chargeable to tax in the year under consideration, the assessee could not claim credit for TDS on such interest income against other income. The Tribunal disallowed the credit for TDS, aligning with the provision that both income and TDS credit must be matched in the same assessment year. Conclusion: The Tribunal ruled that the reassessment proceedings were valid, but the entire interest income could not be taxed in the year of receipt. The interest income should be spread over the relevant years, and the revised returns filed by the assessee should be considered. The Tribunal also disallowed the credit for TDS on the interest income in the year under consideration. The appeal filed by the assessee was disposed of accordingly.
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