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2023 (4) TMI 524 - AT - Income TaxRevision u/s 263 - Taxability of interest awarded under Land Acquisition Act - AO allowed the application filed by the assessee u/s 154 by rectifying the mistake and held that the interest awarded is not taxable - HELD THAT - The issue regarding whether interest awarded under the land Acquisition Act is taxable or not, has been settled in the case of Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT declaring that the interest awarded under the Land Acquisition Act is not taxable. Such being the case, the remedy available to the assessee is to bring to the notice of the AO regarding passing of the judgment in the case of Ghanshyam HUF (supra) and get the other rectified. The said method is also in-conformity with the Circular issued by CBDT No. 68 dated 17.11.1971 wherein, it is stated that the subsequent interpretation of law could constitute a mistake apparent from the record. As on the date of examination of the record of the assessment order it is not prejudicial to the interest of the revenue. The right tax had to be collected from the right person. The reason for exercising power conferred u/s 263 by the ld CIT is that the return of income had to be filed without any paper i.e. it was paperless filing of return of income, even if the assessee had attached the document along with return and same will be taken off the record. Therefore, held that the AO has committed an error in exercising power u/s 154 - In our opinion the income tax proceeding are not adversarial it is not material as to who committed the mistake, the fact that a mistake has been committed and the same has to be rectified. Thus as the interest awarded under Land Acquisition Act is not taxable as held by the Hon'ble Supreme Court, the department cannot demand to pay the tax on the same by way of invoking section 263 therefore, we hold that the order of the ld CIT is erroneous. We quash the impugned order passed by the CIT u/s 263 and uphold the order passed by the ld AO u/s 154 of the Act. Appeal of the assessee is allowed.
Issues Involved:
1. Validity of the order passed under section 263 by the CIT. 2. Taxability of interest awarded under the Land Acquisition Act. 3. Authority of the Assessing Officer (AO) to rectify the mistake under section 154 of the Income Tax Act. Summary: 1. Validity of the order passed under section 263 by the CIT: The assessee contested that the order passed under section 263 by the CIT was erroneous and lacked the foundation for the assumption of jurisdiction. The CIT declared the AO's rectification order under section 154 as null and void, stating that the AO acted beyond his powers and the rectification was prejudicial to the interest of the revenue. The Tribunal held that the CIT's order was erroneous and quashed it, upholding the AO's rectification under section 154. 2. Taxability of interest awarded under the Land Acquisition Act: The assessee, an agriculturist, received compensation and interest from the government for acquired land. Initially, the interest was shown as taxable income. However, the Supreme Court's decision in CIT v. Ghanshyam Dass (HUF) clarified that such interest is not taxable. The AO rectified the mistake under section 154, treating the interest as part of the compensation and exempt under section 10(37) of the Act. The Tribunal affirmed this view, stating that the interest awarded under the Land Acquisition Act is not taxable. 3. Authority of the AO to rectify the mistake under section 154 of the Income Tax Act: The AO rectified the mistake apparent from the record based on the Supreme Court's decision, which was supported by the CBDT Circular No. 68 dated 17.11.1971. The CIT contended that the AO exceeded his jurisdiction under section 154. However, the Tribunal emphasized that income tax proceedings are not adversarial, and mistakes, whether by the assessee or the AO, must be rectified. The Tribunal upheld the AO's rectification, stating it was in line with the law and the CBDT circular. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the CIT's order under section 263 and upholding the AO's rectification order under section 154, thereby confirming that the interest awarded under the Land Acquisition Act is not taxable.
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