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2024 (1) TMI 1077 - AT - Income TaxRevision u/s 263 - taxability of interest on enhanced compensation - assessee argued that revision merely based on audit objection - whether AO has validly held that interest under section 28 of Land Acquisition Act, 1894 granted by the court is an integral part of enhanced compensation and exempt u/s 10(37) in case of the assessee? - HELD THAT - Record reveals that the order of the Ld. PCIT was prompted solely by the audit objection. Hon ble P H High Court has held in CIT vs. Sohana Woollen Mills 2006 (9) TMI 157 - PUNJAB AND HARYANA HIGH COURT that mere audit objection cannot lead to an inference that the order of the Ld. AO is erroneous or prejudicial to the interest of the Revenue. Since the order of the Ld. AO is based on the decision of the Hon ble Supreme Court in Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT on the issue of taxability of interest received by the assessee under section 28 of Land Acquisition Act, it can at best be said to be a debatable issue on which two views are possible and the Ld. AO accepts one of the views. In this view of the matter too, the Ld. PCIT cannot assume revisional jurisdiction as held in CIT vs. Hindustan Coca Cola Beverages P Ltd. 2011 (1) TMI 138 - DELHI HIGH COURT Thus we hold that the order of the Ld. PCIT is not sustainable - Decided in favour of assessee.
Issues Involved:
1. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act. 2. Satisfaction of statutory twin conditions under Section 263. 3. Exercise of revisionary jurisdiction by PCIT concerning the taxability of interest under Section 28 of the Land Acquisition Act. 4. Examination of the assessment order's adherence to judicial precedents. 5. Validity of the assessment order based on the alleged lack of specific mention of examination/verification by the Assessing Officer (AO). Summary: Issue 1: Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act The assessee challenged the jurisdiction of the PCIT under Section 263, arguing that the order passed by the PCIT setting aside the assessment order was "without jurisdiction, bad in law and void-ab-initio." The Tribunal examined whether the PCIT's exercise of jurisdiction was valid. Issue 2: Satisfaction of statutory twin conditions under Section 263 The assessee contended that the PCIT's order did not satisfy the statutory twin conditions prescribed under Section 263, i.e., the assessment order being erroneous and prejudicial to the interest of the Revenue. The Tribunal analyzed whether these conditions were cumulatively satisfied. Issue 3: Exercise of revisionary jurisdiction by PCIT concerning the taxability of interest under Section 28 of the Land Acquisition Act The PCIT had set aside the assessment order on the grounds that the AO did not consider the binding decision of the Punjab & Haryana High Court in Mahender Pal Narang vs. CBDT, which dealt with the taxability of interest received on enhanced compensation. The Tribunal evaluated whether the PCIT correctly exercised revisionary jurisdiction in this regard. Issue 4: Examination of the assessment order's adherence to judicial precedents The assessee argued that the assessment order was passed in accordance with the decisions of the Supreme Court in CIT v. Ghanshyam (HUF) and other relevant cases, and thus, it was not amenable to revision under Section 263. The Tribunal reviewed whether the assessment order adhered to these judicial precedents. Issue 5: Validity of the assessment order based on the alleged lack of specific mention of examination/verification by the Assessing Officer (AO) The assessee claimed that the PCIT erred in assuming that the AO's failure to specifically mention examination/verification in the assessment order indicated non-application of mind. The Tribunal considered whether the AO's assessment was valid despite not explicitly detailing the examination/verification process. Conclusion: The Tribunal held that the PCIT's order was not sustainable as the assessment order was based on the Supreme Court's decision in Ghanshyam HUF, and thus, it could be considered a debatable issue on which two views were possible. Consequently, the Tribunal allowed the appeal of the assessee and quashed the impugned order of the PCIT. The appeal was pronounced in favor of the assessee on 24th January 2024.
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