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Issues Involved:
1. Validity of jurisdiction assumed by the CIT under Section 263. 2. Taxability of interest received on compensation for land acquisition. 3. Characterization of the interest received as capital or revenue receipt. Issue-wise Detailed Analysis: 1. Validity of Jurisdiction Assumed by the CIT under Section 263: The appeal challenges the order of the CIT dated January 4, 2002, under Section 263 for the assessment year 1993-94. The primary issue is the validity of the jurisdiction assumed by the CIT. The CIT assumed jurisdiction under Section 263, believing the assessment order was erroneous and prejudicial to the interests of the Revenue. However, the Tribunal noted that the AO had considered all relevant facts, legal provisions, and case law before making the assessment. The Tribunal referenced the Supreme Court judgment in Malabar Industrial Co. Ltd. vs. CIT, which states that if the view taken by the AO is a possible view, the order cannot be considered erroneous. Consequently, the Tribunal held that the assumption of jurisdiction under Section 263 by the CIT was without authority of law and quashed the CIT's order. 2. Taxability of Interest Received on Compensation for Land Acquisition: The assessee received compensation and interest for land acquired by the State Government. The compensation and interest were initially not offered for taxation, as the acquisition proceedings were challenged in various courts. The AO added the interest amounting to Rs. 9,40,849 as income. The CIT(A) set aside the AO's order, directing a de novo assessment after considering all aspects and relevant judicial decisions. The fresh assessment by the AO concluded that the entire amount received was a capital receipt. However, the CIT, upon examining the assessment record, issued a notice under Section 263, contending that the interest paid was a revenue receipt liable to tax, modifying the AO's order to enhance the assessment by Rs. 9,40,849. 3. Characterization of the Interest Received as Capital or Revenue Receipt: The main contention was whether the interest received on compensation was a capital or revenue receipt. The assessee argued that the possession of land was taken in violation of Section 17 of the Land Acquisition Act (LAA), making the interest a capital receipt, as it was compensation for deprivation of the right to retain possession. The CIT, however, held that the interest was a revenue receipt, relying on the Supreme Court judgment in Dr. Sham Lal Narula vs. CIT, which distinguished between interest paid for deprivation of use of money (revenue receipt) and interest paid for deprivation of the right to retain possession (capital receipt). The Tribunal, considering various judicial decisions, concluded that the view taken by the AO was a possible view. Therefore, the AO's order could not be considered erroneous, and the assumption of jurisdiction by the CIT under Section 263 was without authority. Conclusion: The Tribunal concluded that the view taken by the AO was a possible view and that the assumption of jurisdiction under Section 263 by the CIT was without authority of law. The order of the CIT under Section 263 was quashed, and the appeal of the assessee was allowed. The Tribunal clarified that it was not deciding on the correctness of the AO's view but merely on its possibility as a valid interpretation.
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