2024 (4) TMI 646 - AT - Income Tax

Revision u/s 263 - lack of enquiry or lack of investigation - correct appreciation of conclusion that interest on enhanced compensation during the assessment year under consideration ought to be treated as income from other sources u/s. 56(2)(viii) of the Act - HELD THAT - We find plausible reasons in the contention of the Ld. AR that that the issue under consideration is no longer res integra, in as much as that identical issue arises into the case of other individuals namely Gulshan Kumar S/o Mohari Ram 2024 (2) TMI 748 - ITAT DELHI wherein exactly similar and identical order has been has decided the issue in favour of assessee as held 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 held by the Hon ble Delhi High Court in CIT Vs. Hindustan Coca Cola Beveraces P Ltd. 2011 (1) TMI 138 - DELHI HIGH COURT Revenue has not pointed any change into facts and circumstances of the present case. We therefore, respectfully following binding precedent (Supra), hereby allow the appeal of the assessee by quashing the impugned order of the Ld. PCIT - Assessee appeal allowed.

Issues Involved:
1. Jurisdiction of the order u/s 263.
2. Validity of proceedings initiated u/s 263 based on the proposal of AO.
3. Validity of proceedings initiated u/s 263 based on unsigned show cause notice.
4. Erroneous and prejudicial nature of the AO's assessment order.
5. Applicability of action u/s 263 in the context of "lack of enquiry" or "lack of investigation".
6. Basis of PCIT's order on speculation and generalized observations.
7. Incorrectness of PCIT's findings regarding AO's diligence and taxability of interest on enhanced compensation.
8. Correctness of PCIT's conclusion on taxability of interest on enhanced compensation as income from other sources.
9. Legality of setting aside the assessment order for further enquiries u/s 263.

Summary:

Jurisdiction of the order u/s 263:
The assessee contended that the order dated 27.3.2023 u/s 263 of the Act by Ld. PCIT, Rohtak, was made without satisfying the statutory preconditions contained in the Act, thus lacking jurisdiction and deserving to be quashed.

Validity of proceedings initiated u/s 263 based on the proposal of AO:
The initiation of proceedings u/s 263 on the basis of the proposal by the AO was argued to be void-ab-initio, making both the initiation and consequent order u/s 263 without jurisdiction.

Validity of proceedings initiated u/s 263 based on unsigned show cause notice:
The proceedings initiated u/s 263 based on an unsigned show cause notice by Ld. PCIT, Rohtak, were also argued to be void ab initio, thus lacking jurisdiction.

Erroneous and prejudicial nature of the AO's assessment order:
The assessee argued that the AO had examined the facts on record and made all possible enquiries before accepting the claim, and thus, the assessment order could not be regarded as erroneous and prejudicial to the interest of revenue merely because the Ld. CIT had a different opinion.

Applicability of action u/s 263 in the context of "lack of enquiry" or "lack of investigation":
The Ld. PCIT's action u/s 263 was claimed to be inapplicable as the case was not one of "lack of enquiry" or "lack of investigation."

Basis of PCIT's order on speculation and generalized observations:
The Ld. PCIT's order was argued to be based on speculation, generalized observations, theoretical allegations, and assertions without supporting evidence, thus not in accordance with the law.

Incorrectness of PCIT's findings regarding AO's diligence and taxability of interest on enhanced compensation:
The findings of the Ld. PCIT that the AO had passed the order dated 4.12.2020 in a casual manner without due diligence and without conducting proper enquiries and verification were contended to be factually incorrect, legally misconceived, and contrary to the facts on record.

Correctness of PCIT's conclusion on taxability of interest on enhanced compensation as income from other sources:
The conclusion that "interest on enhanced compensation during the assessment year under consideration ought to be treated as income from other sources u/s 56(2)(viii) of the Act" was argued to be based on an incorrect appreciation of facts and thus untenable.

Legality of setting aside the assessment order for further enquiries u/s 263:
The Ld. PCIT was argued to have failed to appreciate that an order of assessment cannot be set aside simply to make further enquiries and pass a fresh order of assessment, making the impugned order contrary to law and unsustainable.

Tribunal's Decision:
The Tribunal found the issue under consideration to be identical to the case of Gulshan Kumar vs. Pr. CIT, Rohtak, where the Delhi Bench of the Tribunal had decided in favor of the assessee. The Tribunal noted that the AO had accepted the assessee's explanation based on the decision of the Hon'ble Supreme Court in Ghanshyam HUF regarding the taxability of interest received u/s 28 of the Land Acquisition Act. It was held that the Ld. PCIT could not assume revisional jurisdiction u/s 263 on a debatable issue where two views are possible, and the AO had accepted one of the views. Consequently, the Tribunal quashed the impugned order of the Ld. PCIT, Rohtak, dated 27.3.2023, and allowed the appeal of the assessee.

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