1973 (2) TMI 30 - HC - Income Tax

Land Acquisition - state appeals against the compensation for land acquired determined by subordinate judge - whether the Income-tax authorities should wait for disposal of appeal before assessing the capital gains - Whether assessment of the sum as capital gains chargeable to tax under section 45 of the Income-tax Act, 1961, is valid in law? - in cases where section 254(2) of the Income-tax Act, 1961, applied, the assessee can seek a rectification of the order of the Tribunal if the income determined by the subordinate judge or the Land Acquisition Officer as the case may be and taken by the taxing authority to be the true income is varied after the order of the Tribunal by an appellate authority. In this case, the appeal to the High Court did not succeed and the quantum fixed by the subordinate judge has been upheld and no such difficulty as envisaged by the assessee actually arose - We see no error in the order of the Tribunal

Summary

Issues:
1. Validity of assessing a sum as capital gains chargeable to tax under section 45 of the Income-tax Act, 1961.
2. Validity of assessing another sum as capital gains arising to the assessee in a specific assessment year.

Analysis:

Issue 1:
The judgment concerns the assessment of a sum as capital gains chargeable to tax under section 45 of the Income-tax Act, 1961. The property of the assessee was compulsorily acquired under the Land Acquisition Act during the relevant previous year. The Land Acquisition Officer awarded compensation, which was later enhanced by a court judgment. The assessee requested a reopening of the assessment for that year, leading to a fresh assessment calculating the capital gains. The assessee contended that a portion of the compensation was a contingent liability due to an appeal by the State, and the compensation crystallized only upon the court judgment. However, the Tribunal upheld the assessment, citing the principle of equitable estoppel based on the assessee's request for assessment in that year. The court agreed with the Tribunal, emphasizing that the quantum of capital gains was determined by the subordinate judge and could be used for tax assessment purposes. The court also highlighted that the assessee could seek rectification if the quantum of income varied post-assessment, but in this case, the appeal to the High Court did not alter the quantum fixed by the subordinate judge.

Issue 2:
The second question revolved around the validity of assessing a specific sum as capital gains in a particular assessment year. The Tribunal had calculated the capital gains based on the acquisition price received and the property's book value. The assessee argued that the quantum of capital gains could only be determined conclusively after final judgments in appeals, and the principle of equitable estoppel was inapplicable. The court, however, upheld the Tribunal's decision, stating that the taxing authorities could rely on the quantum determined by the subordinate judge for assessment purposes. The court suggested that the assessee could request provisions in the order for adjustments if the quantum of income changed post-assessment due to appellate decisions. As the High Court appeal did not alter the quantum, the court found no error in the Tribunal's order and ruled in favor of the department.

In conclusion, the court answered both questions in the affirmative, supporting the department's assessment of capital gains in the specified assessment year.