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2012 (7) TMI 551 - AT - Income TaxRevision u/s 263 - Interest on enhanced land compensation - assessee has not offered the same to tax by giving a note in the return of income that the same shall be offered for tax, if and when the matter is fianlised by the Highest Court in favour of the assessee Held that - Assessing Officer had mentioned that interest amount has not been brought on tax on the ground that the same would be taxable, when the case is finalized - order cannot be treated as erroneous or prejudicial to the interests of the revenue. In this view of the matter, it cannot be said that Assessing Officer has passed an order in undue haste, without proper application of mind and without conducting due and proper enquiry Regarding interest on late furnishing of return - section 234A(3) mandates levy of interest for late furnishing of the return, in response to section 148 of the Act - Assessing Officer has not charged this interest, the order is erroneous and prejudicial to the interests of revenue to this extent - Assessee is partly allowed.
Issues:
1. Jurisdiction of CIT under section 263 of the IT Act. 2. Taxability of interest on enhanced land compensation. 3. Charging of interest under section 234A of the IT Act. Issue 1: Jurisdiction of CIT under section 263 of the IT Act: The appeal challenged the CIT's order under section 263 of the IT Act, contending that the assessment order was not erroneous or prejudicial to revenue. The CIT had noted that interest income on enhanced compensation was not assessed by the AO, and interest under section 234A was not charged. The CIT concluded that the assessment was erroneous and directed a fresh assessment. However, the Tribunal found that the AO had consciously decided not to tax the interest amount, considering it would be taxable upon finalization. The Tribunal held that the CIT's order was unsustainable as the AO had applied due diligence, and the decision was based on a possible view at that time. Issue 2: Taxability of interest on enhanced land compensation: The case involved the taxation of interest on enhanced land compensation received by the assessee. The AO assessed the enhanced compensation as capital gains but did not include the interest portion received. The CIT found this omission prejudicial to revenue and ordered a fresh assessment. The Tribunal noted that the AO's decision not to tax the interest was a conscious one, supported by a possible view. The Tribunal held that the CIT's order on this aspect was not sustainable, as the AO had not acted in haste and had considered the matter. However, the Tribunal upheld the CIT's decision regarding the non-charging of interest under section 234A, deeming it erroneous and prejudicial to revenue. Issue 3: Charging of interest under section 234A of the IT Act: The Tribunal found that the AO's failure to charge interest under section 234A for late filing of the return was indeed erroneous and prejudicial to revenue. Consequently, the Tribunal set aside the CIT's order on the issue of taxing interest on enhanced compensation but upheld the decision on the non-charging of interest under section 234A. The appeal by the assessee was partly allowed, with the Tribunal providing a detailed analysis of the jurisdictional aspects and taxability issues involved in the case. This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the Tribunal's findings on each issue, providing a comprehensive understanding of the case.
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