9911796707
TMI Blog1990 (7) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... all the earlier assessment years as well as in the three assessment years under consideration in these appeals. The original assessment orders for the three years in question were also made on that basis. In the year 1952 the Central Legislature passed the Requisitioning and Acquisition of Immovable Property Act 1952. Sections 25 and 26 of that Act contained special provisions and provided that any immovable property requisitioned under the Defence of India Act and the Rule made thereunder, which had not been released from such requisition, shall be deemed to have been requisitioned by the Competent Authority under the provisions of the New Act (hereinafter referred to as 'the 1952 Act'). The assessee's property thus uninterruptedly continued in the occupation of the Central Government. The Estate Manager of the Government of India, by his letter dated 2-3-1983, informed the assessee that the compensation for the aforesaid building had been enhanced from Rs. 3,618 to Rs. 19,269 per month effect from 7-3-1975. The arrears amounting to Rs. 14,68,172 for the period from 7-3-1975 to 31-12-1982 were also remitted by the Government of India to the assessee on 31-3-1983. On these facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent accrued. By virtue of the retrospective operation of the order issued by the Government of India, it had to be held that the assessee was entitled to receive such enhanced rent in those three previous years relevant to the assessment years. The argument that such enhanced rent did not accrue to the assessee in those previous years could not, therefore, be accepted. The learned CIT(A) thus held that the ITO was justified in coming to his conclusion that there was escapement of income. He was, therefore, justified in reopening the assessments and recomputing the income from house property on the basis of the enhanced rent. It is that finding and the direction passed in consequence thereof, which has been made the subject matter of the present appeals. 4. The arguments of the learned counsel for the assessee-appellant and the learned Departmental Representative were heard. 5. In the course of his arguments, the learned counsel, Shri S.E. Dastur, raised a number of points. One such point was to the effect that the property requisitioned by the Government of India under the Defence of India Act and the Rules made thereunder or the 1952 Act was not a property 'let out' within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what is the relationship established by the act of requisitioning done by the Government of India under the provisions of the 1952 Act. For this purpose it will be pertinent to refer to some provisions of that Act. One such provision is found in clause (a) of sub-section (2) of section 8 of that Act, which reads as under : "2. The amount of compensation payable for the requisitioning of any property shall, subject to the provisions of sub-sections (2A) and (2B), consist of-- (2a) a recurring payment, in respect of the period of requisition, of a sum equal to the rent which would have been payable for the use and occupation of the property, if it had been taken on lease for that period." 7. Now, although in the various provisions of the Act, the word 'compensation' has been used, yet the scheme underlying the Act and the use of the words 'lease' and rent' clearly indicate that the relationship sought to be created by the act of requisitioning was in the nature of 'lease' and the payment for the use and occupation of the immovable property was in the nature of 'rent'. It would, therefore, be not unreasonable to hold that the property requisitioned and occupied by the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to back to the earlier years of assessment. According to the learned counsel, since the payment was discretionary, it did not accrue in the earlier three years or the assessment years prior thereto. The assessee was maintaining the mercantile system of accounting. It had not known that the rent will be revised with retrospective effect. The enhanced compensation, therefore, could not have been credited in the accounts of the assessee on accrual basis and could not have been included in its total income for these years. Support on this point was sought from the decisions in the cases of E.D. Sassoon Co. Ltd. v. CIT [1954] 26 ITR 27 (SC) ; A. Gajapathi Naidu's case and CIT v. Nadiad Electric Supply Co. Ltd. [1971] 80 ITR 650 (Bom.). We have considered this aspect of the matter, but do not find any position favourable to the assessee on this count. The cases dealt with in the aforesaid three decisions are clearly distinguishable from the present case inasmuch as in those cases the payments were ordered or made as a result of exercise of discretionary power. In the present case, the enhanced compensation was payable and receivable by the operation of the provisions of law. During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under the 1952 Act is thus the amount for which the property may reasonably be expected to be let from year to year. Such compensation thus falls both under clause (a) and clause (b) of sub-section (1) of section 23 for the determination of the annual value of the property. 11. The next argument of the learned counsel, Shri Dastur, related to the lack of jurisdiction on the part of the ITO to initiate proceedings under section 147(b) of the IT Act. The learned counsel, in this connection, referred to the Note No. 16 of the Notes annexed to and forming part of the accounts of the assessee-company for the year ended 31-12-1982. That Note reads as under : "16. In March 1983, the Government of India decided in their discretion, to increase on an ad hoc basis the compensation paid by them in respect of the portion of the company's building occupied by them, such increase being effective from 7th March 1975. Accordingly, an amount of Rs. 14,68,172 representing the additional compensation as above up to 31st December, 1982, was received in March, 1983 from the Estate Manager, Government of India, which amount will be accounted for in the company's accounts for the year ending 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was neither the result of a discretionary exercise of power by the Government nor was on an ad hoc basis. Further more, there was undertaking in that Note by the assessee that the amount will be accounted for in the company's accounts for the year ending 31-12-1983. Since the amount was received only in March 1983 there was no justification for appending a Note of this type in the accounts of the assessee for the year ending 31-12-1982. The assessee has not filed before us its accounts for the year ended 31-12-1983 so as to show that the receipt of the additional compensation was duly accounted for during the year ending 31-12-1983. In these circumstances, we find ourselves in agreement with the learned Departmental Representative that the ITO received the definite, complete and concrete information only subsequent to the completion of the original assessments under section 143(3) and he was, therefore, fully justified in initiating proceedings under section 147(b) of the IT Act. In any case, even the possession of the information contained in Note 16 could possibly be alleged only in relation to the assessment year 1983-84 and not in relation to the earlier two years. Regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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