Ranjitsinh Narsinh Vaghela Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that fresh assessment is necessary in case of taxability of interest earned from Fixed Deposit from compensation received for compulsory acquisition of agricultural land. Thus, matter restored for fresh assessment.
Facts- The AO received information from the Deputy Director of Income Tax (Investigation) [DDIT (Inv.)], Ahmedabad, that the assessee had received cash of Rs.4,32,36,000/- during the Financial Year (FY) 2011-12 relevant to AY 2012-13. This income had not been reported in any return of income. Based on this credible information, the AO formed the belief that income chargeable to tax had escaped assessment. Consequently, the AO reopened the assessment u/s. 147 of the Act and issued a notice u/s. 148 of the Act on 28/03/2019.
In response to the notice, the assessee filed his return of income on 22/05/2019, declaring total income of Rs.1,40,764/-. The assessee also claimed exemption of Rs.6,22,38,075/- u/s. 10(37) of the Act on account of compensation received for the compulsory acquisition of agricultural land situated at Survey Nos. 56/1 and 56/2, Dholakuva, Gandhinagar.
AO acknowledged that the compensation and interest amounts were deposited by the Hon’ble Civil Court in the form of Fixed Deposits (FDs) and subsequently paid to the assessee after the final judgment. However, the AO held that the interest accrued on FDs is not part of the compensation but constitutes “income from other sources” u/s. 56 of the Act. Thus, AO held that the interest earned on FDs cannot be considered as compensation u/s. 10(37) of the Act and thus is taxable.
