R Ramesha Vs Chief Commissioner of Income Tax (Karnataka High Court)
When Compensation Arrives Six Years Late, the Return Cannot Travel Back in Time: Karnataka HC Directs Consideration of Condonation u/s 119(2)(b) for Refund of TDS on Exempt Land-Acquisition Compensation
The Karnataka High Court has directed the PCIT, Bengaluru-3, to examine & decide the assessee’s application u/s 119(2)(b) seeking condonation of delay in filing the revised return for AY 2019-20, where compensation for compulsory acquisition of agricultural land was actually received only in the year 2025 after resolution of a prolonged title dispute. The assessee claimed that the compensation was exempt from income tax u/s 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 & consequently sought refund of the TDS deducted by the KIADB.
Background of the dispute
The petitioner claimed title, as legal heir of the original owners, over land measuring 3 acres and 20 guntas situated in Survey Nos.87/3 & 87/4 of Kothanur Village, Uttarahalli Hobli, Bengaluru South Taluk.
The lands, along with surrounding properties, had been acquired by the Karnataka Industrial Areas Development Board – KIADB under the Karnataka Industrial Areas Development Act, 1966. However, payment of compensation was delayed because of a dispute concerning the petitioner’s title to the acquired lands.
According to the petitioner, the title dispute was ultimately resolved by a civil court decree in his favour. It was only thereafter that the KIADB deposited the acquisition compensation, which was credited to the petitioner’s account in the year 2025.
The petitioner had already filed the original return of income for AY 2019-20. After receipt of the compensation, he attempted to file a revised return in 2025 claiming refund of the TDS deducted by the KIADB. Since the statutory time for filing a revised return had long expired, the petitioner sought condonation of delay.
The petitioner contended that the compensation paid for compulsory acquisition of the land was exempt from income tax by virtue of section 96 of the 2013 Land Acquisition Act. Therefore, retention of tax deducted from such exempt compensation would cause genuine hardship.
Proceedings before the Department
The jurisdictional AO, through communication dated 27.01.2026, informed the petitioner that his application dated 12.01.2026, together with the accompanying documents, had been forwarded to the office of the PCIT, Bengaluru-3.
Before the High Court, the petitioner sought a direction to the Department to condone the delay in filing the revised return & to refund the entire tax deducted by the KIADB, together with applicable interest.
The petitioner relied upon an earlier order of the Karnataka High Court dated 31.10.2025 in W.P. No.26990/2025, where, according to him, the Court had interfered with the refusal to condone delay & directed refund of the entire tax collected. It was argued that the petitioner was entitled to similar relief because the compensation itself was exempt & the delay arose from circumstances beyond his control.
The Revenue submitted that the writ petition could be disposed of by granting liberty to the petitioner to submit a certified copy of the High Court’s order to the PCIT, who could thereafter examine & decide the condonation request.
Findings of the High Court
The High Court noticed that a separate application for condonation of delay had apparently not been filed directly before the PCIT. Nevertheless, the petitioner’s application had been forwarded by the jurisdictional AO to the PCIT.
Considering these circumstances, the Court held that limited interference was warranted. It granted liberty to the petitioner to file a certified copy of the order before the PCIT, Bengaluru-3.
Significantly, the Court directed the PCIT to verify the petitioner’s application for condonation forwarded by the jurisdictional AO & decide it after considering the peculiar circumstances of the case. The relevant factors identified by the Court were that the petitioner claimed ownership of the acquired land on the basis of a civil court decree & that he became entitled to receive the compensation, allegedly exempt u/s 96 of the 2013 Act, only in 2025 after resolution of the civil dispute.
Accordingly, the PCIT was directed to examine the records, verify the application u/s 119(2)(b) for condonation of delay in filing the revised return for AY 2019-20 & communicate the decision to the petitioner within three months from receipt of the certified copy of the order.
Author’s Comments
The judgment does not itself condone the delay or direct an immediate refund. It requires the competent authority to decide the assessee’s application by appreciating the genuine hardship created by the delayed resolution of the title dispute & belated receipt of compensation.
The decision reinforces that the power u/s 119(2)(b) is intended to mitigate hardship where a legitimate refund claim cannot be made within time for reasons beyond the taxpayer’s control. A taxpayer cannot reasonably file a meaningful refund claim before the compensation is determined, released & credited.
However, the exemption should not be treated as automatic merely because the acquisition was compulsory. The assessee must establish that the acquisition & compensation fall within section 96 of the 2013 Act, read with the applicable CBDT clarification. Subject to such verification, refusal to consider the refund merely on account of delay would allow the Revenue to retain tax that was otherwise not legally chargeable.
Cases Discussed:
1. W.P. No. 26990/2025, order dated 31.10.2025, Karnataka High Court — relied upon by the petitioner in support of the claim for similar relief concerning condonation of delay and refund of tax collected.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner, as the legal heirs of Mr. K. Krishnam Raju and Mrs. Lakshmamma, assert title over an extent of 3 acres 20 guntas in Sy.No.87/3 and Sy.No.87/4 of Kothanur Village, Uttarahalli Hobli, Bengaluru South Taluk [the subject lands]. M/s. Karnataka Industrial Areas Development Board [KIADB] has acquired the subject lands, and the surrounding lands under the Karnataka Industrial Areas Development Act, 1966. The payment of compensation for acquisition is delayed with dispute over the petitioner’s claim to the subject lands, but this dispute is ultimately resolved [as asserted by the petitioner] with a decree in their favour. The petitioner is categorical that M/s. KIADB has deposited the compensation payable after this decree.
2. The petitioner who had filed Returns for the assessment year 2019-20, have filed their revised Returns in the year 2025 [after the compensation is credited to their account]. The petitioner seeks directions to the respondents [including the Principal Commissioner of Income Tax – the second respondent] to condone the delay in filing the revised returns and refund the TDS effected by M/s. KIADB asserting that in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 [for short, ‘the Act of 2013’], the compensation paid towards acquisition of land would be exempt from tax.
3. Mr. Ajay J Nandalike, the learned counsel for the petitioner, submits that when the petitioner has filed their revised returns, the Jurisdictional Assessing Officer has caused the Communication dated 27.01.2026 addressed to the Principal Commissioner of Income Tax, Bengaluru-03 referring to the petitioner’s application dated 12.01.2026 and informing the petitioner that the application and the enclosures are forwarded to the office of the Principal Commissioner of Income Tax, Bengaluru-03. The learned counsel submits that in similar circumstances, this Court by Order dated 31.10.2025 in the writ petition in W.P.No.26990/2025, has interfered with the refusal to condone delay directing the Authorities to refund the entire tax collected and that the petitioner would be entitled for similar relief in the present circumstances as well.
4. Mr. M. Thirumalesh, a learned Senior Standing Counsel for the respondents who is assisted by Mr. Nirmal Mathew, the learned standing counsel for the respondents who accept notice for the respondents, is heard on the terms for disposal of the petition. The learned Senior Standing Counsel submits that this Court could examine disposing of the petition with liberty to the petitioner to file a certified copy of this Order with the Principal Commissioner of Income Tax, Bengaluru-03 [the second respondent] for consideration of his application.
5. This Court, on a careful consideration of the circumstances and the submissions, and because it is brought out to this Court’s satisfaction that a separate application for condonation of delay is not filed with the second respondent, must opine that there must be interference with liberty to the petitioner to file a certified copy of this Order with the second respondent. Further, this Court is of the opinion that the second respondent, upon receipt of the certified copy, must verify the petitioner’s application for condonation of delay by the Jurisdictional Assessing Officer and decide on the petitioner’s request for condonation in the light of factors such as that:
- he asserts ownership to the subject land based on a decree, and
- he has been admitted to compensation which is exempt under Section 96 of the Act of 2013 only in the year 2025 after the resolution of the civil dispute.
ORDER
[A] The petition stands disposed of reserving liberty to the petitioner to file a certified copy of this Order with the Principal Commissioner of Income Tax, Bengaluru -3 [the second respondent], who shall examine the records to verify the petitioner’s application under Section 119(2)(b) of the IT Act for condonation of delay in filing the revised Returns for the assessment year 2019-2020.
[B] The second respondent shall decide on the application/s and communicate the decision to the petitioner within three [3] months from the date of receipt of a certified copy of this order.
