Brief of the Case
ITAT Delhi held In the case of Sh. Haripal Singh vs. ACIT that it is settled legal position that that there is no estoppels in law. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. The Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable. It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law.
Facts of the Case
The assessee is an individual and filed his return of income for the AY 2009-10 on 30.7.2009 declaring an income of Rs.45,86,530/- The case was processed u/s 143(1). Later on, the assessee revised his return of income, declaring a total income of Rs.6,73,55,350/- on 30.9.2009. The reasons for revising the return of income were stated by the assessee that, while filing the original return of income, long term capital gain, amounting to Rs.7,09,00,039/- and a part of income from other sources amounting to Rs.3,90,84,891/- were not declared. Thereafter, the case was selected for scrutiny under CASS and statutory notice u/s 143(2) dated 21.8.2010 was issued and duly served upon the assessee and and assessment was completed u/s 143(3) on 29.12.2011.
The assessee declared a sum of Rs.7,09,00,039/- as capital gain in the assessment year 2009-10. The assessee also declared an interest of Rs.7,81,69,783/- as income from other sources in accordance with amended provisions of section 56(vii) read with section 145A(b). The assessee claimed deduction of 50% against interest income under section 57(v) amounting to Rs.3,90,84,892/-. This was disallowed by the assessing officer as the amendment of section 57(iv) which is made effective only from 01/04/2010 i.e. assessment year 2010-11. The assessing officer assessed the income of the assessee by disallowing the deduction of 50% claimed by the assessee against interest on compensation, by stating that section 57(iv) was introduced by the Finance Act, 2009 w.e.f. 01/04/2010, in view of which the provision was not applicable for the assessment year 2009-10.
Contention of the Assessee
The ld. counsel for the assessee submitted that there is no estoppel against law. He submitted that even if the assessee has filed a return of income, declaring income against the proposition of law laid down by various Courts, due to ignorance or otherwise, the AO is duty bound to follow the law and not bring to tax, such amounts which is not income at all.
On the issue as to when, the granting of enhanced compensation and interest thereon is pending before a Court, can be taxed, he submitted that it can be taxed only on the compensation being finally determined in the Court of law. He relied on the following case laws. (i) CIT vs. Hardwari Lal 312 ITR 151 (P & H) (ii) CIT vs. Smt. T. Girija Ammal 282 ITR 614((Mad) (iii) CIT vs. Padam Parkash (HUF) 104 ITD 1 (Del) (SB) (iv) CIT vs. Hindustan Housing & Land Development Trust Ltd. 161 ITR 524 (SC).
He also relied on the explanatory notes introducing to the provisions of the Finance No. 2 Act, 2009 and Circular No. 5/2010/ [F.No. 142/13/2010-SO (TPL)] dated 3.6.2010 for the proposition that, interest income should be computed on accrual basis as held by the Hon’ble Supreme Court in the case of Smt. Rama Bai vs. CIT 181 ITR 400. Hence he argued that, as the compensation and interest thereon is sub judice before the Hon’ble Delhi High Court, the question of taxing the same as income in the current year does not arise.
Contention of the Revenue
The ld counsel of the revenue opposed the contentions of the assessee and submitted that the assessee filed an appeal with the help of professionals and has offered the income in question to tax voluntarily. He submitted that the AO cannot be blamed at all, for the reason that, he has no other information on the file, other than what the assessee has furnished.
Held by CIT (A)
CIT (A) held that the enhanced compensation is to be taxed in the year of receipt, irrespective of the fact that such enhanced compensation was received on furnishing security/bank guarantee or any other conditions with regard to payment of additional compensation. She relied on the decision of the Cochin Bench of the ITAT in the case of CIT vs. Trilok Singh (HUF) (2004) SOT 561 (Delhi).
Held by ITAT
In this case the assessee has filed a return of income, wherein he declared income from interest on enhanced compensation. Such a declaration of interest income on disputed enhanced compensation, under the facts and circumstances of the case, is against the propositions of law laid down by various Courts. Such disputed interest income cannot be taxed in the impugned Assessment Year.
In the case of CIT vs. Hindustan Housing & Land Development 161 ITR 524, it was held that there is a clear distinction between cases such as the present case, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles.
Further in the case of CIT vs. Padam Parkash (HUF) 104 ITD 1 (Del) (SB), it was held that enhanced compensation pending before a Court of law and had not attained finality, same would not accrue and could be subjected to tax only after it was finally determined.
Further in the case of Dy.CIT vs. Shri Bhim Singh Lather, Karnal: 2005-TIOL-97-ITAT-DEL, it was held that the interest though would be chargeable on year to year basis but only when the right disputed by the parties is finally settled by the court, Tribunal or any authority and since in this case the matter is pending in the High Court in the relevant year no right to receive compensation or to interest accrued to the assessee and consequently, no assessment can be made in the year under consideration until the matter is finally settled by the court.
On the matter of self declaration of income by the assessee, it is settled legal position that that there is no estoppel in law. In the case of CIT vs. DKB & Co. Reported in 243 ITR 618, the Hon’ble Kerala High Court held that “It is the settled position in law that there cannot be estoppels against a statute. There is no provision in the statute which permits a compromise assessment. The above position was indicated by the Apex Court in UOI vs. Banwari Lal Agarwal (1999) 238 ITR 461.
Further in the case of In the case of Mayank Poddar (HUF) vs. WTO reported in 262 ITR 633 the Hon’ble Calcutta High Court has held as under. “Even if the assessee had included the same in his return,that would not preclude the assessee from claiming the benefit of law. There cannot be any estoppel against the statute.
Further in the case of In the case of Nirmala L Mehta vs. A Balasubramaniam, CIT and others reported in 269 ITR 85, the Hon’ble Bombay High Court has held that acquiescence to an illegal tax for a long time is not a ground for denying the party the relief that he is entitled to.
Vide Circular No.5/2001-02(F.No.142/13/2010-SO-PPL) dated 3.6.2010, the Board explained the rationalisation of the provision by insertion of Section 56(2) (viii). Income shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. There is no gainsaying that the department circulars are binding on the assessee. Admittedly the assessee followed mercantile system of accounting. Under these circumstances, the interest income in question cannot be brought to tax during the year.
Following the propositions laid down in all the above case laws to the facts of the case, we have to hold that the interest income in question cannot be brought to tax in the hands of the assessee.
Accordingly appeal of the assessee allowed.