Ashwani Kumar Vs CIT (ITAT Delhi)
ITAT Delhi held that the interest awarded under Land Acquisition Act is not taxable, accordingly, tax on the same cannot be demanded by way of invoking jurisdiction u/s 263 of the Income Tax Act.
Facts- The assessee is an agriculturist and assessee’s land has been acquired by the Govt of Haryana under the Provisions of Land Acquisition Act.
The assessee filed her return of income for the year under consideration on 31.03.2009 showing interest of Rs. 2,41.16.305/- accrued on the said FDRs and also interest received on acquisition of land under the head “Income from other sources”. The Land Acquisition Collector deducted the tax at source from the interest which was deposited to the account of Central Govt. In the return of filed by the assessee the interest was shown as taxable income since the issue regarding taxability of interest of compensation was not settled as on the said date. The said return was processed u/s 143(1) of the Act.
Subsequently, a decision of the Hon’ble Supreme in the case of CIT v. Ghanshyam Dass(HUF), wherein, it has been held that the interest awarded under the Land Acquisition Act is not taxable. The assessee filed application u/s 154 requesting that intimation u/s 143(1) of the Act. AO allowed the application filed by the assessee u/s 154 of the Actby rectifying the mistake and held that the interest awarded is not taxable.
CIT by exercising the powers conferred u/s 263 of the Act declaring that the order passed u/s 154 by the AO is null and void. Aggrieved by the order of the ld CIT the assessee has preferred the present appeal.
Conclusion- Held that the interest awarded under Land Acquisition Act is not taxable as held by the Hon’ble Supreme Court, the department cannot demand to pay the tax on the same by way of invoking section 263 of the Act, therefore, we hold that the order of the ld CIT is erroneous. Accordingly, we quash the impugned order passed by the ld CIT u/s 263 and uphold the order passed by the ld AO u/s 154 of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee against the order dated 31.07.2012 of the ld. Commissioner of Income Tax (Appeals) [(hereinafter referred to CIT(Appeals)], Hissar, for assessment year 2008-09.
2. The assessee has raised the following grounds of appeal :-
“1. Order passed under section 263 by the CIT is erroneous and bad law as it is passed without laying the foundation for the assumption of jurisdiction.
2. The CIT ought to have appreciate that at the time of examination of records of the assesse order passed by the Assessing Officer was not prejudicial to the interest of the revenue.
3. The CIT ought to have appreciated that in the return filed by the assesse interest income was inadvertently shown as taxable which was rectified by the assessing officer.
4. The CIT ought to have appreciated that the Union of India does not require to levy tax on an amount returned by mistake. The sovereign authority does not want to take advantage of a mistake committed by an assesse. It is not the policy of the Sovereign State to crave for undue enrichment.
5. The CIT ought to have appreciated that the Circular issued by the 11.04.1955 enjoins upon the assessing officers not to take advantage of the ignorance of the assesse. This circular is binding on the revenue authorities. As such the Assessing Officer followed the spirit of the Circular while rectifying the order under section 154.
6. The CIT failed to appreciate that the Assessing Officer is concerned with the assessment and collection of the revenue, and the power to rectify the order is conferred upon him to ensure that no injustice to the revenue or to the assesse in done.
7. Your petitioner has reserve to right to change, alter, add or modify the any grounds of appeal.
8. That the order passed by the CIT Hissar (Haryana) shall be set aside and grant necessary relief to your petitioner.”
3. Brief facts of the case are that the assessee is an agriculturist and assessee’s land has been acquired by the Govt of Haryana under the Provisions of Land Acquisition Act. The amount of compensation awarded by the Additional District Judge in has been challenged by the assessee before Punjab and Haryana High Court for enhancement of compensation and the compensation has been enhanced by the Hon’ble High Court. Thereafter, the assessee filed her return of income for the year under consideration on 31.03.2009 showing interest of Rs. 2,41.16.305/- accrued on the said FDRs and also interest received on acquisition of land under the head “Income from other sources”. The Land Acquisition Collector deducted the tax at source from the interest which was deposited to the account of Central Govt. In the return of filed by the assessee the interest was shown as taxable income since the issue regarding taxability of interest of compensation was not settled as on the said date. The said return was processed u/s 143(1) of the Act. Subsequently, a decision of the Hon’ble Supreme in the case of CIT v. Ghanshyam Dass(HUF) reported in (2009) 315 ITR 1 (SC) came to be passed on 16.07.2009 wherein, it has been held that the interest awarded under the Land Acquisition Act is not taxable. The assessee filed application u/s 154 requesting that intimation u/s 143(1) of the Act may be amended by following the order of the Hon’ble Supreme Court in the case of Ghanshyam HUF (supra). The AO allowed the application filed by the assessee u/s 154 of the Act on 05.04.2011 by rectifying the mistake and held that the interest awarded is not taxable in following manners:-
“3. The assessee has also contended vide her application U/s 154 of the Act, referred to above, that the Hon’ble Punjab & Haryana High Court has held in the case of CIT vs. Aruna Luthra (2001) 252 ITR 76 (P&H) that the power of rectification u/s 154 can be invoked even when an issue is decided by the jurisdictional High Court or a superior court after the order has been passed. It has been held in this case that when a court interprets a provision, it decides as to what is the meaning and effect of the words used by the legislature. It is a declaration regarding the statute. In other words, the judgement declares as what the legislature had said at the time of the promulgation of the law. The declaration is -This was the Law, This is the Law. It has also been added by the assessee that in view of the above judgement, the case law of Ghanshyam Dass HUF is squarely applicable in the instant case also. The assessee has also relied upon the judgement in the case of case of Nav Nirman (P) Ltd. Vs. CIT (1988) 174 ITR 574 (MP) wherein the Hon’ble Madhya Pradesh High Court has held that in the circumstances of a given case, if a mistake is discovered in an order on the basis of a subsequent judgement of the High Court, then it may be considered as a mistake apparent of the record and a ground for rectification. In view of the judgements relied upon, the mistake apparent from records in this case, as discussed above in detail, is rectifiable U/s 154 of the Act.
4. On verification, the contention raised by the assessee is found to be acceptable, as interest of Rs. 2,41,16,305/- is interest awarded U/s 28 of the Land Acquisition Act, which forms part of ‘Compensation’ and is, therefore, exempt U/s 10(37) of the Act. Since the ‘interest income’ already declared at Rs.2,41,16,305/- acquires the nomenclature of ‘Compensation’ consequent upon delivery of judgement by the Hon’ble Apex Court in the case of Ghanshyam, HUF, which is applicable in this case also in view of the judgements relied upon by the assessee, hence it is exempt U/s 10(37) of the Act. The mistake apparent from records is, therefore, rectified U/s 154 of the Act, read with Section 155(16) of the Act, recomputing the total income of the assessee as under:
