Case Law Details
Umang Sitani Vs ITO (ITAT Delhi)
During the year, the assessee has received Rs.2.58 Cr. on account of compulsory acquisition of his land comprising an amount of Rs.79.17 lacs on account of compensation and Rs.178.92 lacs on account of interest on land compensation, the fact of which is not in dispute. The AO treated the interest u/s 56(2)(viii) r.w.s. 145A(b) and allowed deduction u/s 57(iv).
CIT(A) grossly ignored the judgment of Hon’ble Supreme Court in the case of CIT Vs. Ghanshyam (HUF) and difference between interest received u/s 28 of Land Acquisition Act, 1894 and Section 34 and interest received u/s 37 of the Income Tax Act, 1961. The interest u/s 28 is a part of the amount of compensation whereas interest u/s 34 is only for delay in making payment after the compensation is determined. Interest u/s 28 is a part of enhanced value of the land.
The assessee is produced certificate from the DRO-Land Acquisition Collector stating that interest was given to the assessee u/s 28. The DRO-LAC has also deducted the TDS on the compensation. The ld. CIT(A) held that LAC would not have deducted TDS if it is a part of compensation u/s 28. The ld. CIT(A) further confirmed the addition holding that since TDS is deducted, the amounts falls u/s 34, ignoring the total facts of the case and the certificate given by the DRO-LAC.
We hold that the issue is covered by a number of the judgments of the Co-ordinate Bench of ITAT Chandigarh, to mentioned a few ITA No. 313-318/Chd./2015 and by the Hon’ble Apex Court.
In the result, the appeal of the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the Assessee against the order of the ld. CIT(A)-11, New Delhi dated 21.03.2018.
2. The Assessee has raised the following grounds of appeal:
“1a) That, on the facts and in the circumstances of the case, the Ld. C.I.T.(A) erred in having upheld the action of the Ld. A.O. in considering the compensation received by the appellant against compulsory acquisition of agricultural land along with interest as income from other sources in spite of the fact that such compensation being on agricultural land was exempt from income-tax.
(b) That, on the facts and in the circumstances of the case, the Ld. C.I.T.(A) further erred in having upheld the addition of Rs.89,46,065/- unlawfully made by the A.O. in spite of the fact that as per Hon’ble Supreme Court decision amount awarded u/s. 28 of Land Acquisition Act, 1894 is accretion in value of land and interest therein forms part of compensation, which is beyond the scope of levying any income-tax.
(c) That, the Ld. C.I.T.(A) grossly erred in having denied to take any cognizance to the Certificate issued by District Revenue Officer, Govt. of Haryana, affirming that the appellant was given interest of Rs.1,78,92,130/- u/s.28 of the Land Acquisition Act, 1894 on the compensation for compulsory acquisition of agricultural land, solely on the ground that this document was not filed before the A.O. and hence addition sustained without meeting justice to the appellant is liable to be quashed.
(d) That, the Ld. C.I.T.(A) wrongly invoked provisions of sec.56(2)(viii) r.w.s. 145A(b) of the Act in support of upholding the addition Rs.89,46,065/- as income from other sources without considering that once the appellant’s case falls within the ambit of Sec.28 of Land Acquisition Act, 1894 and settled by decision of Hon’ble Supreme Court, the said provisions on the facts of the case do not come into play in the case of the appellant.
(e) That without any prejudice to the above, the Ld. C.I.T.(A) erred in having taken support from the wrongful deduction of TDS by the State Govt. from payment of interest on compensation to allege that the interest paid to the appellant was not part of compensation when he himself has admitted that DRO-LAC of the State Govt. has clarified that interest has been paid along with enhanced compensation.
2) That, the Ld. C.I.T.(A) erred in having upheld the addition of Rs. 11,26,524/- in the guise of unexplained addition to capital without giving any due cognizance to reconciliation statement with corrected balance sheet and ledger account to explain the mismatch between closing balance of capital as per balance sheet as on 31.03.2012 and opening balance as on 01.04.2013.
3) That as the order of Ld. CIT(Appeals) on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.”
3. During the year, the assessee has received Rs.2.58 Cr. on account of compulsory acquisition of his land comprising an amount of Rs.79.17 lacs on account of compensation and Rs.178.92 lacs on account of interest on land compensation, the fact of which is not in dispute. The AO treated the interest u/s 56(2)(viii) r.w.s. 145A(b) and allowed deduction u/s 57(iv).
4. The ld. CIT(A) confirmed the order of the AO. The relevant part of the order of the ld. CIT(A) is as under:
“The AR has filed a copy of the certificate from the District Revenue Officer stating that the interest was given to the appellant u/s 28. However, this certificate was not filed before the AO and the appellant has not made any request under Rule 46A for admission of additional evidence. The veracity of this certificate also to be checked and the copy of the order specifying the nature of interest ordered to be given is also not on record. Therefore, no cognizance of this certificate is being taken.
Moreover, the various decisions relied upon by the AR including the decision of Hon’ble Supreme Court in the case of CIT vs. Ghanshyam HUF, are pertaining to the years before the above stated provisions of Section 56 (2) (viii) and section 145A(b) of the Act were brought on the statute. I have perused the assessment records also. The AO had made an enquiry from the District Revenue Officer cum Land Acquisition Collector (DRO-LAC) of the State Government and had called for the details of interest and compensation paid to the appellant. In the reply filed vide letter dated 16.02.2016, it has been clarified that interest has been paid along with enhanced compensation and TDS has been deducted in accordance with the provisions of Income Tax Act. In case the interest paid to the appellant was part of the compensation only, the LAC would not have deducted TDS on the same. In view of the amended provisions of the Act as discussed above, I am of the opinion that the AO has rightly treated the interest received on enhanced compensation as income from other sources and has duly granted deduction u/s 57(iv) of the Act @ 50% of the interest received. Accordingly, the addition made by the AO is confirmed and the ground of appeal is dismissed.”
5. Thus, we find the ld. CIT(A) grossly ignored the judgment of Hon’ble Supreme Court in the case of CIT Vs. Ghanshyam (HUF) and difference between interest received u/s 28 and Section 34 and interest received u/s 37 of the Income Tax Act, 1961. The interest u/s 28 is a part of the amount of compensation whereas interest u/s 34 is only for delay in making payment after the compensation is determined. Interest u/s 28 is a part of enhanced value of the land.
6. The assessee is produced certificate from the DRO-Land Acquisition Collector stating that interest was given to the assessee u/s 28. The DRO-LAC has also deducted the TDS on the compensation. The ld. CIT(A) held that LAC would not have deducted TDS if it is a part of compensation u/s 28. The ld. CIT(A) further confirmed the addition holding that since TDS is deducted, the amounts falls u/s 34, ignoring the total facts of the case and the certificate given by the DRO-LAC.
7. The certificate from the DRO has been given to the AO during the assessment proceedings and could not have been treated as additional evidence. In any case, if a request has not been made under Rule 46A, the ld. CIT(A) being the senior functionary of the Department is expected to guide the assessee instead of summarily dismissing the appeal. Further, in case the veracity of the certificate is suspected, the same could have been enquired from the DRO and in case of any falsification, prosecution provision could be invoked against the assessee/AR who has filed the certificate.
8. We hold that the issue is covered by a number of the judgments of the Co-ordinate Bench of ITAT Chandigarh, to mentioned a few ITA No. 313-318/Chd./2015 and by the Hon’ble Apex Court.
9. Keeping in view the entire facts and judicial pronouncements, we hereby hold that the appeal of the assessee is allowed on this ground.
10. Regarding the addition of Rs.11.26 lacs being the unexplained addition to the capital account, we find that the amount of Rs.3.91 Cr. and Rs.3.80 Cr. has been reconciled and the capital account as on 31.03.2013 stands at Rs.6.31 Cr. which includes the compensation received. Hence, the addition is liable to be deleted.
11. In the result, the appeal of the assessee is allowed.
Order Pronounced in the Open Court on 28/06/2022.
