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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision : 27th October, 2017
+ W.P.(C) 8035/2016
RAM KUMAR ..... Petitioner
Through: Mr. Balbir Singh, Senior Advocate
with Mr. Aneesh Mittal, Advocates.
Mr. Arvind Kumar, Advocates.
Versus
INCOME TAX OFFICER, WARD-64(2) & ANR. ..... Respondents
Through: Mr. Ashok K. Manchanda, Senior
Standing Counsel & Mr. Anand
Chaudhuri, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MS. JUSTICE PRATHIBA M. SINGH
SANJIV KHANNA, J. (Oral)
The Petitioner, Ram Kumar by way of the present writ petition has
challenged the reassessment proceedings under Sections 147 read with
Section 148 of the Income Tax Act, 1961 (`the Act' ) initiated vide notice
dated 24th September, 2015 for the Assessment Year (`AY') 2011-12. The
Petitioner has also challenged the order dated 8th August, 2016 rejecting the
Petitioner's objections/representation against the re-opening of the
assessment proceedings.
2. For AY 2011-12, the Petitioner had filed return of income declaring
an income of Rs. 5,52,308 on 1st July, 2011 on which tax, including tax at
source, of Rs. 45,796/- was duly paid.
3. On 19th March, 2012 the Petitioner filed a revised return for AY 2011-
W.P.(C) 8035/2016 Page 1 of 9
12 seeking refund of Rs.12,94,962/- on account of TDS deducted by the
Land Acquisition Collector (`LAC').
4. The Petitioner's case was taken up for scrutiny assessment vide notice
under Section 143(2) of the Act dated 2nd May, 2013.
5. The Petitioner had claimed that the enhanced compensation of Rs.
64,75,249/- paid by the LAC relating to agricultural land was exempt from
tax under Section 10(37) of the Act.
6. The Assessing Officer (`AO') passed the assessment order dated 14th
February, 2014 on a total income of Rs. 6,28,376/- making an addition of
Rs.10,800/- on account of interest income. The AO accepted the claim of the
Petitioner that enhanced compensation of Rs.64,75,249/- was exempted
under Section 10(37) of the Act.
7. As noticed above, the aforesaid assessment has now been made
subject matter of the reassessment proceedings vide notice under Section
148 of the Act dated 24th September, 2015 which is the subject matter of the
challenge before this Court.
8. In order to decide the aforesaid challenge, we would like to reproduce
the reasons recorded by the AO for reopening of the assessment, which read
as under:-
Please refer to you letter dated 20.10.2011 seeking copy of
reasons for issuance of notice u/s 148 of IT Act in your case
for A. Y. 2011-12. The reasons recorded in your case are as
under:-
The assessee has filed original return of Income of Rs.
5,52,310/- on 01.07.2011 for A.Y.2011-12 claiming TDS
amounting to Rs. 45,796/- . Later, the assessee filed a
revised return of income of Rs. 5,52,310/- on 19.03.2012
W.P.(C) 8035/2016 Page 2 of 9
claiming TDS of Rs. 13,40,758/- and claim a refund of
Rs.12,94,962/-. However the return was processed u/s
143(1) of the Income Tax Act, 1961 at Rs. 5,52,310/-, on
17.01.2013 by allowing TDS of Rs.45,796/-.
The case was selected for scrutiny under CASS to examine
the reasons and genuineness for high claimed of refund out
of TDS. However, the Assessing Officer while completing
the assessment on 14.02.2014 omitted to considered the
taxability of TDS received of Rs. 80,02,471 which was
interest on enhanced compensation which has to be taxed in
the said assessment year u/s 56(2) (viii) of Income Tax Act,
1961. The Assessing Officer assessed at total income of Rs.
6,28,376/- by making an addition of Rs.10800/- and Rs.
65266/- on account of difference in gross receipts as per
Form 16 issued from Ministry of Labour and Employment
and on account of undisclosed bank interest income
respectively.
On perusal of TDS certificate showing credits amount of
Rs.7,46,90,061 issued on 10.06.2010 by Land Acquisition
Office, Panchkula Haryana on enhanced compensation on
account of land acquisition in the name of four persons
including the assessee jointly, it is revealed that said
amounts includes interest on enhanced compensation of Rs.
3,20,09,884/- out of which ž the share belongs to the said
assessee amounting to Rs.80,02,471/- which has not been
taxed in said assessment year u/s 56 (2)(viii) of the Income
tax Act, 1961 .
As per Section 56 (2)(viii) of the Income tax Act, 1961, the
interest amount on enhanced compensation is taxable
income in the hands of the said assessee w.e.f. 01.04.2010.
It is seen from assessment order dated 14.02.2014 u/s
143(3), the Assessing officer has neither considered
taxation of such interest amount on enhanced compensation
of Rs.80,02,4711- nor any discussion has been made by the
Assessing Officer in the body of the assessment order /
office note / or order sheet entries regarding such taxation
W.P.(C) 8035/2016 Page 3 of 9
of interest on enhanced compensation received by the
assesee for A.Y. 2011-12 as per TDS statement receipt from
Land Acquisition Office, Panchkula shown in the revised
return filed by said assesee. Then Assessing Officer omitted
to consider taxability of interest on enhanced compensation
of Rs. 80,02,471/- in the hands of said assessee for A.Y.
2011-12 as per Section 56 (2)(viii) of the Income tax Act,
1961, in the assessment made on 14.02.2014 u/s 143(3) of
lncome Tax Act, 1961.
Since, such interest income on enhanced compensation due
to land acquisition of Rs. 80,02,471/- was neither offered
for taxation by the assessee nor Assessing Officer made any
assessment of this amount by omitting such taxation of
interest on enhanced compensation, I have reason to
believe that income of Rs. 80,02,471/- chargeable to tax in
the hands of above said assesee for A.Y. 2011-12 has
escaped assessment. Hence I am satisfied that it is a fit case
to issue notice u/s 148 of Income Tax Act, 1961 in the said
case for the assessment year 2011-12 after taking necessary
statutory approval u/s 151(2) r.w.s. u/s 147/148/149 of the
Income Tax Act, 1961.
After supplying of reasons, you are requested to cooperate
with the assessment proceedings and file necessary details
asked for."
9. The contention raised by the Learned Counsel for the Petitioner is that
the reasons recorded do not show nexus and connection with the allegation
of escapement of income. It is submitted that the reasons recorded are
incorrect as the figures taken from the TDS certificate did not relate to the
Assessee alone, but reflect the entire amount of compensation which was
paid and was to be shared between the Legal Representatives / successors-
in-interest of the owner of the land.
10. The learned counsel for the Petitioner has also objected to the
W.P.(C) 8035/2016 Page 4 of 9
reasoning given by the AO in the order dated 8th August, 2016 which merely
records that on merits the interest component received as enhanced
compensation was taxable as per Section 56 (ix) [sic (viii)] read with Clause
(b) to Section 145A of the Act.
11. Counsel for the Respondent has submitted that in the present case the
AO while passing the original assessment order was not aware and did not
have knowledge that enhanced compensation had included an element of
interest as also the nature and character of the interest. In these
circumstances, there is no question of change of opinion as the question of
taxability of the interest element was not considered, examined and opined
by the Assessing Officer. It is further stated that the question of taxability of
interest would be examined on merits in the reassessment proceedings.
Regarding the question of amounts mentioned in the reasons to believe it is
submitted that the AO had to proceed on the basis of the documents and
papers available on record which had indicated the total amount of
compensation received.
12. We have considered the contentions raised by the Petitioner and the
Respondent and are not inclined to interfere with the reassessment
proceedings, at this stage. We record our reasons for the same.
13. Examination of the order sheet of the original assessment proceedings
reflects and establishes that the AO had not examined the question whether
the enhanced compensation had an element of interest or not. The AO in the
original assessment proceedings had proceeded on the basis that the TDS
certificate and enhanced compensation was in respect of the land without
examining whether or not it had included an interest component. To this
W.P.(C) 8035/2016 Page 5 of 9
extent learned counsel for the Petitioner has not disputed the assertions made
by the learned counsel for the respondents, who has drawn our attention to
the order sheets. In the order sheet dated 18th April 2013, which refers to
interest component, it is pointed out was with reference to the difference
between the interest disclosed by the Petitioner in his original return and as
per Form 26AS. As noticed above, an addition of Rs.10,800/- was made by
the AO in the assessment order dated 14th February,2014 on this account.
This amount of interest is different and distinct from the interest component
which formed part of the enhanced compensation. The assessment order also
does not mention or record that the Petitioner had received interest which
was part of the enhanced compensation.
14. Noticeably, the office note to the assessment order records that the
TDS of Rs.12,94,962/- issued by the LAC, on which the refund has been
claimed, was not being taken into consideration as it was not reflected in
Form 26AS. This note also mentions that the Petitioner has received
enhanced compensation of Rs.64,75,249/- for compulsory acquisition of
agricultural land in Karnal from the Land Acquisition Officer (`LAO'),
Panchkula and this amount was exempted under Section 10(37) of the Act.
15. Subsequently, on verification the TDS certificate of Rs.12,94,962/-, it
was found to have been issued by the LAO and credit of this amount was
given to the Petitioner and refund order was issued. Copy of the refund
order and the date on which the said refund order was issued has not been
indicated and stated in the writ petition.
16. We have also examined the TDS certificate placed on record. Under
the heading `Nature of payment', the word `Enhanced Compensation' is
W.P.(C) 8035/2016 Page 6 of 9
recorded. The TDS certificate was issued in the name of several persons
including the Petitioner. Under the heading `Amounts paid/credit', in the
subsequent column three amounts are indicated as below:
PR (i.e. Principal) - Rs.4,26,79,407/-
INT (i.e. Interest) - Rs.3,20,09,554/- and
Costs - Rs.1,100/-
The TDS certificate shows that tax was deducted at the flat rate of 20%.
17. It is apparent and obvious to us that the AO in the original assessment
proceedings did not examine the question of taxability of interest as this
aspect appears to have completely escaped his attention. It is not even the
case of the Petitioner that the AO had examined the said question in the
original assessment proceedings.
18. On the question of figures given in the reasons to believe, we would
record that the AO had to proceed on the basis of documents available on
record. It is not the case of the Assessee that he had not received interest
amount as indicated in the reasons to believe. The figure or quantum is
disputed. Even if we are inclined to accept the contention of the Petitioner
that the figures of interest as indicated in the reasons to believe recorded for
issue of reassessment notice are not correct, it cannot be disputed that the
Petitioner was also entitled to a part of the interest. The figures may be
wrong or incorrect for the reason that the interest had to be bifurcated and
divided amongst several recipients and the details of such recipients was not
available with the AO when he recorded the said reasons.
19. Learned counsel for the Petitioner has submitted that the interest in
the present case, in terms of the decision of the Supreme Court, in
W.P.(C) 8035/2016 Page 7 of 9
Commissioner of Income Tax v. Ghanshyam (HUF) (2009) 325 ITR 1
(SC) (hereafter `Ghanshyam (HUF)') would be part of the enhanced
compensation and not interest which is taxable. In particular, our attention is
drawn to paragraphs 24, 25, 26, 33 and 35 of the said decision. The
aforesaid decision draws a difference between interest which is payable
under Section 34 of the Land Acquisition Act, 1894 which would be taxable
and interest payable under Section 23 (1A), 23(2) and 28 which as per the
Petitioner is not taxable. According to the Petitioner, the interest received, as
per the Award, was under Sections 23(1A), 23(2) and 28, and hence would
not be taxable.
20. Learned counsel for the Respondents on the other hand submits that
the decision in Ghanshyam (HUF) (supra) is dated 16th July, 2009 and the
Act has been subsequently amended in the form of enactment of Clause
(viii) to sub section 2 to Section 56 read with Clause (b) to Section 145A
with effect from 1st April, 2010 by Finance (2) Act, 2009.
21. Learned counsel for the petitioner however has drawn our attention to
the judgment of the Supreme Court in Ramabai v. Commissioner of Income
Tax, (1990) 181 ITR 400 (SC) and Memorandum/Circular No.5/2010 (F
No.142 /13/2010 SO (TPL) dated 3rd June, 2010 explaining the newly
enacted provisions of Clause (viii) inserted to sub-section 2 to Section 56
and Clause (b) to Section 145A of the Act.
22. We have considered the contention raised by the Petitioner that the
interest element would partake the character of enhanced compensation and
is not taxable, on the basis of the ratio in the case of Ghanshyam (HUF) but
we are not giving any opinion on the same at this stage. These aspects, we
W.P.(C) 8035/2016 Page 8 of 9
believe, are matters which the AO will have to examine in detail during the
course of reassessment proceedings. We would not like to comment on the
issues which the AO will have to determine and decide in the course of
reassessment proceedings.
23. We would, however, like to observe that the AO should have been
more careful while disposing of the objections/representation made by the
Petitioner vide order dated 8th August, 2016. Though the Petitioner had
raised similar objections at that time and also cited the judgement of the
Supreme Court, the same have not been considered in depth and detail. It
would have been more appropriate for the AO to clarify that the said
submissions and contentions would be examined in depth and on merits
during the course of reassessment proceedings. The assessment order should
deal and answer the said contentions including the question of nature of
interest and the section under which it was paid, and the effect and impact of
the decisions relied upon by the petitioner. These issues would be
considered and determined in the re-assessment proceedings. We have not
made any observations on merits. We also clarify that in case the Petitioner
is aggrieved by the final assessment order, he would be at liberty to
challenge the said order, in accordance with law.
24. With the above observations, the writ petition is dismissed without
any order of costs.
SANJIV KHANNA, J
PRATHIBA M. SINGH, J
OCTOBER 27, 2017/R
W.P.(C) 8035/2016 Page 9 of 9
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