AO’s Order Couldn’t Be Held Erroneous If He Accepted Assessee’s Claim Relying on SC’s Ruling | ITAT

Case Details: Pawan Kumar vs. Principal Commissioner of Income-tax - [2024] 159 taxmann.com 61 (Delhi-Trib.)

Judiciary and Counsel Details

• • Ms Astha Chandra, Judicial Member & M. Balaganesh, Accountant Member
  • Surajbhan Nain & Mahfuzur Rahman, CA’s for the Appellant.
  • P.N. Barnwal, CIT-DR for the Respondent.

Facts of the Case

The assessee received enhanced compensation from the State Government for the compulsory acquisition of his agricultural land, which included interest under section 28 of the Land Acquisition Act. He claimed the interest income was exempt under section 10(37). Relying upon the ruling by the Supreme Court, the Assessing Officer (AO) allowed the assessee’s claim. Subsequently, in exercising his powers under section 263, the Commissioner contended that AO’s order was erroneous and prejudicial to the interest of revenue. The Commissioner opined the interest received on the compensation or enhanced compensation would be taxed as per amended provisions introduced through the Finance Act, 2009 and not under the head ‘capital gains’.

Aggrieved by the order, the assessee filed an appeal to the Delhi Tribunal.

ITAT Held

The Tribunal held that the order of the Assessing Officer was based on the decision of the Supreme Court in Ghanshyam HUF v. CIT [2009] 182 Taxman 368. During assessment, assessee explained that interest received under section 28 of the Land Acquisition Act had been held to be part of compensation by the Apex Court in the case of Ghanshyam HUF (supra). Thus, the same being exempt under section 10(37) has not been included in the assessee’s total income while filing return of income. The Assessing Officer accepted the explanation of the assessee.

The position in Ghanshyam HUF’s case has been affirmed by the Supreme Court in UOI v. Hari Singh (2018) 91 taxmann.com 20 (SC). Further, the assessee submitted that the SLP filed by the revenue in Hari Singh’s case had been withdrawn by the revenue, meaning that the issue has now attained certainty.

Since the order of AO was based on the decision of the Supreme Court in Ghanshyam HUF (supra), it can, at best, be said to be a debatable issue on which two views are possible, and AO accepted one of the views. Thus, the Principal Commissioner was not justified in setting aside assessment order under section 263.

List of Cases Reviewed

• • CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del)
  • Rajasthan High Court in CIT v. Ganpat Ram Bisnoi 296 ITR 292 (Raj.)(para 8)
  • Rama Bai v. CIT (1990) 181 ITR 400 (para 11)
  • Mahender Pal Narang (para 13)
  • Sohana Woollen Mills (2008) 296 ITR 238 (P&H) (para 15)
  • CIT v. Hindustan Coca Cola Beverages P Ltd. (2011) 331 ITR 192 (para 16)
  • CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC)(para 16) followed.