$ 6 * IN 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) Petitioner, Ram Kumar by way of present writ petition has challenged reassessment proceedings under Sections 147 read with Section 148 of Income Tax Act, 1961 ( Act ) initiated vide notice dated 24th September, 2015 for Assessment Year ( AY ) 2011-12. Petitioner has also challenged order dated 8th August, 2016 rejecting Petitioner s objections/representation against re-opening of assessment proceedings. 2. For AY 2011-12, Petitioner had filed return of income declaring 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 Petitioner filed 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 Land Acquisition Collector ( LAC ). 4. Petitioner s case was taken up for scrutiny assessment vide notice under Section 143(2) of Act dated 2nd May, 2013. 5. Petitioner had claimed that enhanced compensation of Rs. 64,75,249/- paid by LAC relating to agricultural land was exempt from tax under Section 10(37) of Act. 6. Assessing Officer ( AO ) passed assessment order dated 14th February, 2014 on total income of Rs. 6,28,376/- making addition of Rs.10,800/- on account of interest income. AO accepted claim of Petitioner that enhanced compensation of Rs.64,75,249/- was exempted under Section 10(37) of Act. 7. As noticed above, aforesaid assessment has now been made subject matter of reassessment proceedings vide notice under Section 148 of Act dated 24th September, 2015 which is subject matter of challenge before this Court. 8. In order to decide aforesaid challenge, we would like to reproduce reasons recorded by AO for reopening of 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. reasons recorded in your case are as under:- 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, assessee filed 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 refund of Rs.12,94,962/-. However return was processed u/s 143(1) of Income Tax Act, 1961 at Rs. 5,52,310/-, on 17.01.2013 by allowing TDS of Rs.45,796/-. case was selected for scrutiny under CASS to examine reasons and genuineness for high claimed of refund out of TDS. However, Assessing Officer while completing assessment on 14.02.2014 omitted to considered taxability of TDS received of Rs. 80,02,471 which was interest on enhanced compensation which has to be taxed in said assessment year u/s 56(2) (viii) of Income Tax Act, 1961. Assessing Officer assessed at total income of Rs. 6,28,376/- by making 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 name of four persons including assessee jointly, it is revealed that said amounts includes interest on enhanced compensation of Rs. 3,20,09,884/- out of which share belongs to said assessee amounting to Rs.80,02,471/- which has not been taxed in said assessment year u/s 56 (2)(viii) of Income tax Act, 1961 . As per Section 56 (2)(viii) of Income tax Act, 1961, interest amount on enhanced compensation is taxable income in hands of said assessee w.e.f. 01.04.2010. It is seen from assessment order dated 14.02.2014 u/s 143(3), 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 Assessing Officer in body of 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 assesee for A.Y. 2011-12 as per TDS statement receipt from Land Acquisition Office, Panchkula shown in revised return filed by said assesee. Then Assessing Officer omitted to consider taxability of interest on enhanced compensation of Rs. 80,02,471/- in hands of said assessee for A.Y. 2011-12 as per Section 56 (2)(viii) of Income tax Act, 1961, in 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 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 hands of above said assesee for A.Y. 2011-12 has escaped assessment. Hence I am satisfied that it is fit case to issue notice u/s 148 of Income Tax Act, 1961 in said case for assessment year 2011-12 after taking necessary statutory approval u/s 151(2) r.w.s. u/s 147/148/149 of Income Tax Act, 1961. After supplying of reasons, you are requested to cooperate with assessment proceedings and file necessary details asked for. 9. contention raised by Learned Counsel for Petitioner is that reasons recorded do not show nexus and connection with allegation of escapement of income. It is submitted that reasons recorded are incorrect as figures taken from TDS certificate did not relate to Assessee alone, but reflect entire amount of compensation which was paid and was to be shared between Legal Representatives / successors- in-interest of owner of land. 10. learned counsel for Petitioner has also objected to W.P.(C) 8035/2016 Page 4 of 9 reasoning given by AO in order dated 8th August, 2016 which merely records that on merits interest component received as enhanced compensation was taxable as per Section 56 (ix) [sic (viii)] read with Clause (b) to Section 145A of Act. 11. Counsel for Respondent has submitted that in present case AO while passing original assessment order was not aware and did not have knowledge that enhanced compensation had included element of interest as also nature and character of interest. In these circumstances, there is no question of change of opinion as question of taxability of interest element was not considered, examined and opined by Assessing Officer. It is further stated that question of taxability of interest would be examined on merits in reassessment proceedings. Regarding question of amounts mentioned in reasons to believe it is submitted that AO had to proceed on basis of documents and papers available on record which had indicated total amount of compensation received. 12. We have considered contentions raised by Petitioner and Respondent and are not inclined to interfere with reassessment proceedings, at this stage. We record our reasons for same. 13. Examination of order sheet of original assessment proceedings reflects and establishes that AO had not examined question whether enhanced compensation had element of interest or not. AO in original assessment proceedings had proceeded on basis that TDS certificate and enhanced compensation was in respect of land without examining whether or not it had included interest component. To this W.P.(C) 8035/2016 Page 5 of 9 extent learned counsel for Petitioner has not disputed assertions made by learned counsel for respondents, who has drawn our attention to order sheets. In order sheet dated 18th April 2013, which refers to interest component, it is pointed out was with reference to difference between interest disclosed by Petitioner in his original return and as per Form 26AS. As noticed above, addition of Rs.10,800/- was made by AO in assessment order dated 14th February,2014 on this account. This amount of interest is different and distinct from interest component which formed part of enhanced compensation. assessment order also does not mention or record that Petitioner had received interest which was part of enhanced compensation. 14. Noticeably, office note to assessment order records that TDS of Rs.12,94,962/- issued by LAC, on which refund has been claimed, was not being taken into consideration as it was not reflected in Form 26AS. This note also mentions that Petitioner has received enhanced compensation of Rs.64,75,249/- for compulsory acquisition of agricultural land in Karnal from Land Acquisition Officer ( LAO ), Panchkula and this amount was exempted under Section 10(37) of Act. 15. Subsequently, on verification TDS certificate of Rs.12,94,962/-, it was found to have been issued by LAO and credit of this amount was given to Petitioner and refund order was issued. Copy of refund order and date on which said refund order was issued has not been indicated and stated in writ petition. 16. We have also examined TDS certificate placed on record. Under heading Nature of payment , word Enhanced Compensation is W.P.(C) 8035/2016 Page 6 of 9 recorded. TDS certificate was issued in name of several persons including Petitioner. Under heading Amounts paid/credit , in 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/- TDS certificate shows that tax was deducted at flat rate of 20%. 17. It is apparent and obvious to us that AO in original assessment proceedings did not examine question of taxability of interest as this aspect appears to have completely escaped his attention. It is not even case of Petitioner that AO had examined said question in original assessment proceedings. 18. On question of figures given in reasons to believe, we would record that AO had to proceed on basis of documents available on record. It is not case of Assessee that he had not received interest amount as indicated in reasons to believe. figure or quantum is disputed. Even if we are inclined to accept contention of Petitioner that figures of interest as indicated in reasons to believe recorded for issue of reassessment notice are not correct, it cannot be disputed that Petitioner was also entitled to part of interest. figures may be wrong or incorrect for reason that interest had to be bifurcated and divided amongst several recipients and details of such recipients was not available with AO when he recorded said reasons. 19. Learned counsel for Petitioner has submitted that interest in present case, in terms of decision of 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 enhanced compensation and not interest which is taxable. In particular, our attention is drawn to paragraphs 24, 25, 26, 33 and 35 of said decision. aforesaid decision draws difference between interest which is payable under Section 34 of Land Acquisition Act, 1894 which would be taxable and interest payable under Section 23 (1A), 23(2) and 28 which as per Petitioner is not taxable. According to Petitioner, interest received, as per Award, was under Sections 23(1A), 23(2) and 28, and hence would not be taxable. 20. Learned counsel for Respondents on other hand submits that decision in Ghanshyam (HUF) (supra) is dated 16th July, 2009 and Act has been subsequently amended in 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 petitioner however has drawn our attention to judgment of 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 newly enacted provisions of Clause (viii) inserted to sub-section 2 to Section 56 and Clause (b) to Section 145A of Act. 22. We have considered contention raised by Petitioner that interest element would partake character of enhanced compensation and is not taxable, on basis of ratio in case of Ghanshyam (HUF) but we are not giving any opinion on same at this stage. These aspects, we W.P.(C) 8035/2016 Page 8 of 9 believe, are matters which AO will have to examine in detail during course of reassessment proceedings. We would not like to comment on issues which AO will have to determine and decide in course of reassessment proceedings. 23. We would, however, like to observe that AO should have been more careful while disposing of objections/representation made by Petitioner vide order dated 8th August, 2016. Though Petitioner had raised similar objections at that time and also cited judgement of Supreme Court, same have not been considered in depth and detail. It would have been more appropriate for AO to clarify that said submissions and contentions would be examined in depth and on merits during course of reassessment proceedings. assessment order should deal and answer said contentions including question of nature of interest and section under which it was paid, and effect and impact of decisions relied upon by petitioner. These issues would be considered and determined in re-assessment proceedings. We have not made any observations on merits. We also clarify that in case Petitioner is aggrieved by final assessment order, he would be at liberty to challenge said order, in accordance with law. 24. With above observations, 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 Ram Kumar v. Income-tax Officer, Ward-64(2) & Anr