Sri K.Mallikarjuna , Ballary V. Principal Commissioner of Income Tax , Kalburagi

ITA 1244/BANG/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6777 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 02-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Capital asset; Opportunity of being heard; Principle of natural justice; Set aside
• Section: 143(3); 2(14); 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R BASKARAN, ACCOUNTANT MEMBER ITA NO.1244/BANG/2017 ASSESSMENT YEAR : 2009-10 SHI K MALLIKARJUNA, PROPRIETOR, LAKSHMI CHEMICLAS & FERTILIZERS KARKALATOTA, BENGALURU ROAD, BELLARY 583 102. PAN AKQPK 8338 K. VS. THE PR. COMMISSIONER OF INCOME- AAYAKAR BHAVAN, KALABURAGI. APP E LANT RESPONDENT APPELLANT BY : SHRI B.S BALACHANDRAN, ADVOCATE RESPONDENT BY : SHRI PRADEEP KUMAR, CIT DATE OF HEARING : 14.04.2019 DATE OF PRONOUNCEMENT : 24.04.2019 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE O RDER DATED 30/3/2017 OF CIT, KALABURAGI PASSED U/S 263 OF THE ACT RELATING TO THE ASST. YEAR 2009-20. 2. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSES LA ND WERE SOUGHT TO BE ACQUIRED BY THE STATE GOVT. FOR A PUBLIC PURPOSE NAMELY ASHRAYA GRAMEENA NIVESHANA YOJANA WHICH WAS AUTHORIZED BY R AJIV GANDHI RURAL HOUSING CORPORATION LTD, A GOVT. OF KARNATAKA ENTER PRISES. THE DEPUTY COLLECTOR (DC) OF BELLARY IS AUTHORIZED BY RAJIV GA NDHI RURAL HOUSING CORPORATION LTD., TO PURCHASE LAND FROM PRIVATE L AND OWNERS WITH ITA NO.1244/BANG/2017 PAGE 2 OF 8 CONSENSUS VIDE LETTER DATED 12/12/2008. CONSEQUENT TO SUCH AUTHORIZATION, THE DC HELD A MEETING IN THE PRESENCE OF ASST. COMM ISSIONER ON 21/9/2008. THE COMMISSIONER OF MUNICIPAL CORPORATI ON AND LOCAL M.L.A AND LAND OWNERS ARRIVED AT A CONSENSUS FOR ACQUISIT ION OF LANDS AND FIXATION OF PRICE WHICH WAS AGREED AT A SUM OF RS.6.25 LAKHS PER ACRE. 3. CONSEQUENT UPON THE AFORESAID DEVELOPMENT, THE A SSESSEES LAND MEASURING 23.64 ACRES WAS ACQUIRED. THE ASSESSEE R ECEIVED COMPENSATION OF RS.78,81,250/- AND THE SAME WAS CLA IMED AS EXEMPT U/S 10(37) OF THE ACT. SECTION 10(37) OF THE ACT READS AS FOLLOWS:- SEC.10(37) :IN THE CASE OF AN ASSESSEE, BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, ANY INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' ARISING F ROM THE TRANSFER OF AGRICULTURAL LAND, WHERE (I) SUCH LAND IS SITUATE IN ANY AREA REFERRED TO IN ITEM (A) OR ITEM (B) OF SUB-CLAUSE (III) OF CLAUSE (14) OF SECTION 2; (II) SUCH LAND, DURING THE PERIOD OF TWO YEARS IMMEDIATELY PRECEDING THE DATE OF TRANSFER, WAS BEING USED FOR AGRICULTURAL PURPOSES BY SUCH HINDU UNDIVIDED FAMILY OR INDIVIDUAL OR A PARENT OF HIS; (III) SSUCH TRANSFER IS BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW, OR A TRANSFER THE CONSIDERATION FOR WHICH IS DETERMINED OR APPROVED BY THE CENTRAL GOVERNMENT OR THE RESERVE BANK OF INDIA; (IV) SUCH INCOME HAS ARISEN FROM THE COMPENSATION OR CONSIDERATION FOR SUCH TRANSFER RECEIVED BY SUCH ASSESSEE ON OR AFTER THE 1ST DAY OF APRIL, 2004. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION 'COMPENSATION OR CONSIDERATION' INCLUDES THE ITA NO.1244/BANG/2017 PAGE 3 OF 8 COMPENSATION OR CONSIDERATION ENHANCED OR FURTHER ENHANCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY; 4. IN THE ORDER OF ASST. COMPLETED FOR ASST. YEAR 2 009-10 WHEREIN THE EXEMPTION OF THE AFORESAID U/S 10(37) OF THE ACT WA S CLAIMED BY THE ASSESSEE, THE AO ALLOWED THE CLAIM OF THE ASSESSEE IN THE ORDER PASSED US/ 143(3) OF THE ACT DATED 30/8/2011. 5. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO WAS ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE THE ASSESSES LAND WAS A LAND WHICH WAS WITHIN THE MUNICIPAL LIMITS OF BELLARY MAHANAGARA P ALIKE AND, THEREFORE, HE WAS OF THE VIEW THAT THE LAND OF THE ASSESSEE WAS A CAPITAL ASSET WITHIN THE MEANING OF SEC. 2(14) OF THE ACT. ACCORDING TO THE CIT PROVISION OF SEC. 10(37) OF THE ACT WOULD BE ATTRACTED ONLY IN THE CA SE WHERE THERE WAS A COMPULSORY ACQUISITION OF LAND OF THE ASSESEE. SIN CE THE LAND IN QUESTION WAS VOLUNTARILY SOLD THE CIT WAS OF THE VIEW THAT E XEMPTION U/S 10(37) OF THE ACT OUGHT NOT TO HAVE BEEN ALLOWED. HE THEREFO RE SET ASIDE THE ORDER OF THE AO AS IT WAS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE. HE HOWEVER DIRECTED THE AO TO FRAME A FRESH ASST. IN ACCORDANCE WITH LAW AFTER VERIFICATION OF DETAILS AND AFFORDING OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 6. AGAINST THE SAID ORDER PASSED U/S 263 OF THE AC T ASSESSEE FILED APPEAL BEFORE THE HONBLE ITAT IN ITA NO.1109/BANG/2014 A ND THE ITAT BY ITS ORDER DATED 30/7/2015 SET ASIDE THE ORDER OF THE CI T U/S 263 OF THE ACT ON THE GROUND THAT THERE WAS VIOLATION OF PRINCIPLES O F NATURAL JUSTICE. THE TRIBUNAL DIRECTED THE CIT TO RECONSIDER THE ISSUE A FRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.1244/BANG/2017 PAGE 4 OF 8 6. CONSEQUENT TO THE AFORESAID ORDER OF THE TRIBUNA L, THE CIT PASSED IMPUGNED ORDER U/S 263 OF THE ACT IN WHICH HE TOOK THE VIEW THAT THE PROVISION OF SEC. 10(37)(II) OF THE ACT WOULD APPL Y ONLY IN 2 CASES VIZ., 1) WHEN THE TRANSFER IS BY WAY OF COMPULSORY ACQUIS ITION UNDER ANY LAW. 2) A TRANSFER THE CONSIDERATION FOR WHICH IS DETERMINE D OR APPROVED BY THE CENTRAL GOVERNMENT OR THE RESERVE BANK OF IN DIA; 7. SINCE IN THE CASE OF THE ASSESSEE BOTH THE AFOR ESAID CONDITIONS WERE NOT SATISFIED, ASSESSEE WOULD NOT BE ENTITLED FOR EXEMPTION U/S SEC. 10(37) OF THE ACT. THE CIT ACCORDINGLY HELD THAT T HE COMPENSATION OF RS.1.47 CRORES (THIS IS THE COMPENSATION ACTUALLY R ECEIVED BY THE ASSESSEE) AND NOT RS.78,81,250/- AS MENTIONED IN THE FIRST OR DER DATED 3/1/2014 PASSED BY CIT U/S 263 OF THE ACT. 8. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT, ASS ESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSUE RAISED IN THE ORDER U/S 263 OF THE ACT IS NO LONGER RES INTEGRA AND HAS BEEN CONCLUDED BY THE HONBLE SUPREME COURT IN THE CASE OF BALAKRLISHNAN AND UOI AND OTHERS IN CIVIL APPEAL NO(S) 607/2000 JUDGMENT DATED 11/1/20 17. IN THE AFORESAID DECISION HONBLE SUPREME COURT TOOK THE VIEW THAT F OR APPLICABILITY OF SEC. 10(37) OF THE ACT, EVEN IN A CASE WHERE LANDS ARE V OLUNTARILY TRANSFERRED BY AN ASSESSEE BUT IN CIRCUMSTANCES IN WHICH THERE WOU LD BE A COMPULSORY ACQUISITION, THEN SUCH TRANSFER SHOULD ALSO BE TRE ATED AS COMPULSORY ACQUISITION. FOLLOWING WERE THE RELEVANT OBSERVATI ONS OF THE HONBLE SUPREME COURT:- ITA NO.1244/BANG/2017 PAGE 5 OF 8 IT IS IN THE AFORESAID FACTUAL BACKDROP, THIS COUR T IS TO DETERMINE AS TO WHETHER IT CAN BE TREATED THAT THE LAND OF THE APPELLANT WAS COMPULSORILY ACQUIRED. FROM THE F ACTS MENTIONED ABOVE, IT BECOMES APPARENT THAT THE ACQUISITION PROCESS WAS INITIATED BY INVOKING THE PROVISIONS OF LA ACT BY THE STATE GOVERNMENT. FOR T HIS PURPOSE, NOT ONLY NOTIFICATION UNDER SECTION 4 WAS ISSUED, IT WAS FOLLOWED BY DECLARATION UNDER SECTION 6 AND EVEN AWARD UNDER SECTION 9 OF THE LA ACT. WITH THE AWARD THE ACQUISITION UNDER THE LA ACT WAS COMPLETED. ONLY TH ING THAT REMAINS THEREAFTER WAS TO PAY THE COMPENSATION AS FIXED UNDER THE AWARD AND TAKE POSSESSION OF THE LA ND IN QUESTION FROM THE APPELLANT. NO DOUBT, IN CASE, THE COMPENSATION AS FIXED BY THE LAND ACQUISITION COLLE CTOR WAS NOT ACCEPTABLE TO THE APPELLANT, THE LA ACT PRO VIDES FOR MAKING A REFERENCE UNDER SECTION 18 OF THE ACT TO THE DISTRICT JUDGE FOR DETERMINING THE COMPENSATION AND TO DEIDE AS TO WHETHER THE COMPENSATION FIXED BY THE LAND ACQUISITION COLLECTOR WAS PROPER OR NOT. HOWEVER, T HE MATTER THEREAFTER IS ONLY FOR QUANTUM OF COMPENSATI ON WHICH HAS NOTHING TO DO WITH THE ACQUISITION. IT IS CLEAR FROM THE ABOVE THAT INSOFAR AS ACQUISITION IS CONCE RNED, THE APPELLANT HAD SUCCUMBED TO THE ACTION TAKEN BY THE GOVERNMENT IN THIS BEHALF. HIS ONLY OBJECTION WAS T O THE MARKET VALUE OF THE LAND THAT WAS FIXED AS ABOVE. T O REITERATE HIS GRIEVANCE, THE APPELLANT COULD HAVE E ITHER TAKEN THE AFORESAID ADJUDICATORY ROUTE OF SEEKING REFERENCE UNDER SECTION 18 OF THE LA ACT LEAVING IT TO THE COURT TO DETERMINE THE MARKET VALUE. INSTEAD, THE APPELLANT NEGOTIATED WITH TECHNO PARK AND ARRIVED A T AMICABLE SETTLEMENT BY AGREEING TO RECEIVE THE COMPENSATION IN THE SUM OF RS. 38,42,489/-. FOR THI S PURPOSE, AFTER ENTERING INTO THE AGREEMENT, THE APP ELLANT AGREED TO EXECUTE THE SALE DEED AS WELL WHICH WAS A NECESSARY CONSEQUENCE AND A STEP WHICH THE APPELLAN T HAD TO TAKE. IN OUR VIEW, INSOFAR AS ACQUISITION OF THE LAND IS CONCERNED, THE SAME WAS COMPULSORILY ACQUIRED AS TH E ENTIRE PROCEDURE PRESCRIBED UNDER THE LA ACT WAS FOLLOWED. THE SETTLEMENT TOOK PLACE ONLY QUA THE AM OUNT OF THE COMPENSATION WHICH WAS TO BE RECEIVED BY THE APPELLANT FOR THE LAND WHICH HAD BEEN ACQUIRED. IT GOES ITA NO.1244/BANG/2017 PAGE 6 OF 8 WITHOUT SAYING THAT HAD STEPS NOT BEEN TAKEN BY THE GOVERNMENT UNDER SECTIONS 4 & 6 FOLLOWED BY AWARD UNDER SECTION 9 OF THE LA ACT, THE APPELLANT WOULD NOT HAVE AGREED TO DIVEST THE LAND BELONGING TO HIM TO TECHNO PARK. HE WAS COMPELLED TO DO SO BECAUSE OF THE COMPULSORY ACQUISITION AND TO AVOID LITIGATION ENTE RED INTO NEGOTIATIONS AND SETTLED THE FINAL COMPENSATION. ME RELY BECAUSE THE COMPENSATION AMOUNT IS AGREED UPON WOUL D NOT CHANGE THE CHARACTER OF ACQUISITION FROM THAT O F COMPULSORY ACQUISITION TO THE VOLUNTARY SALE. IT MA Y BE MENTIONED THAT THIS IS NOW THE PROCEDURE WHICH IS L AID DOWN EVEN UNDER THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATION AN D RESETTLEMENT ACT, 2013 AS PER WHICH THE COLLECTOR C AN PASS REHABILITATION AND RESETTLEMENT AWARD WITH THE CONSENT OF THE PARTIES/LAND OWNERS. NONETHELESS, TH E CHARACTER OF ACQUISITION REMAINS COMPULSORY. 10. IN VIEW OF THE AFORESAID DECISION OF THE HONBL E SUPREME COURT, WE ARE OF THE VIEW THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S 10(37) OF THE ACT. CONSEQUENTLY THE CONCLUSION OF THE CIT IN THE IMPUGNED ORDER THAT THE ORDER OF THE AO WAS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE IS NOT CORRECT. CONSEQUENTLY THE ORDER IMP UGNED IN THIS APPEAL IS QUASHED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2019 . SD/- SD/- ( B.R BASKARAN ) ( N.V. VASUDEVAN) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, 24 TH APRIL, 2019 . / VMS / ITA NO.1244/BANG/2017 PAGE 7 OF 8 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.