Mustafa Khaleel, Bangalore V. The Assistant Director of Income Tax, CPC, Bangalore

ITA 698/BANG/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9796 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 15-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV NULVI
• Keywords: Cost of acquisition; Revised return; Ignorance of law; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 139(5); 143(1); 250; 201

Judgement Text

ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA No.698/Bang/2021 Assessment Year: 2018-19 Mustafa Khaleel No.70, H Siddaiah Road Opp. Nayadegula Bangalore PAN NO : AIDPM3523H Vs. ACIT CPC Bangalore APPELLANT RESPONDENT Appellant by : Sri Rajeev Nulvi, A.R. Respondent by : Sri Ganesh R. Ghale, A.R., Standing counsel for Revenue. Date of Hearing : 07.06.2022 Date of Pronouncement : 07.06.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against the order of the CIT(A), NFAC, Delhi dated 8.9.2021. The only issue in this appeal is with regard to the taxability of capital gain offered by assessee in its return of income on the acquisition of land by Karnataka Industrial Development Board for Bangalore Metro Rail Project. 2. Facts of the case are that the assessee Mr KHALEEL MUSTAFA with his three brothers namely 1. Mr ASIF KHALLEL, 2. Mr ASLAM KHALEEL, 3. Mr ISMAIL KAHALEEL were owners of the land of 1 Acre 40 Guntas situated at survey No.41/C, Chikkategoru Village, Begur Hobli, Bangalore South Taluk, ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 2 of 10 Bangalore. The said land was subject to the Joint Development Agreement (JDA) with Skylark Constructions Company dated 16- 12-2008. After being JDA is entered out of said land of 1 Acre 40 Guntas, the land measuring 307.40 Square Meters i.e., 3308.85 Square Feet was acquired by Karnataka Industrial Development Board for Bangalore Metro Rail Project vide order dated 23-12-2016. 2.1 Out of the total acquired land 3308.85 Square Feet, the land 2217.03 Square Feet belongs to the builder and the remaining land 1091.97 belongs to four brothers named as above. Each brother's share in the land acquired was 273 Square Feet. The assessee has received compensation of Rs.45,87,402/- on 07-10-2017. 2.2 The assessee for the Assessment Year 2018-19 relevant to the financial year 2017-18 filed the return of income vide acknowledgement No.948864870280718 on 28-07-2018, wherein, he offered capital gain for taxation for acquisition amount received after claiming the acquisition cost and index cost and conversion cost offer Rs.36,78,562/- for taxation. 2.3 The said return was processed u/s, 143(1) of the Income-tax Act,1961 ['the Act' for short] on 02-02-2019 by accepting the returned income. The assessee in July 2019, came to know that the acquisition of agriculture and non-agriculture land for infrastructure development is not liable for capital gain tax vide CBDT Circular No.36 o f 2 0 1 6 F. No . 2 2 5 / S 8 / 2 0 1 6 - I T A - I I d a t e d 2 5 -1 0 - 2 01 6 , w h e r e i n , i t i s stated that "As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non- agricultural land in the matter of providing an exemption from ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 3 of 10 income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to the acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961." 2.4 And also, the Hon’ble Supreme Court in case of The Land Acquisition Officer, A.P Vs Ravi Santosh Reddy (deceased) represented by legal heirs in CIVIL APPEAL No.5647 of 2006 Judgment dated 18-05-2016 held that "If an owner succumbs to the government only to avoid litigation, the transaction is not a sale but compulsory acquisition, and should be exempted from capital gains tax." 2.5 The assessee thought of withdrawing the said offer of CAPITAL GAIN taxation, he wanted to file a revised return but there was no time limit u/s, 139(5) of Income Tax Act, 1961 to file a revised return as it was expired on 31-03-2019. 2.6 For withdrawing the said offer of taxable income amounting to Rs.36,78,562/-, the assessee preferred an appeal before the National Faceless Appeal Centre on 15-12-2020 vide e-filing acknowledgement No.822418371151220. ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 4 of 10 2.7 The Ld. CIT(A) of the National Faceless Appeal Centre passed an order u/s 250 of the Act for the said the assessment year 2018- 19 bearing DIN-ITBA/NFAC/S/250/2021-22/1035368435 dated 08-09-2021 by dismissing the appeal of the assessee stating the reason that "It is an undisputed fact that the present appeal is filed against the order u/s 143(1) of the Income Tax Act even though there is no adjustment made in the order u/s 143(1) of the 51.ct. Therefore, the issue raised by the assessee in the present appeal does not arise from the intimation order u/s 143(1) of the Act. Hence, the request for withdrawal of declaration of capital gain in the return. of income cannot he entertained Thus, all the grounds relating to this issue are dismissed" 2.8 Aggrieved by the order of the National Faceless Assessment Centre, the Assessee preferred this appeal before the Tribunal to address his grievances as under: 1 The Ld. CIT(A) of National Faceless Appeal Centre has passed order u/s 250 on 08-09-2021, which was received by the assessee on the same day by e-mail and Income Tax web portal. The time limit for filing this appeal expired on 07-11-2021. But now the assessee is preferring this appeal on 17-12-2021. Hence there was a delay of 39 days delay in filing this appeal. The condonation petition for the delay in filing the appeal along with the affidavit is enclosed herewith. 2. Appeal before Ld. CIT(A) of National Faceless Appeal Centre filed on 15-12-2020 was not against the adjustment made in the order passed u/s 143(1) of the Act. But appeal was made to withdraw the tax offered for taxation which was not taxable in view of Circular No.36 of 2016 dated 25-10-2016 3. The offer made by the assessee under CAPITAL GAIN amounting to Rs.36,66,376/- was wrongly offered which was not at all taxable in view of CBDT Circular No.36 of 2016 dated 25-10-2016 and Honourable Supreme Court judgment in case of The Land Acquisition Officer, AP Vs Ravi Santosh Reddy(d) by L.Rs in Civil Appeal No.5647 of 2006. ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 5 of 10 2.9 The Hon’ble Supreme Court in case of CIT Vs Mahendra Mills 243 ITR 56 held that "if the assessee due to ignorance of law and fact offered income as taxable but which is not taxable the department should not take advantage of the ignorance of the assessee with regards to law and fact.” 2.10 The procedure of assessment is to assess the correct income of the assessee. 2.11 The Assessee relies on the following case laws in support of his argument for withdrawing the non-taxable income which was wrongly offered by the Assessee with misconception and facts of law on his own violation. (a) The Hon'ble Delhi High Court in the case of Commissioner of Income-Tax vs Bharat General Reinsurance Co. ... on 24 December, 1970 81 ITR 303 held that "Income which is not taxable as per the law cannot be taxed only because of assessee's offered it." (b) The Hon'ble Bombay High Court in the case of Nirmala L. Mehta vs A. Balasubramaniam 269 ITR 1 held that "There cannot be any estoppel against the statute. No tax can be collected or levied except the authority of law. Acquiescence (consent) cannot take away from the party the relief which he entitles, where the tax has been levied and collected without authority of law." (c) The Honourable Supreme Court in the case of Commissioner of Income-Tax, vs V. Mr. P. Firm 56 ITR 67 held that "If particular income is not taxable as per the statute of income Tax, it cannot be taxed on the basis of estoppel (the action of one's own. Being precluded from the course by the previous action one's own) or any other equitable doctrine." Equity is out of place in taxing statutes, a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the officer has no power to impose the tax on the said income. 2.12 In view of the above judicial pronouncements, the income received by the Assessee on compulsory acquisition of property under section 96 of RFCTLARR Act, 2013 [Right to Fair ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 6 of 10 Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.] is exempt from tax. 2.13 The RFCTLARR Act which came into effect from 1 st January, 2014 in section 96, inter alia provides that income-tax shall not be levied on any a w a r d o r a g r e e m e nt m a d e ( e x c e p t th o se m a d e u n de r s ec t i o n 4 6 ) un d er - - t h e RF CT L A R R A c t . T h e r e f or e , c o m p e n s a t io n r ec e i ve d f or c om p u l s o r y a c q ui si ti o n o f l a n d u n de r t he RF C T L A RR A c t [ ex c ep t t h os e m a d e u n d er s e c t i on 4 6 o f R F C T L A R R A c t ] , i s e x em p te d f r o m th e le vy o f i nc o m e -t a x . 2.14 Henc e, th e assess ee req uested t he Trib una l to di rect the As sessin g Office r/C PC for wi thdr awi ng th e income wrongly o ffered f or t axa bility wh ich is n ot taxabl e in vi ew of CB DT Ci rcu la r No. 36 of 201 6 date d 25 -10 -20 16 and Hon' ble Supr eme Court in th e case of L a nd Ac q u i si t i o n O f f i c e r , A. P v s Ravi S an t o s h R e d d y ( D ) By L rs o n 18 Ma y , 20 16 . 3. There was a delay of 38 days in filing the appeal before this Tribunal. The assessee filed a petition for condoning the delay stating that the delay of 38 days due to the reason of his Chartered Accountant Shri Chennappa R. Nulvi is undergoing medical treatment for blockage of blood clot and angiography during that period and he was under treatment for 1 ½ months from 5 th Nov’21 to 10 th Dec’21. Hence, he prayed that the delay may be condoned. We carefully gone through the condonation petition filed by the assessee requesting for condoning of delay of 38 days. We find that there exists good and sufficient reason for filing the appeal by delay of 38 days before this Tribunal. Accordingly, the delay of 38 days in filing the appeal before this Tribunal is condoned and the delay is admitted for adjudication. ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 7 of 10 4. Coming to the merit of the issue, the Ld. CIT(A) not accepted claim of the assessee by observing that the assessee has already offered capital gain arising out of compulsory acquisition of land bearing Survey No.41/1C Begur Hobli, Bangalore for Metro Rail Project of Bangalore in its return of income. The AO accepted the same while processing the return u/ 143(1) of the Act and the AO has not made any adjustment towards this capital gain in the intimation passed u/s 143(1) of the Act. As such, the issue raised by the assessee does not arise from the intimation order u/s 143(1) of the Act sent by the department to the assessee. Accordingly, he observed that assessee precluded from withdrawing the capital gain declared by assessee in his return of income. In our opinion, there is no estoppel on the part of assessee to pursue the claim. Under the scheme of constitution, the Government cannot retain even a single pie of an individual citizen as tax, when it is not authorized by an authority of law. In this case, the assessee, if offered the capital gain wrongly as taxable in the return of income though it was not subjected to tax under intimation u/s 143(1) of the Act, the assessee cannot be prevented to claim the same as not taxable. This view of ours is fortified by the judgement of Madras High Court in the case of M/s. Areva T & D India Ltd. Vs. CIT in TCA No.673 of 2018 dated 8.9.2020. Further, Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT reported in 229 ITR 383, wherein it was held that while the appeal was pending before the Tribunal, it was found that when a non- taxable item was taxed or a permissible deduction was denied, it did not see any reason why the assessee should not be prevented from raising that question before the Tribunal for the first time so long as the relevant facts were on record in respect of that item. Moreover, as per circular No.14(XI-35) of 1955 dated 11.4.1955 of CBDT also permits the AO to entertain or tax the assessee in the right manner if assessee commits any mistake ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 8 of 10 in its return of income and valid claim of assessee to be entertained in the interest of long run goodwill. In view of this, we are of the opinion that Ld. CIT(A) not justified in not entertaining the claim of the assessee. Coming to the merit of the issue, the assessee submitted that issue is squarely covered in favouir of th assessee by the following judgements:- a) ITA No.96/Coch/2018 dated 24.10.2018 in the case of Smt. Jayasree Sreedharan b) ITA No.123/Coch/2019 dated 17.7.2019 in the case of Shri Abdul Kareem c) ITA No.116/Coch/2016 dated 1.4.2019 in the case of Smt. Halima Zubair. 5. It is to be noted that in all the above cases, it is observed that the benefit of section 10(37) of the Act was available in respect of acquisition of land though it was not a compulsory acquisition, but only executed through a negotiated sale deed and the Tribunal in those cases placed reliance on the judgement of Hon’ble Supreme Court in the case of Balakrishna Vs. UOI & Others and UOI Vs. Infopark, Kerala reported in 81 Taxmann.com 51 (SC) and very clearly observed that since the entire procedure fixed under Land Acquisition Act was followed, the character of acquisition from that of compulsory acquisition to voluntary sale would not change though price was fixed on negotiated settlement. The relevant findings of the Hon’ble Supreme Court reads as follows: "8. In our view, insofar as acquisition of the land is concerned, the same was compulsorily acquired as the entire procedure prescribed under the LA Act was followed. The settlement took place only qua the amount of the compensation which was to be received by the appellant for the land which had been acquired. It goes without saying that had steps not been taken by the Government under Sections 4 and 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 entered into negotiations and settled the final compensation. Merely ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 9 of 10 because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale. It 'nay be mentioned that this is now the procedure which is laid down even under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as per which the Collector can pass rehabilitation and resettlement award with the consent of the parties / landowners. Nonetheless, the character of acquisition remains compulsory." 6. The contention of A.R. is that the instant case also falls under section 10(37) of the Act since land was acquired by the Special Land Acquisition Officer KIADB (Metro Rail Project) vide agreement to be executed u/s 29(2) of the KIADB Act, 1966 dated 7.10.2017. 7. Contrary to this, Ld. D.R. submitted that the land acquired by KIADB for the use of the BMRCL for Bangalore Metro and said land was not acquired under RFCTLARR. As such, the claim of assessee even on merit cannot be allowed. Judgements relied by the assessee’s counsel are not on different set of facts. In our opinion, similar issue came for consideration before this Tribunal in ITA No.168/Bang/2021 dated 7.10.2021 in the case of Sri Raghu Belagodu, wherein it was held as under: 7. “We heard the parties and perused the record. Since the Ld A.R is contending that the provisions of RFCTLARR Act shall apply to the land compulsorily acquired from the assessee and since these legal contentions were not raised before Ld PCIT, we are of the view that this issue requires reconsideration at the end of Ld PCIT. Accordingly, we set aside the order passed by Ld PCIT and restore all the matters to his file for examining afresh duly considering various legal contentions raised before us. After affording adequate opportunity of being heard, the Ld PCIT may take appropriate decision in accordance with law.” 8. In view of this, the claim of the assessee is required to be examined at the end of AO and who has no occasion to examine the same as there was no claim before him. The AO has to examine the ITA No.698/Bang/2021 Mustafa Khaleel, Bangalore Page 10 of 10 entire claim of assessee in the light of above observations and decide accordingly. 9. In the result appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 7 th June, 2022 Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 7 th June, 2022. VG/SPS 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.