Sh. Nohar Chand, Patiala V. ITO, Ward-5, Patiala

ITA 715/CHANDI/2022

AI Insights

The case involves Shri Nohar Chand, who appealed against the order of the CIT(A) concerning the assessment year 2017-18. The dispute centered on the treatment of enhanced compensation and interest received from the government for acquired agricultural land, which the assessee claimed was exempt under section 10(37) of the Income Tax Act. Initially, the AO rejected this claim, but later, a rectification order favored the assessee, leading to a refund. However, the CIT(A)'s subsequent order partially allowed the appeal but still created a demand, which was contested by the assessee. The Tribunal found procedural lapses and substantive issues in the CIT(A)'s handling of the case, leading to the annulment of the demand.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127506 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 07-12-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rectification of order; Revised return; FORM 26AS
• Section: 244A; 143(1); 73

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 715/CHD/2022 नधा रण वष / Assessment Year : 2017-18 Shri Nohar Chand, #21A, New Officer Colony, Near Kangroo Kids School, Patiala. बनाम VS The ITO, Ward-5, Patiala. थायी लेखा सं./PAN /TAN No: AZHPC2063K अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Shri R.K.Gupta, C.A. राज व क ओर से/ Revenue by : Shri M.P. Dwivedi, Sr.DR तार"ख/Date of Hearing : 01.05.2023 उदघोषणा क तार"ख/Date of Pronouncement : 08.05.2023 आदेश/ORDER PER A.D.JAIN, VICE PRESIDENT This is assessee's appeal for assessment year 2017-18 against the order dated 25.07.2022 passed by the ld. CIT(A) NFAC (NFAC) Delhi. The following grounds have been taken : 1. That CIT (Appeal) has not decided the legal issue raised by the appellant that the adjustment by Ld. AO CPC under section 143(1) are not covered under the provision of section 143(1) being debatable issue as such the addition is liable to be deleted. 2. That the order of CIT(Appeal) is against the facts of the case. 3. That the order passed by CIT(Appeal) is wrong as the same was already rectified by the AO and the issue was resolved with the rectification order. ITA 715/CHD/2022 A.Y.2017-18 Page 2 of 7 4. That the ClT(Appeals) has erred in not following the provisions of section 251(2) in enhancing the demand without issuing show cause notice for the same as on the date of appeal order there was NIL demand against the appellant. 5. That AO has given a wrong appeal effect to the order of CIT(Appeal) and thereby the wrong demand has been created/enhanced. 2. We have heard the parties and have perused the material on record. 3. The agricultural land of the assessee was acquired by the Government. During the year under consideration, the assessee received enhanced compensation and interest thereon. The assessee, vide the return of income filed, claimed such enhanced compensation and interest to be exempt u/s 10(37) of the Income Tax Act. The Assessing Officer (AO), CPC passed order u/s 143(1) of the Income Tax Act. The claim of the assessee was rejected. The assessee preferred an appeal before the ld. CIT(A). Simultaneously, a rectification application was also filed before the AO at Patiala. During the pendency of the appeal, the AO passed a rectification order in favour of the assessee, treating the interest on the compensation received to be a part of the compensation and the demand raised was taken to the Remission Account. The appeal of the assessee was partly allowed by the ld. CIT(A), by virtue of the impugned order dated 25.07.2022, holding that the disallowance of the amount of Rs.94,01,280/-, which had been claimed as exempt by the assessee, included two components, i.e., enhanced compensation and interest thereon; ITA 715/CHD/2022 A.Y.2017-18 Page 3 of 7 that the enhanced compensation falls under the provisions of Section 10(37) of the Income Tax Act and should have been allowed as a deduction; that however, the interest is to be treated as ‘income from other sources’ as per the provisions of Section 56(2)(viii) and was eligible for deduction under Section 57(iv). In accordance with these observations, the ld. CIT(A) directed the AO to treat the enhanced compensation alongwith the interest thereon, as observed by the ld. CIT(A) and to modify the intimation u/s 143(1) of the Act accordingly, after due verification. In pursuance of the aforesaid order of the ld. CIT(A), giving effect thereof vide order dated 26.09.2022, has again created a demand on the assessee. 4. Challenging the impugned order, the ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in not deciding the legal issue raised by the assessee, which was to the effect that the adjustment made by the AO CPC u/s 143(1) of the Income Tax Act is not covered under the provisions of Section 143(1), being a debatable issue; that the order passed by the ld. CIT(A) is otherwise wrong, as the matter had been rectified by the AO; that the ld. CIT(A) has erred in not following the provisions of Section 251(2) of the Act in enhancing the demand without issuance of any Show Cause Notice for the same, since as on the date of the passing of the CIT’s order, there was no demand pending against the assessee. It has been contended that the AO has, ITA 715/CHD/2022 A.Y.2017-18 Page 4 of 7 further, given a wrong appeal effect to the order of the ld. CIT(A). It has been submitted that the assessee had failed to withdraw the appeal before the ld. CIT(A) due to non availability of communication window on the Portal of the Department; that due to such non availability of communication window on the Portal, the assessee could not communicate with the ld. CIT(A) about the rectification order having been passed by the AO; that the assessee remained unable to receive the various notices of hearing issued by the ld. CIT(A); that all this was due to the new regime of faceless hearing of appeals effective from 25.09.2020; that though all the notices were on the Portal of the Income Tax Department, the assessee, who is a 73 years old farmer, could not observe and take note of such notices. It is in these facts and circumstances that the ld. Counsel for the assessee has requested that the order under appeal be annulled and the demand created against the assessee illegally be cancelled. The ld. DR, on the other hand has placed strong reliance on the impugned order, contending that it is the admitted case of the assessee himself that he did not respond to the repeated notices issued by the ld. CIT(A). It has been submitted that the ld. CIT(A) was undisputedly never made aware of the rectification order passed by the AO. It has been submitted that it is well settled that nobody can make premium out of their own remissness. ITA 715/CHD/2022 A.Y.2017-18 Page 5 of 7 5. It is seen that the revised return of income was filed by the assessee at a total taxable income of Rs.14,900/-. The intimation u/s 143(1) dated 15.04.2019 (APB 26-29) made a disallowance of Rs.93,94,350/- ( the correct figure, as per the ld. Counsel for the assessee, is Rs.94,01,280/-). Rectification Order dated 24.02.2021 (APB 30-34) was passed on the application of the assessee, during the pendency of the assessee's appeal before the ld. CIT(A). Thereby, the demand raised, amounting to Rs.9,15,850/- (APB 29, Item 52) resulted into refund of Rs.18,89,657/-, with interest u/s 244A of the Act, amounting to Rs. 9401/-. Interest amount of Rs.94,01,280/- was received by the assessee from the Central Works Division, Sangrur. This stands depicted in the Form 26AS, a copy whereof has been filed at APB 22-25. The gross total income of the assessee as per the return of income filed, i.e., income from other sources (APB-1, Item-3 in the Computation of Income and tax thereof) is Rs.21,916/-. This also stands mentioned in the intimation dated 15.04.2019 (APB-26). The income from other sources, as computed u/s 143(1) is Rs.94,16,266/-. From this, the amount of Rs.21,916/- was reduced, to get the amount of Rs.93,94,350/- Deduction of Rs.6,930/-, claimed under Chapter-VI A of the Act was added (Intimation dated 15.04.2019, relevant portion at APB- 27, Item 12). This resulted in the figure of Rs.94,01,280/-, ITA 715/CHD/2022 A.Y.2017-18 Page 6 of 7 which was the addition made by the CPC in the intimation issued. 6. In the Rectification Order passed by the AO on 24.02.2021 (APB 30-34), the income was restored by the AO to Rs.14,990/- (APB 33, Item 13). Thus, the total income, after deduction, came to Rs.14,990/-. As such, the demand raised vide the intimation, amounting to Rs.9,15,850/- (APB 29, Item 51) resulted in a refund of Rs.18,89,657/-, with interest of Rs.9,401/-, u/s 244A of the Act. 7. It is, thus, seen that as on the date of the passing of the impugned order, i.e., on 25.07.2022, there was no demand of income tax subsisting against the assessee, the disallowance having been deleted by the AO vide order dated 24.02.2021. 8. Under the aforesaid facts and circumstances, irrespective of the fact that the assessee failed, for the reasons discussed herein above, which reasons we find to be plausible reasons, to make a request before the ld. CIT(A) for withdrawal of pending appeal, the irrefutable fact remains that there was no demand subsisting against the assessee. Therefore, the appeal before ld. CIT(A) stood rendered infructuous as on the date of passing of the Rectification Order by the AO, i.e., on 24.02.2021. 9. In view of the above, finding the grievance of the assessee to be justified, we accept the same. Accordingly, the order under ITA 715/CHD/2022 A.Y.2017-18 Page 7 of 7 appeal is hereby reversed. The consequential order passed by the AO on 26.09.2022 also meets the same fate consequentially i.e., the said order passed by the AO on 26.09.2022 is also cancelled. Ordered accordingly. 10. In the result, the appeal is allowed. Order pronounced in the Open Court on 8 th May,2023. Sd/- Sd/- (VIKRAM SINGH YADAV) (A.D.JAIN ) ACCOUNTANTMEMBER VICE PRESIDENT “Poonam” आदेश क琉 灹ितिलिप अ灡ेिषत/ Copy of the order forwarded to : 1. अपीलाथ牸/ The Appellant 2. 灹瀄यथ牸/ The Respondent 3. आयकर आयु猴/ CIT 4. िवभागीय 灹ितिनिध, आयकर अपीलीय आिधकरण, च瀃डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड榁 फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar