DHARMVIR, GURUGRAM V. ITO, WARD- 1(4), GURUGRAM

ITA 836/DEL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4718 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 02-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Assessee Lawyers: MANOJ GARG
• Keywords: Capital asset; Earning of tax free income; Set aside; Capital Gains
• Section: 45(5); 194LA; 28; 144; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DLEHI BEFORE SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 836/DEL/2018 ASSESSMENT YEAR: 2014-14 DHARMVIR, VS. INCOME-TAX OFFICER, JAG RAM, F-36, 1 ST FLOOR, WARD 1(4), GURGRAM RAHEJA SQUARE, IMT MANESAR, GURGAON. PAN : ARUPD2605D (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANOJ GARG, CA RESPONDENT BY: SH. JAGDISH SINGH, SR. DR DATE OF HEARING: 15/10/2020 DATE OF ORDER : 20/10/2020 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 29/11/2017 IN APPEAL NO. 373/2016- 17, PASSED BY THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS)-2, GURGAON (LD. CIT(A)) IN THE CASE OF SH. DHARAMVEE R (THE ASSESSEE), FOR THE ASSESSMENT YEAR 2014-15, ASSESSEE PREFERRED THI S APPEAL CHALLENGING 2 THE ADDITION OF RS.85 LACS ON ACCOUNT OF CASH BORRO WINGS FROM AGRICULTURISTS AND RS. 47, 32, 420/-, THE INTEREST RECEIVED ON COMPENSATION IN RESPECT OF AGRICULTURAL LAND. 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT I S AN AGRICULTURIST. FOR THE ASSESSMENT YEAR 2014-15 HE HAS FILED RETURN OF INCOME ON 18.03.2015 DECLARING INCOME AT RS 1,71,200/- TOWARDSINCOME FRO MHOUSE PROPERTY ALONG WITH THE AGRICULTURAL INCOME OF RS 94,64,870/ - ASINTEREST ON COMPENSATION FROM STATE GOVERNMENT, DRO-CUM- LAC, G URGAON ONAGRICULTURAL LAND ACQUIRED BY HARYANA GOVERNMENT ANDPURSUANT TO THE NOTIFICATION FOR ACQUIRING THELAND ISSUED IN THE YE AR 2001-02, ASSESSEE RECEIVED THE COMPENSATION ALONG WITH INTEREST IN TH E YEAR 2013-14. ASSESSEETREATED THE INTEREST ON COMPENSATION ASADDI TIONAL COMPENSATION AND SHOWN AS EXEMPT INCOME IN HIS RETU RN OF INCOME. 3. ASSESSMENT WAS COMPLETE UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), HOWEVER, THE ASSES SING OFFICER ASSESSED AN INCOME OF RS 1,34,36,670/-BY ORDER DATED 20.12.2 016 BY MAKING AN ADDITION OF RS. 85 LACS ON ACCOUNT OF CASH DEPOSITE D IN PUNJAB NATIONAL BANK SAVINGS ACCOUNT AND RS. 47, 32, 420/- BEING 50 % OF INTEREST RECEIVED ON COMPENSATION U/S 56(2)(VIII) AND RS 33,049/- AS INTEREST RECEIVED ON BANK DEPOSIT AND SAVING BANK INTEREST. 4. AGGRIEVED BY SUCH ADDITIONS, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THE INTEREST ON AN EN HANCED COMPENSATION GRANTED UNDER SECTION 28 OF THE LAND ACQUISITION AC T IS ACCRETION TO THE VALUE OF LAND ACQUIRED AND THEREFORE, ARE NON-TAXAB LE; AND THAT THE ASSESSEE BEING AN ILLITERATE AND NOT CONVERSANT WIT H THE GRIEVANCES OF THE 3 TAX LAW DID NOT REALISE THE IMPLICATIONS IN RECEIVI NG THE LOAN IN CASH AND TO SUBSTANTIATE THE LOAN FROM ONE DHARAM SINGH, BIS HAMBARDAYAL AND SHREE RAM. THE ASSESSEE CLAIMS TO HAVE PLACED MATER IAL BEFORE THE LD. CIT(A). 5. LD. CIT(A) HOWEVER, ENTERTAINED THE DOUBT AS TO WHETHER THE INTEREST RECEIVED UNDER SECTION 28 OF THE LAND ACQU ISITION ACT IS IN THE NATURE OF INTEREST OR IS IT PART OF THE ENHANCED CO MPENSATION AND WHETHER THE SAME IS TAXABLE UNDER THE HEAD OF OTHER SOURCES. LD. CIT(A), THOUGH NOTICED THE DECISIONS OF THE HONBLE APEX CO URT IN THE CASE OF CIT VS. GHANSHYAM (HUF) AND CIT VS. GOVINDBHAIMAMAIYA N OT APPLICABLE TO THE FACTS OF THE CASE OF THE A ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE O F JAGMAL SINGH VS. STATE OF HARYANA BY ORDER DATED 2/2/2016 AND ALSO T HE AMENDMENT OF SECTION 145-A (B) OF THE ACT FROM APRIL 2010. 6. IN RESPECT OF THE ADDITION OF RS. 85 LACS WHICH THE ASSESSEE CLAIMS TO HAVE OBTAINED BY WAY OF LOAN FROM SH. CHARAN SIN GH, DHARAM SINGH AND BISHAMBERDAYAL, LD. CIT(A) OBSERVED THAT ALL TH ESE THREE PERSONS HAD BANK ACCOUNTS, THERE WERE REGULAR TRANSACTIONS REFL ECTED THEREIN, THERE WAS NO EXPLANATION FROM THE ASSESSEE AS TO WHY CASH LOAN WAS TAKEN FROM THESE THREE PERSONS WHEN THEY COULD HAVE EASIL Y GIVEN LOAN BY CHEQUE AND MORE PARTICULARLY WHEN THE ASSESSEE WAS EXPECTING TO RECEIVE THE COMPENSATION AMOUNT, THERE WAS NO NEED TO OBTAIN ANY LOAN. LD. CIT(A) THEREFORE, REJECTED BOTH THE CONTENTIONS OF THE ASSESSEE AND CONFIRMED THE ADDITIONS. 7. FIRST CONTENTION OF THE ASSESSEE BEFORE US IS TH AT, ALTHOUGH THE CASE WASSELECTED FOR LIMITED SCRUTINY UNDER CAS S BUT THE LD AO DID 4 NOT CONCENTRATE ONLY ONTHE REASONS FOR WHICH CASE W AS SELECTED FOR LIMITED SCRUTINY BUT WENT ON ASKING MORE& MORE IMP ROVED REASONS WITHOUT TAKING PRIOR APPROVAL FROM THE COMPETENT AU THORITIES. BY PLACING RELIANCE ON THE CBDT INSTRUCTION NO 20/2015 DATED 2 9.12.2015, HE ARGUED THAT THE ASSESSMENT ORDER IS BAD. ON MERITS HE ARGUED THAT THE INTEREST RECEIVED ON THE ENHANCED COMPENSATION PART AKES THE CHARACTER OF THE VALUE OF THE AGRICULTURAL PROPERTY IN VIEW O F THE DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. GHANSHYAM 315 ITR 1 (SC) AND UNION OF INDIA VS. HARI SINGH 302 CTR 458 (SC) AND IN VIEW OF THE FACT THAT THE PROPERTY ACQUIRED HAPPENS TO BE AN AGRICULTURAL PROPERTY ANY INCOME CHARGEABLE UNDER THE HAD CAPITAL GAINS ARISING FR OM THE TRANSFER OF AGRICULTURAL LAND SHALL NOT BE INCLUDED IN COMPUTIN G THE TOTAL INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR. 8. INSOFAR AS THE ADDITION OF RS. 85 LACS IS CONCER NED, ASSESSEE BEING A PERSON NON CONVERSANT WITH THE TAX LAWS AND THE I MPLICATIONS OF OBTAINING LOAN IN CASH, OBTAINED THE SAME IN CASH A ND THE FACT OF THE CREDITORS WITHDRAWING THE CASH FROM THEIR BANK ACCO UNTS AND PAYING TO THE ASSESSEE STOOD DEMONSTRATED BY WAY OF PRODUCING THE BANK STATEMENTS OF THE CREDITORS. LD. AR FURTHER SUBMITT ED THAT THE SAID AMOUNT OF LOAN WAS SUBSEQUENTLY REPAID THROUGH THE BANKING CHANNELS AND SUCH FACT IS EVIDENT FROM THE BANK STATEMENT OF THE ASSESSEE. 9. PER CONTRA, IT IS THE SUBMISSION OF THE LD. DR T HAT THE REASON FOR SELECTION OF THE CASE FOR SCRUTINY THROUGH CASS WAS STATED TO BE LOW INCOME FROM OTHER SOURCE AS COMPARED TO LARGER VALU E OF FIXED ASSETS AND THE ASSESSEE HAS ALSO TRANSFERRED ONE OR MORE PROPE RTIES DURING THE YEAR, AND THE EXPRESSION LOW INCOME FROM OTHER SO URCE TAKES INTO ITS 5 FOLD THE RECEIPT OF RS. 46,21,066/-TOWARDS INTEREST ON ENHANCED COMPENSATION FROM THE STATE GOVERNMENT AND, THEREFO RE, IT CANNOT BE SAID THAT ENQUIRY OF THE LEARNED ASSESSING OFFICER INTO SUCH AN ASPECT CANNOT BE SAID TO BE IN EXCESS OF JURISDICTION CONF ERRED ON THE LEARNED ASSESSING OFFICER UNDER LIMITED SCRUTINY. HE FURTHE R SUBMITTED THAT THE LD. CIT(A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF THE RECEIPT TOWARDS INTEREST ON ENHANCED COMPENSATION UNDER SECTION 28 OF THE LAND ACQUISITION ACT IN VIEW OF THE AMENDMENT TO SECTION 145-A (B) OF THE ACT, IN VIEW OF WHICH THE EFFECT OF THE JUDGEMENT IN GHA NSHAM (SUPRA) HAS BEEN STATUTORY ABROGATED. 10. IN RESPECT OF THE ADDITION OF RS. 85 LACS, LD. DR SUBMITTED THAT THE CIRCUMSTANCES DISCUSSED BY THE LD. CIT(A) IN THE IM PUGNED ORDER, NAMELY, THERE IS NO EXPLANATION FOR THE CASH LOANS WHEN THE CREDITORS THEMSELVES ARE MAINTAINING AND OPERATING THE BANK ACCOUNTS AND THERE IS NO IMMEDIATE NECESSITY FOR THE ASSESSEE TO OBTAIN ANY SUCH CASH LOAN, JUSTIFY THE CONFIRMATION OF SUCH AN ADDITION BY THE LD. CIT (A). HE SUBMITTED THAT THOUGH THE ASSESSEE AND THE CREDITORS ARE UNAWARE O F THE IMPLICATIONS OF THE CASH LOANS UNDER THE INCOME TAX ACT, 1961 , THO UGH THE ASSESSEE CLAIMS TO HAVE REPAID THE SAME THROUGH BANKING CHAN NELS, SUCH A FACT IS NOT EMANATING FROM ANY MATERIAL ON RECORD. HE SUBMI TTED THAT THE ASSESSEE FAILED TO SUBMIT ANY BANK STATEMENTS TO DE MONSTRATE SUCH A FACT. 11. IN REPLY, LD. AR SUBMITTED THAT IN VIEW OF THE PROVISIONS UNDER SECTION 10 (37) OF THE ACT, ANY INCOME CHARGEABLE U NDER THE HEAD (CAPITAL GAINS) ARISING FROM THE TRANSFER OF AGRICULTURAL LA ND SHALL NOT BE INCLUDED IN THE INCOME OF THE ASSESSEE AND THE DECISION OF T HE HONBLE APEX COURT 6 IN THE CASE OF GHANSHAM (SUPRA) IS AN AUTHORITY ON THE PRINCIPLE THAT WHEN THE COURT/TRIBUNAL DIRECTS PAYMENT OF ENHANCED COMPENSATION UNDER SECTION 23(1A) , OR SECTION 23(2) OR UNDER SECTION 28 OF THE 1894 ACT IT IS ON THE BASIS THAT AWARD OF COLLECTOR OR T HE COURT, UNDER REFERENCE, HAS NOT COMPENSATED THE OWNER FOR THE FU LL VALUE OF THE PROPERTY AS ON DATE OF NOTIFICATION AND THERE IS NO CHANGE INSOFAR AS THIS PROPOSITION IS CONCERNED. ON THE ASPECT OF THE REPA YMENT OF LOANS RELATING TO THE ADDITION OF RS. 85 LACS, LD. AR SUB MITTED THAT GIVEN AN OPPORTUNITY THE ASSESSEE IS READY TO FURNISH THE BA NK STATEMENTS ESTABLISHING SUCH A FACT. 12. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. ACCORDING TO THE ASSESSMENT OR DER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS WIT H THE REASONS THAT LOW INCOME FROM OTHER SOURCE AS COMPARED TO LARGE VALUE FIXED DEPOSITS AND A LARGE CASH DEPOSITS IN SAVING BANK ACCOUNT AN D ASSESSEE HAS ALSO TRANSFERRED ONE OR MORE PROPERTIES DURING THE YEAR . FURTHER DURING THE COURSE OF ORDER, THE LEARNED ASSESSING OFFICER REFE RRED TO THE COMPUTATION OF INCOME SHOWING INCOME OF RS. 46,21,0 66/-FROM OTHER SOURCES AND THE DETAILS OF COMPENSATION AND INTERES T RECEIVED FROM THE GOVERNMENT AND THE INTEREST ON ENHANCED COMPENSATIO N. IN VIEW OF THESE, WE ARE CONVINCED THAT ANY CONSIDERATION OF T HE DETAILS RELATING TO THE INCOME FROM OTHER SOURCES IS BEYOND THE SCOPE O F THIS LIMITED SCRUTINY, INASMUCH AS THE REASON FOR A LIMITED SCRU TINY INCLUDES LOW INCOME FROM OTHER SOURCES AS COMPARED TO LARGE VALU E FIXED DEPOSITS. THIS REASON TAKES INTO ITS FOLD THE SCRUTINY OF THE INCOME FROM OTHER SOURCES INCLUDING THE RECEIPT OF INTEREST ON ENHANC ED COMPENSATION 7 UNDER SECTION 28 OF THE LAND ACQUISITION ACT. WE TH EREFORE, HOLD THAT THE LEARNED ASSESSING OFFICER DID NOT STEP OUT THE SCOP E OF ENQUIRY IN THIS MATTER. 13. NOW COMING TO THE MERITS OF THE CASE ON THE ASP ECT OF ADDITION OF THE INTEREST ON ENHANCED COMPENSATION RECEIVED FOR ACQUISITION OF THE AGRICULTURAL PROPERTY, THE ASPECT OF THE CHARGEABIL ITY OF TAX IN RESPECT OF THE INTEREST ON ENHANCED COMPENSATION U/S 28 OF THE LAND ACQUISITION ACT IS NOW FAIRLY SETTLED. IN THE CASE OF GHANSHYAM 315 ITR 1 (SC), THE HONBLE SUPREME COURT HELD IN UNEQUIVOCAL TERMS THA T THE ADDITIONAL AMOUNT U/S 23(1A), SOLATIUM UNDER SECTION 23(2) AND INTEREST ON ENHANCED COMPENSATION U/S 28 OF THE LAND ACQUISITIO N ACT FORM PART OF ENHANCED COMPENSATION U/S 45(5)(B) AND, THEREFORE, IS SUBJECT TO TAX U/S 45(5) IN THE YEAR OF RECEIPT. NO CONTRARY VIEW IS TAKEN BY THE SUPREME COURT IN THE SUBSEQUENT JUDGMENTS AND AS ON THE DAT E, LAW IS FAIRLY SETTLED THAT THE AMOUNT OF INTEREST RECEIVED U/S 28 OF THE LAND ACQUISITION ACT IS IN THE NATURE OF CAPITAL GAIN. IT COULD BE SEEN THAT SECTION 45(5) MAKES NO REFERENCE TO THE NATURE OF P ROPERTY THAT IS ACQUIRED BUT IT DEALS WITH THE CATEGORY OF CASES WH ICH FALLS IN THE DESCRIPTION OF CAPITAL ASSETS; WHEREAS SECTION 10 (37) EXEMPTS SPECIFICALLY AN INCOME CHARGEABLE UNDER THE HEAD C APITAL GAINS ARISING FROM THE TRANSFER OF AGRICULTURAL LAND. A REFERENC E TO THE PROVISIONS UNDER SECTION 194LA OF THE ACT CLEARLY BRINGS OUT T HIS DISTINCTION. IN THE CASE OF HARI SINGH 302 CTR 458 (SC) WHILE DEALING W ITH THE SIMILAR QUESTION UNDER IDENTICAL SET OF FACTSUNDER SECTION 194LA OF THE ACT, HONBLE COURT SET ASIDE THE MATTER TO THE FILE OF T HE AO TO EXAMINE THE FACTS OF THE CASE AND TO APPLY THE LAW AS CONTAINED IN THE INCOME-TAX ACT. 8 HONBLE SUPREME COURT SPECIFICALLY DIRECTS THAT IN CASE THE LEARNED AO FINDS THAT THE COMPENSATION WAS RECEIVED IN RESPECT OF THE AGRICULTURAL LAND, THE TAX DEPOSITED WITH THE INCOME-TAX DEPARTM ENT SHALL BE REFUNDED TO THE ASSESSEE. HONBLE SUPREME COURT GA VE THE ABOVE DIRECTION AFTER NOTICING THE DECISION IN THE CASE O F GHANSHYAM (SUPRA). IN THIS SET OF CIRCUMSTANCES, IT DOES NOT ADMIT OF ANY DOUBT AS TO THE NATURE OF AMOUNT BY WAY OF INTEREST U/S 28 OF THE LAND ACQ UISITION ACT IN THE HANDS OF THE ASSESSEE OR THE APPLICABILITY OF THE I NCOME-TAX ACT TO SUCH AMOUNT. WE THEREFORE, DO NOT FIND ANY REASON TO SU STAIN THE ADDITION ON THIS SCORE IN THE ABSENCE OF ANY DISPUTE AS TO WHET HER THE INTEREST RECEIVED WAS UNDER SECTION 28 OF THE LAND ACQUISITI ON ACT. SUCH AN ADDITION CANNOT BE SUSTAINED AND THE SAME IS DIRECT ED TO BE DELETED. 14. NOW COMING TO THE ADDITION OF RS. 85 LACS, WHEN THE ASSESSEE PRODUCED THE BANK STATEMENTS OF THE CREDITORS, THE CORRECTNESS OF THE SAME IS NOT DISPUTED AND IT IS BASING ON SUCH STATE MENTS ONLY LD. CIT(A) CONCLUDED THAT THE CREDITORS HAVE BANK ACCOUNTS AND REGULAR TRANSACTIONS ARE REFLECTED THEREIN. LD. CIT(A), HOWEVER, DID NOT TAKE INTO CONSIDERATION THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE THAT BEING NOT AWARE OF THE IMPLICATIONS OF RECEIVING CASH LOANS UNDER THE PROVISIONS OF THE ACT, SUCH A COURSE WAS RESORTED TO, AND THE FACT OF REPA YMENT BY WAY OF BANKING CHANNELS WOULD LEND ANY AMOUNT OF SUPPORT T O THE CONTENTION OF THE ASSESSEE ABOUT THE GENUINENESS OF THE LOAN TRAN SACTIONS. IT IS AN ADMITTED FACT THATNO BANK STATEMENT OF THE ASSESSEE WAS PRODUCED BEFORE THE AUTHORITIES TO DEMONSTRATE THE FACT OF R EPAYMENT. LD. AR NOW SEEKS AN OPPORTUNITY OF PRODUCING SUCH MATERIAL FOR THE DETERMINATION OF JUST TAX LIABILITY OF THE ASSESSEE. 9 15. IT IS A FACT THAT THERE WAS NO OPPORTUNITY FOR THE AUTHORITIES BELOW TO CONSIDER THIS FACT OF THE REPAYMENT OF LOAN THRO UGH BANKING CHANNELS. ASSESSEE NOW DESERVES TO PRODUCE THE BANK STATEMENT S TO ESTABLISH SUCH A FACT. IN THE CIRCUMSTANCES, HAVING REGARD TO THE PLEA THAT THE ASSESSEE, ONLY BECAUSE OF THEIR IGNORANCE AS TO THE IMPLICATI ONS UNDER THE INCOME TAX ACT, OBTAINED THE CASH LOANS, WE ARE OF THE CON SIDERED OPINION THAT THIS ISSUE NEEDS TO BE SET-ASIDE TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION OF SAID FACT IN THE LIGHT OF THE M ATERIAL TO BE PRODUCED BY THE ASSESSEE TO PROVE THE FACT OF REPAYMENT.WE, ACC ORDINGLY, SET ASIDE THE FINDINGS OF THE AUTHORITIES BELOW ON THIS ASPEC T OF ADDITION OF RS. 85 LACS AND REMAND THE ISSUE TO THE FILE OF THE LEARNE D ASSESSING OFFICER FOR FRESH CONSIDERATION IN THE LIGHT OF THE MATERIAL TO BE PRODUCED BY THE ASSESSEE. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART AND FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20/10/2020 SD/- SD/- (B.R.R. KUMAR) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20/10/2020