Kanav Khanna V. The Commissioner of Income Tax II, Amritsar and others

CWP/24902/2013

AI Insights

The case involves Kanav Khanna, the petitioner, who challenged the tax demand raised by the Income Tax Department concerning compensation received from land acquisition. The petitioner argued that the compensation was exempt under Section 10(37) of the Income Tax Act, as the land was used for agricultural purposes. The Income Tax authorities had raised a demand of \\u20b91,28,36,480, which the petitioner contested. The High Court heard arguments regarding the applicability of Section 10(37) and the conditions under which an unconditional stay on the tax demand could be granted. The court decided to stay 50% of the tax liability pending the appeal's outcome, emphasizing the need for a detailed factual analysis by the appellate authority.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 675159 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 26-03-2014
• Assessment Year: misc
• Other Referred Cases: Valvoline Cummins Limited v. Deputy Commissioner of Income Tax and others, Soul v. Deputy Commissioner of Income Tax, Bhubaneswar Stock Exchange v. Union of India and others, Rajasthani Sammelan Sarvoday Balika Vidyalaya and another v. Assistant Director of Income Tax (Exemption) and others
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: DENESH GOYAL
• Assessee Lawyers: R SANTHARAM; KANHIYA SONI
• Keywords: Agricultural Land; Capital Gains; Compensation; Income Tax; Stay of demand; TDS
• Section: 143(2); 143(1); 2(14); 194LA; 10(37)

Judgement Text

"CWP No.24902 of 2013 (O&M) 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No.24902 of 2013 (O&M) Date of decision: 26.03.2014 Kanav Khanna ...Petitioner Versus The Commissioner of Income Tax II, Amritsar and others ...Respondents CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MS. JUSTICE ANITA CHAUDHRY Present: Mr. R.Santharam, Advocate and Mr. Kanhiya Soni, Advocate for the petitioner. Mr. Denesh Goyal, Advocate for the respondents. Ajay Kumar Mittal,J. CM No.3843 of 2014 1. The documents Annexures P.17 to P.19 alongwith the application are taken on record subject to all just exceptions. CM stands disposed of. CWP No.24902 of 2013 2. Prayer in this petition filed under Articles 226/227 for quashing the orders dated 22.10.2013, 18.9.2013 and 30.3.2013, Annexures P.1 to P.3 respectively passed by the respondent-authorities raising demand of ` 1,28,36,480/- against the petitioner. Further prayer has been made for restraining the respondents from taking coercive action for recovery of the amount till the disposal of the appeal of the petitioner before respondent Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 2 No.4. 3. Briefly, the facts necessary for adjudication of the controversy involved, as available on the record may be noticed. The petitioner is an individual. Return declaring income of ` 19,93,025/- was filed on 19.4.2010 which was processed under section 143(1) of the Act on 19.4.2011. The case was selected for scrutiny. Notice under section 143(2) of the Act was issued on 27.8.2011.The assessee is earning income from other sources. He claimed that land measuring 3 kanals 17 marlas bearing Khasra No.1034/3 and 2 kanals 8 marlas bearing Khasra No.1444 was acquired by the SDM- cum-competent authority-cum-Land Acquisition Collector, Amritsar and he received payments on account of acquisition of land. The total amount of compensation received was ` 8,57,41,680/- on which TDS of ` 96,80,881/- was deducted as per provisions of Section 194LA of the Act. In the return, the assessee showed long term capital gain at ` 8,32,58,783/- on the amount of compensation received which was claimed as exempt under Section 10 (37) of the Act. According to the petitioner, the capital gains, as per provisions of Section 10(37) of the Act could be treated as exempted if the land acquired was being used for agricultural purposes during the period of two years immediately preceding the date of transfer. The assessment order was passed vide order dated 30.3.2013 creating tax demand of `1,28,36,480/-. The assessee-petitioner filed an appeal before respondent No.4 against the assessment order on 8.4.2013. The assessee filed an application for stay of demand on 16.8.2013 before respondent No.2. The said application was disposed of vide order dated 18.9.2013, Annexure P.2 by the Deputy Commissioner of Income Tax, Circle V, Amritsar with the Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 3 direction that the assessee shall deposit a sum of ` 64,18,240/- i.e. 50% of total demand of ` 1,28,36,480/- by 30th September 2013 and the balance due of ` 64,18,240/- through two installments at the rate of ` 32,09,120/- each on or before 24.12.2013 and 24.3.2014 respectively. The application for stay of demand before the Commissioner of Income Tax II was dismissed vide order dated 22.10.2013, Annexure P.1. Hence the present petition. 4. We have heard learned counsel for the parties and perused the record. 5. Learned counsel for the petitioner submitted that the Assessing Officer had passed the assessment order raising a huge demand in an arbitrary manner without application of mind. It was also submitted that the respondents had erred in refusing to grant unconditional stay of collection and recovery of the demand contrary to the CBDT instructions. Reliance was placed on judgments in Valvoline Cummins Limited v. Deputy Commissioner of Income Tax and others, (2008) 307 ITR 103 (Delhi), Soul v. Deputy Commissioner of Income Tax, (2010) 323 ITR 305 (Delhi), Bhubaneswar Stock Exchange v. Union of India and others, (2006) 283 ITR 562 (Orissa) and Rajasthani Sammelan Sarvoday Balika Vidyalaya and another v. Assistant Director of Income Tax (Exemption) and others, (2013) 350 ITR 349 (Bom.). It was further argued that the petitioner was carrying on agricultural activities on the land which was acquired in respect of which he had received compensation and the said amount was thus exempt under Section 10(37) of the Act. It was urged that in such circumstances, demand of tax raised by the respondents was uncalled for and stay of demand ought to have been allowed by the Assessing Officer Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 4 and the Commissioner of Income Tax. 6. On the other hand, learned counsel for the respondents besides supporting the impugned order submitted that the petitioner was not entitled for benefit under the provisions of Section 10(37) of the Act. 7. The primary dispute in this case relates to whether in the facts and circumstances of the case, the petitioner-assessee is entitled to the grant of unconditional stay of recovery of demand in view of his claim that he is entitled to benefit under Section 10(37) of the Act on the amount of compensation which was received on acquisition of land. 8. In the present case, the petitioner-assessee received a total amount of ` 8,57,41,680/- as compensation out of which TDS of ` 96,80,881/- was deducted as per provisions of Section 194LA of the Act. The assessee showed long term capital gain of ` 8,32,58,783/- on the amount of compensation in the income tax return. As per provisions of Section 10(37) of the Act, the capital gains could be treated as exempted if the land acquired was being used for agricultural purposes during the period of two years immediately preceding the date of transfer. It may be noticed that from perusal of Annexure P.17, return for the assessment year 2007-08, in Column No.24, agricultural income shown was nil whereas in the computation chart appended alongwith the said Annexure, agricultural income has been shown to be ` 4900/- only. Further on a query being put to the learned counsel for the petitioner as to whether the land which was acquired was not capital asset within the meaning of Section 2(14) of the Act, he was unable to dispute that it was falling within the limits of the Municipality of Amritsar. In such a situation, it cannot be conclusively held Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 5 that agricultural activities were being carried on the land and thus, the petitioner was entitled for the benefit under Section 10(37) of the Act. Moreover, it is a question of fact which is required to be determined on appreciation of material before the appellate authority. In such a situation, we do not consider it a fit case for grant of stay of recovery of entire demand. Accordingly, in the interest of justice, we deem it appropriate to direct that there shall be interim stay of recovery of 50% of the tax liability during the pendency of the appeal, which is stated to be fixed for hearing on 9.4.2014. The judgments relied upon are based on individual fact situation involved therein. Moreover, it may be noticed that with regard to the grant of interim prayer, there is no strict principle of law or precedent. 9. In view of the above, the writ petition stands disposed of in the manner indicated above. (Ajay Kumar Mittal) Judge March 26, 2014 (Anita Chaudhry) 'gs' Judge Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh "