RAIPUR REALITY PVT. LTD., V. INCOME TAX OFFICER,

TAXC/228/2024

AI Insights

The case involves Raipur Reality Pvt. Ltd., the appellant, contesting the taxability of compensation received for land acquired by NHAI, and procedural issues regarding the transfer of their case between Assessing Officers without proper authority under Section 127(1) of the Income Tax Act, 1961. The Income Tax Appellate Tribunal (ITAT) initially dismissed the appellant's appeal, leading to this challenge in the High Court of Chhattisgarh. The High Court found procedural errors in the ITAT's dismissal of the compensation tax issue but upheld the procedural validity of the case transfer between Assessing Officers due to the appellant's failure to challenge it in a timely manner.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 746495 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 05-05-2025
• Assessment Year: misc
• Other Referred Cases: Ajanta Industries Vs. CBDT, State of Kerala Vs. M. K. Kunhikannan, Janarddhan Reddy Vs. State of Hyderabad, Sultan Sadik Vs. Sanjay Raj Subba and Ors, Krishnadevi Malchand Kamathia and Ors Vs. Bombay Environmental Action Group
• Laws Referred To: Income Tax Act, 1961, National Highways Act, 1956, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Reassessment Act, 2013
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: AJAY KUMRANI
• Assessee Lawyers: S RAO
• Keywords: Assessment; Compensation; Income Tax; Land Acquisition; Transfer of Case
• Section: 143(3); 263; 260A; 127(1)

Judgement Text

"1 2025:CGHC:20549-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 228 of 2024 {Arising out of order dated 28.06.2024 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.241/RPR/2024} Raipur Reality Pvt. Ltd., E-76, G.K. Chambers, Sector-2, Devendra Nagar, Raipur (C.G.) ... Appellant. versus Income Tax Officer, Ward-3(1), Aayakar Bhawan, Raipur (C.G.) ... Respondent. For Appellant : Mr. S. Rajeshwar Rao, Advocate. For Respondent : Mr. Ajay Kumrani, Advocate. Hon'ble Shri Justice Sanjay K. Agrawal & Hon'ble Shri Justice Deepak Kumar Tiwari, JJ Judgment On Board (05/05/2025) Sanjay K. Agrawal, J 1. This appeal preferred under Section 260A of the Income Tax Act, 1961 (for short the \"Act of 1961\") was admitted for final hearing on 24.04.2025 by formulating the following substantial questions of law:- Digitally signed by AJAY KUMAR DWIVEDI Date: 2025.05.13 12:00:43 +0530 2 “1. Whether the finding recorded by the two authorities that the assessment order dated 10.10.2019 is not open to challenge on the ground of transfer of case under Section 127(1) of the Income Tax Act, 1961 i.e. transfer of assessment proceedings from one Assessing Officer (Income Tax Officer Ward No.4(1) Raipur) to another Assessing Officer (Income Tax Officer Ward No.3(1) Raipur) by incompetant authority? 2. Whether the Income Tax Appellate Tribunal is justified in dismissing the appeal of the appellant without deciding the appeal on merits, more particularly, the issue with regard to addition of Rs.65,04,107/- (wrongly mentioned as 'Rs.65,74,704/-' in the order dated 24.04.2025) received as compensation against the acquisition of land by NHAI to tax by recording a finding which is perverse to the record?\" 2. The aforesaid substantial questions of law arise for consideration on the following factual backdrop:- 3. The appellant/assessee is engaged in the real estate business. The return for the Assessment Year 2017-18 was filed by the assessee on 30.10.2017 declaring taxable income at NIL. During the year under consideration, the lands of the assessee situated at Abhanpur, Bhatgaon, Nimora were acquired under the National Highways Act, 1956. The assessee claimed a capital gain of Rs.3.41 3 Crores arising from the said transaction as exemption under Section 10 (37) of the Act of 1961 read with Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Reassessment Act, 2013 (for short \"Act 2013\"). The Assessing Officer completed the assessment under Section 143 (3) of the Act of 1961 on 10.10.2019 accepting the returned income, however, the Principal Commissioner Income Tax (PCIT) in exercise of his powers under Section 263 of the Act of 1961, set aside the said assessment by the order dated 11.02.2022, holding that the claim of the assessee was not tenable and directed for adjudication of the same afresh. The appellant challenged the order of the PCIT before the Income Tax Appellate Tribunal (ITAT) and ultimately the ITAT dismissed the appeal of the assessee and by order dated 17.08.2023 upheld the order of PCIT. In the meanwhile, on 28.03.2023, the Assessing Officer passed a fresh order in consequence of the directions issued by PCIT and by making the addition, dismissed the claim of the assessee qua exemption under Section 10 (37) of the Act of 1961 which was further affirmed by the Commissioner of Income Tax (Appeals) by order dated 26.02.2024 and subsequently also affirmed by the ITAT by order dated 28.06.2024, feeling dissatisfied with that order, the present appeal has been preferred by the appellant. 4. (i) Mr. S. Rajeshwar Rao, learned counsel appearing for the appellant would submit that during the period of assessment, on 4 08.08.2019 the assessment proceeding was transferred from Assessing Officer (Income Tax Officer Ward No.4 (1) Raipur) to Assessing Officer (Income Tax Officer Ward No.3 (1) Raipur) which is without jurisdiction, which could have been done only under Section 127 (1) of the Act of 1961 by the Principal Commissioner of Income Tax and in that view of the matter the entire proceeding is void ab initio. In support of his contention, he places reliance on the judgment rendered by the Supreme Court in the matter of Ajanta Industries Vs. CBDT 1 to submit that transfer of cases from one Assessing Officer to another Assessing Officer without passing the order under Section 127 (1) and without recording the reasons is against the provisions of the Act of 1961. Therefore, all subsequent order/proceeding is liable to be set-aside. (ii) Mr. S. Rajeshwar Rao would further submit that the appeal of the appellant has been dismissed without deciding the same on merits. He also submits that the ITAT was influenced with the fact that earlier appeal, questioning the order under Section 263 Act of 1961, was dismissed, whereas, it has nothing to do with the present appeal. He also submits that the present appeal ought to have been decided afresh on merits and the issue with regard to addition of Rs.65,04,107/-, received by the assessee as compensation, against the acquisition of land by NHAI, ought to 1(1976) 102 ITR 281 (SC) 5 have been considered on merits. Therefore, the appeal of the appellant deserves to be allowed and the matter is required to be remanded to the ITAT to decide the appeal afresh on merits. 5. Mr. Ajay Kumrani, learned counsel for the respondent submits that the assessment order dated 10.10.2019 was not challenged by the assessee and in first round of litigation, the assessee did not question the issue raised herein and ultimately, by the subsequent order of the ITAT, the assessment order dated 10.10.2019 has attained finality. He also submits that the order dated 08.08.2019, by which, the assessment proceeding was transferred from the Income Tax Officer No.4 (1), Raipur to Income Tax Officer 3(1) Raipur has also not been challenged by the assessee. As such, the said order has also attained finality. Subsequently, the appeal has also been decided by the CIT (Appeals) and affirmed by the ITAT in accordance with law. In view of such submission, learned counsel submits that present appeal has no merit and the same deserves to be dismissed. 6. We have heard learned counsel for the parties and considered their rival submissions and also went through the record with utmost circumspection. Answer to Substantial Question No.1 7. It is undisputed that earlier, the Income Tax Officer Ward No.4 (1) Raipur was considering the case being the Assessing Officer, 6 however, by the order dated 08.08.2019, the Income Tax Officer Ward No.4 (1), Raipur suo motu transferred the case to the Income Tax Officer Ward No.3 (1), Raipur. Thereafter, the Income Tax Officer Ward No.3 (1), Raipur passed the assessment order under Section 143 (3) of the Act of 1961 accepting the returned income of the assessee by the order dated 10.10.2019, which was set-aside by the PCIT by order dated 11.02.2022. Against the said order, the assessee preferred an appeal before the ITAT and the ITAT maintained the order dated 17.08.2023 passed by the PCIT. Subsequently, the Assessing Officer passed a fresh order on 28.03.2023 in compliance of the order passed by the PCIT, which has been affirmed by the CIT(Appeals) on 26.02.2024 as well as by the ITAT on 28.06.2024. Consequently, the order dated 08.08.2019 passed by the Assessing Officer has attained finality. Admittedly, before transferring the case from one Assessing Officer to other Assessing Officer, order could have been passed only by the competent Authority under Section 127 (1) of the Act of 1961, which confers power on the Principal Commissioner of Income Tax to transfer a case from one assessing officer to another assessing officer and also in light of decision of the Supreme Court in the matter of Ajanta Industries (Supra). In this case, the assessee allowed the order dated 08.08.2019 to become final and did not challenge the same being in the teeth of Section 127 (1) of the Act of 1961. However, the challenge of the appellant/assessee is that 7 since the order dated 08.08.2019 is ab initio void, therefore, the assessment order and all subsequent proceeding is non est in law. 8. In the matter of State of Kerala Vs. M. K. Kunhikannan2 relying upon the decision of Janarddhan Reddy Vs. State of Hyderabad3 their Lordships of Supreme Court have held that if a court acts without jurisdiction, its decision can be challenged in the same way as it would have been challenged if it had acted with jurisdiction and thus, observed as under:- \"Evidently, the appellate court in a case which properly comes before it on appeal, is fully competent to decide whether the trial was with or without jurisdiction, & it has jurisdiction to decide the matter rightly as well as wrongly. If it affirms the conviction and thereby decides wrongly that the trial court had the jurisdiction to try and convict it cannot be said to have acted without jurisdiction and its order cannot be treated as a nullity. *** *** *** It is well settled that if a court acts without jurisdiction, its decision can be challenged in the same way as it would have been challenged if it had acted with jurisdiction, i.e., an appeal would lie to the Ct. to which it would lie if its order was with jurisdiction.\" 9. In the matter of Sultan Sadik Vs. Sanjay Raj Subba and Ors 4, it has been held by the Supreme Court that the order may be void for one and voidable for other and an invalid order necessarily need not be non est, in a given situation it has to be declared as such. 2 (1996) 1 SCC 435 3 AIR 1951 SC 217 4 (2004) 2 SCC 377 8 10. Similarly, in the matter of Krishnadevi Malchand Kamathia and Ors Vs. Bombay Environmental Action Group5, relying on earlier two decisions of M. K. Kunhikannan (Supra) and Sultan Sadik (Supra) their Lordships have held that even if an order is void, it requires to be so declared by a competent forum and it is not permissible for any person to ignore the same merely because in his opinion the order is void. In the above judgment, the following was observed from Para 16 to 19, which are reproduced hereunder:- \"16. It is settled legal proposition that even if an order is void, it requires to be so declared by a competent forum and it is not permissible for any person to ignore the same merely because in his opinion the order is void. In State of Kerala v. M.K. Kunhikannan Nambiar Manjeri Manikoth Naduvil (dead) & Ors., AIR 1996 SC 906; Tayabbhai M. Bagasarwalla & Anr. v. Hind Rubber Industries Pvt. Ltd. etc, AIR 1997 SC 1240; M. Meenakshi & Ors. v. Metadin Agarwal (dead) by LRs. & Ors. (2006) 7 SCC 470; and Sneh Gupta v. Devi Sarup & Ors., (2009) 6 SCC 194, this Court held that whether an order is valid or void, cannot be determined by the parties. For setting aside such an order, even if void, the party has to approach the appropriate forum. 17. In State of Punjab & Ors. v. Gurdev Singh, Ashok Kumar, AIR 1991 SC 2219, this Court held that a party aggrieved by the invalidity of an order has to approach the court for relief of declaration that the order against him is inoperative and therefore, not binding upon him. While deciding the said case, this Court placed reliance upon the judgment in Smith v. East Ellore Rural District Council, [1956] 1 All ER 855 wherein Lord Radcliffe observed: 5 (2011) 3 SCC 363 9 \"....an order, even if not made in good faith is still an act capable of legal consequences. It bears no brand of invalidity on its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders.\" 18. In Sultan Sadik v. Sanjay Raj Subba & Ors., AIR 2004 SC 1377, this Court took a similar view observing that once an order is declared non-est by the Court only then the judgment of nullity would operate erga omnes i.e. for and against everyone concerned. Such a declaration is permissible if the court comes to the conclusion that the author of the order lacks inherent jurisdiction/competence and therefore, it comes to the conclusion that the order suffers from patent and latent invalidity. 19. Thus, from the above it emerges that even if the order/notification is void/voidable, the party aggrieved by the same cannot decide that the said order/notification is not binding upon it. It has to approach the court for seeking such declaration. The order may be hypothetically a nullity and even if its invalidity is challenged before the court in a given circumstance, the court may refuse to quash the same on various grounds including the standing of the petitioner or on the ground of delay or on the doctrine of waiver or any other legal reason. The order may be void for one purpose or for one person, it may not be so for another purpose or another person.\" 11. Coming to the facts of the present case, in light of the principles of law laid down by their Lordships of the Supreme Court in the above stated judgments, it is quite vivid that though the order dated 08.08.2019, transferring the case from one Assessing Officer to other Assessing Officer was not passed by the Principal 10 Commissioner of Income Tax/Competent Authority under Section 127 (1) of the Act of 1961, however, the said order was also not challenged by the appellant/assessee right in time. When the assessee questioned the order under Section 263 of the Act of 1961 passed by the PCIT before the ITAT, the said order was allowed to become final, as he failed to avail the opportunity to challenge the order dated 08.08.2019 branding the same to be void and without jurisdiction. Thus, the said order is binding on the appellant/assessee and he was required to challenge the order dated 08.08.2019 before the competent Authority which he has failed to do so. According to the principles laid down in Sultan Sadik (Supra), an invalid order necessarily need not be non est, in a given situation it has to be declared by the competent Court. As such, the appellant/assessee did not question the above order in accordance with law and allowed it to become final. Therefore, in the second round of litigation, the appellant cannot be allowed to contend that the order dated 08.08.2019 transferring the case from one Assessing Officer to the other Assessing Officer by the incompetent Authority is void non est, therefore, the entire proceeding would lapse. 12. For the foregoing, the substantial question of law No.1 is answered against the Appellant/Assessee and in favour of the Respondent/Revenue. Answer to Substantial Question No.2 11 13. Admittedly, the Assessing Officer has passed an order of assessment on 28.03.2023 directing addition of Rs.65,04,107/-, against which, the assessee preferred an appeal before the CIT (Appeals), which has been dismissed by the order dated 26.02.2024. Being aggrieved by the said order, the assessee has preferred an appeal before the ITAT and the ITAT has dismissed the appeal on 28.06.2024 without considering the issue as to whether addition of Rs.65,04,107/- received as compensation against the acquisition of land by NHAI is liable to tax. The ITAT has not considered the issue on merits and dismissed the appeal by observing that earlier the Tribunal has already dismissed the appeal of the appellant, while affirming the order of CIT (Appeals) under Section 263 of the Act of 1961. In our considered opinion, the order passed by the ITAT is contrary to the facts and law available on record. The ITAT by its earlier order dated 17.08.2023 has only affirmed the legality, validity and correctness of the order passed under Section 263 of the Act of 1961, consequent to which, the Assessing Officer has passed a fresh order of assessment on 26.02.2024. Therefore, the ITAT was required to decide the issue as to whether addition of Rs.65,04,107/- received as compensation against the acquisition of land by NHAI is liable to tax or not, however, the ITAT has not considered the same and wrongly relied on the earlier decisions, which had no nexus with the issue involved in the appeal preferred before the Tribunal. 12 14. Accordingly, the order dated 28.06.2024 passed by the ITAT is set- aside to the aforesaid extent. The matter is remitted to the ITAT to decide the issue as to whether addition of Rs.65,04,107/- received as compensation against the acquisition of land by NHAI is liable to tax, after affording an opportunity of hearing to both the sides. The ITAT shall decide the appeal expeditiously, preferably within a period of 3 months from the date of receipt of a copy of this order. In that view of the matter, the substantial question of law No.2 is answered in favour of the Appellant/Assessee and against the Respondent/Revenue. 15. In the result, the appeal is partly allowed to the extent indicated herein-above leaving the parties to bear their own cost(s). Sd/- Sd/- (Sanjay K. Agrawal) (Deepak Kumar Tiwari) Judge Judge ajay. "