Commissioner of Income Tax vs Kartar Singh

Rakesh Kumar Garg, J.—The assessee (sic?Revenue) has filed the present appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as the "Act") against the order dated 14-6-2007, passed by the Tribunal, Delhi Bench G, New Delhi, in ITA No. 547/Del/2006 for the assessment year 1998-99.

The assessee had received interest on enhanced compensation amounting to Rs. 11,89,053 on 26-10-1996, consequent upon acquisition of land by the Land Acquisition Officer, HUDA, Gurgaon. The assessment for the assessment year 1997-98 was completed at an income of Rs. 12,49,410 vide order dated 31-1-2003, u/s 143(3) of the Act against the returned income of Rs. 1,70,640.

Aggrieved against the assessment order, assessee preferred an appeal before the Commissioner (Appeals) (hereinafter referred to as the Commissioner (Appeals)), who vide his order dated 3-3-2004, dismissed the appeal and confirmed the additions made in the assessment order.

The penalty proceedings u/s 271(1)(c) of the Act were initiated in terms of notice dated 31-1-2003, requiring the assessee to show cause as to why penalty should not be imposed. Vide letter dated 4-2-2005, the assessee was given an opportunity to show cause as to why penalty u/s 271(1)(c) of the Act should not be imposed. The counsel for the assessee by writing a letter requested that penalty proceedings u/s 271(1)(c) of the Act be stayed till the decision of the Income Tax Appellate Tribunal, Delhi {hereinafter referred to as the Tribunal) in his appeal filed against the order of the Commissioner (Appeals).

The Income Tax Officer, Ward 4, Gurgaon, vide order dated 31-3-2005, imposed a penalty upon the assessee u/s 271(1)(c) of the Act on account of furnishing inaccurate particulars of income leading to concealment of income.

Aggrieved against the said order, the assessee filed an appeal before the Commissioner (Appeals), Panchkula, who vide order dated 21-11-2005, held that interest on enhanced compensation is taxable on accrual basis and, therefore, in such a situation, there was no deliberate defiance of law proved against the assessee. Consequently, the penalty order u/s 271(1) (c) of the Act was cancelled.

Aggrieved against the order of the Commissioner (Appeals), the revenue filed an appeal before the Tribunal, which was dismissed vide order dated 14-6-2007, observing as under:

...in its recent decision rendered by Delhi Special Bench of Tribunal in the case of Dy. CIT v. Padam Prakash (HUF) (2006) 10 SOT 1 (Del)(SB), it has been held that chargeability of interest income on enhanced compensation to tax is still governed by the decision of Honble Supreme Court in the case of Smt. Rama Bai v. CIT (supra) as well as in the case of Commissioner of Income Tax, West Bengal-II, Calcutta Vs. Hindustan Housing and Land Development Trust Ltd., in the absence of any change in the relevant statutory provision and accordingly, the same is to be assessed on accrual basis from year to year. This decision of the Special Bench of Tribunal as well as the judicial pronouncements of Hon"ble Apex Court relied upon by the Tribunal in the said decision clearly shows that the claim of the assessee about the chargeability of interest on enhanced compensation on accrual basis was based on a possible view and making of such claim bona fide on the basis of a possible view, in our opinion, could not be treated as concealment of its income by the assessee or furnishing of inaccurate particulars of such income so as to attract the penal provisions of Section 271(1)(c) as rightly held by the learned Commissioner (Appeals)

The revenue has challenged the order dated 14-6-2007 passed by the Tribunal and has sought to raise the following substantial questions of law:

Whether on the facts and circumstances of the case, the Honble Tribunal was right in holding that the view of assessee regarding non-taxability of interest on enhanced compensation was bona fide ?

That the Honble Tribunal erred in deciding that proving contumacious intent is an essential ingredient in levy of penalty in contravention of the provisions of a civil statute like Income Tax Act in spite of there being so many judgments that breach of a civil obligation attracts levy of penalty whether the contravention was made by the defaulter with any guilty intention or not ?

That the order of the Honble Tribunal is in contravention of the many judicial pronouncements including Thirupathy Kumar Khemka and Raj Kumar Khemka Vs. The Commissioner of Income Tax,

That the Honble Tribunal at least should have confirmed the penalty to the extent of interest on enhanced compensation received on accrual basis as the assessee had not filed return voluntarily ?

Shri Yogesh Putney, learned Counsel for the revenue has very fairly conceded that question Nos. 1 and 2 as raised by the revenue have already been answered by the judgment of this Court passed in CIT v. Hardwari Lal (HUF) and Ors. IT Appeal No. 490 of 2007, decided on 26-3-2008 and in CIT v. Tek Ram (HUF) IT Appeal No. 579 of 2007, decided on 4-2-2008 respectively. He has not addressed any arguments with regard to question Nos. 3 and 4 and has stated that in fact these questions are covered by question No. 2 only.

In ITA No. 490 of 2007, decided on 26-3-2008 (supra), this Court has held that interest on enhanced compensation would not accrue till the issue of enhanced compensation is finally decided and thereafter on attaining the finality of determination of enhanced compensation by the Court, the interest accrued to the assessee has to be spread over on an annual basis right from the date of delivery of possession till the date of order of the court on the time basis. In IT Appeal No. 579 of 2007 (supra) on similar facts, it was held by this Court that the matter relating to enhanced compensation and interest was still in dispute and the same was a highly debatable issue as two views were clearly possible on the said issue and thus the claim of the assessee was based on one possible view (although the said claim was not accepted in the quantum proceedings on a difference of opinion) and therefore, such claim made by the assessee could not be treated as concealment of income by the assessee or furnishing of inaccurate particulars of such income so as to attract the penal provisions of Section 271(1)(c) of the Act.

In view of the above facts, we are not inclined to interfere in the impugned order passed by the Tribunal. The appeal being without any merit, is dismissed.