Kanav Khanna vs Commissioner of Income Tax

Ajay Kumar Mittal, J.

C.M. No. 3843 of 2014

The documents, annexures P.17 to P.19, along with the application are taken on record subject to all just exceptions. CM stands disposed of.

C.W.P. No. 24902 of 2013

Prayer in this petition filed under articles 226/227 for quashing the orders dated October 22, 2013, September 18, 2013, and March 30, 2013, annexures P.1 to P.3, respectively, passed by the respondent-authorities raising demand of Rs. 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 No. 4.

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 an income of Rs. 19,93,025 was filed on April 19, 2010, which was processed u/s 143(1) of the Act on April 19, 2011. The case was selected for scrutiny. Notice u/s 143(2) of the Act was issued on August 27, 2011. The assessee is earning income from other sources. He claimed that the 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 Rs. 8,57,41,680 on which TDS of Rs. 96,80,881 was deducted as per the provisions of section 194LA of the Act. In the return, the assessee showed long-term capital gains at Rs. 8,32,58,783 on the amount of compensation received which was claimed as exempt u/s 10(37) of the Act. According to the petitioner, the capital gains, as per the 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 March 30, 2013, creating tax demand of Rs. 1,28,36,480. The assessee-petitioner filed an appeal before respondent No. 4 against the assessment order on April 8, 2013. The assessee filed an application for stay of demand on August 16, 2013, before respondent No. 2. The said application was disposed of, vide order dated September 18, 2013, annexure P.2 by the Deputy Commissioner of income tax, Circle V, Amritsar, with the direction that the assessee shall deposit a sum of Rs. 64,18,240, i.e., 50 per cent, of the total demand of Rs. 1,28,36,480 by September 30, 2013, and the balance due of Rs. 64,18,240 through two installments at the rate of Rs. 32,09,120 each on or before December 24, 2013, and March 24, 2014, respectively. The application for stay of demand before the Commissioner of income tax-II was dismissed, vide order dated October 22, 2013, annexure P.1. Hence, the present petition.

We have heard learned counsel for the parties and perused the record.

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 Central Board of Direct Taxes instructions. Reliance was placed on the judgments in Valvoline Cummins Limited Vs. Deputy Commissioner of Income Tax, Additional Commissioner of Income Tax, Commissioner of Income Tax-VI and Chief Commissioner of Income Tax, , Soul Vs. Deputy Commissioner of Income Tax, , Bhubaneswar Stock Exchange Vs. Union of India (UOI) and Others, and Rajasthani Sammelan Sarvoday Balika Vidyalaya and Another Vs. Assistant Director of Income Tax Exemption I (1) and Others, 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 u/s 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 and the Commissioner of income tax.

On the other hand, learned counsel for the respondents besides supporting the impugned order submitted that the petitioner was not entitled for the benefit under the provisions of section 10(37) of the Act.

The primary dispute in this case relates to whether, in the facts and in the 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 the benefit u/s 10(37) of the Act on the amount of compensation which was received on acquisition of land.

In the present case, the petitioner-assessee received a total amount of Rs. 8,57,41,680 as compensation out of which TDS of Rs. 96,80,881 was deducted as per the provisions of section 194LA of the Act. The assessee showed long-term capital gains of Rs. 8,32,58,783 on the amount of compensation in the income tax return. As per the 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 a 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 along with the said annexure, agricultural income has been shown to be Rs. 4,900 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 that agricultural activities were being carried on the land and, thus, the petitioner was entitled for the benefit u/s 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 the entire demand. Accordingly, in the interest of justice, we deem it appropriate to direct that there shall be interim stay of recovery of 50 per cent, of the tax liability during the pendency of the appeal, which is stated to be fixed for hearing on April 9, 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. In view of the above, the writ petition stands disposed of in the manner indicated above.