Income-tax Appeal No. 955 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income-tax Appeal No. 955 of 2008 Date of decision: 27.10.2010 The Commissioner of Income Tax Panchkula --- Appellant Versus Smt. Rani Shakuntla Devi --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Yogesh Putney, Senior Standing Counsel for the Revenue. Mr. H.N. Mehtani, Advocate for the respondent-assessee. --- AJAY KUMAR MITTAL, J. This order will dispose of Income-tax Appeal Nos. 955 and 956 of 2008 as the substantial questions of law raised therein are common. The facts have been taken from Income Tax Appeal No. 955 of 2008. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the Revenue against the order dated 7.7.2008, passed by the Income Tax Appellate Tribunal, Chandigarh Bench (B), Chandigarh (in short “the Tribunal”) in ITA No. 990/CHANDI/2007 in respect of the assessment year 2003-04, raising the following substantial questions of law for determination by this Court: Income-tax Appeal No. 955 of 2008 2 1- Whether on the basis and in the circumstances of the case, the Hon’ble ITAT was right in cancelling the order of the Commissioner of Income Tax u/s 263 to bring to tax an enhanced compensation of Rs. 1,41,59,163/- by ignoring the provisions of section 45(5) of the I.T. Act, 1961 and also the fact that the compensation is received and retained in A.Y. 2003-04? 2- Whether the Hon’ble ITAT was right in holding that provisions under Section 45(5)(c) and 155(16) are not applicable with retrospective effect for the A.Y. 2003-04 and are contrary to the ratio laid down by the Hon’ble Supreme Court in 224 ITR 677 in Allied Motors (P) Ltd.? In short, the facts necessary for adjudicating the appeal are that the assessee-respondent derives income from interest. She filed return declaring income of Rs. 3,46,480/- on 30.9.2003. The assessing officer, however, during the proceedings of assessment found that the assessee had received a sum of Rs. 2,27,32,695/- on account of enhanced compensation and amount of interest on enhanced compensation, i.e. Rs. 1,41,49,163/- and Rs. 86,11,120/- respectively. A notice dated 5.8.2005, under Section 148 of the Act was issued to the assessee calling upon her to respond why the amount of interest of Rs. 86,11,120/- received by her and which had escaped assessment be not included in her income. The assessee furnished reply on 11.2.2005. The assessment proceedings under Section 143(3) were thereafter completed on 29.8.2005 by adding the amount of interest in the following manner: Income already processed : Rs.3,46,490/- On account of interest due on the compensation payable to the assessee : Rs. 86,11,120/- Taxable Income : Rs.89,57,600/- The Commissioner of Income (in short the “CIT”), in exercise of revisional jurisdiction under Section 263 of the Act noticed that the enhanced amount of compensation of Rs. 1,41,49,163/- was received by the assessee in the financial year Income-tax Appeal No. 955 of 2008 3 2002-03 relevant to the assessment year 2003-04 besides Rs. 86,11,120/- as interest on the enhanced compensation. The CIT observed that the order of the assessing officer to that extent was erroneous, and accordingly issued a notice under Section 263(1) of the Act to the assessee. The CIT, thus, vide order dated 7.11.2007, Annexure A-2, directed the assessing officer to modify the assessment order dated 29.8.2005 accordingly. The assessee challenged the order dated 7.11.2007 passed by the CIT under Section 263 of the Act before the Tribunal. The Tribunal vide its order dated 7.7.2008 cancelled the order of the CIT observing that the matter of award of enhanced compensation payable to the assessee in respect of her acquired land had not yet been finalized and further that the assessee had been allowed to retain enhanced compensation and earn interest thereon would be of no consequence. It is how the present appeal has been filed by the Revenue raising the aforesaid substantial questions of law for determination by this Court: We have heard learned counsel for the parties and perused the record. The primary question that requires answer is, whether the enhanced compensation is exigible to capital gains tax in the year of receipt irrespective of pendency of litigation relating to award of compensation. The issue is no longer res integra. The said question came up before the Hon’ble Supreme Court in Commissioner of Income-tax v. Ghanshyam (HUF) [2009] 315 ITR 1 (SC) and the same was decided in favour of the Revenue by holding that irrespective of the fact whether litigation with regard to award of compensation had attained finality or not, under Section 45(5)(b) of the Act, which was inserted retrospectively w.e.f. 1.4.1988, taxability of income shall be in the year of receipt. In view of the above, the CIT had rightly invoked revisional jurisdiction under Section 263 of the Act. Accordingly, we set aside the order of the Tribunal and answer question No.1 in favour of the Revenue and remit the matter to the Tribunal for Income-tax Appeal No. 955 of 2008 4 passing orders in accordance with law. Question No.2 has been rendered academic in view of answer to question No.1. The parties through their counsel are directed to appear before the Tribunal on 16.12.2010. The appeals stand disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) October 27, 2010 JUDGE *rkmalik*