Decided on March 31,1994



R.V. Easwar, Judicial Member - (1.) THE appeal relates to the assessment year 1987-88 for which the accounting year ended on 31 -3-1987. THE assessee filed the return of income on 12-8-1987. It is common ground that in the covering letter it was stated by the assessee that it received enhanced compensation and interest thereon in respect of the agricultural land acquired by the Government. It was also pointed out that against the judgment of the sub-ordinate Judge, Bhagalpur, granting enhanced compensation, the State of Bihar had filed an appeal which was pending before the High Court. It was claimed that till final decision of the High Court, the compensation cannot be taxed. THE original assessment was completed under Section 143(1) of the Act accepting the income returned. Subsequently the ITO while completing the assessment for the assessment year 1988-89 noticed that the assessee had received enhanced compensation on 5-8-1986 which should have been brought to tax for the assessment year under appeal. He therefore recorded reasons for reopening the assessment for the assessment year under appeal and issued notice under Section 148. In response thereto, the assessee filed return of income showing income as assessed originally and pointed out that the enhanced compensation was not included in the original return since the matter had not acquired finality.
(2.) The ITO did not accept the assessee's contention. According to him, both the enhanced compensation as well as the interest on the compensation were taxable in the year under appeal. Regarding the enhanced compen sation, the ITO also took the view that the same was taxable as capital gains under Section 45(5) of the Act, which according to him was applicable even for the assessment year under appeal. In this view of the matter, the compensation of Rs. 5,29,744 and the interest for the period from 1967 up to 1986 being Rs. 11,56,008 were brought to tax. The assessee questioned the reassessment both on the grounds of jurisdiction as well as on merits. The CIT(A) was of the view that the compensation amount which was received during the year of account was taxable under Section 45(5). Regarding the contention that on account of the State's appeal against the enhancement of the compensation no income can be stated to have arisen to the assessee, the CIT(A) referred to the judgment of the Calcutta High Court in CITv. Sakil Ahmed [1988] 172 ITR 498 40 Taxman 265 and rejected the same. As regards the interest, the CIT(A), agreed with the assessee that it is taxable only in the respective years on accrual basis and cannot be brought to tax in the year of receipt. However, he directed the ITO to re-open the earlier assessment years for taxing the interest income.
(3.) MR. K.N. Jain, the learned Counsel appearing for the assessee took up various contentions against the jurisdiction of the ITO to re-open the assessment as well as on the merits of the addition of Rs. 5,29,744. He first submitted that complete particulars regarding the receipt of the compensation during the year were furnished in the covering letter filed along with the return. Therefore, according to him, there was no failure on the part of the assessee to furnish complete particulars regarding the compensation. His next contention, based on the decision of the Supreme Court in CIT v. Hindustan Housing & Land Development Trust Ltd. [1986] 161 ITR 524 27 Taxman 450A was that the entire additional compensation was pending in appeal before the High Court and therefore no income can be stated to have arisen to the assessee. He pointed out that the judgment of the Calcutta High Court, cited by the CIT(A) was really against the department's contention. Alternatively MR. Jain submitted that even assuming that the additional compensation was income, neither Section 147(a) nor Section 147(b) was applicable. He pointed out that there was only a change of opinion on the part of the ITO, based on the assessment proceedings for the assessment year 1988-89, which will not confer jurisdiction to re-open the assessment under Section 147(b). He further contended that Section 45(5) of the Act was not applicable for the year under appeal and was made applicable only from the assessment year 1988-89, and therefore, the reliance on that provision was misconceived.;

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