COMMISSIONER OF INCOME TAX Vs. SHARDA KOCHHAR

JUDGEMENT

(1.) THIS appeal by the Revenue under Section 260A of the Income Tax Act, 1961, (Act, for short) pertains to assessment year 1988 -99. By order dated 9th January, 2002, the following substantial questions of law were admitted for adjudication: -

(2.) THE respondent -assessee is legal representative of one B.K. Kochhar. The said B.K. Kochhar had filed original return on 27th July, 1988 declaring business income of Rs.17,693.60. Subsequently, two notices, under Section 148 dated 8th March, 1991 and 20th March, 1991, were issued and served on 17th March, 1991 and 27th March, 1991, respectively. These notices were, however, challenged on the ground of legality. The Assessing Officer thereafter issued another notice dated 26 th March, 1993, under Section 148, after recording reasons in the order sheet dated 15th December, 1992. The assessee filed a return revising/enhancing his income to Rs.23,750/ -. The return mentioned that the assessee had received compensation of Rs.72,80,752/ - against a bank guarantee and Rs.1,20,466/ - as initial compensation with interest. It was claimed that these amounts were not taxable as the question of enhancement was pending challenge before the Supreme Court. The Assessing Officer rejected the said submission and brought to tax Rs.72,80,752/ - and Rs.1,20,466/ - observing that the assessee's father late H.R. Kochhar had Bhumidari rights in agricultural land at village Masudpur, Delhi, which was acquired by the Government under Section 4 of the Land Acquisition Act, 1894. Not satisfied with the compensation granted, proceedings for enhancement of compensation were initiated and enhanced compensation was awarded by the Additional District Judge, Delhi on 7 th July, 1987. On further appeal, by an interim order dated 9th March, 1988, the Delhi High Court directed Union of India to pay enhanced compensation awarded on 7th July, 1987, upon furnishing a bank guarantee. Against the said direction, Union of India had preferred appeal before the Supreme Court, which was pending at the time when the assessment order was passed. The Assessing Officer held that the decision in the case of Commissioner of Income Tax Vs. Hindustan Housing and Land Development Trust, (1986) 161 ITR 524 (SC) cannot apply in view of the provisions of newly enacted Section 45(5) inserted with effect from 1st April, 1988. He accordingly computed the total taxable income as Rs.67,71,560/ -.

(3.) THE respondent -assessee did not succeed in the first appeal, but the Tribunal by the impugned order dated 25 th September, 2000 accepted the assessee's contention that Rs.72,80,752/ - was not taxable in the year in question, inter alia, relying upon an earlier order dated 23rd July, 1998, passed in the case of K.K. Kochhar. Copy of this order dated 23rd July, 1998 has been placed on record. The said order takes note of the decision of the Delhi High Court in the case of Harish Chander, 154 ITR 473 and CIT Vs. Devki Nand, 138 ITR 225 and it was held that Section 45(5) would not be applicable as the money had been paid on furnishing of bank guarantee etc.