K MAHENDAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal is by the assessee challenging the order of the Tribunal on the following substantial questions of law: " (i ) Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was right in law in holding that the sum of Rs. 2,02,624/- has to be assessed as "capital gains" in the assessment year 1991-92 under Section 45 (5) (b)of the Income-tax Act, 1961? (ii) Whether the Income-tax Appellate Tribunal on the facts and circumstances of the case was right in law in upholding the applicability of Section 148 of the Income-tax Act, 1961 especially when all the facts were placed before the assessing authority even while filing the return and at the assessment stage itself?

(2.) THE assessee and his brothers received certain lands in a partition in the year 1956 made by their father who died in the year 1969. THE said lands were acquired by the government in the land acquisition proceedings. THE assessee received compensation from the Government for the first time in the Assessment year 1984-85. THE assessee went on appeal against the compensation granted under the acquisition proceedings before the Sub Court, Poonamallee , which ordered additional compensation together with interest. Both the assessee as well as the State went on appeal before the High Court. Till the assessment year 1990-91, the additional compensation received was admitted in the returns. In the Assessment year 1991-92, the assessee received additional compensation of Rs. 2 ,02,624 / -. THE assessee claimed exemption of this compensation by making an entry in Part-IV of the income tax return. In the proceedings taken under Section 148, the assessing authority held that in view of the insertion of the Section 45 (5) (b) with effect from the Assessment Year 1988-89, the additional compensation of rs. 2,02,624/- received by the assessee was taxable under Section 45 (5) (b ). It was pointed out that the State Government obtained stay from the High Court, Madras; that it ordered release of 50% of the enhanced compensation.

(3.) BY order dated 14. 11. 1995, the Commissioner of Income tax (Appeals) allowed the appeal. On the question of reopening the assessment, he held that the Assessing Officer was within his jurisdiction to do so. The commissioner of Income Tax (Appeals) also noted that the High Court, in its order, allowed the assessee to withdraw a part of the amount deposited by the Government. Thereafter, in the appeal preferred before the Apex Court as against the order of this Court in its order dated 25. 7. 1990, the Supreme Court allowed the withdrawal of the said amount of 50% of compensation on the claimant assessee filing a written undertaking to return the same with interest if called upon. On the question of applicability of Section 45 ( 5 ) (b), the commissioner of Income Tax (Appeals) agreed with the assessee that the question as regards the right to enhanced compensation was still a matter to be adjudicated upon by the High Court, and hence the assessee did not have the right to receive the enhanced compensation amount. The question of capital gains could be considered in the year in which the matter was finally decided by the High Court. In so holding, the Commissioner of Income Tax (Appeals) followed the decision of the Supreme court reported in 161 ITR 534 (CIT Vs. HINDUSTAN housing & LAND DEVELOPMENT TRUST ). Thus, on merits, the Commissioner of income Tax (Appeals) allowed the appeal.