INCOME TAX ACT, 1961

Section 263

Land Acquisition Act, 1894 - Sections 28 & 34

Revision under section 263 - Erroneous and prejudicial order - Interest on account of delay payment of enhanced compensation on compulsary acquisition of agricultural land -

The Pr. CIT initiated revisionary procedings under section 263 on ground that assessee claimed interest of Rs 28,525.90 under section 288. Land acauisition Act, 1894 as exempt under section 10(37) of IT Act and AO accepted the ROI. He formed the opinion that the AO had completed the assessment without carrying out necessary and proper enquiry which he ought to have carried out in respect of the treatment of interest received on compensation or enhanced compensation. He therefore, issued show cause notice dated 16-1-2023 under section 263(1) to which the assessee responded vide letter dated 14-2-2023. Assessee submitted that AO on examination of the facts on record and after making all possible enquiries had accepted his claim, then such an order of assessment could not be regarded as erroneous. Held: Interest paid on the excess amount under section 28 of LAA depends upon a claim by a person whose land was acquired whereas interest under section 34 of LAA was for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under section 28 was part of the amount of compensation, whereas interest under section 34 was only for delay in making payment after the compensation amount was determined. Interest under section 28 was a part of enhanced value of the land which was not the case in the matter of payment of interest under section 34. It was thus evident that the view taken by AO that interest under section 28 of Land Acquisition Act received by the assessee was exempt under section 10(37) was not contrary to law. Hence, the order of the Pr.CIT was not sustainable.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2018-19

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