Appeal Against Tax Assessment Order Dismissed by National Faceless Appeal Centre

• An appeal has been lodged against the order dated 26-08-2022 issued by the National Faceless Appeal Centre (NFAC) in Delhi for the assessment year 2016-17. The appellant contests the decision of the Income Tax Officer, Ward 1(2)(3) in Rajkot, which resulted in the taxation of interest granted by the Land Acquisition Officer under section 28 of the Land Acquisition Act. The appellant contends that the addition of Rs. 51,31,595 to their total income under section 56 was erroneous and based on a misinterpretation of Supreme Court judgments.

• The grounds of appeal outlined by the appellant include:

1. Disagreement with the taxation of interest on enhanced compensation under section 56(2)(viii).
2. Reservation of rights to modify or supplement additional grounds during the appeal process.

• The appellant initially declared nil income of Rs. 6,10,530 on 22-03-2017. However, the case was flagged for scrutiny due to discrepancies between reported receipts in schedule 0S of the Income Tax Return (ITR) and receipts in 26AS under section 193, as well as substantial agricultural income. Following the issuance of notices under section 143(2) on 19-09-2017, the appellant's Chartered Accountant and Authorized Representative submitted a response on 18-10-2018. The Assessing Officer concluded that the interest component of the enhanced compensation should be taxed under the head "income from other sources" as per section 56(2)(viii).

• The appellant, aggrieved by the assessment order, appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the decision of the Assessing Officer. Despite notices served to the appellant, they failed to appear at the hearing, leading to the appeal proceeding based on submissions made before the Assessing Officer and CIT(A).

• During the proceedings, the Departmental Representative (D.R.) presented written submissions, arguing that interest on enhanced compensation should be taxable under section 56(2)(viii) and 57(iv) rather than exempt under section 10(37). The D.R. cited various judicial precedents, including recent judgments, to support this stance. Notably, the D.R. referenced the decision of the Hon'ble Supreme Court in the case of Bikram Singh vs. Land Acquisition Collector, affirming the taxability of interest under section 28 of the Land Acquisition Act.

• After considering the arguments from both parties and reviewing relevant legal precedents, the appeal was dismissed by the authorities. The decision rested on the applicability of the Supreme Court's ruling in Bikram Singh, which deemed interest under section 28 as a revenue receipt subject to taxation. Consequently, the appeal filed by the appellant was rejected.

• In conclusion, the appeal against the tax assessment order, concerning the taxation of interest on enhanced compensation, was dismissed by the National Faceless Appeal Centre, affirming the taxability of the interest component under section 56(2)(viii) and 57(iv) of the Income Tax Act.

Topic- Jayantilal Paghadal Versus Income Tax Officer

Court-ITAT-Rajkot

Date-13/02/2023

Team Taxonation

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