Kanav Khanna vs The Commissioner Of Income Tax Ii

CWP No.24902 of 2013 (O&M) 1

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

CWP No.24902 of 2013 (O&M) Date of decision: 26.03.2014

Kanav Khanna

...Petitioner

Versus

The Commissioner of Income Tax II, Amritsar and others

...Respondents

CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL HON'BLE MS. JUSTICE ANITA CHAUDHRY

Present: Mr. R.Santharam, Advocate and Mr. Kanhiya Soni, Advocate for the petitioner.

Mr. Denesh Goyal, Advocate for the respondents.

Ajay Kumar Mittal,J.

CM No.3843 of 2014 1. The documents Annexures P.17 to P.19 alongwith the

application are taken on record subject to all just exceptions. CM stands

disposed of.

CWP No.24902 of 2013

2. Prayer in this petition filed under Articles 226/227 for quashing

the orders dated 22.10.2013, 18.9.2013 and 30.3.2013, Annexures P.1 to P.3

respectively passed by the respondent-authorities raising demand of `

1,28,36,480/- against the petitioner. Further prayer has been made for

restraining the respondents from taking coercive action for recovery of the

amount till the disposal of the appeal of the petitioner before respondent

Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 2

No.4.

3. Briefly, the facts necessary for adjudication of the controversy

involved, as available on the record may be noticed. The petitioner is an

individual. Return declaring income of ` 19,93,025/- was filed on 19.4.2010

which was processed under section 143(1) of the Act on 19.4.2011. The case

was selected for scrutiny. Notice under section 143(2) of the Act was issued

on 27.8.2011.The assessee is earning income from other sources. He

claimed that land measuring 3 kanals 17 marlas bearing Khasra No.1034/3

and 2 kanals 8 marlas bearing Khasra No.1444 was acquired by the SDM-

cum-competent authority-cum-Land Acquisition Collector, Amritsar and he

received payments on account of acquisition of land. The total amount of

compensation received was ` 8,57,41,680/- on which TDS of ` 96,80,881/-

was deducted as per provisions of Section 194LA of the Act. In the return,

the assessee showed long term capital gain at ` 8,32,58,783/- on the amount

of compensation received which was claimed as exempt under Section 10

(37) of the Act. According to the petitioner, the capital gains, as per

provisions of Section 10(37) of the Act could be treated as exempted if the

land acquired was being used for agricultural purposes during the period of

two years immediately preceding the date of transfer. The assessment order

was passed vide order dated 30.3.2013 creating tax demand of

`1,28,36,480/-. The assessee-petitioner filed an appeal before respondent

No.4 against the assessment order on 8.4.2013. The assessee filed an

application for stay of demand on 16.8.2013 before respondent No.2. The

said application was disposed of vide order dated 18.9.2013, Annexure P.2

by the Deputy Commissioner of Income Tax, Circle V, Amritsar with the

Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 3

direction that the assessee shall deposit a sum of ` 64,18,240/- i.e. 50% of

total demand of ` 1,28,36,480/- by 30th September 2013 and the balance due

of ` 64,18,240/- through two installments at the rate of ` 32,09,120/- each

on or before 24.12.2013 and 24.3.2014 respectively. The application for stay

of demand before the Commissioner of Income Tax II was dismissed vide

order dated 22.10.2013, Annexure P.1. Hence the present petition.

4. We have heard learned counsel for the parties and perused the

record.

5. Learned counsel for the petitioner submitted that the Assessing

Officer had passed the assessment order raising a huge demand in an

arbitrary manner without application of mind. It was also submitted that the

respondents had erred in refusing to grant unconditional stay of collection

and recovery of the demand contrary to the CBDT instructions. Reliance

was placed on judgments in Valvoline Cummins Limited v. Deputy

Commissioner of Income Tax and others, (2008) 307 ITR 103 (Delhi),

Soul v. Deputy Commissioner of Income Tax, (2010) 323 ITR 305 (Delhi),

Bhubaneswar Stock Exchange v. Union of India and others, (2006) 283

ITR 562 (Orissa) and Rajasthani Sammelan Sarvoday Balika Vidyalaya

and another v. Assistant Director of Income Tax (Exemption) and others,

(2013) 350 ITR 349 (Bom.). It was further argued that the petitioner was

carrying on agricultural activities on the land which was acquired in respect

of which he had received compensation and the said amount was thus

exempt under Section 10(37) of the Act. It was urged that in such

circumstances, demand of tax raised by the respondents was uncalled for

and stay of demand ought to have been allowed by the Assessing Officer Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 4

and the Commissioner of Income Tax.

6. On the other hand, learned counsel for the respondents besides

supporting the impugned order submitted that the petitioner was not entitled

for benefit under the provisions of Section 10(37) of the Act.

7. The primary dispute in this case relates to whether in the facts

and circumstances of the case, the petitioner-assessee is entitled to the grant

of unconditional stay of recovery of demand in view of his claim that he is

entitled to benefit under Section 10(37) of the Act on the amount of

compensation which was received on acquisition of land.

8. In the present case, the petitioner-assessee received a total

amount of ` 8,57,41,680/- as compensation out of which TDS of `

96,80,881/- was deducted as per provisions of Section 194LA of the Act.

The assessee showed long term capital gain of ` 8,32,58,783/- on the

amount of compensation in the income tax return. As per provisions of

Section 10(37) of the Act, the capital gains could be treated as exempted if

the land acquired was being used for agricultural purposes during the period

of two years immediately preceding the date of transfer. It may be noticed

that from perusal of Annexure P.17, return for the assessment year 2007-08,

in Column No.24, agricultural income shown was nil whereas in the

computation chart appended alongwith the said Annexure, agricultural

income has been shown to be ` 4900/- only. Further on a query being put to

the learned counsel for the petitioner as to whether the land which was

acquired was not capital asset within the meaning of Section 2(14) of the

Act, he was unable to dispute that it was falling within the limits of the

Municipality of Amritsar. In such a situation, it cannot be conclusively held

Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh CWP No.24902 of 2013 (O&M) 5

that agricultural activities were being carried on the land and thus, the

petitioner was entitled for the benefit under Section 10(37) of the Act.

Moreover, it is a question of fact which is required to be determined on

appreciation of material before the appellate authority. In such a situation,

we do not consider it a fit case for grant of stay of recovery of entire

demand. Accordingly, in the interest of justice, we deem it appropriate to

direct that there shall be interim stay of recovery of 50% of the tax liability

during the pendency of the appeal, which is stated to be fixed for hearing on

9.4.2014. The judgments relied upon are based on individual fact situation

involved therein. Moreover, it may be noticed that with regard to the grant

of interim prayer, there is no strict principle of law or precedent.

9. In view of the above, the writ petition stands disposed of in the

manner indicated above.

(Ajay Kumar Mittal) Judge

March 26, 2014 (Anita Chaudhry) 'gs' Judge

Singh Gurbax 2014.04.02 17:00 I attest to the accuracy and integrity of this document High Court Chandigarh