Commissioner Of Income Tax, Delhi v. Suman Dhamija

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: October 29, 2015 Date of Decision: December 08, 2015 + ITA 20/2003 COMMISSIONER OF INCOME TAX, DELHI ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus SUMAN DHAMIJA ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. WITH + ITA 21/2003 COMMISSIONER OF INCOME TAX, DELHI ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus SUMAN DHAMIJA ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. WITH + ITA 24/2003 COMMISSIONER OF INCOME TAX, DELHI ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 1 of 39 SUMAN DHAMIJA ..... Respondent Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. WITH WTA 3/2003 COMMISSIONER OF WEALTH TAX ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus SUMAN DHAMIJA ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. WITH+ WTA 4/2003 COMMISSIONER OF WEALTH TAX, DELHI ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus SUMAN DHAMIJA ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. WITH + WTA 5/2003 COMMISSIONER OF WEALTH TAX ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 2 of 39 SUMAN DHAMIJA versus ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. AND + WTA 6/2003 COMMISSIONER OF WEALTH TAX, DELHI ..... Appellant Through: Mr. Rohit Madan, Senior Standing counsel with Mr. Zoheb Hossain, Advocate. versus SUMAN DHAMIJA ..... Respondent Through: Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate. CORAM: JUSTICE S. MURALIDHAR JUSTICE VIBHU BAKHRU JUDGEMENT 08.12.2015 Dr. S. Muralidhar, J. Introduction 1. These are three Income Tax Appeals (ITAs) and four Wealth Tax Appeals (WTAs) filed by the Revenue. ITA Nos.20, 21and 24 of 2003 are in respect of Assessment Years (AY) 1988-89, 1989-90 and 1985-86 respectively. WTA Nos.3/2003, 4/2003, 5/2003 and 6/2003 are in respect of AYs 1992-93, 1990-91, 1991-92 and 1988-89 respectively. 2. It must be noted at the outset as far as the Revenue’s appeals under the Income Tax Act, 1961 ('Act') are concerned, there were originally ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 3 of 39 nine appeals, ITA Nos. 20 to 28 of 2003. Common questions of law were framed in all the appeals by the Court on 14[th] September, 2004. By the order dated 7[th] April, 2011, ITA Nos. 22 to 28 of 2003 were disposed of by the Court without answering the questions framed on account of the Circular dated 9[th] February, 2011 of the Central Board of Direct Taxes (CBDT) since the tax effect in each of the appeals was less than Rs.10 lakhs. Subsequently, review petitions were filed by the Revenue in respect of three of the appeals, i.e., ITA Nos. 23, 24 and 25 of 2003. The said review petitions were dismissed by the Court on 26[th]March, 2012, after giving liberty to the Revenue to file “proper applications, if so advised.” ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 3 of 39 nine appeals, ITA Nos. 20 to 28 of 2003. Common questions of law were framed in all the appeals by the Court on 14[th] September, 2004. By the order dated 7[th] April, 2011, ITA Nos. 22 to 28 of 2003 were disposed of by the Court without answering the questions framed on account of the Circular dated 9[th] February, 2011 of the Central Board of Direct Taxes (CBDT) since the tax effect in each of the appeals was less than Rs.10 lakhs. Subsequently, review petitions were filed by the Revenue in respect of three of the appeals, i.e., ITA Nos. 23, 24 and 25 of 2003. The said review petitions were dismissed by the Court on 26[th]March, 2012, after giving liberty to the Revenue to file “proper applications, if so advised.” 3. The orders dated 7[th] April 2011 and 26[th] March 2012 in ITA No. 24 of 2003 were challenged by the Revenue in the Supreme Court by filing Civil Appeal Nos. 4919-20 of 2015. The said appeals were allowed by the Supreme Court on 1[st] July, 2015 by holding that the CBDT Circular dated 9[th] February, 2011 was prospective. The appeal was remitted to the High Court for re-adjudication on merits. As a result, ITA No. 24 of 2003 was revived. Taking note of the above development, this Court on 24[th] August 2015, passed an order directing that the aforementioned ITA No. 24 of 2003 pertaining to AY 1985-86 be listed along with ITA No. 20/2003 (pertaining to AY 1988-89), ITA No.21/2003 (AY 1989-90) and the four WTAs as noted above. Background Facts 4. The facts leading to the filing of the present appeals is that a land measuring 4826 bighas situated in Village Masoodpur was notified ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 4 of 39 under Section 4 of the Land Acquisition Act, 1894 (LA Act) on 23[rd]January, 1965 for being acquired for a public purpose. 5. Even while the acquisition proceedings were pending, the predecessor-in-interest of the Respondent, i.e. late Mr. J.N. Dhamija, purchased 1/16th share of the bhumidari rights in respect of the said land from one Mr. Rampal Malhotra and fifteen others on 1[st] June, 1965. A sale deed for a sum of Rs. 4,000/- was engrossed on a stamp paper and the sale deed was duly registered. It was noted in the sale deed that Mr. Rampal Malhotra, the vendor, had agreed to sell his share in the said land, which he had purchased by way of a deed dated 14[th] April, 1960. In the sale deed Mr. Rampal Malhotra was described as holding 1/16[th] share of the bhumidari rights regarding land measuring 4200 bighas situated in Village Masoodpur. The sale deed stated that from that date, i.e. 1[st] June, 1965, the vendee, i.e. Mr. J.N. Dhamija “shall become a shareholder of 1/16[th] share”and “shall be bound to pay or to receive, whatever is written in the purchase deed mentioned above.” 6. Mr. J.N. Dhamija was, therefore, not the owner of the land himself but had purchased 1/16th of the bhumidari rights therein from Mr. Rampal Malhotra under the aforementioned sale deed. Mr. Malhotra was one of the transferees, who had acquired the bhumidari rights from Smt. Gulab Sundri on 14[th] April, 1960 and she too was not the owner of the land. She had acquired the bhumidari certificate on 5[th] July, 1958, with effect from 20th July, 1954 as proprietor of M/s. Diwan Bahadur Seth Kesri Singh Budh Singh which had taken the land on sub-lease from M/s. Delhi Pottery Works, which had in turn taken the land on ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 5 of 39 lease (to the extent of 3224 bighas) for a period of twenty years from the owner of the said land in 1939. 6. Mr. J.N. Dhamija was, therefore, not the owner of the land himself but had purchased 1/16th of the bhumidari rights therein from Mr. Rampal Malhotra under the aforementioned sale deed. Mr. Malhotra was one of the transferees, who had acquired the bhumidari rights from Smt. Gulab Sundri on 14[th] April, 1960 and she too was not the owner of the land. She had acquired the bhumidari certificate on 5[th] July, 1958, with effect from 20th July, 1954 as proprietor of M/s. Diwan Bahadur Seth Kesri Singh Budh Singh which had taken the land on sub-lease from M/s. Delhi Pottery Works, which had in turn taken the land on ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 5 of 39 lease (to the extent of 3224 bighas) for a period of twenty years from the owner of the said land in 1939. 7. The land was leased to Smt. Gulab Sundri, the proprietor of the aforementioned concern for the purposes of extracting minerals as well as for agricultural and horticultural purposes. The Revenue Assistant, Delhi in accordance with the provisions of the Delhi Land Reforms Act, 1954 (DLRA) declared Smt. Gulab Sundri as bhumidar on 5[th] July 1958, with effect from 20[th] July, 1954. A few days thereafter on an application filed by 4-5 proprietors of the land, the Revenue Assistant cancelled the bhumidari certificate on 14[th] July, 1958 and ordered that the land be vested in the Gaon Sabha. 8. On 24[th] November, 1959, Smt. Gulab Sundri filed a suit being Civil Suit No.174/66 before the Court of the Subordinate Judge, Delhi seeking a declaration that the order dated 14[th] July, 1958 of the Revenue Assistant cancelling the bhumidari certificate in her favour was void, illegal and without jurisdiction. This suit was decreed by the Sub Judge on 12[th] December, 1966. Against the aforementioned order, the Gaon Sabha as well as the Union of India filed an appeal which was dismissed by the Senior Sub Judge on 23[rd] April, 1968. No further appeal was filed by the Gaon Sabha. The aforementioned judgement dated 23[rd] April, 1968 became final and conclusive between the parties. 9. It is in the above background that late Mr. J.N. Dhamija acquired by way of sale deed dated 1[st] June, 1965 from Mr. Rampal Malhotra 1/16th share of the bhumidari rights. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Proceedings under Section 31 (2) LA Act 10. Now turning to the land acquisition proceedings that commenced with the notification dated 23[rd] January, 1965 under Section 4 of the LA Act, an Award No.2225 was made by the Land Acquisition Collector (LAC) on 26[th] March 1969 in respect of land measuring 4826 bighassituated in Village Masoodpur, of which included the land admeasuring 3224 bighas, 1/16th of the bhumidari rights in which was purchased by late Mr. J.N. Dhamija. 11. Since there was a dispute as to who should receive the compensation, a reference was made by the LAC under Section 31(2) of the LA Act to the Additional District Judge (ADJ), Delhi. By a judgement dated 20[th] April 1980, the learned ADJ decided the claims –made by the following three sets of claimants (i) Gaon Sabha of Village Masoodpur, (ii) Proprietors from owners of the land acquired under the awards and (iii) Smt. Gulab Sundri, proprietor of M/s. Dewan Bahadur Seth Kesari Singh Budh Singh, Kesari Pottery Works her transferees and bhumidars. While deciding the reference under Section 31(2), the learned ADJ framed the following issues on 20[th] November, 1969: (i) Whether the claim of Gaon Sabha Masoodpur is not barred by res judicata? (ii) If issue No.1 is not proved, whether Gaon Sabha has any right or interest in the land in dispute. If so, to what extent? ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 7 of 39 (iii) Whether the declaration of the bhumidari rights and the issuance of the bhumidari certificate in favour of Gulab Sundri was illegal, void and without jurisdiction? (i) Whether the claim of Gaon Sabha Masoodpur is not barred by res judicata? (ii) If issue No.1 is not proved, whether Gaon Sabha has any right or interest in the land in dispute. If so, to what extent? ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 7 of 39 (iii) Whether the declaration of the bhumidari rights and the issuance of the bhumidari certificate in favour of Gulab Sundri was illegal, void and without jurisdiction? (iv) Whether the alleged owners/bhumidars are legally barred from challenging and disputing the validity of the declaration of bhumidaricertificates? (v) Whether the provisions of the DLRA were not applicable to the land in dispute. If so, effect? (vi) Whether the claims of the alleged Owners/Proprietors are barred by time? (vii) What are the rights and shares, if any, of the various respondents in the land in dispute? (viii) To what apportionment of the amount of compensation if any, the respondents are entitled? 12. The following additional issues were framed by the learned ADJ on 7[th] November, 1970: (i) Whether the decrees of the Civil Courts passed in favour of Smt. Gulab Sundri and against Gaon Sabha or in favour of the owners and ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 8 of 39 against Gaon Sabha are illegal, without jurisdiction and a nullity. If so, to what effect? (ii) Whether the order dated 14th July 1958 passed by the Revenue Assistant operates as res judicata? (iii) Whether the land in dispute was a waste land as defined in the DLRA and as alleged by Gaon Sabha. If so its effect? (iv) Whether there were orders of the Deputy Commissioner dated 1st November 1954 and 10th March 1966 in respect of the land in dispute as alleged by Gaon Sabha and if so, whether the same were valid (objected to). 13. While deciding the issues (i) and (ii) framed on 18[th] December, 1969 and 7[th] November, 1970, the learned ADJ (Mr. P.S.Singla) held that the earlier judgement passed by the Sub Judge confirmed by the Senior Sub Judge operated as res judicata. Issue Nos.(iii) and (iv) were also decided against the Gaon Sabha. Issue Nos.(iii) and (v) framed on 18[th]December, 1969 were decided in favour of Smt. Gulab Sundri. It was held that the land in question fell within the purview of Section 3(13) of DLRA and that Smt. Gulab Sundri was a tenant as defined under Section 4(5) of the Punjab Tenancy Act. Deciding issue No. (iv) framed on 18[th] December, 1969 in favour of Smt. Gulab Sundri, the learned ADJ held that she had rightly been declared as a bhumidar and that the proprietors were legally barred from disputing the bhumidari rights ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 9 of 39 confirmed in her favour. Deciding the issue No. (vi) in her favour the learned ADJ held that Smt. Gulab Sundri had been in possession of the entire land on the date of filing of the suit on 15[th] April, 1970. The learned ADJ while deciding issue Nos.(vii) and (viii) took note of a compromise arrived at between the parties on 31[st] July, 1969 by virtue of which inter alia Mr. J.N. Dhamija was to get 1/32[nd] share (later this was corrected as 1/16[th] share by the learned ADJ). 14. Against the aforementioned judgement dated 20[th] May, 1980, passed by the learned ADJ, RFA Nos.309, 310, 356, 357, 340 and 341 of 1980 were filed in this Court. Reference under Section 18 LA Act for enhanced compensation 15. Meanwhile at the instance of Mr. J.N. Dhamija a reference was made under Section 18 of the LA Act by way of LAC No.201/80 before the learned ADJ, Mr. S.R. Goel, seeking enhancement of compensation. By the judgement dated 7[th] July 1987, this reference was decided in favour of Mr. J.N. Dhamija holding that he was entitled to compensation of Rs.18,000/- per bigha and Rs.10,000/- per bigha for the minerals in respect of his 1/16[th] share of the rights in the land acquired in terms of the Award. 14. Against the aforementioned judgement dated 20[th] May, 1980, passed by the learned ADJ, RFA Nos.309, 310, 356, 357, 340 and 341 of 1980 were filed in this Court. Reference under Section 18 LA Act for enhanced compensation 15. Meanwhile at the instance of Mr. J.N. Dhamija a reference was made under Section 18 of the LA Act by way of LAC No.201/80 before the learned ADJ, Mr. S.R. Goel, seeking enhancement of compensation. By the judgement dated 7[th] July 1987, this reference was decided in favour of Mr. J.N. Dhamija holding that he was entitled to compensation of Rs.18,000/- per bigha and Rs.10,000/- per bigha for the minerals in respect of his 1/16[th] share of the rights in the land acquired in terms of the Award. 16. Against the aforementioned judgement of Mr. S.R. Goel, the learned ADJ, the Union of India filed RFA No.768/87 in this Court. While the said appeal was pending an order was passed on 29[th] October, 1987 by a Division Bench of this Court directing the Union of India to deposit the enhanced amount of compensation together with interest in the trial ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 10 of 39 court with the direction that it will not be disbursed till further orders of this Court. Thereafter on 9[th] March, 1988 after noticing that the compensation amount had already been deposited it was directed by the Division Bench that the undisputed amount be paid to Mr. J.N. Dhamija without any guarantee and the disputed amount be paid on Mr. J.N. Dhamija furnishing bank guarantee to the satisfaction of the learned ADJ. 17. Treasury vouchers were then prepared by the learned ADJ on 30[th]March, 1988 in favour of Mr. J.N. Dhamija for sums of Rs.6,02,330.67 and Rs.3,64,03,764.62 both dated 30[th] March, 1988. 18. As a result Mr. J.N. Dhamija received a net amount of Rs.3,64,03,764.62. This comprised the additional compensation of Rs.52,79,463.75, 30 % solatium on the said sum amounting to Rs. 15,82,839.12, additional amount of 12 % amounting to Rs. 27,64,511.90 and interest under Section 28 of the LA Act amounting to Rs.2,67,75,949.85. Appeals arising from the proceedings under Section 31(2) LA Act 19. Meanwhile the appeals filed by the Union of India being RFA No.309 and 310/80 in respect of the proceedings under Section 31 (2) of the LA Act were dismissed by the High Court on 26[th] February, 1991 on the ground of partial abatement in respect of the sum of the Respondents whose LRs were not brought on record by the Appellant. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 20. Against the aforementioned order, the Union of India went in appeal to the Supreme Court by way of a Special Leave Petition. By a judgement in S. Amarjit Singh Kalra (Dead) By LRs v. Smt. Pramod Gupta (Dead) By LRs 2002 (9) SCALE 577, the judgement dated 26[th]February, 1991 of the High Court was set aside and a direction was issued to the High Court decide the appeals afresh on merits. As a result RFA No.309 and 310/80 along with the other RFAs stand restored to the file of the High Court and are pending. Appeals in the enhancement proceedings under Section 18 LA Act 21. As far as the order dated 7th July 1987 passed by the learned ADJ (Mr. S.R.Goel) in the proceedings under Section 18 of the LA Act, the Union of India did not question the enhancement to the extent of Rs. 6,02,330. However, as regards the balance enhanced sum of Rs. 3,64,03,754 the Union of India filed RFA Nos.85 and 868/1987 in this Court. A Division Bench of this Court passed a judgement on 5[th]October, 2001 dismissing RFA Nos.85 and 868/1987. The appeal filed against the said judgement by the Union of India was allowed by the Supreme Court by judgement dated 7[th] September, 2005 in Union of India v. Pramod Gupta (2005) 12 SCC 1. The Supreme Court set aside the judgement of the High Court and remitted the appeals to this Court for a fresh decision. 22. As a result the appeals arising both from the proceedings under Section 31 of the LA Act and the proceedings for enhancement of the compensation under Section 18 of the LA Act are pending before this Court. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 12 of 39 Proceedings under the Income Tax Act 23. Mr. J.N. Dhamija filed his return of income for AY 1989-90 on 26th August 1989 declaring an income of Rs. 15,61,044 of which Rs. 14,44,39 was shown as interest from M/s. Kashmir Holdings. During the course of the assessment proceedings, Mr. Dhamija's auditors submitted a letter dated 19th August 1990 to the Assessing Officer (AO) explaining that Mr. Dhamija had received additional compensation of Rs. 3,64,03,764/- and Rs. 6,02,3301-in the previous year relevant to AY 1989-90 for his share in land measuring 3224 bighas situated in village Masoodpur, Delhi pursuant to an order passed by the ADJ in LAC No. 201/80 on 7th July 1987. It was explained in the said letter that while the first enhanced sum of Rs.6,02,330/- was not disputed by the Union and had been disclosed by the Assessee as capital gains, the balance enhanced sum of Rs.3,64,03,764/- was not accepted by the Union of India and an appeal had been filed by it in this Court. It was pointed out that the money had been released to the Assessee against bank guarantee and that in case the Assessee did not succeed in the High Court in the said appeal of the Union of India, the entire amount would have to be returned by the Assessee to the Union of India. A copy of the guarantee was also enclosed with the letter. It was submitted that till finality was attached to the determination of the appeal by the High Court withdrawal of the amount by the Assessee was pursuant to an inchoate and contingent right and therefore not liable to any capital gains. Further details were furnished in this regard by letters dated 27[th] September, 1990, 5[th] December, 1990, 16[th] January, 1991, 13[th] February, 1991 and ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 13 of 39 27[th] November, 1991. A copy of the original compensation order dated 26th March 1969, which stood modified by the aforementioned order of the ADJ, was also furnished. 24. The AO passed an order dated 27th March 1992 holding that the entire compensation received by Mr. Dhamija, whether in the form of interest on solatium or additional compensation, was taxable in the year of receipt. Capital gain was charged on this amount. The CIT (A) by an order dated 28th August 1992 held following the order rendered by him in the case of Mr. K.K. Kochar, one of the co-owners of the same property, that the land in question was not agricultural land, and to this extent the plea of Mr. Dhamija was negatived. The CIT (A) however agreed with Mr. Dhamija that since the negotiable instrument in the nature of the treasury vouchers were received by Mr. Dhamija on 30th March 1988, the taxability of the said sums had to be examined in AY 1988-89 and not in the AY 1989-90. The AO was directed to examine the assessability of the amount of capital gains, in the accounting year 1987-88 relevant to AY 1988-89, after considering all the contentions of Mr. Dhamija and pass a speaking order after hearing him on all the relevant points. 25. Meanwhile in relation to the return that had been filed by Mr. Dhamija for AY 1988-89 on 29th July 1988 declaring a total income of Rs. 76,020, the assessment was completed u/s 143 (1) of the Act by the AO's order dated 24th November 1988. However, consequent upon the developments in relation to the assessment proceedings for AY 1989-90, ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 14 of 39 the assessment for AY 1988-89 was reopened under Section 147 by issue of notice under Section 148 on 22nd March 1991. In response thereto, Mr. Dhamija filed a return declaring the same income on 19th October 1992. 25. Meanwhile in relation to the return that had been filed by Mr. Dhamija for AY 1988-89 on 29th July 1988 declaring a total income of Rs. 76,020, the assessment was completed u/s 143 (1) of the Act by the AO's order dated 24th November 1988. However, consequent upon the developments in relation to the assessment proceedings for AY 1989-90, ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 14 of 39 the assessment for AY 1988-89 was reopened under Section 147 by issue of notice under Section 148 on 22nd March 1991. In response thereto, Mr. Dhamija filed a return declaring the same income on 19th October 1992. 26. As regards AY 1985-86, Mr. Dhamija had originally filed a return disclosing an income of Rs 49,540. In relation to the said AY too notice under Section 148 was issued. Mr. Dhamija filed a return in response to the said notice on 10th June 1992 declaring an income of Rs 49,540. The AO held that the interest to the tune of Rs. 2,67,75,950 paid to Mr. Dhamija was also embedded in the additional compensation. He noted that out of the said sum, Rs. 14,63,028was liable to be included in the total income of Mr. Dhamija in relation to AYs 1981-82 to 1987-88 and accordingly added the said sum to the income of Mr. Dhamija for AY 1985-86. 27. The AO, by order dated 18th March 1993, held that under Section 45(5) the entire amount of compensation is to be taxed in the year of receipt and that since Mr. Dhamija was not following the mercantile system of accounting, the interest received was also taxable in the year of receipt. Accordingly, the AO made additions in that regard for AY 1988-89, but on a protective basis and subject to the finality of proceedings in the AY 1989-90 as the Revenue had taken a stand that the entire receipt is taxable in the AY 1989-90 and not 1988-89. 28. The CIT (A), in the appeal by Mr. Dhamija held, inter alia, that Section 45 (5), was not applicable on the enhanced compensation since ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 15 of 39 as of that date the order of the Delhi High Court regarding ownership of the land in favour of the Assessee to the extent of his share had not attained finality. Relying upon the decision of the Supreme Court in CIT v. Hindustan Housing and Land Development Trust Limited (1986) 161 ITR 524, the CIT (A) agreed with Mr. Dhamija that he would be subject to tax at that stage only to the extent of the amount on which there was no dispute, i.e. Rs.1,20,446/- together with the corresponding interest. The CIT(A) held that the re-opening of the assessments for AY 1981-82 to 1987-88 by invoking Section 147 of the Act was not justified. Consequently, the CIT (A) invalidated the action of the AO in charging interest in AYs 1981-82 to 1987 -88. 29. At this stage Mr. J.N. Dhamija expired. Against the above order of the CIT(A), the Revenue and Mr. Dhamija's legal heir, Suman Dhamija (hereafter 'the Assessee'), filed appeals. 30. The Revenue was aggrieved by the order of the CIT (A) in invalidating the reopening of the assessments and in declining to apply Section 45 (5) of the Act for even AY 1988-89. The Revenue was also aggrieved by the CIT (A) holding that interest could not be taxed since the receipt itself was not covered under Section 45(5) of the Act. The Assessee was in appeal before the ITAT on the ground that the invoking of Section 147 was justified only for AY 1989-90 and not for other years including AY 1988-89. The other contentions urged by the Assessee were that (i) the land in question was agricultural land and therefore not amenable to capital gains tax; (ii) the Assessee was not the owner of the land and was not at all liable to tax in respect of the ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 16 of 39 ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 16 of 39 enhanced compensation and (iii) since the enhanced compensation was not finally settled, the right to receive the amount had not been acquired and could not be brought to tax in these AYs. In support of the last submission the Assessee relied upon the ITAT's orders in respect of the co-owners in respect of the same land, i.e. Mr. KK Kochar and Mrs. Sharda Kochar. 31. As far as the Wealth Tax Act (WT Act) proceedings are concerned, the Assessee while computing net wealth for AY 1988-89 claimed that the compensation received under bank guarantee was not includable in the net wealth as it was only an advance towards compensation for the compulsory acquisition of the land. While the AO did not accept this claim, the CIT(A) accepted it for AY 1988-89. A similar exercise took place at the hands of the CIT(A) for AY 1990-91 as well to 1991-92 with only the amount being different. The Revenue was aggrieved by these orders and therefore appealed to the ITAT. 32. A common order dated 31[st] December, 2002 was passed by the ITAT disposing of all of the aforementioned appeals. The Assessee's appeals were dismissed by holding that the reopening of the assessments for AYs 1981-82 to 1987-88 by invoking Section 147 of the Act was valid. It was held that the "AO's action for reopening assessments for all the assessment years under consideration was based on the material which came into existence only after the completion of the assessments in those years according to which the income chargeable to tax was liable to taxed in those assessment years, we feel that his actions was based on his prima facie belief that income chargeable to tax has ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 17 of 39 escaped assessment." To that extent the Revenue's appeals were partly allowed. However, the ITAT agreed with the Assessee that the enhanced compensation could not be included in the total income for the AYs in question “for the reason that no finality was attached to the receipt of the amount.” The ITAT followed it earlier orders in the cases of Mr. K.K. Kochar and Mrs. Sharda Kochar and also in the case of Gulab Sundri Bapna 79 ITD 455 (Del). 33. As far as the WT Act cases were concerned, the ITAT agreed with the Assessee that the monies received were in the nature of trust money. The WT Act did not contemplate including trust money in the net wealth. The appeals of the Revenue were dismissed and those of the Assessee were allowed. As regards sum of Rs.6,02,330/-, since the CIT(A) had not dealt with the grievance of the Assessee, the said issue was remitted to the CIT(A) for a fresh adjudication. Questions of law 34. The following questions of law were framed by this Court in the ITAs by the order dated 14[th] September, 2004: "1. Whether the amount of enhanced compensation received by the assessee during the relevant previous year is taxable in view of the provisions of Section 45(5)(b) of the Income Tax Act, 1961? 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the decision of the Supreme Court in CIT vs. Hindustan Housing and Land Development Trust Limited 161 ITR 524 is to be applied despite the subsequent change in provisions of law, namely the provisions of Section 45(5) of the Act? ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 3. Whether the ITAT was correct in law in holding that the interest received by the assessee on enhanced compensation pertaining to the assessment year could not be assessed in the same year though it had already been received by him along with enhanced compensation?" 35. In the WTAs the following question was framed by the same order: "Whether the Tribunal had not erred in holding that the money received by the assessee by way of enhanced compensation/interest was in the nature of trust money and, therefore, not includable in the net wealth of the assessee?" Submissions of counsel ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 3. Whether the ITAT was correct in law in holding that the interest received by the assessee on enhanced compensation pertaining to the assessment year could not be assessed in the same year though it had already been received by him along with enhanced compensation?" 35. In the WTAs the following question was framed by the same order: "Whether the Tribunal had not erred in holding that the money received by the assessee by way of enhanced compensation/interest was in the nature of trust money and, therefore, not includable in the net wealth of the assessee?" Submissions of counsel 36. On behalf of the Revenue, it was submitted by Mr. Zoheb Hossain, Advocate as under: (i) The order of ITAT in the cases of Mr. K.K. Kochar and Mrs. Sharda Kochar was reversed by this Court by the decision dated 18[th] July 2014 of this Court in ITA No. 171 of 2001(Commissioner of Income Tax v. Sharda Kochar). The order of the ITAT in Gulab Sundri Bapna (supra) was reversed by this Court in CIT v. Gulab Sundri Bapna (2014) 367 ITR 498. Consequently, these appeals of the Revenue ought to succeed on that short ground. (ii) After the decision of the Supreme Court in CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC), the earlier decision in CIT v. Hindustan Housing and Land Development Trust Limited (supra) was no longer good law as far as receipt of enhanced compensation, solatium, additional amount and interest in the financial year ending 31st March ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 19 of 39 2008 (relevant to AY 1988-89) was concerned. It made no difference whether the proceedings concerning enhancement of compensation were pending in appeal in the High Court. Section 155(16) read with Section 45(5)(c) of the Act would take care of the consequences of the final orders that might be passed in either the proceedings for enhancement of compensation or those under Section 31(2) LA Act. Reliance was also placed on the decision in CIT v. Govindbhai Mamaiya 367 ITR 498 (SC). (iii) In support of the submission that Section 45 (5) was applicable from AY 1988-89 onwards reliance was placed on the decisions in CIT v. Commissioner of Wealth Tax, Calcutta v. U.C. Mehatab AIR 1995 SC 1925, Commissioner of Wealth Tax, Kolkata v. Smt. Anjamli Khan AIR 1991 SC 2023, CIT v. Bhanwarlal Choudhary (2002) 125 Taxman 361 (Raj). 37. In reply, it was submitted by Mr. C.S.Aggarwal, learned Senior counsel for the Assessee as under: (i) By virtue of the sale deed executed by Mr. Ram Pal Malhotra in favour of Mr. Dhamija, the latter had merely became a shareholder of 1/16th share of the bhumidari rights which were acquired by him from Mr. Ram Pal Malthora who had agreed to sell his share which he had purchased by virtue of the purchase deed executed on 14the April 1960. In view of the aforesaid purchase deed, Mr. Ram Pal Malhotra had nothing to do with the land in question and consequently the Assessee too had nothing do with it. The compensation received and/or receivable ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 20 of 39 was not in respect of any land and was in respect of a capital asset being merely a right which right itself was an inchoate right. Thus Section 45(5) of the Act had no application since the Assessee had not acquired any land but only a 1/16th share in the bhumidari rights. (ii) Further, the question whether the Assessee had the right to receive the compensation was itself in dispute and as such Section 45(5) of the Act had no application. Thus, where the right to receive the compensation itself was inchoate and not merely the amount received or receivable, Section 45 (5) of the Act would have no application. The decision in CIT v. Hindustan Housing and Land Development Trust Ltd. (supra) was still applicable. Reliance was also placed on the decisions in CIT v. Sharda Sugar Industries Ltd. 239 ITR 393 (Bom). and CIT v. Smt. Prakash Kaur 330 ITR 332(P&H), (ii) Further, the question whether the Assessee had the right to receive the compensation was itself in dispute and as such Section 45(5) of the Act had no application. Thus, where the right to receive the compensation itself was inchoate and not merely the amount received or receivable, Section 45 (5) of the Act would have no application. The decision in CIT v. Hindustan Housing and Land Development Trust Ltd. (supra) was still applicable. Reliance was also placed on the decisions in CIT v. Sharda Sugar Industries Ltd. 239 ITR 393 (Bom). and CIT v. Smt. Prakash Kaur 330 ITR 332(P&H), (iii) The decisions of this Court in CIT v. Sharda Kochar and CIT v. Smt. Gulab Sundri Bapna are not applicable as in neither decision, the question whether the two assessees therein had an inchoate right in the title to the asset said to have been transferred was examined. The dispute was only in respect of their inchoate right in the amount of compensation. (iv) Mere receipt of an amount of compensation could not be held to be income. Reliance is placed on the decision in Parimisetti Seetharamamma v. CIT 57 ITR 532 (SC). A receipt can be brought to tax only if it falls under any tax provisions of the Act and the burden is ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 21 of 39 on the Revenue to establish the same. Section 155(16) of the Act cannot also be invoked to contend that in case the assessee loses its right, the order could be amended so as to refund the amount. (v) Alternatively, and without prejudice, it is contended that if the amount is held to be includible in the total income then only the amount as computed by the AO for AY 1989-90 i.e. Rs. 26,41,232/- could be assessed to tax and the addition made of Rs. 2,70,64,077/- should be held untenable in law. Without prejudice thereto, if it is held that the amount is to be added while computing capital gain then the AO be directed to compute the capital gain as per the statutory provisions contained in that AY i.e. 1989-90. As regards the interest amount, if at all it has to be added to the compensation received then only 50% thereof could be brought to tax by way of capital gain as is the sum computed by the AO out of the compensation received as per Section 45 of the Act as it stood for the relevant AY. Analysis of Section 45(5) of the Act 38. The central issue that arises is whether the land acquisition compensation received by the Assessee can be subjected to capital gains tax in her hands for the AYs in question. Section 45 (5) of the Act is relevant in the present case reads as under: “45 (5) Notwithstanding anything contained in sub-Section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 enhanced or further enhanced by any Court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:- (a) the capital gain computed with reference to the compensation awarded in the first reference or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head ‘Capital gains’ of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the Court, Tribunal or other authority shall be deemed to be income chargeable under the head ‘Capital gains’ of the previous year in which such amount is received by the assessee: (a) the capital gain computed with reference to the compensation awarded in the first reference or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head ‘Capital gains’ of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the Court, Tribunal or other authority shall be deemed to be income chargeable under the head ‘Capital gains’ of the previous year in which such amount is received by the assessee: Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head ‘Capital gains’ of the previous year in which the final order of such court, Tribunal or other authority is made; (c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. –Explanation For the purposes of this sub-Section- ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 23 of 39 (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil; (ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1[st] day of April 1988; (iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head “Capital gains” of such other person.” 39. In order to understand the rationale behind the insertion of sub-section (5) to Section 45 of the Act with effect from 1st April 1988, the law that was in force prior to its insertion requires to be noted. 40. To begin with, prior to introduction of sub-section (5) in Section 45, the compensation initially awarded and the enhanced compensation, finally determined on conclusion of the proceedings in appeal, were both taxable in the year of acquisition. Section 155 (7A) of the Act provided for rectification of the assessment of an earlier year and this provision was invoked as and when additional compensation was received. Where the additional compensation was awarded at several stages by different appellate authorities, it necessitated rectification of the original assessment at each of the said stages. To overcome this difficulty sub-section (5) was inserted in Section 45 with effect from 1st April 1988. In terms of this provision, both the compensation as first determined in the land acquisition Award as well as the enhanced ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 24 of 39 compensation would be taxed in the respective years of receipt. The amount would be taxed in the hands of the recipient of the additional compensation, even if that person was not the original transferor. Section 155 (7A) was omitted with effect from 1st April 1992. By a further amendment with effect from 1st April 2004, clause (c) to sub-section (5) to Section 45 was introduced in terms of which, for this purposes of Section 45 (5) (b) the cost of acquisition would be taken as nil. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 24 of 39 compensation would be taxed in the respective years of receipt. The amount would be taxed in the hands of the recipient of the additional compensation, even if that person was not the original transferor. Section 155 (7A) was omitted with effect from 1st April 1992. By a further amendment with effect from 1st April 2004, clause (c) to sub-section (5) to Section 45 was introduced in terms of which, for this purposes of Section 45 (5) (b) the cost of acquisition would be taken as nil. 41. For the purposes of Section 45 (5), in order to attract capital gains in regard to enhancement of compensation received in respect of land that has been acquired, the following conditions must be fulfilled: (i) There must be a transfer of a capital asset (ii) the compensation or consideration for such transfer has to be enhanced by a court, Tribunal or other authority 42. Two questions that have arisen in the past in relation to the enhanced compensation received in terms of Section 45 (5) are: what happens (a) when the right to receive compensation is itself in dispute and has not attained finality, and (b) when the question of the quantum enhanced compensation is pending final determination before a Tribunal or Court? 43.1 The distinction between the two situations was brought out in the decision of the Supreme Court in CIT v. Hindustan Housing and Land Development Trust Limited (supra). There the Assessee company was dealing in land and maintaining its accounts on the mercantile system. ITA Nos.20, 21 & 24 of 2003 and WTA Nos.3, 4, 5 & 6 of 2003 Page 25 of 39 Some of the plots belonging to it initially requisitioned and later acquired by the Government of West Bengal. The Land Acquisition Officer (LAO) awarded a sum of Rs. 24,97,249 as compensation. 43.2 Not satisfied with the compensation, the Assessee preferred an appeal before the Arbitrator who made an award enhancing the compensation to Rs. 30,10,873 with interest at 5% and a further recurring compensation at Rs. 6,272-10-4 per month. The State Government appealed to the High Court and during the pendency of the appeal, it deposited Rs. 7,36,691, which the Assessee was permitted to withdraw on furnishing security. On receipt of the amount, the assessee credited it in its suspense account on the same date. 43.3 During the assessment proceedings for the AY 1956-57, relevant to the accounting period ending 31[st] March 1956, the AO brought to tax a sum of Rs. 7,24,914 as the Assessee's business income. This represented the difference between the sum of Rs. 7,37,190 payable to the assessee in terms of the award dated 29[th] July, 1955, of the arbitrator and a sum of Rs. 12,276 out of that amount which had already been assessed to tax. The Income-tax Officer treated the sum as liable to income-tax during that year on the basis that the income accrued to the assessee on the date of the award. The ass