The assessment order was quashed for failing to consider the RFCTLARR Act's exemption from capital gains tax, necessitating reassessment.

JUDGMENT

This writ petition has been filed challenging Ext.P5 order of assessment under the provisions of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the assessment year 2022-23.

2. It is the case of the petitioner that the entire order of assessment is without jurisdiction as alteast a substantial portion of the demand arises out of the calculation of capital gains tax on account of compulsory acquisition of land under the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereinafter referred to as ‘the RFCTLARR Act’).

3. Sri. A. Kumar, the learned Senior Counsel appearing for the petitioner would submit that, going by the provisions of Section 96 of the RFCTLARR Act, any amount of compensation received on account of compulsory acquisition of land under the provisions of the RFCTLARR Act are not liable to be assessed to capital gains tax and is completely exempted from such assessment. It is submitted that, this issue is also covered by Ext.P6 Circular dated 25.10.2016 issued by the Central Board of Direct Taxes. It is submitted that since the assessment order does not consider this issue, and has not even referred to Ext.P6 Circular and the provisions of the RFCTLARR Act, the assessment order has to be set aside notwithstanding the availability of any alternative remedy.

4. Sri. P.G. Jayashankar, the learned Senior Standing Counsel appearing for the Income Tax Department would submit that the issues now raised by the petitioner before this Court can be properly considered in an appeal filed under the provisions of the Act before the First Appellate Authority and there is no ground made out for interference with the assessment order in exercise of the jurisdiction vested in this Court under Article 226 of the Constitution of India. It is submitted that, apart from the issue of capital gains tax on compensation received for compulsory acquisition of land under the provisions of the RFCTLARR Act, certain other issues are also involved and therefore, it only is appropriate that the petitioner is relegated to alternative remedy.

5. Having heard the learned Senior counsel appearing for the petitioner and the learned Senior Standing Counsel appearing for the respondent Department, I am of the view that the petitioner is entitled to succeed. A reading of Ext.P5 order of assessment indicates that a substantial portion of the demand arises out of the calculation of capital gains tax on compensation received by the petitioner on account of compulsory acquisition of land under the provisos of the RFCTLARR Act. Though the learned Senior Standing Counsel appearing for the Income Tax Department is right in contending that there are certain other issues also, since the substantial part of the liability arises out of calculation of capital gains tax on compensation received by the petitioner for acquisition of land, I am of the view that the matter requires reconsideration at the hands of the Assessing Authority. I am inclined to take this view principally on account of the fact that the order of the Assessing Authority does not indicate that he had considered the provisions of the RFCTLARR Act. It does not also appear that the Assessing Authority had considered the terms of Ext.P6 Circular issued by the Central Board of Direct Taxes.

Accordingly, the writ petition will stand allowed. Ext.P5 order of assessment under the provisions of the Act for the assessment year 2022-23 will stand quashed. The assessment of the petitioner for the assessment year 2022-23 will stand restored to the file of the 2 nd respondent, who shall pass fresh orders, after affording an opportunity of hearing to the petitioner and after considering the provisions of the RFCTLARR Act as also to the terms of Ext.P6 Circular. Since the order has been set aside in its entirety, it will also be open to the petitioner to contest the matter in respect of any other issues also b