Appeal to High Court- Section 260A of I. T. Act, 1961- A. Y. 1996-97- Plea urged for first time in appeal before High Court- Not permissible- Capital vs. revenue receipt- Income from other sources- Casual and non-recurring receipts- Auction sale of property mortgaged with bank set aside by Supreme Court- Auction purchasers and judgment debtors compromising in execution proceedings- Amount received by auction purchaser not casual and non-recurring receipt but capital receipt not taxable-

Auction sale of property mortgaged with bank was set side by the Supreme Court. Auction purchaser(assessee) and judgment debtors compromised the execution proceedings wherein the assessee purchaser received Rs. 10 lakhs as a settlement amount. For the A. Y. 1996-97, the assessee claimed the amount as the non-taxable capital receipt. The Assessing Officer treated the amount as the casual and non-recurring receipt u/s. 10(3) of the Income-tax Act, 1961 and assessed it as income. The Tribunal upheld the order of the Assessing Officer.

On appeal by the assessee before the Delhi High Court the Department sought consideration of the amount received by the assessee as revenue receipt. The High Court reversed the decision of the Tribunal and held as under:

“i) The Department could not be permitted to shift its stand from one forum to another. The consistent case of the Department was to be tested at various levels for its correctness. It was possible that in the interregnum there might be decisions of the Supreme Court which might support or negate the case of the Department. That would then have to be taken to its logical end. Under these circumstances the Court was not prepared to permit the Department to urge a new plea for the first time in the High Court.

ii) The Assessing Officer was in error in proceeding on the basis that a sum of Rs. 10 lakhs received by the assessee was in the nature of a casual and nonrecurring receipt which could be brought to tax u/s. 10(3) of the Act. The Assessing Officer having held that it could not be in the nature of capital gains it was not open to the Department to seek to bring it to tax under the heading revenue receipt. What was in the nature of a capital receipt could not be sought to be brought to tax resorting to section 10(3) read with section 56 of the Act.

iii) The question is accordingly answered in favour of the assessee and against the Revenue.”