THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
AND
THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
WRIT PETITION Nos.5396, 5402 & 5404 of 2002
COMMON ORDER: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)
This order will dispose of Writ Petition Nos.5396, 5402
& 5404 of 2002.
2. Heard Mr. A.V.A.Siva Kartikeya, learned counsel
representing Mr. A.V.Krishna Koundinya, learned counsel for
the petitioner and Mr. J.V.Prasad, learned Standing Counsel,
Income Tax Department for the respondent.
3. In all the writ petitions, challenge made is to the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 (briefly referred to hereinafter as 'the Act') for reopening of assessments for the different assessment years.
4. Issue involved in all the writ petitions is whether interim award received by an assessee following order of the 2 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002 Court can be treated as income of the assessee and resultantly for non-disclosure of the same, notice under Section 148 of the Act can be issued by treating the same to be a case of escapement of taxable income?
5. Since the issue involved is identical in all the writ petitions, the petitioner being also the same, for the sake of convenience, we may refer to the averments made in Writ Petition No.5396 of 2002.
6. Petitioner is a firm which is engaged in the business of execution of civil contract works. Petitioner is an assessee under the Act being assessed by the respondent. In this case, assessment year is 1994-95.
7. Petitioner filed return of income on 30.10.1994 disclosing total income of Rs.11,90,040.00, tax payable being Rs.5,33,138.00.
8. During the said assessment year, petitioner was awarded compensation in two arbitration proceedings being O.P.Nos.452/88 and 467/88. State of Andhra Pradesh 3 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002 questioned the award before the High Court. High Court granted stay of execution of the award subject to the condition that 50% of the awarded amount was paid to the petitioner. It is stated that by the aforesaid interim order, 50% of the awarded amount was paid to the petitioner. In the return of income, petitioner appended a note mentioning therein that the awards had not become final as the challenge to the awards was pending before the High Court.
9. On 06.03.1995, assessing officer issued intimation under Section 143(1)(a) of the Act raising a demand of Rs.7,73,216.00 on the basis of the return filed by the petitioner. Following rectification of the aforesaid intimation under Section 154 of the Act, the total tax payable by the petitioner was determined at Rs.5,33,138.00 which was paid by the petitioner.
10. It was thereafter that a notice dated 02.01.2001 was issued by the assessing officer to the petitioner under Section 147 of the Act alleging that the assessing officer had reason to believe that income of the petitioner chargeable to 4 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002 tax for the said assessment year had escaped assessment within the meaning of Section 147 of the Act.
11. Responding to the above notice, petitioner submitted a detailed reply on 22.02.2001 raising various grounds as to the proposed reassessment. It was also contended that as the arbitration proceedings had not attained finality, the amounts received by the petitioner could not be deemed to have accrued to the petitioner. As a matter of fact, this information was disclosed by the petitioner and was before the assessing officer. Assessing officer was requested to communicate the reasons recorded for reopening which was not done.
12. It was at that stage that the present writ petitions came to be filed.
13. On 27.03.2002, this Court had issued notice and granted interim stay which has been extended since then.
14. In the hearing today, learned counsel for the petitioner submits that issue raised in this batch of writ 5 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002 petitions has been answered by this Court in the common judgment and order dated 02.09.2014 passed in Income Tax Tribunal Appeal Nos.68, 97 & 168 of 2003 (M/s. R.S.Rangadas v. ACIT).
15. However, learned Standing Counsel submits that only notice of reassessment was issued which is under challenge in the writ petitions. Petitioner should respond to the said notice. In the event of any order being passed, petitioner would have the remedy under the Act for redressal of its grievance.
16. After hearing learned counsel for the parties and on perusal of the materials on record, we find that issue raised in this writ petition is squarely covered by the aforesaid decision of this Court in M/s. R.S.Rangadas (supra). In that case, assessing officer had issued notice under Section 148 of the Act for reopening of assessment on the ground that there was non-disclosure of deposit of compensation award pertaining to arbitration.
6 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002
17. From a reading of the aforesaid decision, we find that there were two issues dealt with by this Court therein. We are concerned with the first issue, which is, whether the amount deposited by a party to an award in compliance to the directions of the Court in which the award is under challenge can be treated as the income of the assessee for the relevant assessment year? This Court answered the above question in the following manner:
"When the deposits are made in compliance with the directions issued by the Court during the pendency of the dispute, it is difficult to treat the amount so deposited as the exclusive property or income of any particular assessee. Even where the permission is accorded for withdrawal of the same, it is always subject to the outcome of the proceedings before the Courts. There exits every likelihood of a view being taken by the Court, contrary to the claim of the party, who is permitted to receive the amount; and he being required to refund it, if the final outcome goes against him. When such is the uncertainty and contingent nature of the amounts, it is difficult to treat it as income of the concerned assessee."
18. Thus this Court held that when deposits are made in compliance to directions of the Court during 7 HCJ & CVBRJ W.P.Nos.5396, 5402 & 5404 of 2002 pendency of the dispute, it would be difficult to treat the deposit as the income of the assessee. There exist every likelihood of a contrary view being taken by the Court which may result in refund of the amount received. When such is the uncertainty and contingent nature of the amount, it would be difficult to treat it as an income of the concerned assessee. While arriving at the above view, this Court relied upon the decision of the Supreme Court in Commissioner of Income Tax v. Hindustan & Land Development Trust Ltd.1 which was followed by the Bombay High Court in FGP Ltd. v. Commissioner of Income Tax2 which held that it is only on the arbitral proceedings coming to an end that the income received by an assessee based on such award would be liable to be assessed in the relevant assessment year.
19. Mr. Siva Kartikeya, learned counsel for the petitioner submits that in the present case ultimately the appeal filed by the State was rejected by the High Court whereafter petitioner received the entire arbitral amount.
1 (1986) 161 ITR 524
2 (2010) 326 ITR 444
8 HCJ & CVBRJ
W.P.Nos.5396, 5402 & 5404 of 2002
Income tax pertaining to such income on account of receipt of arbitral award was paid by the petitioner in the assessment year 2014-15.
20. In that view of the matter and following the decision of this Court in M/s. R.S.Rangadas (supra), we set aside the impugned notices under Section 148 of the Act.
21. Writ Petitions are accordingly allowed. However, there shall be no order as to costs.
22. Miscellaneous applications pending, if any, in these Writ Petitions shall stand closed.
___________________________ UJJAL BHUYAN, CJ ___________________________ C.V.BHASKAR REDDY, J Date: 28.12.2022 KL