M/S R.S.Rangadas, vs Asst. Commissioner Of Income Tax,
2022 Latest Caselaw 7069 Tel

   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