PRATIMA REDDY MUTHU,HYDERABAD V. ACIT., CIRCLE-14(1), HYDERABAD

ITA 1310/HYD/2025

AI Insights

The case involves Pratima Reddy Muthu, the widow of late Sri Muthu Mohan Reddy, who appealed against the order of the CIT(A) confirming the addition of compensation received from the government as income. The compensation was awarded following contractual disputes and was initially declared as income by the late husband in his books. After his death, the legal heirs received the compensation, which was partially contested by the government. The Tribunal examined whether the compensation received should be considered as income for the assessment year 2010-2011 or 2011-2012 and whether it included capital receipts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 822329 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2010-2011
• Appeal Filed On: 21-08-2025
• Other Referred Cases: CIT, Central Circle, Bangalore vs. Shri L Sambashiva Reddy, Bangalore, Paragon Constructions (I) Pvt. Ltd. vs. CIT, CIT, West Bengal-II, Calcutta vs. Hindustan Housing and Land Development Trust Ltd.
• Laws Referred To: Income Tax Act, 1961, Civil Procedure Code, 1908
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CH. PURNACHANDRA RAO; U MINICHANDRAN
• Assessee Lawyers: YOGESH K JAGI A
• Keywords: Set aside; Business income; Revenue expenditure; Bad and doubtful debts; Capital receipt; Rectification of order
• Section: 148; 143(3); 154; 234B; 28; 43B

Judgement Text

" 1 ITA.No.1310/Hyd./2025 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A’ Bench, Hyderabad BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MANJUNATHA G. ACCOUNTANT MEMBER आ.अपी.सं /ITA No.1310/Hyd/2025 Assessment Year 2010-2011 Pratima Reddy Muthu, Hyderabad – 500 034. Telangana. PAN AAOPM8335J vs. The ACIT, Circle-14(1), Hyderabad – 500 004. (Appellant) (Respondent) िनधाŊįरती Ȫारा /Assessee by: Sri Yogesh K Jagia And Sri Amit Sood, Advocates. राज̾ व Ȫारा /Revenue by: MS U Mini Chandran, CIT-DR सुनवाई की तारीख/Date of hearing: 24.11.2025 घोषणा की तारीख/Pronouncement: 24.12.2025 आदेश/ORDER PER VIJAY PAL RAO, VICE PRESIDENT : This appeal by the Assessee is directed against the Order dated 07.07.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2010-2011. Printed from counselvise.com 2 ITA.No.1310/Hyd./2025 2. The assessee has raised the following grounds: 1) That the impugned order passed by Ld. CIT (Appeal) under section 250 of Income Tax Act, 1961 being contrary to the schematic and purposive interpretation of provisions of Income Tax Act, 1961 and perverse of record is liable to be set aside. 2) That Ld. CIT(Appeal) failed to appreciate that liabilities of legal representative under section 159(6) of Act, is limited to the extent of which the estate is capable of meeting the liabilities and no personal liability can be fasten on the legal representative whereas admittedly appellant discharged substantial liabilities of deceased out of the estate, which have been denied in the impugned order. 3) That Ld. CIT (Appeal) erred in passing impugned order by failing to take countenance of section 159(1) of Act making legal representative, as defined in section 2(29) of Act, liable to pay tax as if the deceased is alive. On the contrary, in the impugned order, assessment is upheld by deeming as if the amount received is income of appellant. 4) That Ld. CIT (Appeal), while passing impugned order upholding assessment order, failed to appreciate that determination of legal representative under section 2(29) of Income Tax Act, 1961 read with section 2(11) of Civil Procedure Code, 1908 is sine qua non for completion of assessment. In absence of such determination, assessment order passed is non-est. 5) That Ld. CIT (Appeal) in complete perversity of records passed impugned order upholding the assessment order passed by Ld. AO based on self-contradictory findings in para 7.42 and 7.43 of admitting the fact that amount received during assessment year 2010-11 was declared as receivable by Mr. Mohan Reddy (HUF), a separate Assessee assessed under PAN No. AACHM 0710R, in Printed from counselvise.com 3 ITA.No.1310/Hyd./2025 its audited balance sheet of which assessment was completed under section 143(3) of Act for assessment year 2002-03. 6) That the impugned order passed is contrary to the provisions of Income Tax Act, 1961 because admittedly contract of which receipt and compensation has been taxed in the hands of appellant, were executed by Mr. M. Mohan Reddy (HUF) assessed to income tax as assessee under PAN No. AACHM 0710R which neither has been dissolved nor any order has been passed for its dissolution under section 171(1) of Act so much so that PAN of the HUF is valid even as on date on the portal of revenue authorities in absence of which assessment order passed is liable to be set aside. 7) That Ld. CIT (Appeal) failed to appreciate that in the suit filed, relief was claimed on various counts including claim of capital in nature i.e., illegal encashment of bank guarantees, compensation for keeping the machinery idle etc and Ld. Civil Court awarded consolidated award which includes capital receipt, reimbursement of expenses but assessment has been completed by treating entire receipt as revenue income without differentiating capital receipt and revenue receipt. 8) That Ld. CIT (Appeal) erred in not taking cognizance of the fact that entire claim in three civil suits, CS 106/2007, 107/2007 and 108/2008 was revised under settlement, pending appeals wherein compensation as well as interest were substantially reduced and appellant declared income in the return based on revised compensation and interest, but assessment was completed based on original decree passed. 9) That Ld. CIT (Appeal) failed to appreciate that income under the provisions of income tax Act is chargeable under various heads as mandated under section 14 of Income Tax Act because of which amount received of award on account of compensation is a business receipts taxable under section 28 of Act. Printed from counselvise.com 4 ITA.No.1310/Hyd./2025 10) That Ld. CIT (Appeal) failed to appreciate that under the provisions of income tax Act, income is chargeable to tax whereas amount received of award on account of legal cost has no specie of income and is only reimbursement of expenses incurred. 11) That Ld. CIT (Appeal) failed to appreciate the settled proposition of law that every receipt is not an income, and Act permits charging of tax only on income and not on gross receipt. 12) That Ld. CIT (Appeal) failed to appreciate that reassessment notice issued under section 148 is contrary to the settled provisions of law governing the reassessment. 13) That Ld. CIT (Appeal) failed to appreciate that reassessment proceeding in absence of requisite approval as mandated under section 151 of Act vitiate the entire assessment proceedings. 14) That impugned order passed is contrary to and not in adherence with Faceless Appeal Scheme 2021, as amended from time to time. 15) That all the grounds of appeals are without prejudice to each other. 16) That appellant craves leave to amend, alter grounds of appeal before hearing.” 3. The facts emerging from the record leading to the controversy in the case are that the assessee is widow of late Sri Muthu Mohan Reddy who was in the business of civil works. The assessee claimed that the business was being done in the capacity of HUF and the husband of the assessee was filing the return of income earned from the said business of work executed in the name and style of Warangal Works. There were some contractual disputes between the assessee Printed from counselvise.com 5 ITA.No.1310/Hyd./2025 and the State Government Department leading to the claim of compensation made by Sri Muthu Mohan Reddy the late husband of the assessee by filing Suits in the year 1994. Thereafter, the husband of the assessee expired on 06.04.2005 and the legal heirs were taken on record of the suits. The suits were decreed by the Civil Court directing the Government to pay the compensation to the legal heirs of late Muthu Mohan Reddy. The assessee and her son are the legal representatives/heirs of late Muthu Mohan Reddy. The Government challenged the Order of the Civil Judge before the Hon’ble Jurisdictional High Court. The Hon’ble Jurisdictional High Court vide Order dated 24.08.2009 granted interim stay against the decree passed by the Civil Judge, subject to deposit of 50% of the decretal amount and cost Awarded by the Civil Judge. The respondents/Assessee and her son being the legal heirs were also allowed to withdraw the same without furnishing any security. The assessee filed her return of income for the year under consideration declaring total income of Rs.1.39 crores and also claiming balance amount of compensation as capital Printed from counselvise.com 6 ITA.No.1310/Hyd./2025 receipt not liable to tax. Thereafter, on receipt of information from the DDIT-(Inv.) regarding the compensation received by the assessee and her son of Rs.23,11,35,200/- along with interest during the year under consideration from the Executive Engineer, Hanamakonda, Irrigation Department, Government of Andhra Pradesh vide G.O. dated 30.08.2009, 02.09.2009 and 02.09.2009 which has not been disclosed as an income, the Assessing Officer has issued notice u/sec.148 of the Act. In response to the notice issued u/sec.148, the assessee vide letter dated 09.01.2015 has submitted that the return of income filed on 31.03.2012 may be treated as the return filed in response to the notice u/sec.148 of the Act. Before the Assessing Officer the assessee claimed that the compensation awarded by the Court was in respect of the losses suffered by late Sri Muthu Mohan Reddy in his business due to arbitrary action of the Department and, therefore, the said claim was already shown as income in his books and they were carry-forward in the balance-sheet for a long time. Thus, the assessee claimed that the compensation is not taxable as income in the hands of these legal heirs for Printed from counselvise.com 7 ITA.No.1310/Hyd./2025 the year under consideration. Further the assessee contended that the compensation was awarded by the Court towards certain liabilities and expenses incurred by late Muthu Mohan Reddy in carrying out the contract work of the Government and, therefore, the same is not in the nature of income. The assessee claimed that she has rightly declared the income of Rs.1.39 crores in her return of income after deducting those expenses. The Assessing Officer did not accept this contention of the assessee and assessed the entire compensation being 50% share out of the total compensation along with interest in the hands of the assessee as the rest 50% compensation belongs to the son of the assessee. The assessee challenged the action of the Assessing Officer before the learned CIT(A), but could not succeed. 4. Before the Tribunal, the learned Authorised Representative of the Assessee submitted that though the assessee has offered the part of the compensation to tax after deducting the expenses already incurred by the late husband of the assessee, for which, the Court awarded the Decree towards compensation however, it was neither an income Printed from counselvise.com 8 ITA.No.1310/Hyd./2025 accrued nor arisen during the year under consideration. He has further submitted that for the year under consideration the compensation was received only as per the interim stay granted by the Hon’ble Jurisdictional High Court to the extent of 50% of the decretal amount and cost and, therefore, the said amount was subjected to the final outcome of the appeal filed by the Government before the Hon’ble High Court. Therefore, only when the appeals filed by the Department were finally decided/disposed of by the Hon’ble High Court, the income would be considered as accrued and liable for tax. The learned Authorised Representative of the Assessee has further submitted that in any case the entire amount of compensation cannot be assessed as income when the compensation was awarded towards the liability as well as expenses incurred by the late husband of the assessee and, therefore, only the net amount after deducting said expenditure can be considered as income in the hands of the assessee. He has filed the details of the revised compensation and interest vide Settlement Deed Dated 07.08.2010 and submitted that only on the date of settlement the income on Printed from counselvise.com 9 ITA.No.1310/Hyd./2025 account of compensation and interest would arise and accrue to the assessee and, therefore, the same cannot be assessed for the year under consideration. He has further submitted that only when this amount was finalized and crystalized in the F.Y. 2010-2011 relevant to the assessment year 2011- 2012 the income if any, on account of the compensation received can be assessed to tax. In support of his contention, he has relied upon the following decisions : i. Judgment of Hon’ble Supreme Court in the case of CIT, Central Circle, Bangalore vs. Shri L Sambashiva Reddy, Bangalore 2015 SCC Online Kar. 2200. ii. Judgment of Hon’ble Delhi High Court in the case of Paragon Constructions (I) Pvt. Ltd., vs. CIT [2005] 274 ITR 413. iii. Judgment of Hon’ble Supreme Court in the case of CIT, West Bengal-II, Calcutta vs. Hindustan Housing and Land Development Trust Ltd., [1986] 3 SCC 641. 5. On the other hand, the learned DR has submitted that when the assessee herself has declared the income on account of compensation received by way of decree awarded Printed from counselvise.com 10 ITA.No.1310/Hyd./2025 by the Court in her return of income for the year under consideration, then the assessee cannot take this plea that the income to the extent of 50% of the decretal amount along with the interest and cost is not assessable to tax for the year under consideration. The learned DR has submitted that the decisions relied upon by the assessee are not applicable in the case in hand as in those decisions the compensation awarded by the Arbitrator was challenged before the Court and it was not a right to receive the amount by way of a decree, therefore, until and unless the Arbitration Award under the Old Arbitration Act, 1940, is made decree of Court. She has relied upon the Orders of the authorities below. 6. We have considered the rival submissions as well as the relevant material on record. The assessee filed her return of income for the year under consideration declaring income of Rs.1.39 crores on account of compensation received under the suits filed by the late husband of the assessee which were decreed in the year 2009 and thereafter, the Government challenged the decrees passed by the Civil Judge before the Hon’ble Jurisdictional High Court. The Printed from counselvise.com 11 ITA.No.1310/Hyd./2025 Hon’ble Jurisdictional High Court vide Order dated 24.08.2009 has granted an interim stay on the condition that the Government should deposit 50% of the decretal amount and cost within a period of 8 weeks and the assessees were allowed to withdraw the same without furnishing any security. For the sake of completeness, the Order of the Hon’ble Jurisdictional High Court dated 24.08.2009 is reproduced as under: “IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD MONDAY THE TWENTY FOURTH DAY OF AUGUST TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE A.GOPAL REDDY AND THE HON'BLE SRI JUSTICE B. CHANDRA KUMAR CCCAMP.NO.409 OF 2000 IN CCCA.NO : 130 of 2000 Between 1 The State of Andhra Pradesh, rep by Secretary, Irrigation Department, Govt. of A.P Secretariat Bulling, Tank bund Road, Hyderabad 2. The Superintending Engineer, Sreeramsagar Project Construction Circle, Huzurabad-605498, Karimnagar District 3. The Executive Engineer, Sreeramsagar Project, Div. No 6 K.V.Campus, Chintagutte, Hanankonda, Warangal District. …Petitioners Printed from counselvise.com 12 ITA.No.1310/Hyd./2025 (APPELLANTs in CCCA.No.130 of 2009 on the file of the High Court) AND 1. M. Mohan Reddy, Engg. Contractors, Hyderabad, rep.by its Sole Proprietor Sn M. Mohan Reddy s/o, Venkatapathi Reddy, Office at Flat No. 3011, Manjari Apartments, Somajiguda, Hyderabad (dead per LRs Plaintiffs 2 to 4) 2. Mrs. M. Pralluma Reddy w/o late M. Mohan Reddy, Rio No. 2-334/30, Road No. 3, Banjara Hills, Hyderabad-500034 AP 3. M. Rohit Reddy s/o late M. Motian Reddy, Rio H.No.8-2-334/30 Road No. 3, Banjara Hills, Hyderabad-500034. A.P 4. Mrs. M. Nitya Reddy w/o. S. Harshavardhan Reddy, R/o No.547, Annasalai, Chennai-000 018. .....RESPONDENTS (Respondent-in-do) Counsel for the Petitioners : ADVOCATE GENERAL Counsel for the Respondents : SRI CH. PURNACHANDRA RAO Petition Under Section 151 of CPC praying that is the circumstances stated to the affidavit fled therewith, the High Court may be pleased to grant stay of all further proceedings pursuant to the decree and Judgment stated 1-05-2000 made in O.S. No.106 of 2007 including EP. No. 93 of 2000 on the file of the Chief Judge, City Cheil Court, Hyderabad, pending disposal of the CCCA.No.130 of 2009 on the file of the High Court. The Court while directing issue of notice to the Respondents here to show cause as to why this application should not be complied with made the following order. (The receipt of this order will be deemed to be the receipt of notice in the case). Printed from counselvise.com 13 ITA.No.1310/Hyd./2025 ORDER : There shall be Interim stay on condition of the petitioners/appellants depositing 50% of the decretal amount and costs, within a period of eight (8) weeks from today, on such deposit, the respondents are entitled to withdraw the same, without furnishing any security. Sd/-M. SURYANARAYANA MURTHY Asst. Registrar //TRUE COPY// for ASSISTANT REGISTRAR” 7. Thus, it is clear that the suits were filed by Sri M. Mohan Reddy in the capacity of sole proprietor and not Karta of HUF. In pursuance to the directions of the Hon’ble Jurisdictional High Court, the Government paid 50% of the decretal amount along with costs and issued different G.Os as under: (a) Vide G.O.Rt.No.674 dated 31.8.2009 issued by Irrigation & C.A.D (P.W.-MAJ.IRR. VIII.1) Department, Govt. of Andhra Pradesh according permission for release of 50% of the following payments towards SRSP Package Works and payment of decretal amount on O.S.No.108 of 2007. Amount for accepted claims as per judgement Rs.4,07,05,823 Amount towards Interest @ 12% Rs.4,07,02,823 from 28.10.1994 to 27.8.2009 on i.e. 14 years 10 months Rs.7,24,56,365 Printed from counselvise.com 14 ITA.No.1310/Hyd./2025 Amount towards cost of Suit Rs. 19,51,898 Rs.11,51,14,086 50% of Decretal Amount is Rs.5,75,57,043 (b) Vide G.O.Rt.No.677 dated 2.9.2009 issued by Irrigation & C.A.D (P.W.-MAJ.IRR.VIII.1) Department, Govt. of Andhra Pradesh according permission for release of 50% of the following payments towards SRSP Package Works and payment of decreetal amount on O.S.No.106 of 2007. Amount for accepted claims as per judgement Rs.9,16,99,885 Amount towards Interest @ 12% Rs. Rs.9,16,99,885 from 28.10.1994 to 27.8.2009 on i.e. 14 years 10 months Rs. 16,32,25,792 Amount towards cost of Suit Rs.35,01,482 Rs.25,84,27,159 50% of Decretal Amount is Rs.12,92,13,580 (c) Vide G.O.Rt.No.678 dated 2:9.2009 issued by Irrigation & C.A.D (P.W.-MAJ.IRR.VIII.1) Department, Govt. of Andhra Pradesh according permission for release of 50% of the following payments towards SRSP Package Works and payment of decretal amount on O.S.No.106 of 2007. Amount for accepted claims as per judgement Rs.2,82,16,660 Amount towards Interest @ 12% Rs. Rs.---- from 28.10.1994 to 27.8.2009 on i.e. 14 years 10 months Rs.5,02,25,652 Amount towards cost of Suit Rs.16,52,731 Rs.8,00,95,043 50% of Decretal Amount is Rs.4,00,47,522 Printed from counselvise.com 15 ITA.No.1310/Hyd./2025 8. Out of this total amount of Rs.23,11,35,200/-, the Assessing Officer made an addition of 50% share of the assessee amounting to Rs.10,86,33,547/-. The assessee challenged the said order of the Assessing Officer before the learned CIT(A) and contended vide submissions dated 01.07.2025 reproduced in para-5 of the impugned order as under : 1. “The appellant filed the return of income for the AY 2010-11. on 31/03/20212 declaring an income of Rs. 69.34.054/- and paid taxes amounting to Rs. 26, 18.200 and claimed a refund of Rs. 5.77.550/-, The copy of return of income filed is uploaded vide ANNEXURE-I. 2. The assessment was completed Vs 143(3) r.w.s 147 of the Income Tax Act, 1961 on 31/03/20216 for A.Y 2010-11 assessing the income at Rs.11,55,67,600 by the ACIT Circle- 14(1) Hyderabad and raising a demand of Rs.6,25,63,978/- including interest U/s 234B of Rs.2,56,38.048 and interest Uls 234C of Rs.1,31.754/- The ACIT made an addition of Rs.10,86,33,547/ as appellant's 50% share of Compensation received along with interest. We are uploading a copy of the Order passed vide ANNEXURE-II. Printed from counselvise.com 16 ITA.No.1310/Hyd./2025 3. Aggrieved by the above Order passed U/s 143(3) r.w.s 147 of the Act on 31/03/2016, the appellant preferred an appeal before the Commissioner of income Tax (Appeal)-6, Hyderabad on 29/04/2016 stating that the addition made of Rs.10,86 33,547 as compensation is not a Revenue Receipt liable for tox. The appellant is enclosing the copy of the Appeal filed before the CIT(A) -6, Hyderabad) and uploading the same vide ANNEXURE-III. 4. Subsequently, Rectification Order U/s 154 of the Income Tax Act, 1961 was passed on 13/06/2016 by the Income Tax Assistant Commissioner of the Income Tax, Circle 14(1), Hyderabad wherein Taxable income was assessed at Rs.7,98,29,124/- and a demand of Rs.4,31,66,523/- was raised including interest of Rs.1,76,89,176/- U/s 234B was raised and interest of Rs.9,09,028/- U/s 234C was raised. The appellant is enclosing the copy of the Order passed U/s 154 dt 13/06/2016 in respect of her son Mr. Rohit Reddy vide ANNEXURE-IV as the Facts of the Case and amounts of income declared and addition made are similar. The appellant is also enclosing the Summary of Demands Outstanding in respect of the appellant wherein the demand Printed from counselvise.com 17 ITA.No.1310/Hyd./2025 outstanding for AY 2010-11 is shown at Rs.3,45,13,073/- vide ANNEXURE-V. 5. The appellant made written submissions on 16/06/2017 by way of Paper Book containing 48 Pages and a copy of the same is uploaded vide ANNEXURE – VI. 6. The appellant makes the following submissions for deleting the addition made amounting to Rs.10,86,33,547/- as 50% of Compensation received. a. The Legal Heirs of late Mr. Mohan Reddy Muthu (HUF) namely Mrs Pratima Reddy Muthu (Wife) and Mr. Rohil Reddy Muthu (Son) received Compensation of Rs.22,68,18,145/- in respect of works executed in Warangal which were reflected in the Balance Sheet of Late Mr. Mohan Reddy (HUF) as on 31/03/2002 as Warangal works amounting to Rs 21,72,77,202/- Mr. Mohan Reddy in the earlier assessments has already shown the bills raised as Gross Receipts in Profit & Loss A/c. The income arised while execution of Warangal works is already reflected by Mr Mohan Reddy (HUF) and offered as income up to the A.Y 2002-03. And he reflected the Balance Sheet of 31/03/2002 an amount of Rs.21,72,77,202/- as Receivables from Warangal works. It is pertinent to mention here that the return of income lied by the Mr Mohan Reddy Muthu (HUF) for A. Y 2002-03 was subject to Scrutiny by the Deputy Printed from counselvise.com 18 ITA.No.1310/Hyd./2025 Commissioner of Income Tax, Circle 6(1), Hyderabad In fact, the learned DCIT in his Show Cause Notice dt 02/11/2004 sought a clarification of loans obtained/due on account of guarantees involved amounting to Rs.30,02,61,213/- in a detailed proforma. After obtaining the clarifications, the leamed DCIT accepted the income returned and a NIL Demand Notice U/s 156 dt 21/02/2005 was issued. The appellant enclosed all the relevant documents regarding Mr. Mohan Reddy Muthu (HUF) is assessment for the A Y 2002-03 from Page No 27 to 35 in the submissions made vide ANNEXURE VI. Thus, the appellant submits that she has not received additional amounts as compensation on behalf of her Late husband Mr. Mohan Reddy Muthu (HUF) She received the amounts as realisation of Receivables already reflected in the Balance Sheel as on 31/03/2002 The appellant prays that the addition made of Rs.10,86,33,547/- is not justified and the addition made be deleted. b. The appellant submits that her husband Lale Mr. Mohan Reddy Muthu (HUF) never claimed Debtors of Rs.21,72,77,202/- representing Warangal works as Bad Debts U/s 35(1)(vi) of the income tax Act 1961, when such Debtors are recovered, the deemed provisions of Sec 41(1) cannot be applied and hence the compensation received cannot be treated as Taxable Income. Similarly, the interest accrued and due but unpaid on loans taken from banks was disallowed Suo Moto U/s 43B in the year of accrual and when banks Printed from counselvise.com 19 ITA.No.1310/Hyd./2025 are repaid both compensation amounts received, the appellant can claim such interest paid component as revenue expenditure and is an allowable expenditure U/s 36(1)(iii) r.w.s 43B of the Income Tax Act, 1961, in the year of payment Bused on the above fact, the appellant prays to the Hon'ble Commissioner that the addition made be deleted and necessary Order be passed. c. It is further submitted that the business of Execution of Contract work was carried on in the capacity of the HUF of Mr. Mohan Reddy Muthu (HUF) [Husband of the Appellant). The returns of Mr. Mohan Reddy Muthu (HUF) are filed up to A Y 2002-03. Mr. Mohan Reddy Muthu (HUF expired in 2004. The compensation of Rs.23.11 Cr was received in respect of Mr. Mohan Reddy Muthu (HUF) business and DCIT made on addition of Rs 10.86 Cr in the hands of the appellant (50% of Rs 23.11 Cr) in her individual capacity. After the death of her husband Mr. Mohan Roddy Muthu (HUF) She stepped into the shoes of her husband and pursued the litigations with the Appellant Authorities of the AP Govt and the Department. d. The appellant further submits that the compensation received is on account of the Contractee i.e., illegal encashment of the bank guarantees, which has gone for setting the Nobilities which were created for giving guarantees to the contractee. Therefore, the compensation received is a Capital Receipt and not a Revenue Receipt. Printed from counselvise.com 20 ITA.No.1310/Hyd./2025 7. Considering the above submissions and facts, the appellant prays to the Hon'ble Commissioner that the addition made of Rs.10,86,33,547/- be deleted and necessary Order be passed.” 9. Thus, the assessee has claimed in the reply that this amount of compensation was already recorded in the books of accounts by the late husband as an expenditure incurred and, therefore, the same cannot be assessed for the year under consideration. The learned CIT(A) has confirmed the addition made by the Assessing Officer while passing the impugned order by recording the reasons that the assessee herself has admitted the income for the year under consideration in her return of income. There is no quarrel on the point that so far as the income declared by the assessee in the return of income, the same cannot be withdrawn in the re-assessment proceedings because the re- assessment proceedings are for the benefit of Revenue and not for the Assessee as held by the Hon’ble Supreme Court in the case of CIT vs., Sun Engineering Works (P) Ltd., [1992] 198 ITR 297 (SC). Therefore, the income offered to tax in return of income filed u/sec.139 of the Act cannot be withdrawn in the proceedings u/sec.147 of the Act. Further we find that the assessee has given Printed from counselvise.com 21 ITA.No.1310/Hyd./2025 the details of the compensation and interest vide settlement with the Government dated 07.08.2010 as under: Printed from counselvise.com 22 ITA.No.1310/Hyd./2025 Printed from counselvise.com 23 ITA.No.1310/Hyd./2025 Printed from counselvise.com 24 ITA.No.1310/Hyd./2025 10. The compensation received under settlement has been bifurcated on account of principal compensation, legal cost and interest as under : 11. Thus, it is clear that the compensation received as per the directions of the Hon’ble Jurisdictional High Court being 50% of the decretal amount and cost was subject to the final outcome of the appeals filed by the department and thereafter, the parties comprised and settled the dispute and the assessee and her heir (son) received the total amount of Rs.32,95,10,999/-. This amount was received in the F.Y. 2010-2011 and, therefore, this sum is assessable for the assessment year 2011-2012. Out of this total amount of compensation, the amount already declared by the assessee in the return of income for the assessment year under consideration would be deducted from the share of the Printed from counselvise.com 25 ITA.No.1310/Hyd./2025 assessee and the total compensation received under the settlement arising from the decree passed by the Civil Court and, therefore, rest of the compensation is assessable to tax for the assessment year 2011-2012. It is also pertinent to note that if the part of the compensation is received towards loss and expenditure already incurred by the late husband of the assessee, then to the extent of the amount of expenses and losses the same would not be considered as an income assessable to tax. Therefore, only the balance amount of compensation after deduction of these expenses would be considered as income liable to tax. Accordingly, we hold that the rest of the compensation after deducting the allowable deductions is assessable to tax for the assessment year 2010- 2011 and Assessing Officer is at liberty to assess the same for the assessment year 2011-2012 as per sec.150 of the Income tax Act, 1961. Needless to say, that the relevant record to be examined and verified by the Assessing Officer for arriving to the income in the hands of the assessee assessable to tax, after allowing the deductions. The assessee is also directed to produce relevant records including books Printed from counselvise.com 26 ITA.No.1310/Hyd./2025 of accounts in support of the said claim of expenditure and liabilities/losses incurred by the late husband of the assessee. 12. In the result, appeal of the Assessee is partly allowed. Order pronounced in the open Court on 24th day of December, 2025. Sd/- Sd/- [MANJUNATHA G.] [VIJAY PAL RAO] ACCOUNTANT MEMBER VICE PRESIDENT Hyderabad, Dated 24th December, 2025 VBP Copy to : 1. Pratima Reddy Muthu, 8-2-334/30, Road No.3, Banjara Hills, Hyderabad – 500 034. Telangana. 2. The ACIT, Circle-14(1), Room No.635, 6th Floor, C- Block, IT Towers, AC Guards, Hyderabad – 500 004. 3. The Pr. CIT, Hyderabad. 4. The DR, ITAT, “A” Bench, Hyderabad. 5. Guard file. BY ORDER //True copy// Printed from counselvise.com "