M/s R.S.Rangadas, V. Asst Commissioner of Income Tax,

WP/5404/2002

AI Insights

The case involves M/s R.S. Rangadas, a firm engaged in civil contract works, which challenged the notices issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961. These notices were for reopening assessments for the years 1994-95, 1996-97, and 1997-98, based on the grounds that the petitioner had received income from arbitration awards that were not disclosed in the original assessments. The petitioner argued that the awards were still under challenge and had not become final, thus the amounts received could not be considered as income. The court examined whether interim amounts received from such awards during ongoing litigation could be treated as income for tax purposes.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 764438 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 28-12-2022
• Assessment Year: misc
• Other Referred Cases: Income Tax Tribunal Appeal Nos. 68, 92 & 168 of 2003 (M/s. R.S.Rangadas v. ACIT), Commissioner of Income Tax v. Hindustan & Land Development Trust Ltd., FGP Ltd. v. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: A V KOUNDINYA
• Keywords: Assessment Year; Escapement of taxable income; Income Tax; Mandamus; Reassessment
• Section: 147; 148; 154; 143(1)(a); 151; 226

Judgement Text

"Is2e5 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY .THE TWENTY EIGHTH DAY OF DECEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURAELE SRI JUSTICE C.V. BHASKAR REDDY WRIT PETITION Nos. : 5396 5402 And 5404 OF 2002 w.P.NO.5396 0F 2002 Between: M/s R.S.Rangad as, 2-2-1137131Cl1, New Nallakunta Hyderabad-44 ...PETITIONER AND Asst. Commissioner of lncome Tax, Circle 4(1) Aayakar Bhavan, Hyderabad. ...RESPONDENT Petition under Arlicle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ, order or direction one in the nature of Mandamus declaring the notice P.A.No.R. 308 dated: 2-1-2OO1 issued by the respondent for the assessment year 1994-95 U/s. 148 of lncome Tax Act, 1961 as illegal, arbitrary and without jurisdiction l.A. NO: I OF 2002(WPMP. NQ: 6795 OF 2002) Petition under Section '151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceeding pursuant to the notice PANO. R.308 dated: 2-1-2001 for the Assessment Year 1994-95 issued U/sec 148 of lT Act, 1961 by the respondent herein pending disposal of the Writ Petition WRIT PETITION NO: 5402 OF 2002 Between: M/s. R.S.Rangadas, 2-2-1137131C/1 , New Nallakunta, Hyderabad-44 ...PETITIONER I AND Asst. Comm ssioner of lncome Tax, Circle 4 (1), Aayakar IJililvar, Hyderabad ...RESPONDENT Petition under Article 226 of the Constitution of lntlia praying that in the circumstances ;tated in the affidavit filed therewith, the lligir Court may be pleased to issur'a writ order or direction one in the nature ('f l'/andamus declaring the notice P.ANo.R.308 dated: 9-1-2001 issued by th: resrondent for the assessment yeirr 1997-98 U/s 148 of lncome Tax Act, 196\" as illegal, arbitrary and without jurit diction l.A. NO: 1 OF 2('02(WPMP. NO: 6808 OI2q02l Petition urder Section 151 CPC praying that in the crcrmstances stated in the affidavit file( in support of the petition, the High Court nt;ly b€j pleased to stay of all further pro:eedings pursuant to the notice P.A,No.R.3)B daled: 9-1-2001 for the Assessment year 1997-98 U/s 148 of lncome Tax Act, 1 161 bv the respondent herein pending t isposal of the Writ Petition W. P. NO: 5404 )F 20Oz Between: M/s R.S.Ranr radas, 2-2-1137131C/1 New Nallakunta Hyder;rb;ad-44 ...PETITIONER AND Asst Com nissioner of lncome Tax, Circle4 (1), Aayakar Bravan Hyderabad. ...RESPONDENT Petition u rder Article 226 of the Constitution of lnd a praying that in the circumstances r tated in the affidavit filed therewith, the High Court may be pleased to issu.' a Writ, Order or Direction one in the raturer of Mandamus declaring the no ice P.A.No-R. 308 dated: 9-1-2001 issued t,y the Respondent for the Assessment year 1996-97 U/s 148 of lncome Tax, 19(;1 as illegal, arbitrary and without juris, liction LA. NO: 1 OF 20 )2(WPMP. NO: 6810 OF 2002 Petition ur der Section 151 CPC praying that in the circ.rrms.ances stated in the affidavit filed in support of the petition, the High C,turt m ty be pleased to stay all further proce,)ding pursuant to the notice PA.No. R.308 dt: 9-1-200'l for the I I Assessment Year 1996-97 issued Uisec 148 of I T Act., 1961 by the respondent herein pending disposal of the Writ Petition Counsel for the Petitioner: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondents: SRl. J. V. PRASAD, SC FOR INCOME TAX The Court made the following: COMMON ORDER I I THE HO {,BI,E THE CHIEF JUSTICE IiJJAt BHUYAN AND THE H('N,BLE SRI JUSTICE C.V.BHI SKAI. RIIDDY WRIT 'ETITION Nos.5396, 5402 & 5404 <'.f 2,OO2 QO!{MON C BDE_E: (Per the Hon'ble the Chief Justice l).iictl Bhuyan) This o'der will dispose of Writ Petitron Nc,..r.51196, 5402 & 5404 of 2,)02. 2. I Ieard Mr. A.V.A.Siva Kartikelra, le :rrned counsel representinl; Mr. A.V.Krishna Koundinya, learrre(1 counsel for the petition.:r and Mr. J.V.Prasad, learnerl Standinll Counsel, Income Tax Department for the respondent. 3. ln all the writ petitions, challt:nge rn.adr: is to the notice issu,:d by the respondent under Sectj(rn 148 of the Income Ta: Act, 1961 (briefly referred to herr:inaf.,er as 'the Act') for reo rening of assessments for the differ,:rrt assessment -veaf s 1. ssue involved in all the writ petitions is ri,hether intgrim avt i rrd received by an assessee ft,lloq'i rF; order of the I I I 2 I.ICJ & CVBR.] W.P.Nos.539(l 5402 & 5404 of2002 Court can be treated as income ol 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 a1l 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 2OO2. 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. 1 1,90,040.00, tax payable being Rs.5,33,138.00. B. During the said assessment year, petitioner was awarded compensation in two arbitration proceedings being O.P.Nos.452/BB and 467 188. State of Andhra Pradesh H(J & CVBRJ W.P.Nos.5396, 54)2 & t:404 of 2002 questioned i he au,ard before the High Court. High Court granted sta / execution of the ar.r,al'd srrLrject to the condition th 5O% of the awarded amount wiLs pzLici to the petitroner. t is stated that by the aforesaid interim order, 50% ol rhe awarded arnount was paid to the petir,lonr:r. In the return of ir come, petitioner appended i1 OO () mentioning therein that lhe awards had not become final as the challenge to the au,ard s rvas pending before the High Court. 9. C n 0t-r.03. 1995, assessing officer issrred intimation under Secti >n 143(1)(a) of the Act raising a- dt:mand of Rs.7,73,216 00 on the basis of the return f ile(l by the petitioner. ltollowing rectification of the aforesa-r d intimation under Sectir,n 154 of the Act, the totai lax pzLl'able by the petitioner wr ts determined at Rs.5,33,138.00 whrch was paid by the petiti< ,ner. 10. It rvas thereafter that a notice datt:ti 0i1.01.2001 u'as issued b1, the assessing oflicer to the petitiorrer under Section 1 47 of the Act alleging that the assess: rlil officer had L re ason to bt lieve that income of the petitioner c hargeable to I HCJ & CVBRJ LU.P.Nos.5396, 5402 & 5404 cf 2002 ta-x for the said assessment year had escaped assessment u,ithin the mealing ol Section 147 of the Act. 1 1. Responding tc the above llotice, petitioner submitted a detailed reply on 22.02.2OC1 raising various grounds as to the proposed reassessment. It u.,as aiso contended that as the arbitration proceedings had not attained finality, the amounts received by 'rhe petitioner could not be deemed to have accrued to the petitioner. As a matter of fact, this information rvas disclosed by the petitioner and was before the assessing officer. Assessing officer q,as requested to communicate the reasons recorded for reopening which was not done. 72. It was at that stage that the present writ petitions came to be filed. 13. On 27.O3.2002, 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 c W.p.N, .q.S j)t, a,,, ,ll'L -VltP I ..t t 1 ol 2uO_ Hor.r,ever, learned Standing Counsr:i submits that petitions 1las been answered by this Court in the common judgment and order dated 02.O9.2014 passei in Income Tax Tribunai Appeat Nos.6B, gZ & 168 cf. 2OO3 (M/s. R.S.Rangadas v. ACITf . i5. only noticr of challenge ir the writ petitions. the said nc tice. In the event petitioner w(,uld have the of its grr evan :e reassessment was issued which is under Petitioner shorld respond to of any order being passed, remedy under flre Act _.or redressal 16. Alter hearing iearned counsel for th, on perusal o I the materials on record, we fin raised in this ,vrit petition is squarely covered by decision of this Court in M/s. R.S.Rangadas (su} case, assessinlJ officer had issued notice under Se the Act for reo rening of assessment on the groun, was non-discl tsure of deposit of compensat pertaining to ar titration. : parties and d that issue the aforesaid rra). In that ctior: i4B of j tha.t there ion award HCJ & CVIJR,I W-P.Nos.5396, 5aO2 & 5404 of 20O2 17 . From a reading of the aforesaid decision, we find that there vrrere two issues dealt u,ith by this Court therein. We are concerned u,ith thc first issue, u,hich is, .,r,hether tite alnount 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 arnount; 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 di{ficult to treat it as income of the concemed assessee.\" 18. Thus this Court held that when deposits are o t made in compliance to directions of the Court during IICJ & CVBRJ W.P.Nos.!,396,54(,2 & 5404 of 2OO2 pendency t f the Cispute, it u,ould be rlifficr, 11 tc treat the deposit as the incomc of the assessee. There r:xist every Iikelihor-rd c f a contrary vieu, being taken b1, t-rc C,rurt which may result ir-r refund of the amount received. 'I/hen such is the uncert rinty and contingent nature of -h e ;rmount, it would be c ifficult to treat it as an incorne ol the concerned ASSCSSCC. ily'I-rile arriving at the above view, t.ris C:ourt relied upon the d:crsion of the Supreme Court in Cc,mm:issioner of Income Tax v. Hindustan & Land Developmerrt 'lrust Ltd.t which q,as followed by the Bombay High Cour' in FGP Ltd. v. Commissioner of Income Tax2 which held tlrert il. is only on the arbitra I proceedings coming to an end that ,:he income received b5 an assessee based on such award r:r.ould be liable to be asses sed in the relevalt assessment year. 19. Mr. Siva Kartikeya, learned counsel for the petitioner submits that in the present CilS€ rrltimately the appeal file d by the State was rejected by :he rligh Court whereafter petrtioner received the entire arbitr;rl amount. ' (1986) 161 ITR 524 , (2010) 326 tl-R 444 ; t HC] & CVBR.] W.P.Nos.5396, 5402 &, 5404 of )A02 Income tax pertaining to such income on account of receipt of arbitral award .vas 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 impugr-red notices under Section 148 of the Act. 2l . Writ Petitions are accordingly allowed. However, there shall be no order as to costs. 22. Misceilaneous applications pending, ii any, in these Writ Petitions shall stand closed. /ITRUE COPY' To, ) That Rule Nisi has been made absolute as above' Witness the Hon'ble the Chief Justice UJJAL BHUYAN' on This Wednesday the Twenty Eighth Day of December Two Thousand And Twenty Two s D/. N c*t[D+h i'#H,S,[13 Gb SECTION OFFICER 1. The Assistant Commissioner of lncome Tax' Circle 4(1) Aayakar Bhavan 2 4 H#ii.xli\"\"ffi 3xst$\".'aPlNIt#!Ki:l?1\"'\"?L'o'u\"r Two CD copies BM f{ I t S ' I I t3 I j HIGH COUIRT DATED:2811212022 COMMON I)RDER WP.Nos.S396, 5402 and 5404 of 2002 ALLOWIN(; THE WRIT PETITIONS WITHOUT COSTS o .{Hr- s i_.. J.! il ( 3 1 ,lRlrt zon ? t:) ). f' f- Ir .... .: ( GEqg34 t7.-. 6rr, I "