TaxTMI 
TaxTMI 
2024 (6) TMI 206
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.... explanation - 2 of section 263 the PCIT can't invoke section 263. (2) That on the facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in treating the order dated 26.02.2021 passed u/s 143(3) of the Act by the National Faceless Assessment Centre, Delhi for A.Y. 2018-19 as erroneous and prejudicial to the interests of revenue. (3) That on the facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in concluding that the ld. AO has neither made any inquiry nor the assessee company filed any reply and evidence regarding the taxability of the award shown in Note No. 7 of the audited balance sheet of Rs. 29.03 crores and Rs. 3.52 crores termed as Nardana Claim-1 and Nardana Claim-1 and Nardana Claim - 2. (4) That on the facts and in the circumstances of the case and in law the ld. Pr. CIT erred in not relying on the decision of Hon'ble Apex Court, various High Courts and Tribunals including jurisdictional tribunal wherein it was held that as per explanation 2 section 263 order cannot be revised where the order is passed by the ld. AO after making proper enquiry. (5) That on the facts and in the circumstances of the case and in ....
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....itted that income of Rs. 29,02,76,211/- has been offered to tax in AY 19-20 after the order of Dhule Court vide order dated 15.10.2018 which is a matter of verification. Since, the liability created by you in the books of accounts for Nardana claim-1 and Nardana claim-2 is contingent in nature as it is dependent upon outcome of the Hon'ble Court, such liability as per ICDS cannot be recognized and, therefore, the amount received on arbitral award is taxable during the year of receipt as business income. However, the same was not offered to tax in A.Y. 2018-19 on account of income received as arbitral award under the head Profits and Gains of Business and Profession." 3. By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised. In response thereto, the assessee filed a detailed reply, running over 14 pages, to PCIT which is reproduced by PCIT in Para No. 2 / Page No. 4 to 17 of revision-order. The assessee submitted to PCIT that the issue raised by him had been duly examined by AO during assessment-proceeding through notices u/s 142(1) and after considering replies filed by him, the AO was fully satisfied. The a....
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....19 and should be added to total income. But, thereafter, in subsequent para 3.2 and 3.3, the PCIT has talked of 'Nardana Claim-1' and 'Nardana Claim-2'. Therefore, the revision-order passed by PCIT is clumsy and not very clear as to whether the PCIT intended to revise assessment-order qua 'Nardana Claim-1' only or both 'Nardana Claim-1' and 'Nardana Claim-2'. But during proceeding before PCIT, the assessee made a detailed submission on 'Nardana Claim-1' as well as 'Nardana Claim-2'. Further, in Ground No. (3), as re-produced above, the assessee is talking of 'Narmada Claim-1' as well as 'Nardana Claim-2'. Furthermore, during hearing before us, there were submissions on both items. Hence, we proceed to make adjudication in subsequent discussions taking into account both items. 5. Ld. AR straightaway carried us to a Paper-Book filed by assessee and submitted that during the course of assessment-proceeding, the AO has made specific queries to assessee qua the issue raised by PCIT and the assessee has also filed enough details/documents in response thereto, which is very much evident from the following details/documents forming part of the assessment-record available with department: ....
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....award and filed a Misc. Civil Application No. 18/2017 in Dhule District Court. During pendency of matter before Dhule District Court, the Govt. released 75% portion of the award amounting to Rs. 29,02,76,211/- through an Escrow A/c with ICICI Bank in financial year 2017-18 relevant to AY 2018-19 under consideration on furnishing of 100% bank guarantee by assessee to Govt. The copies of order of Dhule District Court, Govt.'s order of release through Escrow A/c and the evidences of bank guarantee were filed to AO during assessment proceeding as well as to PCIT during revision-proceeding; the same are also filed in Paper-Book at Page No. 77 to 94. Since the dispute between assessee and Govt. subsisted before Dhule District Court, there was no finality of the dispute and the receipt of Rs. 29,02,76,211/- against 100% bank guarantee was a mere conditional and contingent receipt. Therefore, the assessee could not treat it as its own revenue and had to declare as a liability in books of account. This is for the reason that if the dispute is ultimately decided in favour of Govt., the assessee would have to refund/return back to Govt. the amount received by it through Escrow A/c against 100....
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....n assessee and Govt. subsisted before Dhule District Court and whatever the assessee received was against 100% bank guarantee. Ld. AR submitted that as soon as the Govt.'s Misc. Application was disposed of by Dhule District Court vide order dated 15.10.2018, the assessee took no further time in offering the same as revenue. 8. Then, Ld. AR proceeded to explain the factual matrix of 'Nardana Claim-2'. Basically, he re-iterated the same submission as made by assessee to PCIT (noted by PCIT on Page No. 7 of revision-order) that in terms of agreement with Govt., the assessee-company was entitled to collect toll charges till 18.11.2014. Thereafter, further extension from 19.11.2014 onwards was allowed by Ministry of Road & Transport vide letter dated 18.11.2014 on condition No. (ii) mentioned in the said letter specifying that the entire amount of toll collection from 19.11.2014 would be deposited in a Joint Escrow A/c with Govt. in a nationalized bank and the assessee shall not be entitled to withdraw any amount from such Escrow A/c except that a sum of Rs. 26,000/- per day for expenses on day to day running of toll plaza would be allowed to assessee. The assessee submitted copy of af....
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....t. Ld. AR submitted that the approach of assessee of declaring income upon final adjudication by Dhule District Court / Delhi High Court is very much correct and fully supported by (i) CIT Vs. Hindustan Housing & Land Development Trust Ltd. (1986) 161 ITR 524 (SC), (ii) CIT Vs. L. Sambashiva Reddy (2015) 234 Taxman 775 (Karnataka HC), and (iii) ITO Vs. Shri Chandi Ram ITA No. 11/JP/15 order dated 28.02.2017 of ITAT, Jaipur. Thirdly, Ld. AR submitted that even if we assume that there are two possible views qua the year of taxability of the impugned amounts and the AO accepted one of the possible views, then also the assessment-order cannot be said to be erroneous as per landmark judgement of Hon'ble Supreme Court in Malabar Industries Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). Fourthly, he submitted that in any case, there is no loss of revenue to Govt. because the assessee has offered income in subsequent year. 10. Ld. AR made one more important submission. He carried us to the contents of show-cause notice issued by PCIT wherein the PCIT has initiated revisionary action on the reasoning that the liability of 'Nardana Claim-1' and 'Nardana Claim-2' cannot be recognized as per ICDS (....
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.... statutory notice dated 13.01.2021 issued u/s 142(1), the AO made specific queries qua 'Nardana Claim-1' and 'Nardana Claim-2' to assessee and in response, the assessee filed a cogent reply dated 19.01.2021. Then, vide notice dated 05.02.2021 issued again u/s 142(1), the AO referred assessee's previous reply dated 19.01.2021 and raised follow-up queries qua not only the present status of 'Nardana Claim-1' and "Nardana Claim-2' but also how the assessee has taken 'income incidence' in his regular books of account. In reply thereto, the assessee filed a vehement and detailed reply dated 09.02.2021. Therefore, there can hardly be any dispute or controversy by revenue that the AO has not investigated the issues of 'Nardana Claim-1' and 'Nardana Claim-2'. The 'follow-up' query by AO itself negates the revenue's stand that the AO has merely kept assessee's reply in departmental file and not applied any mind. Therefore, even if the AO has not discussed the issues in assessment-order it cannot be said that the AO has not examined the assessee. This proposition, as contended by Ld. AR, is well settled in several judicial rulings including ITAT, Mumbai in Reliance Payment Solutions Ltd. Vs. ....
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.... Court answering the following question in the negative : "Whether, on the facts and in the circumstances of the case, the extra amount of compensation amounting to Rs. 7,24,914 was income arising or accruing to the assessee during the previous year relevant to the assessment year 1956-57?" 2. The assessee, who is the respondent before us, is a limited company dealing in land. It maintains its accounts on the mercantile system. By an order dated 21-6-1946 under rule 75A(1) of the Defence of India Rules, read with section 19 of the Defence of India Act, 1939, certain plots of land measuring about 19.17 acres in village Kankulia in the district of 24 Parganas and belonging to the assessee, were requ isitioned by the Government of West Bengal. Subsequently, the land was acquired permanently by the State Government under section 5, Requisition of Land (Continuance of Powers) Act, 1951, by a notice of acquisition dated 27-12-1952 published in the Gazette dated 8-1-1953. The LAO awarded a sum of Rs. 24,97,249 as compensation payable to the assessee. The assessee was not satisfied with the amount of compensation, and preferred an appeal before the arbitrator, 24 Parganas, Calcutta. ....
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....l referred the question of law set out earlier to the Calcutta High Court for its opinion, and by its judgment dated 9-1-1973 the High Court answered the question in favour of the assessee and against the revenue. 5. The question raised in this appeal is limited to the point whether on the facts and in the circumstances of the case, the revenue can claim that the sum of Rs. 7,24,914 payable to the assessee as compensation can be said to have accrued to it as income during the previous year ended 31-3-1956 relevant to the assessment year 1956-57. Now as long ago as E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27, this Court considered the question as to the point at which income could be said to accrue or arise to an assessee for the purpose of the Indian Income-tax Act, 1922. In the majority judgment delivered by N.H. Bhagwati, J. it was explained that the words 'arising or accruing' describe a right to receive profits, and that there must be a debt owed by somebody. 'Unless and until there is created in favour of the assessee a debt due by somebody', it was observed 'it cannot be said that he has acquired a right to receive the income or the income has accru....
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....on has not been fixed, no income could accrue to him. It cannot be contended that the mere claim by the assessee, after taking of possession, at a particular rate or for a certain sum is the compensation. It is the amount actually awarded by the Collector or subsequently decreed by the Court which accrues to him, and the respective amounts, whether awarded by the Collector or the Court accrue on the respective dates on which the award or the decree is passed. Income-tax is not levied on a mere right to receive compensation; there must be something tangible, something in the nature of a debt, something in the nature of an obligation to pay an ascertained amount. Till such time, no income can be said to have accrued.. . . . . . On the date when the Collector awarded the compensation, it is only that amount which had accrued or deemed to accrue, whether in fact paid or not. But by no stretch of the words in section 4(1)(b)(i), could it be said that the right to enhance compensation, which has not yet been accepted by the proper forum, namely, the Court, has also become payable on the date when the original compensation became payable, for being included in that year of assessment. ....
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....pensation till it is judicially determined by the final Court since the entire question, namely, whether the offer made by the Land Acquisition Officer is inadequate and the claimant is entitled to an additional compensation and if yes, at what rate is in flux till the question is set at rest finally, we do not think that any enforceable right to a particular amount of compensation arises. The offer made by the Land Acquisition Officer, by his award, if not accepted by a claimant, would not result automatically in a liability to pay additional compensation as claimed by a party aggrieved. There is no doubt a liability to pay compensation as offered by the Land Acquisition Officer. But that is far from saying that that liability is a liability to pay additional compensation or enhanced compensation as claimed by a party aggrieved. If there is an existing liability, the mere fact that the payment is postponed to future would not detract that liability from becoming a debt but the liability to pay unliquidated damages or additional compensation which are inchoate or contingent would not create a debt. . . ." (p. 247) Khan Bahadur Ahmed Alladin & Sons' case (supra) and Topandas ....