TaxTMI 
TaxTMI 
2024 (6) TMI 206
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....he assessment year in question, thus, according to 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. ....
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....; therefore, the same was shown as liability in the balance sheet. You have further submitted 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 n....
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.... revision-order, the PCIT has concluded that 'Nardana Claim-1' of Rs. 29,02,76,211/- should be considered as revenue for AY 2018-19 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....
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....ecided in favour of assessee and in terms of Para-11 and Para-12 thereof, the assessee became entitled to award of Rs. 38,70,34,948/- (including interest). However, the Govt. did not accept arbitral-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 accoun....
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....89 of Paper- Book. In conclusion, Ld. AR submitted that though the assessee received a part sum of Rs. 29,02,76,211/- during AY 2018-19 involved in present appeal but the receipt itself was not a final money of assessee as the dispute between 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....
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....er of the amount and immediately declared income in AY 2019-20. Same is the case of toll collection charges of Rs. 3,52,21,375/- which became assessee's money only in the year 2019-20 relevant to AY 2020-21 upon final decision by Delhi High Court. 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 impo....
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....n a careful consideration, we find that during the course of assessment-proceeding, there were specific queries raised by AO with regard to the issues contemplated by Ld. PCIT and the assessee made detailed replies/submissions. It is on record that vide 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 n....
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....dustan Housing & Land Development Trust Ltd. (1986) 161 ITR 524 (SC), the order of Hon'ble Supreme Court is reproduced below in entirety for full clarity: "This appeal by certificate granted by the High Court is directed against the judgment of the Calcutta High 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 a....
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...., therefore, a receipt of a revenue nature liable to tax. The Tribunal, however, accepted the other contention that the sum of Rs. 7,24,914 was not taxable in the assessment year 1956-57. It allowed the appeal accordingly by its order dated 22-2-1964. At the instance of the revenue, the Tribunal 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 accru....
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....estion whether income could be said to have accrued to the assessee on the date when possession of the land was taken by the Government for the purpose of assessment to tax in the year of assessment, P. Jaganmohan Reddy, CJ., speaking for the Court, said : ". . . If the actual amount of compensation 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. ....
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....] 1 SCR 676 that the award made by the Collector was merely an offer or tender of the compensation determined by the Collector to the owner of the property on the acquisition, the High Court observed : ''. . . the legal position which emerges is that there is no liability in praesenti to pay an enhanced compensation 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....
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....nue' and how the ICDSs referred by PCIT were violated? During hearing, we questioned Ld. DR about this aspect but the Ld. DR could not give any reply except dutifully relying on the observation made by Ld. PCIT. 16. In view of above discussion and for the reasons stated therein, we are of the considered view that the revision-order passed by Ld. PCIT in the present case is not sustainable. Hence we are inclined to quash the revision order passed by PCIT and restore the assessment-order passed by AO. Ordered accordingly. 17. Resultantly, this appeal is allowed. Order pronounced in the open court on 12.01.2024 ============= Document 1 (105) 7.1] That you have asked to explain the liability 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 -2 respectively. Out of the above Liability Claim of Rs. 29,02,76,211/- was under protest against the bank guarantee but same is sub judicial as Govt has filed suit filed against company in Dhule District Court kindly referred [Note- 7 of the Audited Balance sheet] 7.2.1] That the company had filed arbitration against the Governme....
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....[Note 7 of the Audited Balance sheetj 7.3.1] That the assessee company is entitled to collect the Toll collection till 18-11- 2014. That further extension was allowed to it for the period 19/11/2014 To For Ayushajay Construction Pvt. Ltd Director. Document 3 107 178 TO 13/03/2015 on the condition that entire amount of toll collection was deposited into Escrow account in bank with PWD, Maharashtra and after the end of the period only Rs. 26,000/- per day being expenses against toll collection was given to the company. Xerox copy of the letter dated 18-11- 182 2014 issued by Government of India and minutes of the meetings held as on 18-11-2014 in this respect are enclosed herewith. 7.3.2] That against the above amount of toll collection of Rs. 3,52,21,375/- Rs. 4,13,00,000/- (Including Interest) kept as Flexible Fixed Deposit Account with Dena Bank and Rs. 2,12,178/- were was lien in Escrow Account with Dena Bank Shirpur Branch. 7.3.3] That the amounts were duly appeared in the details of FFD bank account of Dena Bank Shirpur Branch filed in reply to point no 05 above and same are escrow account opened with Dena Bank with ....
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....scrow Agreement dated 22-11-2014 is enclosed herewith. 423 to 440 1.4] That Arbitrator recorded the award in favour of the company as on 26-09- 2016 Copy of the arbitration award order was already enclosed on pages 152 to 161 of our previous submission dated 19-01-2021. That as per PARA-11 and PARA-12, page no 06 & 07 of the aforesaid order the company is entitled for the award of Rs.38,70,34,948/- with interest. to 450 1.5] That out of the said amount of Rs.38,70,34,948/- only 75% payment i.e 44/ Rs.29,02,76,211/- is received in FY 2017-18 relevant to Assessment year 2018-19 against the bank guarantee which was also against the 100% bank guarantee for which assessee has given the margin money in the form of FDR. Copy of FDR and bank guarantee are enclosed herewith. 1.6] It is pertinent to mention that the amount deposited in the Escrow account could not be freely withdrawn by the company. The amount was withdrawn against a bank guarantee and again the matter is sub-judice before the Court. 1.7] The bank guarantee was taken from the company by the Government of India (through Secretary Ministry of Road Transport & Highways & ....
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....16. Copy of the above order is enclosed herewith. 1.16] That after receipt of Order of Delhi High Court the company has offered the Income of Rs. 19,17,10,908/- in the FY 2019-20 relevant to Assessment year 2020-21. 483 To 369 1.17] Copy of the audited Balance Sheet and Profit & Loss a/c for the Financial 343 year 2018-19 relevant to Assessment year 2019-20 are enclosed herewith. That after perusal of Para 16 read together with Note No 16.1 of the above report it is evident the Income of Rs.29,02,76,211/- was duly shown under the head "Operational Income". 1.18] Copy of Income Tax Return filed for the Assessment year 2019-20 is also 370 enclosed for your kind perusal. 1.19] It is also pertinent to note that the order of the Delhi high court is also subject to various calculation for which necessary directions has been given in the order. to 380 For Ayushajay Construction Pvt. Ltd. Director Document 9 In view of the above and considering the facts of the case and settled position of law the liability as shown in the year under consideration i.e in assessment year 2018-19 is legal and proper since in that assessme....