INCOME TAX OFFICER v. ROHTAK AND HISSAR DISTRICT ELECTRIC SUPPLY COMPANY (P) LTD
[Citation -1984-LL-0725-3]

Citation 1984-LL-0725-3
Appellant Name INCOME TAX OFFICER
Respondent Name ROHTAK AND HISSAR DISTRICT ELECTRIC SUPPLY COMPANY (P) LTD.
Court ITAT
Relevant Act Income-tax
Date of Order 25/07/1984
Assessment Year 1968-69 , 1969- 70
Judgment View Judgment
Keyword Tags acquisition of immovable property • proceedings for reassessment • reopening of an assessment • reassessment proceedings • state electricity board • physical verification • initial depreciation • voluntary disclosure • payment of interest • written down value • deeming provision • disclosure scheme • reason to believe • source of income • state government • concealed income • delay in payment • interest accrued • land acquisition • original return • revenue receipt • interest income • local authority • purchase price • actual payment
Bot Summary: On the basis of the aforesaid finding of the learned AAC for the assessment year 1971-72, the ITO included the interest income amounting to R s. 1,83,892 in the total income for the assessment year 1972-73, because during the previous year, corresponding to the aforesaid assessment year, the Court's decree had been passed on the basis of the compromise reached between the two parties with regard both to the amount of compensation to be paid and the interest to be given. In the course of the hearing of appeal for the assessment year 1972- 73, the learned counsel for the assessee questioned the inclusion of the income from interest in the assessment for the assessment year 1972-73 on the ground that the right to receive interest had been granted to the assessee-company by the recent legislation and that interest under the said Ordinance accrued to the assessee from year to year and that the inclusion of the interest in only one assessment year, namely, 1972-73, was not justified. As to the merits, the learned departmental representative supported the order of the ITO and submitted that the aforesaid interest income had been held to be accruing to the assessee from year to year by the AAC at the assessee's pleading in respect of the assessment year 1972-73, that there was nothing in law to show that the above view was not correct and that the ITO was justified in bringing to assessment the aforesaid income. Emphasis supplied In the present case, as we have seen above, part of Rs. 1,83,892 was excluded from the assessment of the assessment year 1972-73 and the assessment of such income is being sought to be made in the assessment years under consideration. The assessability of the aforesaid interest has been the subject-matter of litigation between the assessee and the department for a number of years in the course of several assessment proceedings, namely, the assessment years 1971-72, 1972-73 and the present assessment years. In the course of assessment proceedings for the assessment year 1972-73, all the relevant facts, which have a bearing on the determination of this question, were raised before the learned AAC and the stand of the assessee in the said appeal was that the income from interest accrued and arose to the assessee by the operation of the statutes from year to year and that such interest accrued to the assessee irrespective of the decree passed by the Court and that it was wrong to tax the entire amount in one year, namely, the assessment year 1972-73, in the relevant accounting period for which the decree in question was passed. Spreading over the assessment years 1971-72 and 1972- 73, the matter was decided by the AAC that the interest income aggregating to Rs. 1,83,958 was taxable in the assessee's hands, not in one year, when the amount was decreed in the assessee's favour, but from year to year beginning from 1-1-1967 to 22-6-1971.


These appeals are directed against validity of initiation of proceedings under section 147/148 of Income-tax Act, 1961 (' Act '), in respect of assessment years 1968-69 and 1969-70, on ground that assessee's income from interest accruing and arising on amount of compensation payable to assessee-company had escaped assessment in respect of aforesaid two years. 2. learned Commissioner (Appeals) has upheld validity of action under section 148 in respect of assessment year 1969-70, but has quashed said proceedings in respect of assessment year 1968-69. Therefore, assessee is aggrieved by order of learned Commissioner (Appeals) in respect of assessment year 1969-70, whereas department is aggrieved of aforementioned order of learned Commissioner (Appeals) in respect of assessment year 1968-69. 3. circumstances in which proceedings under section 147(a) were initiated by ITO against assessee-company may be noted: assessee-company owned electricity supply undertakings at Rohtak, Hissar, Hansi and Bhiwani towns of then Punjab and later Haryana State. company's licence to supply electricity to aforesaid towns expired o n 8-4-1962. On its expiry, Punjab Electricity Board (predecessor of Haryana State Electricity Board) took over undertaking in terms of provisions of section 66 of Indian Electricity Act, 1910. statutory notice of one year of Government's intention of take-over having already been given to assessee-company, Rs. 1 lakh were given to assessee-company ' on account ' pending determination of final compensation to be paid to assessee-company. In return filed by assessee for assessment year 1963-64, company declared above fact of take-over of its undertaking by Punjab Electricity Board as also factum of Rs. 1 lakh having been given to it as ad hoc payment and that final compensation was yet to be determined. above statement of fact was noted by ITO in para 1 of his assessment order while completing original assessment for assessment year 1963-64 on 21-12-1966. 4. Negotiations between assessee-company and Punjab State Electricity Board regarding compensation to be paid in respect of assets taken over continued up to December 1966. As two sides could not reconcile their difference with regard to compensation to be given, both sides named their arbitrators and referred matter for their award. two arbitrators could agree with regard to compensation to be paid to assessee-company in respect of eleven (item 1 to 11) of assets only. With regard to rest of items, there could be no agreement between two. Thereupon matter was referred to umpire, Shri B.P. Sinha, in February 1970. Shri Sinha gave his award on 12-7-1970 determining quantum of compensation of various items t Rs. 7,28,423. To this, he added solatium at rate of 20 per cent amounting to Rs. 1,45,684. Total compensation, thus, determined was Rs 8,74,107. To this amount, he further added interest at rate of 6 per cent per annum from 1-1-1967 to 31-7-1970. In respect of said interest, umpire made observations in paragraph 11 of his award, relevant parts of which may be extracted here for ready reference: " 11. It remains to consider very controversial question of interest. claimant-company has claimed interest at rate of 12 per cent per annum from date of taking over until date of payment of compensation money. It is argued on behalf of company that as matter of determination of compensation to be paid to company has been pending for years and several years must elapse between date of taking over and date of determination of amount of compensation, and as Board might take its o w n time in making full payment of amount of compensation, ultimately determined as payable to company, it is only just and equitable that company should be entitled to interest. contention further is that company itself has to pay interest of near about 12 per cent to bank on its own borrowings; it is fit and proper that company should be fully reimbursed in matter of interest. It is true that company has been paid only Rs. 1 lakh on account, at time of taking over, and is being kept out of remaining amount of compensation that may ultimately be determined as payable to it; it is not matter to be decided on considerations of justice and equity. I should have felt bound to award interest claimed, but Electricity Act does not entitle company to claim interest as of right. In certain other cases, Electricity Act does contemplate payment of interest but not in cases like present. Hence, claim for interest from date of taking over has to be disallowed. But question still remains whether company, should be entitled to claim interest pendente lite, that is to say, from time arbitration proceedings commenced in December 1966, until date of final determination of these proceedings, and until date of actual payment of amount determined and ultimately found due to company. In my view, I am competent to allow interest at usual rate of 6 per cent per annum during period of pendency of arbitration proceedings, that is to say, from January 1967 until date of this award, and also until date when outstanding amount found due to company is actually paid to company ..." [Emphasis supplied] 5. aforesaid award of umpire was contested in Court of Senior Sub-Judge, Hissar, on various counts by either sides. Ultimately, compromise was reached between two contestants on 19-6-1971, wherein total amount of compensation including 20 per cent solatium was determined at Rs. 8,07,921 as against sum of Rs. 8,74,107 determined by umpire. Interest at rate of 6 per cent was agreed to be paid by State Electricity Board from 1-1-1967 to 20-6-1971 amounting to Rs. 1,83,982. In terms of said compromise, Senior Sub-Judge, Hissar, passed decree on 22-6-1971, awarding aforesaid compensation and interest to assessee-company. 6. assessee had in meanwhile filed his return of income for assessment year 1968-69. Along with it, assessee had filed certain notes. In note No. 1, forming part of Annexure ' ', assessee disclosed following facts: " Punjab State Electricity Board took over Electric licence from 8-4- 1962 and ' on account ' payment of Rs. 1 lakh was received during 1962-63 as compensation. final compensation payable is not yet determined. matter has been referred to arbitration by company and Electricity Board has also nominated their nominee as arbitrator. proceedings are still continuing and Court has allowed further time to arbitrators to give their award before 26-2-1969." In return filed by assessee-company for aforesaid year, it did not disclose any income from interest, nor did it disclose that it had claimed interest at rate of 12 per cent from arbitrators with regard to compensation to be paid to it from date of taking over to date of award. Assessment on basis of aforesaid return was completed on 24- 12-1968, accepting aforesaid statement of facts at its face value. 7. In respect of assessment year 1969-70 also, assessee did not return any income from interest. said assessment was completed on or about 11-1-1972. In meanwhile, decree of amount referred to above had been passed finalising compensation to be paid to assessee- company as also interest to be paid to assessee-company. aforesaid fact of decree having been passed, was not brought by assessee to notice of ITO in course of original assessment proceedings for assessment year 1969-70. Accordingly, original assessment for assessment year 1969-70 was completed without taking into account any income from this source. 8. In assessment for assessment year 1971-72, ITO included interest awarded by umpire, Shri B.P. Sinha, in total income of assessee-company on footing that said interest had accrued and arisen to assessee-company from award and was, therefore, assessable as assessee's income for year ending on 31-3-1971. aforesaid addition was, however, deleted on appeal by learned AAC on footing that said award of umpire had not become final as both sides had disputed said award in Court of Senior Sub-Judge, Hissar, and that no income by way of interest could, therefore, accrue and arise to assessee-company on basis of such disputed award. 9. On basis of aforesaid finding of learned AAC for assessment year 1971-72, ITO included interest income amounting to R s . 1,83,892 in total income for assessment year 1972-73, because during previous year, corresponding to aforesaid assessment year, Court's decree had been passed on basis of compromise reached between two parties with regard both to amount of compensation to be paid and interest to be given. 10. assessee challenged inclusion of aforesaid interest income in respect of assessment year 1972-73 before learned AAC. It appears that while aforesaid appeal was pending, Governor of Haryana issued Ordinance on 27-2-1975, being Haryana Ordinance No. 1 of 1975, amending section 6 of Indian Electricity Act in its application to State of Haryana. need to pass said Ordinance, prima facie, arose on account of decision of Hon'ble Supreme Court in case of Godhra Electricity Co. Ltd. v. State of Gujarat AIR 1975 SC 32 striking down provisions of section 6 of Indian Electricity Act, as violative of articles 19(1)(f) and 19(1)(g) of Constitution of India and holding that taking over of Godhra Electric Co. Ltd. was unconstitutional. Their Lordships of Supreme Court pointed out in aforesaid case that as there was no provision to pay interest to licensee in respect of his undertaking being taken-over by Government, fundamental rights of licensee were violated. aforesaid judgment was rendered on 15-10-1974. Ordinance No. 1, referred to above, sought to amend provision in law with regard to deficiency as pointed out by their Lordships of Supreme Court in aforementioned case. Accordingly, section 6 was amended by aforesaid Ordinance and relevant portion of Ordinance reads as follows: " In section 6 of Indian Electricity Act, 1910 (hereinafter referred to as Principal Act): (i) after sub-section (5), following sub-section shall be inserted and shall be deemed to have been inserted with effect from 1st day of April, 1960, namely, (5A) Whereas notice exercising option to purchase undertaking has been served upon licensee under this section, licensee shall deliver undertaking to State Electricity Board, State Government or local authority, as case may be, on expiration of relevant period referred to in sub-section (1) pending determination and payment of purchase price: Provided that in any such case, purchaser shall pay to licensee, interest at Reserve Bank rate ruling at time of delivery of undertaking plus one per centum, on purchase price of undertaking for period from date of delivery of undertaking to date of payment of purchase price: (ii) Sub-section (5) shall be omitted and shall be deemed to have been omitted with effect from 1st day of April, 1960: (5) Notwithstanding anything contained in any judgment, decree or order of any Court, every option of purchase of undertaking, in territories now forming part of State of Haryana, exercised by erstwhile Punjab State Electricity Board or Haryana State Electricity Board by serving notice upon licensee under section 6 of principal Act and every delivery of undertaking effected by licensee to said Electricity Board in pursuance of such notice at any time on or after commencement of this Ordinance, shall be deemed to have been exercised or effected, as case may be, under section 6 of principal Act as amended by this Ordinance, as if section 6 as so amended were in force at all material time when such option was exercised or delivery was effected and accordingly every option of purchase so exercised and every delivery of undertaking so effected and all things done or actions taken in consequence of such exercise of option or delivery of undertaking shall be, and shall be deemed always to have been valid and shall not be called in question in any Court or Tribunal or before any other authority on ground that section 6 of principal Act did not provide for payment of any interest on purchase price for period from date of delivery of undertaking to date of payment of purchase price." 11. In course of hearing of appeal for assessment year 1972- 73, learned counsel for assessee questioned inclusion of income from interest in assessment for assessment year 1972-73 on ground that right to receive interest had been granted to assessee-company by recent legislation and that interest under said Ordinance accrued to assessee from year to year and that, therefore, inclusion of interest in only one assessment year, namely, 1972-73, was not justified. learned AAC accepted above reasoning of assessee by observing, inter alia, as follows: " 11. Amending section 6(5) of 1910 Act did not provide for interest. Therefore, umpire had awarded interest from time proceedings were pending before him. Such interest, therefore, arose only when it was awarded. This issue came up before my predecessor who held that Umpire's award is only tentative determination, which was challenged by both parties. decree which was passed in June 1971 has been held by my predecessor to have given appellant company right to receive such interest. However, on happening of such right, interest could be included. But by law amended by Haryana Amending Act, matter of interest did not any more remained matter of discussion, deliberations and decisions by umpire. Under section 7(a) of 1910 Act, umpire was only to decide market value of asset. On such valuation, appellant-company had become entitled to interest from 8th April, 1962. Thus, interest entitlement, which was matter of decision by umpire, has become statutory right rested with appellant- company as it was dispossessed of undertaking on 8th April, 1962, and was not paid any compensation till June 1971. Under income-tax law, income can accrue only when right to receive such income vests with assessee. In present case, right to receive interest is statutory. right to interest does not get postponed to quantification of compensation." After reviewing various case laws, from pages 8 to 11 of his judgment, learned AAC reached his conclusion in paragraph 12 of his order as follows: " 12. From ratio laid down in above judgment, it will be clear: (i) that right to receive interest under Haryana Amendment Act has arisen from April 8, 1962, and has run from year to year. interest is, therefore, assessable on accrual basis from year to year as against whole of amount included by ITO which is clearly erroneous. (ii) amount of compensation determined in 1967 had actually been related back to 8th April, 1962, and on such sum, appellant had acquired right to receive interest on specified rates from date till June 1971. I, therefore, hold that interest income from 8th April, 1962, amounted to Rs. 3,02,637 and Rs. 1,83,982 as held by ITO but cannot be included in total income of appellant-company during year under appeal. interest income has to be assessed from year to year as per ratio laid down in above noted judgments. However, I find that quantum of interest of Rs. 7,293 [proportionate interest for period 1st April, 1971 to 20th June, 1971 (81 days)] is includible in total income. contention of appellant that such sum was not received is not tenable and should be rejected on same reasoning that interest should be held to accrue from year to year." 12. aforesaid judgment was delivered by learned AAC on 17-7- 1976. Soon thereafter on 21-8-1976, ITO recorded following reasons in terms of sub-section (2) of section 148 of Act for reopening assessment for assessment year 1968-69: " assessee-company received compensation of Rs. 7,07,921 and interest of Rs. 1,83,982 for period from 1-1-1967 to 20-6-1971 from Haryana Electricity Board, Chandigarh, on taking over of assessee- company. Out of this amount, Rs. 50,210 was kept by Haryana Electricity Board as audit objections, reserves. This interest was not shown by assessee in his return of income. As interest is to be assessed on accrual basis, hence interest income of Rs. 42,469 has not been assessed. Thus, I have reason to believe that due to failure on part of assessee to disclose fully and truly all material facts, interest income of Rs. 42,469 has escaped assessment." Similar reasons were recorded as we understand for assessment year 1969-70. assessments reopened as above were completed after including interest income in respect of aforesaid two years as follows: Assessment year Amount (Rs.) 1968-69 42,469 1969-70 42,469 13. validity of aforesaid assessments was challenged by a s s e s s e e before learned Commissioner (Appeals). learned Commissioner (Appeals) quashed proceedings for assessment year 196869 on ground that said proceedings were barred by time as proceedings for that year could have been reopened only in terms of clause (b) of section 147 and as time had expired for reopening said assessment, ITO could not initiate proceedings for reassessment for that year. In respect of assessment year 1969-70, however, learned Commissioner (Appeals) confirmed reassessment proceedings. While doing so, he made following observations: " assessment for 1969-70 was completed on 11-1-1972. question of interest was finalised on compromise dated 17-6-1971 being made rule of Court on 22-6-1971. This happened when proceedings for assessment year 1969-70 were going on and it is common ground that there was no disclosure about this compromise having been made during course of proceeding for assessment year 1969-70. It was fact which was of primary nature, and which should have been disclosed during course of proceeding for assessment year 1969-70. I am of opinion that there was failure or omission to disclose this primary fact of compensation and interest having been compromised between assessee and Haryana State Government which should have been disclosed. There was, thus, failure or omission on part of assessee. assessment order for assessment year 1972-73, during course of which ITO came to know all relevant facts, was finalised in March 1975. In March 1975, ITO could reopen assessment for assessment year 1969-70 under section 147(a) on account of assessee's failure to disclose fully and truly material facts necessary for assessee's assessment. I am, therefore, of opinion that for assessment year under appeal, ITO was within jurisdiction to start proceeding under section 150(1) and provisions of section 150(2) are not applicable to assessee's case for this assessment year, namely, 1969-70. limitation under section 153(2) is not applicable to facts of case because factually assessment has been reopened under section 150(1). Provisions of section 153(3) regarding limitation apply." 14. As noted earlier, aforesaid orders of learned Commissioner (Appeals) in respect of assessment years 1968-69 and 1969-70, which are under challenge, one by department and other by assessee. 15. main thrust of argument of revenue has been that proceedings under clause (a) of section 147 in respect of assessment year 1968-69 were within time in August 1976 (being within eight years from end of assessment year 1968-69), that interest to assessee on compensation was payable statutorily by Haryana State Electricity Board by virtue of retrospective legislation enacted by Ordinance No. 1 referred to above, that this matter had been adjudicated upon by AAC in course of appeal for assessment year 1972-73 on assessee's plea to this effect, that learned AAC had clearly held that right to receive interest had accrued and arisen to assessee from year to year, that assessee had not disclosed his income from this source in original return filed for assessment year 1968-69, that it was obligatory on part of assessee to disclose all his income, that assessee had also not disclosed to ITO that he was claiming interest at rate of 12 per cent from date of take-over of undertaking to date of payment of compensation to assessee, that not giving said information to ITO at time of original assessment amounted to withholding information of primary facts from ITO and that, therefore, reopening under section 147(a) was justified. As to merits, learned departmental representative supported order of ITO and submitted that aforesaid interest income had been held to be accruing to assessee from year to year by AAC at assessee's pleading in respect of assessment year 1972-73, that there was nothing in law to show that above view was not correct and that, therefore, ITO was justified in bringing to assessment aforesaid income. learned departmental representative drew our attention, in this connection, to decision of Hon'ble Delhi High Court in case of Fazilka Electric Supply Co. Ltd. v. CIT [1983] 143 ITR 551, in which case, according to learned departmental representative, on identical in which case, according to learned departmental representative, on identical facts, it has been held by Hon'ble Delhi High Court that interest awarded by arbitrator did accrue and arise from year to year and could only be assessed on that basis and not on basis of date of decree. Reference has also been made to decisions of Hon'ble Allahabad High Court in case of Addl. CIT v. Virendra Singh [1979] 118 ITR 923 and Moti Lal Chaddami Lal Jain v. CIT [1980] 122 ITR 949. It has been held in both above cases that interest received for delay in payment of compensation on acquisition of land was revenue receipt and that interest accrued from year to year and could be assessed on that basis alone. According to learned departmental representative, approach of learned Commissioner (Appeals) to effect that assessment for assessment year 1968-69 could be reopened only in terms of section 147(b), was erroneous for that had never been case of ITO and that learned Commissioner (Appeals) had erred in holding that assessee had no obligation to disclose accrual of interest in his return of income because at that time, there was no law which granted interest to assessee-company. While holding so, learned Commissioner (Appeals) had apparently omitted to take note of retrospective nature of legislation brought about by Ordinance No. 1 by Haryana State. retrospective legislation deemed situation to be existing when, in fact, it did not exist and when law deemed certain situation to, exist, officials giving effect to said legislation had to presume that deemed situation existed all along even though, in fact, it did not. They could not allow their imagination to boggle and stop natural consequences of such deeming from having their normal operation. Once Legislature deemed in 1975 that interest was accrued from 1-1-1960, it had to be presumed that interest was payable to assessee from 8-4-1962 onwards till date of final payment of compensation, even though assessee might not have known this fact on date when he filed his original return of income. To give effect to retrospective legislation, it had to be presumed that assessee did have such right whether or not knowledge of said right was with assessee. 16. learned counsel for assessee opposed above submission and pointed out that interest, which has been received by assessee and which is subject-matter of dispute, is not one in terms of amended statute but in terms of decree, and nature of this interest was basically different from that of statutory interest to be given in terms of amended sub-section (5A) of section 6 as made applicable to State of Haryana. assessee's claim for interest from date of take-over to date of payment had been specifically negatived by umpire by observing that Haryana State Electricity Act did not permit awarding of such interest. What he granted was in exercise of his discretionary powers as arbitrator, who called it interest pendente lite. Such interest could not be equated to statutory interest and would arise only on date of decree. learned counsel did admit that plea, which was being taken by assessee now was directly opposed to plea that had been taken earlier by assessee's counsel in course of appeal in assessee's case for assessment year 1972-73. He also conceded that assessee had taken benefit of appellate order for assessment year 1972-73 and had been successful in getting addition for interest made in respect of 1972-73 deleted from that assessment. He nevertheless submitted that view taken by AAC in respect of assessment year 1972-73 was erroneous and that assessee was now wiser and that he could now take plea, which was permissible in law, despite contrary plea, which had been taken by assessee in respect of assessment year 1972-73 with regard to same income. 17. Besides, learned counsel pointed out that assessee could not have disclosed in his returns what he did not know at time of filing of returns. Court's decree was passed on 22-6-1971. Return for 1968-69 had been filed much earlier and even original assessment had been completed o n 24-12-1968. assessee could not know as on this date as to what terms of decree would be. He naturally could not inform ITO, of what he himself did not know. So far as Ordinance No. 1 of Haryana was concerned, this was enacted much later and assessee could not disclose his income based on its provisions in 1968. According to learned counsel, assessee had disclosed to department in his return for assessment year 1968-69 fact of pending arbitration proceedings. There were no other primary facts that could be disclosed and which could be said to have been withheld and so reopening on basis that assessee had not disclosed all facts, would not be proper. In support of above proposition, learned counsel relies on following authorities: Modi Spg. & Wvg. Mills. v. ITO [1975] 101 ITR 637 (All.), Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1 (SC), Rai Singh Deb Singh Bist v. Union of India [1977] 77 ITR 802 (Delhi) and Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC). 18. In rejoinder, learned departmental representative submitted that assessee should not be allowed to raise plea contrary to what had been raised by him in respect of assessment year 1972-73 and that it would be highly inequitous if assessee is allowed to take advantage of his consistently shifting stands with view to avoid assessment of income, which is otherwise assessable in his hands. 19. In respect of assessment year 1969-70, assessee's pleas were similar as raised above. learned departmental representative, however supported order of learned Commissioner (Appeals) and relied on observation made by him in para 3 of his order, which have been extracted by us in extenso above in para 13 supra. plethora of case law was cited by both sides, but after going through said case law, we feel that it would not be necessary for us to refer in detail to same for purpose of deciding present appeals. We are, therefore, not referring to catena of case law; which was cited before us by either sides, though we have carefully gone through each case. 20. While examining validity of reopening of assessment under section 147(a), we have to ascertain state of mind of ITO at time when he reopened assessment. question that ITO has to ask while reopening assessment is, whether he has reasons to believe that assessee's income had escaped assessment on account of assessee's failure to return all details of his income. In present case, assessee's own plea before learned AAC, in course of appeal proceedings for assessment year 1972-73, was that interest income accrued and arose to assessee from year to year, and not on basis of decree of Court passed in June 1971. above pleading of assessee was accepted by learned AAC. Once knowledge about income from interest accruing and arising to assessee from year to year came in possession of ITO and he found by reference to income-tax returns filed by assessee that he had not returned income from that source in his original returns, ITO had, prima facie, reasons to believe that assessee's income had escaped assessment on his own pleading due to assessee's omission to show said income in said returns. For determination as to whether or not assessee's income had escaped assessment due to assessee's omission, one had to look at tenor objective facts, namely, (i) whether there was return of income and (ii) whether there was mention in said return of income from certain source. If on physical verification, it was found that given source of income, though existent, was not disclosed by assessee for whatever reasons, essential ingredients for initiating proceedings under section 147(a) will be made out. Whether or not there was conscious state of mind which prompted assessee not to disclose facts, may be relevant for purpose of establishing concealment but it is not necessary to establish such conscious state of mind when one is to find out as to whether income of assessee had escaped assessment due to assessee's failure to disclose said income in his return of income. In present case, as noted earlier, assessee's submission before learned AAC was that income from interest did not accrue or arise to assessee on date of passing of decree, that is on 22-6-1971 and that, therefore, said income was not assessable in hands of assessee in respect of assessment year 1972-73; and that income had accrued and arisen to assessee from year to year, beginning from 1-1-1967 to 22-6-1971. This plea of assessee has been accepted by learned AAC as tenable on facts and in law. Once ITO learnt of aforesaid finding, he had all material with him to believe that assessee's income for aforesaid two assessment years had escaped assessment and that said escapement was due to assessee's failure to show said income in original returns for assessment years 1968-69 and 1969-70. 21. contention of assessee that assessee had disclosed all material facts necessary for its assessment while filing original returns is not acceptable to us. In respect of assessment year 1969-70, may it be noted, and learned Commissioner (Appeals) has stressed this point, decree in question had been passed during pendency of original assessment proceedings for assessment year 1969-70, yet it was not brought to attention of ITO by assessee. Withholding information on this point, while assessment was pending, would, without doubt, amount to withholding primary information having bearing on assessee's total income. It is of no consequence in this connection as to what was honest opinion of assessee with regard to relevance of that information to assessment to be made. relevance or irrelevance of it has to be left to decision-making authority. fact of decree should have been disclosed and it was, admittedly, not disclosed. 22. As regards 1968-69, it is true that assessee could not have disclosed contents of decree, as return was filed in middle of 1968 and assessment itself was completed on 26-12-1968. But plea of assessee before learned AAC in course of appeal for assessment year 1972-73 was, and it is also correct, that right to receive interest accrued to assessee statutorily from 1-4-1962 onwards on basis of provision of section 6(5A), as applied to State of Haryana by Ordinance No. 1. May be t h e Ordinance was promulgated in 1975, but it deemed section 6(5A) to be existing with effect from 1-4-1960. This putative state of affairs has to be taken at its face value and its existence from 1-4-1960 onwards cannot be disputed. immediate consequence of this deeming provision is that right of assessee to receive interest existed as on 1-4-1962 but same was not disclosed in return or during course of assessment proceedings. logical consequences of this putative state of affairs must follow in law as such for excluding income from interest from total income of assessment year 1972-73 as to include said income in total income for assessment years 1968-69 and 1969-70. None of decisions, relied upon by assessee, in our opinion, throw light on this aspect of matter which is before us. In case of Modi Spg. & Wvg. Mills and Parashuram Pottery Works Ltd., record of ITO contained information regarding initial depreciation allowed and written down value, (WDV) etc. assessees had not disclosed in returns filed by them initial depreciation allowed to them. ITO completed original assessments on basis of WDV declared by assessees. We subsequently discovered that WDV's should have been adjusted by reducing initial depreciation and depreciation that could have been allowed to assessee could not be more than such adjusted WDV's. He, therefore, initiated proceedings under section 147(a). These proceedings were struck down by Hon'ble Allahabad High Court in Modi Spg. & Wvg. Mills' case and by Hon'ble Supreme Court in Parashuram Pottery Works Co. Ltd.'s case. It was pointed out by their Lordships that assessee had disclosed all primary details and that ITO could not initiate proceedings under section 147(a). above is not position in present case. income from interest accrues and arises under section 6(5A) of Indian Electricity Act from year to year and same was not disclosed. There is no remissness on part of ITO. law deemed aforesaid sub-section (5A) to be on statute book with effect from 1-4-1960 and its logical effect has to be given. assessee had right to receive interest, and this was not disclosed in return. There was thus clear cut escapement on this putative state of law. In Rai Singh Deb Singh Bist's case, their Lordships were dealing with loans in names of some which had been disclosed, in original returns. ITO noted those loans and accepted them at their face value at time of original assessment. Subsequently, he came to conclusion that loans were bogus and initiated proceedings under section 34(1)(a) of Indian Income-tax Act, 1922 (' 1922 Act '). These proceedings were quashed by their Lordships by saying that all primary facts had been disclosed by assessee at time of original assessment and that it was not for assessee to instruct ITO as to what inference he will draw from given facts. Similar is ratio of Calcutta Discount Co. Ltd.'s case. None of these cases dealt with situation with which we are faced in present proceedings, namely, effect of retrospective legislation and income accruing and arising as result thereof. When such be position, putative state has to be taken as real one and result of it would be that income from interest accrued to assessee in accounting periods corresponding to assessment years 1968-69 and 1969- 70, and this was not disclosed in returns for those years and so same escaped assessment on account of its non-declaration in returns. There was, thus, in our opinion, sufficient justification to reopen assessments for years in question. 23. Then, provisions of section 150, read with Explanation 2 to section 153 of Act, cannot be ignored. finding of AAC in appellate order for assessment year 1972-73 was that entire interest income of Rs. 1,83,892 was not assessable in 1972-73 and that it was assessable on accrual basis from year to year---see para 12 of AAC's order quoted in para 11 supra. It was in pursuance of this finding that assessments under consideration were reopened by ITO. Explanation 2 to section 153, in circumstances, squarely applies to facts of present case. said Explanation 2 reads as follows: " Where, by order referred to in clause (ii) of sub-section (3), any income is excluded from total income of assessee for assessment year, then, assessment of such income for another assessment year shall, for purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in said order." [Emphasis supplied] In present case, as we have seen above, part of Rs. 1,83,892 was excluded from assessment of assessment year 1972-73 and assessment of such income is being sought to be made in assessment years under consideration. present assessments have, therefore, to be deemed to be ones made in consequence of or to give effect to finding contained in AAC's order referred to above. Section 150(1) provides that bar for initiation of action for assessment or reassessment shall be, lifted when assessment is sought to be made in consequence of or to give effect to direction of appellate authority. said sub-section reads as follows: " (1) Notwithstanding anything contained in section 149, notice under section 148 may be issued at any time for purpose of making assessment o r reassessment or recomputation in consequence of or to give effect to any finding or direction contained in order passed by any authority in any proceeding under this Act by way of appeal, reference or revision." Reassessment proceedings, in view of above provision, will not be subject to limitation prescribed in section 149 of Act. If any authority for this proposition is needed, we may refer to decision of Hon'ble Calcutta High Court in case of Hungerford Investment Trust Ltd. v. ITO [1984] 146 ITR 73. In that case, action under section 34 in respect of assessment year 1949-50 taken on 29- 10-1961 was held to be valid as bar of limitation had been lifted on account of finding of AAC. Hon'ble Allahabad High Court also took similar view in Raghunath Prasad Tandon v. CIT [1964] 51 ITR 763 and in Jawahar Lal Mani Ram v. CIT [1963] 48 ITR 837. In latter case, action under section 34(1)(b) for assessment year 1946-47 taken on 4-3-1955 was held to be valid as bar of limitation had been lifted under second proviso to section 34(3) of 1922 Act (analogous to section 150(1) of 1961 Act). 24. learned counsel had drawn our attention to provisions of sub- section (2) of section 150, which, in his opinion, constituted exception to general provisions of section 150(1). said sub-section reads as follows: " (2) provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to assessment year in respect of which assessment, reassessment or recomputation could not have been made at time order which was subject-matter of appeal, reference or revision, as case may be, was made by reason of any other provision limiting time within which any action for assessment, reassessment or recomputation may be taken." In present case, we are not concerned with ' assessment ' for assessments for both years under consideration stood completed within normal time limits. We are concerned with reopening of assessments or ' reassessments '. question to be answered is: whether assessments for years under consideration could be reopened on date when order appealed against, i.e., assessment for assessment year 1972-73 was made. It is not clear from our record as to when assessment order in question was made. date of AAC's order was 17-7-1976. Even on this day normal time limit for reopening assessments under section 147(a) was available. Sub-section (2) of section 150 did not, thus, come in way of ITO and reassessment proceedings cannot be said to be invalid. 25. For reasons stated above, we are of opinion that commencement of proceedings under section 147(a) in respect of both years was for valid reasons and was within time and, therefore, learned Commissioner (Appeals) had no justification to quash proceedings for assessment year 1968-69. His order on this point is, therefore, hereby reversed and in respect of assessment year 1969-70 his order on this point is hereby confirmed. 26. validity of assessments in question were challenged by assessee on another ground also. According to him, provisions of section 144B of Act did not apply to assessments made under section 147 and inasmuch as in present case section 144B had been resorted to, assessment got vitiated and time barred. For above proposition, he relied on alleged decision of Nagpur Bench of Tribunal (copy of it has not been placed on record). learned departmental representative, however, pointed o u t that matter has since been considered by Special Bench of Tribunal in case of Bela Singh Pabla v. ITO [1982] 9 TAXMAN 114 (Delhi). In view of Special Bench decision, with reasoning and conclusion of which we concur, we reject assessee's contention in this regard. 27. Now coming to merits of case, we are of opinion that subject-matter is no more res integra. assessability of aforesaid interest has been subject-matter of litigation between assessee and department for number of years in course of several assessment proceedings, namely, assessment years 1971-72, 1972-73 and present assessment years. In course of assessment proceedings for assessment year 1972-73, all relevant facts, which have bearing on determination of this question, were raised before learned AAC and stand of assessee in said appeal was that income from interest accrued and arose to assessee by operation of statutes from year to year and that such interest accrued to assessee irrespective of decree passed by Court and that, therefore, it was wrong to tax entire amount in one year, namely, assessment year 1972-73, in relevant accounting period for which decree in question was passed. This plea of assessee was accepted by learned AAC and on that footing, he held that income from interest accrued from year to year from 1-1-1967 to 22-6-1971 and that said interest income is, accordingly assessable in different assessment years corresponding to aforesaid period and that it was wrong to tax entire interest income in one assessment year, namely, assessment year 1972-73. Accordingly, sum of Rs. 1,83,982 which was brought to assessment by ITO in respect of aforesaid assessment year 1972-73, was deleted by learned AAC from total income of 1972-73 and only sum of Rs. 7,293, being interest due for period 1-4-1971 to 22-6-1971, was included in total income for year. said order of learned AAC has been allowed to become final by both parties accepting correctness of said judgment in view of this, it is not open to assessee in present proceedings, which have directly arisen from aforesaid order of learned AAC, to retract from pleadings made by assessee himself in course of aforesaid appellate proceedings. nature of aforesaid income and time of its accrual have been adjudicated upon in between both parties by learned AAC and both sides accepted its correctness by not appealing against it. If said judgment is binding on department, it is equally binding on assessee. present proceedings have been initiated to give effect to aforementioned finding of AAC in terms of Explanation 2 to section 153. assessee cannot, therefore, be allowed to question correctness of finding which has become final and, what is more, which is as per his own pleadings. 28. Apart from above, on general principles also, assessee has to b e estopped from reprobating his earlier stand of which he has already taken advantage. Thus, in Sri Raja v. Sarvagnaya Kumara Krishna Yachendra Bahadur Varu, Rajah of Venkatagiri v. Province of Madras AIR (34) 1947 Mad. 5(2) their Lordships quoted with approval Lord Shaw, who delivered judgment on behalf of Board in Hoystead v. Commissioner of Taxation 1926 AC 155 and observed as follows (with reference to situation resembling one with which we are confronted in this appeal): " In opinion of their Lordships, it is settled, first, that admission of fact fundamental to decision arrived at cannot be withdrawn and fresh litigation started, with view of obtaining another judgment upon different litigation started, with view of obtaining another judgment upon different assumption of fact; secondly, same principle applies not only to erroneous admission of fundamental fact, but to erroneous assumption as to legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views they may entertain of law of case, or new versions which they present as to what should be proper apprehension by Court of legal result either of construction of documents or weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted." [Emphasis supplied] In present case, as has been seen while narrating facts above, learned counsel for assessee fairly conceded that stand which assessee wanted to take up in present appellate proceedings was directly opposed to what assessee itself had taken in course of appellate proceedings for assessment year 1972-73 and on basis of which assessee had obtained relief referred to above and said adjudication was accepted by either sides, and yet he submitted that he could raise such plea in present appeals, because years in question were different from 1972-73 and that principle of res judicata did not apply in income-tax proceedings and that he was wiser now than when he was when he had argued for assessment year 1972-73, and had, according to him, put forward erroneous pleading in course of assessment year 1972-73. learned counsel failed to note that it was not only that allegedly wrong pleading was taken in respect of assessment year 1972-73 but that on basis of such pleading, he obtained relief from taxation. He, of course, now submits that relief was not due to him in assessment year 1972-73 and urges that proceedings, which have now been launched on basis of aforesaid finding of learned AAC (which have been accepted by both sides as correct expression of opinion by him on basis of facts admitted before him), should be thrown out on ground that said finding was obtained from learned AAC on basis of erroneous pleadings. aforesaid approach of learned counsel appears to us to be directly contrary to observations of their Lordships of Hon'ble Madras High Court referred to above. Having obtained benefit on basis of aforementioned pleadings, assessee cannot, in our opinion, be allowed to go back from said pleadings on same subject-matter in respect of present assessment years, when action for these years flows directly from said pleadings and order of AAC thereon. Sir Ashotosh Mukherjee formulated aforesaid principle in his ruling of Calcutta High Court in 39 CLJ 40 (sic) in case of Dwijendra Narain Roy v. Joges Chandra De AIR 1924 Cal. 600, as follows: "...It is elementary rule that party litigant cannot be permitted to assume inconsistent positions in Court to play fast and loose, to blow hot and cold, to approbate and reprobate to detriment of his opponent. This wholesome doctrine applies not only to successive stages of same suit, but also to another suit than one in which position was taken up provided that second suit grows out of judgment in first." 29. above enunciation of law was approvingly quoted by their Lordships of Hon'ble Allahabad High Court in case of Udrej Singh v. Ram Bahal Singh AIR (33) 1946 All. 436. Their Lordships of Hon'ble Andhra Pradesh High Court have also reiterated above principle in case of Indermull Loniya v. Subordinate Judge, Secunderabad AIR 1958 AP 779. After referring to decision of Hon'ble Allahabad High Court in case of Udrej Singh, their Lordships observed that: ". . . If parties have taken up particular position before Court at one stage of litigation, it is not open to them to approbate and reprobate and to resile from that position...." [Emphasis supplied] 30. It is true that as general rule, principle of res judicata is not applicable to decisions of income-tax authority, as has been pointed out by their Lordships of Hon'ble Bombay High Court in H.A. Saha & Co. v. CIT [1956] 30 ITR 618, but their Lordships have themselves pointed out in that case, that above rule is subject to limitation that effect of revising decision in subsequent year should not lead to injustice. In that case, their Lordships were considering action of ITO in going back upon finding reached in assessee's case in earlier year. Referring to action of income-tax authorities in this regard, their Lordships pointed out that: " . . . if Court is satisfied that by depriving assessee of his rights under latter decision, in earlier year, assessee lost important advantage or lost some benefit which he could have got under Income-tax Act, then Court may take view that departing from earlier decision leads to injustice or denial of justice and Court may prevent income-tax authority from doing something which should be unjust and inequitable." [Emphasis supplied] above observations would apply mutatis mutandis to assessee also as litigant. What cannot be done by one side, namely, ITO, cannot also be done by other side to litigation, namely, assessee. If as result of assessee's action injustice is going to be caused to revenue, assessee must be prevented from resiling from its earlier stand, where it took advantage of its pleadings and got benefit. 31. It is true that in case of CIT v. V.MR.P. Firm [1965] 56 ITR 67 their Lordships of Hon'ble Supreme Court observed that doctrine of approbate and reprobate cannot operate against provisions of statute and that if particular income was not taxable under Act, it could not be taxed on basis of estoppel or any other equitable doctrine. According to their Lordships, equity was out of place in tax law and particular income was either exigible to tax under taxing statute or it was not and that if it was not, ITO had no power to impose tax on said income. aforesaid observations have to be understood in context in which they were made. Their Lordships were considering situation where certain amount was not income at all and, could not, therefore, be taxed under Act. department wanted to tax it on plea that assessee had taken advantage of certain scheme formulated by Government of India, in terms of which sums received by assessee from its debtors would be taxable. plea of assessee was that, if sums in question represented principal amount of debt, there could be no question of their being taxed, even when assessee adopted scheme formulated by Government of India. It was in this context that their Lordships observed that if certain amount was not income, it would not be exigible to tax, and it would not be taxed on principle of estoppel. Their Lordships made their intention clear by referring to decision of Hon'ble Calcutta High Court in case of Amarendra Narayan Roy v. CIT AIR 1954 Cal. 271 and case of Amarendra Narayan Roy v. CIT AIR 1954 Cal. 271 and distinguishing it on facts. In that case, assessee had challenged imposition of tax on its concealed income on basis that due procedure of law had not been followed in order to tax him. Hon'ble Calcutta High Court rejected assessee's submission and said that concealed income was taxable and, therefore, tax could be recovered from assessee by revenue following procedure laid down in Voluntary Disclosure Scheme, 1951. revenue relied on this case of Hon'ble Calcutta High Court to plead before their Lordships of Supreme Court in aforesaid case that assessee having opted for scheme of Government of India, in accordance with which amounts recovered by it from debtors were to be taxed as assessee's income, assessee could not be allowed to riggle out net of taxation by saying that said amounts were not income. Rebutting aforesaid reasoning of revenue, their Lordships observed as follows: " decision in Amarendra Narayan Roy v. CIT AIR 1954 Cal. 271 has n o bearing on question raised before us. There concessional scheme tempted assessee to disclose voluntarily all his concealed income and he agreed to pay proper tax upon it. agreement there related to quantification of taxable income but in present case what is sought to be taxed is not taxable income. assessee in such case can certainly raise plea that his income is not taxable under Act. We, therefore, reject this plea." [Emphasis supplied] 32. principle which has, thus, been laid down by their Lordships of Hon'ble Supreme Court in aforementioned case is that, if item is not income and is not taxable as income under Act, it cannot be brought to tax even with consent of assessee, and that, in this sense, assessee cannot be estopped from pleading that amount did not have taxable quality on basis of doctrine of ' approbate and reprobate.' amount, which did not have taxable quality, would not become taxable merely because assessee had, at one stage, agreed to be assessed in respect thereto. In present case, as in case of Amarendra Narayan Roy, there is no doubt about taxable quality of income. income from interest is taxable, though there was dispute at one time between revenue and assessee as to which was year or years in which said income should be taxed. After considerable litigation, spreading over assessment years 1971-72 and 1972- 73, matter was decided by AAC that interest income aggregating to Rs. 1,83,958 was taxable in assessee's hands, not in one year, when amount was decreed in assessee's favour, but from year to year beginning from 1-1-1967 to 22-6-1971. decision was accepted by both sides and on that basis, present action against assessee in respect of assessment years 1968-69 and 1969-70 have been commenced. Part of sum of Rs. 1,83,958 included in total income of assessee for assessment year 1972-73 has already been excluded as result of order of learned AAC referred to above. Relevant parts of excluded amount are being sought to be taxed in present years as per assessee's pleadings which have been accepted by AAC. assessee, in these circumstances, cannot be allowed to go back and thereby cause injustice to revenue, depriving it altogether of its right of taxing assessee's income. If we allow assessee to reprobate on aforesaid stand, department would be losing important advantage inasmuch as entire amount, which is now being sought to be taxed on basis of decision of AAC, which has been accepted by both sides, would go without tax, even though it had taxable quality of years in which interest income accrued and arose. When this is going to be result, Hon'ble Bombay High Court says in H.A. Shah & Co.'s case, that principle of res judicata should be applied and litigant concerned, who is trying to reprobate, must not be allowed to reprobate. 33. assessee's learned counsel, though given opportunity to do so, has not been able to bring to our attention any case law which might be militating against view taken by us above. He had, of course, pleaded that interest received by assessee was not income at all and that it was part of compensation and, hence, capital receipt. He had relied for this proposition on decision of Hon'ble Kerala High Court in case of CIT v. Periyar & Pareekanni Rubbers Ltd. [1973] 87 ITR 666. We have gone through aforesaid decision and we find that it was not dealing with awarding of interest given under section 6(5A), as applied to State of Haryana. position of interest under aforesaid Act is similar to that under Land Acquisition Act, 1894, and their Lordships of Hon'ble Kerala High Court themselves held in aforementioned case that position under Land Acquisition Act would be different from what was in that case, where land had been taken over by Government otherwise than under Land Acquisition Act. ratio of aforesaid case, therefore does not help assessee. matter is, in our opinion, squarely covered by ratio of decision of Hon'ble Allahabad High Court in Virendra Singh's case and Moti Lal Chaddami Lal Jain's case. interest paid in present case is on capital sum of compensation for paying it late. It is, therefore, taxable. 34. In recent case, Om Parkash v. CIT [1984] 148 ITR 180, their Lordships of Hon'ble Delhi High Court dealt with situation where interest for 22 years was awarded by arbitration in one year for acquiring land under Requisitioned Land (Continuance of Powers) Act, 1947, and Requisitioning and Acquisition of Immovable Property Act, 1952. There was no provision under these Acts for payment of interest. arbitrator, however, awarded interest by his award dated 26-4-1967 since 1945. aforesaid interest was held to be " in lieu of loss of income for those 22 years during which period assessee did not have lands and did not have compensation amount". Their Lordships further pointed out that: " . . . If compensation amount had been with assessee he could have earned interest or income from same. If land had been with assessee he could have derived income from utilising land. But, for 22 years, neither was with him. Therefore, this interest is to be treated as relating to loss of income during these 22 years and has not to be treated as revenue receipt for only one year." Thus, interest was held by Hon'ble Delhi High Court to be not only revenue receipt being compensation for loss of profit, but also that it accrued from year to year. above ratio is based directly on ratio of decision of Hon'ble Supreme Court in case of Satinder Singh v. Umrao Singh AIR 1961 SC 908. facts of present case have remarkable similarity with facts of above case. Here too, Court awarded interest on 22-6-1971 for period 1-4-1962 onwards for reason that assessee-company was kept out of electricity undertaking as well as compensation during aforesaid period. nature of interest is clearly of compensation for loss of income for aforesaid period. It has, therefore, to be taxed as revenue receipt and on year to year basis, and not all in one lump sum. added factor in present case is that such right to receive interest has also been made statutory with effect from 1960 and so it derives its strength not from award but from statute itself. plea of assessee to this effect in appellate proceedings for assessment year 1972-73 was correct and was rightly accepted by learned AAC. plea of learned counsel now that said plea was wrong has, thus, to be rejected as not sustainable in law. said finding is not only binding on both sides, but also correct. 35. In view of what we have stated above, we hold that amounts in question have been rightly brought to assessment by ITO in respect of both assessment years. Accordingly, assessee's appeal and cross- objection stand rejected. No other pleas or grounds were pressed before us. *** INCOME TAX OFFICER v. ROHTAK AND HISSAR DISTRICT ELECTRIC SUPPLY COMPANY (P) LTD.
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