Punjab-Haryana High Court
V.K. Sood Engineers And Contractors ... vs Commissioner Of Income-Tax And Ors. on 7 May, 1993
JUDGMENT A.L. Bahri, J.
1. The petitioner, Messrs. V.K. Sood Engineers and Contractors Pvt. Ltd., has approached this court in a peculiar set of circumstances for the relief claimed under Article 226/227 of the Constitution of India. The broad facts on which we propose to grant the relief are not in dispute and only, in brief, reference thereto is considered necessary. The petitioner is a contractor. In some contracts containing arbitration clauses disputes arose which ultimately ended with awards given by the arbitrator/arbitrators. Such awards were made a rule of the court. Since the awards were against the State of Punjab, eight first appeals were filed in the High Court which stood dismissed for default. Applications for restoration of the appeals were dismissed. Hence, the letters patent appeals, eight in number. Those eight appeals which are stated to be pending were filed against the order refusing to restore the appeals as well as the order dismissing the appeals in default. Since the petitioner recovered the amount of the awards which were made a rule of the court, the question arose before the income-tax authorities to include the amount of the awards in the taxable turnover of the assessee. It was so included. Appeals against the orders of the Income-tax Officer are stated to be pending. At this stage, it may be observed that though the petitioner had withdrawn the amount of the awards which were made a rule of the court, in the letters patent appeals, a direction was given to the petitioner to deposit the amount so withdrawn. Certain restraints were also imposed on the petitioner with respect to the operation of the accounts or encumbering the property.
2. Since the petitioner was unable to pay the tax, he has approached this court for quashing the orders (annexures P-18 to P-21 and P-23). Vide order dated December 10, 1992 (annexure P-18), the Commissioner of Income-tax allowed permission to provisionally attach the cash received by the assessee on encashing the fixed deposit receipts. Order dated December 18, 1992 (annexures P-19 and P-20), are the directions of the Deputy Commissioner of Income-tax to the Income-tax Officer under Section 144A of the Income-tax Act for framing the assessment in the case of the petitioner. Annexure P-21 is the order dated December 23, 1992, passed by the Income-tax Officer framing the assessment against the petitioner as stated above. Annexure P-23 is the notice dated December 23, 1992, issued by the Commissioner of Income-tax, Investigation Circle II, Chandigarh, for imposing penalty.
3. On notice of motion having been issued, reply has been filed on behalf of the respondents, inter alia, raising preliminary objections to the maintainability of the writ petition as an appeal against the order of assessment passed by Hit Income-tax Officer is already pending. The challenge to the order of the Deputy Commissioner of Income-tax giving directions under Section 144A of the Act is met by saying that it merged in the order of the Income-tax Officer and, thus, independently, no challenge could be made to such an order of the Deputy Commissioner of Income-tax. In such like matters, even otherwise, resort could not be had to the writ jurisdiction. Attachment order stands withdrawn. Annexure P-23 was merely a notice and the final order is yet to be passed. The petitioner has not approached the court with clean hands and thus is not entitled to a discretionary relief.
4. We have heard learned counsel for the parties and we are fully conscious of the fact that in cases where the facts are disputed or a question of law is raised on disputed facts, this court should not exercise jurisdiction under Article 226 of the Constitution of India by entertaining the writ petition and encroach upon the jurisdiction of the authorities under a special statute like the Income-tax Act. However, that does not mean that in no case this court can interfere in matters which are to be dealt with by the income-tax authorities. It is in this view of the matter that on the admitted broad facts as stated above, the question which has been raised and debated needs to be mentioned. On behalf of the petitioners, it is stated that the amount of the awards, which were made a rule of the court, was withdrawn on furnishing bank guarantee under the orders of the court. However, the orders, vide which such awards were made a rule of the court, are pending final adjudication in the High Court in the letters patent appeals filed by the State of Punjab. Till such a dispute is finally disposed of, it cannot be said that the amount, though received, accrue as income of the petitioner. For this contention, reliance has been placed on the decision of this court in the case of CIT v. Jai Parkash Om Parhash Co. Ltd. [1961] 41 ITR 718, which judgment was approved by the Supreme Court in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 ; AIR 1986 SC 1805. Judgments of other High Courts have also been cited at the Bar which may also be noticed : G. Karunakaran v. State of Kerala [1979] 120 ITR 571 (Ker) ; CIT v. Mysore Sugar Co. Ltd. [1990] 183 ITR 113 (Kar) ; Akber A. Dehgamwalla v. CWT [1992] 195 ITR 17 (Bom) ; CIT v. Bharat Iron and Steel Industries [1993] 199 ITR 67 (Guj) [FB]. In Hindustan Housing's case [1986] 161 ITR 524 (SC), the assessee was maintaining accounts on the mercantile system. The Land Acquisition Officer gave the award and the assessee approached the higher court for enhancement of the amount of compensation which was ultimately enhanced and further appeal was pending. The question debated was with respect to the enhanced amount of compensation regarding which the order was not finalised and the right was being questioned by the State. Such an amount was treated as assessable to income-tax. The matter ultimately came to the High Court and the question was answered in favour of the assessee and against the Revenue. Since the right was not finally determined, the income could not be treated to have accrued which could be subjected to income-tax. It was under these circumstances that the Supreme Court observed as under (at page 527) :
"The question raised in this appeal is limited to the point whether, on the facts and 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 March 31, 1956, relevant to the assessment year 1956-57."
5. In paragraph 6 of the judgment, the conclusion was arrived at by observing (at page 530) :
"It is sufficient to point out that there is a clear distinction between cases such as the present one, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. We are of the opinion that the High Court is right in the view taken by it and, therefore, this appeal must be dismissed."
6. The decision of the Punjab and Haryana High Court in CIT v. Jai Parkash Om Parkash Co. Ltd, [1961] 41 ITR 718, as already stated above, was approved observing, "the very foundation of the claim made by the assessee was in serious jeopardy and nothing would be due if the appeal was decided against the assessee".
7. Learned counsel appearing on behalf of the Revenue sought to distinguish this judgment on the facts that the petitioner in the present case was maintaining mixed accounts, i.e., mercantile as well as cash accounting basis. Some cases have been referred to us by learned counsel appearing on behalf of the Revenue with respect to the liabilities of the assessee maintaining cash system of accounting that such liabilities would be of the year in which they accrue. These cases relate to liabilities for payment of sales tax. It is not considered necessary to refer to such authorities as the present is not a case of maintaining accounts in the system of cash accounting. No statute has been referred to nor any case law cited of an assessee maintaining accounts in the mixed accounting system, i.e., mercantile as well as cash, to show when such receipt could be treated as income accrued when the very right to claim such amount remains in turmoil subject to the decision in appeal. It is in such a state of affairs that we are of the opinion that the contention of the petitioner straightaway cannot be rejected. The ratio of the decision of the Supreme Court in the case of CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524, if applied to the facts of the case, would certainly benefit the petitioner. Thus without expressing any firm opinion on the subject as the appellate authority under the Income-tax Act is yet to decide the appeal, we are prima facie of the opinion that the writ petition can be entertained and considering the facts and circumstances of the present case, some effective order can be passed to safeguard the rights and interests of both the parties.
8. Thus, we direct that the appeal filed by the petitioner against the order of assessment will be disposed of on the merits at a very early date. Till then coercive measures to recover the amount of the tax under the orders of the Income-tax Officer in this case will not be taken. This of course would be subject to furnishing bank guarantee by the petitioner to the satisfaction of the Income-tax Officer for the amounts of the tax due within a period of two months.
9. It was argued on behalf of the petitioner that in view of the restraints imposed by the civil courts, the petitioner will not be in a position to operate bank accounts or encumber his property to arrange for the bank guarantee. We need not comment on this aspect of the matter. It is left to the petitioner to arrange for the bank guarantee tapping his sources at his own level. Disposed of with the above observation. No costs.