Compensation received from the landowner on termination of development agreement

Compensation received from the landowner on termination of development agreement was a deprivation of potential income and loss of future profit as mentioned in the settlement agreement and not for divesting the assessee of it’s earning apparatus, as restrictive covenant in the said agreement only prohibited the assessee from undertaking a similar project in the vicinity of the existing project without consent of the land owner for Limited duration of 3 years and therefore the compensation was a revenue receipt. This was held in the case of Commissioner Of Income-Tax vs Ansal Properties And Industries.

Refer the case below:

1. This is an application Under Section 256(1)of the Income-tax Act, 1961, moved by the Commissioner of Income-tax, Delhi-Ill, New Delhi praying that the following questions, stated to be of law and to arise out of an order dated 24th June, 1985 passed by this Tribunal in ITA No. 788/Del./C4 for asst. year 1973-74, be referred for the opinion of Hon’ble the High Court :
2. Whether, on the facts and. in the circumstances of the case,, the Tribunal was right in holding that income from flats constructed on the plots owned by the assessee was not taxable in the hands of the assessee-company ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the flats situated on plots registered in the name of the assessee-company were not owned by it?
4. The office reported that the reference application was barred by 544 days as the order had been served on the Commissioner on the 7th August, 1985, while the present application was moved in this Tribunal on the 3rd April, 1987. The office reported that the copy of the order passed in the aforesaid appeal was sent to the Commissioner of Income-tax, Central, on the 1st August, 1985 but the official concerned refused to receive the same. The copy of the order was again sent to the Commissioner of Income-tax, Central Revenues Building, New Delhi on the 8th August, 1985 but again the person concerned refused to receive the copy. Thereafter, the copy of the order was again sent to the Commissioner of Income-tax, Central Revenues Building on 5-2-1987. On that date it was accepted and the present application was filed thereafter. The Commissioner-applicant has mentioned in the application that the copy of the order was served on the Commissioner on 5-2-1987. The Commissioner thus treats the service of the copy of the order as having been made on 5-2-1987 and if that be the correct date of service, the application would be within limitation. Notice was issued to the Commissioner stating that the application is barred by time and after repeated adjournments the Senior Departmental Representative Shri D.K. Sharma filed a reply dated 10th December, 1987, signed by the ITO, Judicial-Ill, New Delhi stating as under:

In the aforesaid case I have been communicated by the Senior Authorised Representative, ITAT, New Delhi that the reference application filed in the aforesaid case is belated by 544 days, I have also been given to understand that the aforesaid delay has been reckoned by treating the service of the aforesaid order on 7-8-1985.

From the judicial file maintained in this office it appears that the order in question was received only on 5-2-1987 and a reference application having been filed on 3-4-1987 was well within the time. It is also not borne out from the judicial file that the order in question was ever presented prior to the date referred to above and in such circumstances the question of refusal of the service does not arise at all. To substantiate this contention that the order was received only on 5-2-1987 and it was not presented prior to that a photostat copy of the order of the ITAT is enclosed herewith.

In view of the facts discussed above it will be appreciated that there was no delay at all and the reference application filed on 3-4-1987 was well within the stipulated period.

3. The hearing of the matter was first fixed on the 16th July, 1987 and was adjourned from time to time, inter alia, to give the revenue an opportunity to show how the application is within time. It may be mentioned that we had given the Senior Departmental Representative to liberty to inspect all connected office records of this Tribunal relating to this matter.
4. Before proceeding further we may state certain requirements of law. Section 254(3)of the Income-tax Act, 1961 provides that the Appellate .Tribunal shall send a copy of any orders passed under this section (section 254) to the assessee and to the Commissioner. Section 256(1)under which the assessee or the Commissioner can apply for a reference to the High Court provides that the assessee or the Commissioner may within 60 days of the date on which he is served with notice of an order Under Section 254 may move an application in prescribed form requiring a reference to the High Court. Section 255(5) of the Income-tax Act gives power to the Tribunal to regulate its own procedure and the procedure of Benches in all matters arising out of the exercise of its power or the discharge of its function. In exercise of this power the Tribunal has framed the Income-tax (Appellate Tribunal) Rules, 1963 and rule 35 of these rules deals with the matter in question. It says that the Tribunal shall after the order is signed, cause it to be communicated to the Commissioner.
5. It was in discharge of the Tribunal’s obligation to send a copy of the order passed in the aforesaid appeal to the Commissioner that the Registry of this Tribunal sent a copy of the impugned order to the Chief Commissioner of Income-tax, Delhi on the 1st August, 1985. As many as 41 orders entered at Serial Nos. 1 to 41 in the Peon Book were sent to the Chief Commissioner on that date. Out of these 41 orders, the official concerned deputed by the Commissioner of Income-tax to receive the papers on his behalf, received 14 orders only. The order in question which was mentioned at Serial No. 29 was amongst the orders that the said official refused to accept. Again on 8-8-1985 the Registry sent a copy of the order in question to the Chief Commissioner of Income-tax-cum-Commissioner of Income-tax, Delhi-I. The procedure adopted was the same, i.e., the copies of the orders were entered in the Peon Book and sent through a peon for delivery. On this date as many as 134 orders were sent. Out of them 28 orders are entered on the date 25-7-1985/8-8-1985 and 106 orders are entered on 8-8-1985 itself. The order now under consideration finds mention at Serial No. 72 of the entries, dated 8-8-1985. On this date the official concerned received 124 orders out of a total of 134. The order in question was amongst the unlucky 10 which he refused to accept. The peon book bears the signature of the official concerned on two dates, i.e., 1-8-1985 as well as 8-8-1985 as well as an endorsement in his own handwriting regarding the number of orders received. The peon book dated 8-8-1985 also bears the receipt stamp of the Office of the Chief Commissioner (Administration)-cum-Commissioner of Income-tax, Delhi-I. Before proceeding further we may mention that the practice obtaining in this Tribunal had consistently been to send copies of its orders to the Chief Commissioner through peon book entries and it was only during the aforesaid period and thereafter that the office of the Chief Commissioner started refusing to accept some of the orders. In the aforesaid manner a large number of orders remained to be delivered at the Commissioner’s office and the Tribunal was perturbed over the state of affairs. There was certain exchange of correspondence between the Chief Commissioner and the Tribunal and even a conference had to be arranged between the Chief Commissioner and the nominees of the Tribunal and it was after considerable persuasion that the Chief Commissioner of Income-tax, Delhi agreed to accept all orders and it was in these circumstances that the order in question was again sent on 5-2-1987 to the Chief Commissioner and was accepted by his receipt clerk.
6. The learned Departmental Representative contended before us that Section 256(1)provides that limitation for a reference application would start running from the date on which notice of an order passed Under Section 254is served on the Commissioner. It was contended that what was required by this provision was not a mere intimation but actual service of the copy of the order. He also contended that Section 282 of the Income-tax Act provides the manner of service of notices and says that a notice or requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a Court under the civil procedure. According to him, in the present case, since the copy of the order was not sent by post the service had to be made in accordance with the provisions contained in Order V of the Code of Civil Procedure. He referred to Rules 17 and 19 of Order V of the Code of Civil Procedure. Rule 17 provides that where the defendant or his agent refuses to sign the acknowledgement . . . the serving officer shall affix a copy of the summon on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business . . . shall return the original to the Court with a report endorsed therein or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed. Rule 19 then says that where summon is returned under Rule 17, the Court shall, if the return under that rule has not been verified by the affidavit of the serving officer, and say, if it has been so verified, examine the serving officer on oath, or cause to have been so examined . . . and shall either declare that the summon has been duly served or order such service as it thinks fit. According to the learned Departmental Representative, this procedure was not adopted by the Tribunal when the copy of the order was refused on 1-8-1985 and 8-8-1985 and therefore, there was no proper service of the copy of the order’. The learned Departmental Representative also contended that Section 256(1) of the Income-tax Act, 1961 confers a substantive right on the Commissioner or the assessee to seek a reference and this right cannot be whittled away by not serving the copy of the order properly. It was also contended that ultimately the Tribunal again sent the copy of the order to the Chief Commissioner on 5-2-1987 which signifies that the Tribunal was satisfied that earlier the copy of the order was not duly served on the Commissioner. The learned counsel for the assessee, on the other hand, contended that-the various provisions of Income-tax Act merely require that a copy of the order should be supplied to the assessee or to the Commissioner and that it was not necessary that the Tribunal should adopt the manner of service provided for summons while communicating the order to the parties concerned. According to him, Section 282 is not exhaustive and is a general provision regarding service of notices or requisition. According to the learned counsel for the assessee, when a copy of an order passed Under Section 254 is sent to an assessee or to the Commissioner, it is neither a notice, nor a summons, nor a requisition and hence Section 282 and consequently the provisions aforesaid of the Code of Civil Procedure had no application.
7. We have already referred to the various provisions contained under the Income-tax Actand the Income-tax (Appellate Tribunal) Rules regarding the communication of orders to the parties. Section 254(3)requires the Tribunal to send a copy of the order to the assessee or to the Commissioner. It doesn’t say that the Tribunal shall serve the copy on the assessee or on the Commissioner much less that the same should be served like a summons. No doubt, Section 256(1) speaks of the service of notice of an order but here also the phrase ‘served with notice of an order’ is quite typical and appears to keep in mind the distinction between service of summons and notices and the communication of orders. Rule 35 of the Income-tax (Appellate Tribunal) Rules provides that the order is to be communicated to the assessee and to the Commissioner. In rule 35 the word used is merely “communicated” and it clearly indicates that service of the copy of the order in the strict manner provided for service of summons was not required. A perusal of the three provisions aforesaid would indicate that what is required is that the parties should be given information of the nature of order passed and a copy of the order should be supplied to either party. Section 282 which was proposed the service by the learned Departmental Representative relates to service of notices or requisition. A requisition is an intimation which requires the person to whom it is addressed to do or to refrain from doing a certain act. A notice may similarly require a person to do or not to do an act. A summons invariably requires a person to attend and answer certain civil or criminal charge. It is those types of notices, summons, or requisitions which have to be served in the manner prescribed in Section 282(1)of the Income-tax Act or in the Code of Civil Procedure. Where, however, a mere intimation is intended to a particular person or to the public at large without obliging any particular person to act in a certain manner, such notices need not be served according to the strict procedure referred to above. That is why some notices are required to be published in the Official Gazette and publication of such notices is notice to the public at large. Such notices are meant for certain information and it is for the person concerned to take action, if any.
8. The learned Departmental Representative had relied on the cases of Kalekhan Mohammad Hanif v. CIT[1956] 30 ITR 522 (Nag.) and Jayalakshmi Cloth Stores v. ITO[1981] 132 ITR 764 (AP). In the case of Kalekhan Mohammad Hanif (supra) similar provisions of the old Act came for consideration. In that case in the memorandum of appeal the assessee had written that the copy of the order was to be sent to the assessee care of one Shri V.T. Ojha. The Tribunal sent the copy of order to Shri V.T. Ojha instead of the appellant. It was held that this was not due communication of the Tribunal’s order to the assessee. The Hon’ble Nagpur High Court did refer to Section 63 of the 1922 .Act which was akin to the present Section 282 of the 1961 Act. However, it has nowhere been held in this case that Section 63governed the manner of communication of the order to the assessee in terms of rule 34 of the Appellate Tribunal Rules. The judgment of Hon’ble the Nagpur High Court proceeded on the basis that plainly the order was sent to Shri V.T. Ojha and not to the assessee. In our view, this ruling cannot be said to be an authority for the proposition that Section 288(2),would be applicable to the communication or service of the copy of order of the Tribunal on the assessee or the Commissioner. In the other case, i.e., Jayalakshmi Cloth Stores (supra) also, the ITAT had sent a copy of its order to another partner of the firm than the one whom the assessee had mentioned in the memorandum of appeal. It was held that the communication of the order was not proper. The Hon’ble Andhra Pradesh High Court specifically held that the procedure adopted for service of notice in Section 282(1) of the Income-tax Act, 1961 applies only to notices in assessment proceedings and has no application to service of appellate orders in view of the fact that special procedure had been prescribed for the service of notice of appeals and notice of appellate orders.
9. Reliance was also placed on CIT v. Satya Namin Poddar[1973] 89 ITR 136 (All.) and M.O. Thomas v. CIT[1963] 47 ITR 775 (Ker.). The first case related to the issue of summons Under Section 22(2)and the second relied to the service of a notice Under Section 34 of the Income-tax Act, 1922. It was held that the procedure prescribed in Order V, Rules 17 and 19 had to be followed. These rulings do not have any effect in the present case because as observed above when a copy of an order is sent to a party it is neither a summons, nor a notice, nor a requisition. Reliance was also placed on a judgment of Hon’ble the Bombay High Court in Rasiklal Amritlal Doshi v. A. Nandy, Addl. ITO [1961] 42 ITR 35. This ruling too has no application. It was held, that a notice of demand could not be issued in the absence of an assessment order and that there was no presumption that an assessment order had in fact been passed. On behalf of the assessee reliance was placed on Agricultural Co. v. COT [1974] 93 ITR 353 (Delhi) and K.C. Tiwari & Sons v. CIT [1962] 46 ITR 236 (Bom.). In both these rulings it was held that Section 63(1) of the Income-tax Act, 1922 which was in pan materia with present Section 288(1) was not exhaustive and it was permissible to have the service of notice effected by any other mode mentioned in Section 61. We have already held that the copy of the order being neither a notice, summons or a requisition. Section 288 had no application. These rulings, however, do show that even in cases in which Section 288 was applicable a mere irregularity in the procedure may not always invalidate the service.
10. For the reasons discussed above, we are of the opinion and we hold that for the supply of copy of order to the parties, it was not necessary for the Tribunal to effect service thereof in the manner prescribed for the service of summons, notices, or requisitions. It is enough if the Tribunal puts the order in the course of transmission in a manner in which delivery of the copy to the person concerned may be reasonably expected.
11. We have mentioned above that the Tribunal had been complying with the provisions of Sections 254(3), 256(1)and rule 35 of the Tribunal Rules, by sending copies of the orders passed by the Tribunal to the Commissioner through a peon after entering them in a peon book and the said peon delivering the copies to the Commissioner’s nominee or the receipt clerk, as we may put it, and obtaining his signatures in the peon book in acknowledgement of the receipt of the orders. Never the Commissioner had challenged that the copies of notices sent to him in this manner did not reach him or that this was not the proper procedure for the communication of the Tribunal’s order. This was the manner in which the Tribunal sent the order in question to the Commissioner on 1-8-1985 and 8-8-1985 and the Commissioner’s nominees for the reasons best known to the Commissioner or to the receipt clerk refused to accept the same. This was also the procedure by which the copy of the order was ultimately delivered to the Commissioner on 5-2-1987. We are, therefore, of the opinion that the copy of the order was duly tendered to the Commissioner as required by Section 256(3)and the Tribunal’s act of sending a copy of the order also amounted to service of a notice of an order on him within the meaning of Section 256(1) and communication of the order within the meaning of Rule 35 of the Income-tax (Appellate Tribunal) Rules. It is true that after the Commissioner’s nominee refused to accept the copy of the order in question, the procedure mentioned in Rules 17 and 19 of Order V, Cr.P.C. was not followed but in view of what we have discussed above that was, in our view, not necessary. We, therefore, hold that the copy of the order was duly communicated, etc., to the Commissioner on 1-8-1985 as well as on 8-8-1985.
12. The contention of the learned Departmental Representative that by sending the copy of the order again on 5-2-1987, the Tribunal should be deemed to have taken a view that the communication on 1-8-1985 and 8-8-1985 was not valid is, in our view, not tenable. The Tribunal sent the copy again not in discharge of its legal obligations Under Sections 254(3), 256(1)and rule 35 but in discharge of what it thought its administrative duty of maintaining a proper administrative rapport with the revenue authorities. Insofar as its legal obligations were concerned, the Tribunal need, not have taken up the matter with the Chief Commissioner and arranged a conference between its representatives and the Chief Commissioner who ultimately agreed to accept all copies and to distribute the same himself to appropriate officers. If an assessee or the Commissioner refused to receive the copy of the order once or twice there is nothing that debars the Tribunal from supplying the assessee or the Commissioner a copy if the assessee or the Commissioner wants it. It was under that administrative capacity that the Tribunal sent the copies of the orders that had earlier been refused by the Chief Commissioner to him once over again. It did not mean that the Tribunal ignored the earlier refusal and its legal effect.
13. As already observed it was contended on behalf of the Commissioner that the right to seek reference under Section 256(1)is a valuable right and this should not be frustrated by technical rules of limitation. We have no doubt that a right granted under Section 256(1)is a valuable right but rules of limitation have been created to put an end to litigation and to prevent a person from taking up a legal quarrel at any time whatsoever. If the right to seek reference is a valuable right for the Commissioner, the right to prevent a reference after the expiry of period of limitation is an equally valuable right and cannot be frustrated by granting indulgence to a litigant, who has been behaving in irresponsible manner. The rule of law requires that there should be finality to proceedings and rules of limitation have been enacted for the preservance of legal order in the society.
14. We have quoted the contents of a letter from ITO, Judicial-Ill, New Delhi. The letter is not from any authorised person and, therefore, has little significance. It was for the Commissioner himself to have explained the facts of the case. However, leaving that as it is we find from the letter that an attempt has been made to deny the tender of the copy of order on 1-8-1985 and 8-8-1985 with reference to the judicial file. We are unable to comprehend what type of a judicial file is that to which reference has been made in which it is recorded in the Commissioner’s office as to what orders tenders were accepted and what were refused. We have in the peon books maintained by the registry of this Tribunal, entries showing that the copy of this order was, along with several other copies, despatched to the Commissioner through a peon and the Commissioner’s nominees received certain copies and refused to receive others which included the copy of the order in question. It is, therefore, not possible to accept that the copy of the order was not served on 1-8-1985 and 8-8-1985.
15. The copy of the order having been duly tendered to the Chief Commissioner of Income-tax on 1-8-1985 and 8-8-1985, the present application is barred by time by more than 30 days. This Tribunal has no power to condone delay of more than 30 days and the Commissioner has also not applied or could not have applied for condonation of delay.
16. The application thus being beyond the time prescribed is liable to be dismissed and is hereby dismisse.