Time Of Accrual For Taxing Income Gets Postponed Till Adjudication Of Dispute By Civil Court: Rajasthan High Court Stays Demand Order

The Rajasthan High Court has stayed the penalty order and consequential demand notices passed under Section 270-A and Section 156 of the Income Tax Act, respectively.

The bench of Justice Pushpendra Singh Bhati and Justice Munnuri Laxman, while issuing the notices to the National Faceless Assessment Centre (NFAC), has observed that the time of accrual for taxing income gets postponed till the dispute is adjudicated by the Civil Court.

They reopened the assessment on the footing that the Petitioner-Assessee had undervalued the consideration in the sale deed. The respondents-department issued a notice under Section 148 of the Income-tax Act of 1961 to the petitioner for reopening the assessment in relation to FY 2017–2018. The respondents passed a revised assessment order dated March 9, 2023. The petitioner replied that a notice under Section 148 was submitted to Income- Tax.

The petitioner replied that the civil rights regarding the property were under adjudication in the civil suit pending before the Civil Court, Mavli, District Udaipur.

The respondent department, while rejecting the reply of the petitioner, passed the consequential notice of demand dated September 21, 2023, against the petitioner while ignoring the fact that the civil rights regarding the property in question are under adjudication in Civil Suit No. 12/2020 pending before the Civil Court.

The petitioner contended that since the dispute regarding power of attorney and the sale deed executed in favour of the petitioner is pending before a civil court, the petitioner is not owed any debt. Since the dispute is pending before the Civil Court, there is no factual or deemed accrual of income. Thus, the order deserves to be quashed and set aside.

The petitioner contended that once there is a cloud of suspicion over over the Petitioner's title being adjudicated by civil court and the petitioner is not in possession of the land, it would be an absurdity if department reopens assessment.

The court, while issuing the notice to the respondent department, listed the matter on April 3, 2024.

The court, while granting the stay, clarified that the department shall be at liberty to file an application for vacation of the interim order.

Counsel For Petitioner: Avin Chhangani

Counsel For Respondent: Gajendra Chauhan

Case Title: Lalit Kumar Kothari Versus National Faceless Assessment Centre & Anr.

Case No.: D.B. Civil Writ Petition No. 1859/2024

Click Here To Read The Order