Pr. Commissioner Of Income Tax Central 2 v. M/S A.a. Estate Pvt. Ltd

Section: ISSUES 188 SUPREME COURT REPORTS [2019] 6 S.C.R. APR. COMMISSIONER OF INCOME TAX CENTRAL 2 M/S A.A. ESTATE PVT. LTD. (Civil Appeal No. 3968 of 2019) APRIL 16, 2019 [ABHAY MANOHAR SAPRE AND DINESH MAHESHWARI, JJ.] Income Tax Act, 1961: ss. 260-A, 260-A(3), 260-A(4) – AppealCto High Court – Formulation of substantial question of law – Onfacts, non-formulation of any substantial question of law by theHigh Court as required to be framed u/s.260-A – Held: Questionsframed by the High Court were not as was required to be framed u/s 260-A(3) for hearing the appeal but were the questions urged bythe appellant – There lies a distinction between the questionsDproposed by the appellant for admission of the appeal and thequestions framed by the Court – Questions, which are proposed bythe appellant, fall u/s 260-A(2)(c) whereas the questions framed bythe High Court fall u/s 260-A(3) – Appeal is heard on merits onlyon the questions framed by the High Court u/s. 260-A(3) as providedEu/s. 260-A (4) – Further, if the High Court was of the view that theappeal did not involve any substantial question of law, it shouldhave recorded a categorical finding to that effect and dismissed theappeal in limine – However, the High Court without admitting theappeal and framing any question of law, issued notice of appeal tothe assessee, heard both the parties on the questions urged by theFappellant and dismissed it – Thus, the High Court did not decidethe appeal in conformity with the mandatory procedure prescribedin s.260-A – High Court should have seen that the substantialquestions of law did arise in the appeal for being answered ontheir respective merits – Matter remanded to the High Court to answerGthe questions framed by this Court u/s. 260-A(3) of the Act.CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3968of 2019. From the Judgment and Order dated 09.01.2017 of the HighCourt of Judicature at Bombay in Income Tax Appeal No. 1239 of 2014. H. R. Rao, P. V. Yogeswaran, Mrs.Anil Katiyar, Advs. for theAppellant. Salil Kapoor, Sumit Lalchandani, Praveen Swarup, Advs. for theRespondent. The Judgment of the Court was delivered by ABHAY MANOHAR SAPRE, J. 1. Leave granted. 2. This appeal is filed against the final judgment and order dated09.01.2017 passed by the High Court of judicature at Bombay in ITANo.1239 of 2014 whereby the High Court dismissed the appeal of theRevenue-Commissioner of Income Tax-Mumbai(appellant herein). 3. A few facts need mention hereinbelow for the disposal of thisappeal, which involves a short point. 4. The appellant is the Revenue-Commissioner of Income Tax,Mumbai, whereas the respondent is an assessee. 5. The respondent-assessee is a Company engaged in the businessof development and building of properties. The dispute relates to theassessment year 2008-09. 6. On 24.12.2009, the Assessing Officer (for short, “the AO”)completed the assessment under Section 143(3) read with Section 153Aof the Income Tax Act, 1961 (hereinafter referred to as “the Act”) anddetermined the total income at Rs.7,77,49,790/-. 7. On 22.09.2010, the AO issued a notice under Section 148 ofthe Act seeking therein to re-open the assessment of the respondent-assessee which was made on 24.12.2009. This notice was issued by theAO on the basis of information received from ADIT (investigation)Unit II (2). 8. By this notice, the AO proposed to make an addition ofRs.1,70,94,000/- towards unaccounted sale proceeds alleged to havebeen made by the respondent-assessee in the assessment year in question(2008-2009) because, in his opinion, it was in the nature of escapedassessment. 9. The AO proposed this addition on the basis of one document(Annexure–AB-1), which was seized by the Revenue Department in Atheir search operation carried on 30.11.2007 in the business premises ofanother assessee by name-M/s Ashok Buildcom Ltd. 10. In other words, the foundation for issuance of notice underSection 148 of the Act to the respondent-assessee for adding theaforementioned sum was the document-Annexure-AB-1. 11. The respondent-assessee objected to issuance of noticecontending inter alia that first, there is no factual foundation for issue ofnotice; Second, there is no case for any “escaped assessment”, andThird, there is no case to “reason to believe”. 12. By order dated 30.12.2011, the AO overruled the objectionsCraised by the respondent-assessee and passed a re-assessment orderby adding a sum of Rs.1,70,94,000/- in the total income of the respondent-assessee. He held that, in his opinion, it was a case of escaped assessmentand secondly, there was enough material to add the said sum in the totalincome of the respondent-assessee for the assessment year underconsideration.D 13. The respondent-assessee felt aggrieved and filed appealbefore the CIT (appeal). By order dated 21.02.2013, the CIT (appeal)dismissed the appeal and upheld the addition made by the AO. Therespondent-assessee felt aggrieved and filed second appeal before theEITAT. By order dated 05.02.2014, the Tribunal allowed the appeal andset aside the order of the CIT (appeals). 14. The Commissioner of Income Tax felt aggrieved and filedappeal before the High Court under Section 260-A of the Act. Byimpugned order, the High Court dismissed the appeal and affirmed theorder of the Tribunal giving rise to filing of the special leave to appeal byFthe Commissioner of Income Tax in this Court. 15. So, the short question, which arises for consideration in thisappeal, is whether High Court was justified in dismissing the appeal filedby the Commissioner of Income Tax (appellant herein). 16. Heard Mr. H.R. Rao, learned counsel for the appellant andMr. Salil Kapoor, learned counsel for the respondent. 17. Having heard the learned counsel for the parties and on perusalof the record of the case and the written submissions filed by the learnedcounsel, we are inclined to allow this appeal and while setting aside the impugned order, remand the case to the High Court for deciding theappeal afresh. 18. In our view, the need to remand the case to the High Courthas occasioned for more than one reason as stated hereinbelow. 19. First, the High Court did not formulate any substantial questionof law as was required to be framed under Section 260-A of the Act. 20. Second, in Para 2 of the impugned order, the High Courtobserved that “Revenue urges following questions of law for ourconsideration”. 21. As is clear from reading of Para 2, the two questions set outin Para 2 were not the questions framed by the High Court as wasrequired to be framed under Section 260-A(3) of the Act for hearing theappeal but were the questions urged by the appellant. 22. In our view, there lies a distinction between the questionsproposed by the appellant for admission of the appeal and the questionsframed by the Court. 23. The questions, which are proposed by the appellant, fall underSection 260-A (2) (c) of the Act whereas the questions framed by theHigh Court fall under Section 260-A (3) of the Act. The appeal is heardon merits only on the questions framed by the High Court under sub-section (3) of Section 260-A of the Act as provided under Section 260-A (4) of the Act. In other words, the appeal is heard only on the questionsframed by the Court. 24. Third, if the High Court was of the view that the appeal didnot involve any substantial question of law, it should have recorded acategorical finding to that effect saying that the questions proposed bythe appellant either do not arise in the case or/and are not substantialquestions of law so as to attract the rigor of Section 260-A of the Act forits admission and accordingly should have dismissed the appeal in limine. 25. It was, however, not done and instead the High Court withoutadmitting the appeal and framing any question of law issued notice ofappeal to the respondent-assessee, heard both the parties on the questionsurged by the appellant and dismissed it. In our view, the respondent hada right to argue “at the time of hearing” of the appeal that the questionsframed were not involved in the appeal and this the respondent could Aurge by taking recourse to sub- section (5) of Section 260-A of the Act.But this stage in this case did not arise because as mentioned above, theHigh Court neither admitted the appeal nor framed any question asrequired under sub-section (3) of Section 260-A of the Act. The expression“such question” referred to in sub- section (5) of Section 260-A of theAct means the questions which are framed by the High Court underBsub-section (3) of Section 260-A at the time of admission of the appealand not the one proposed in Section 260-A (2) (c) of the Act by theappellant. 26. We are, therefore, of the view that the High Court did notdecide the appeal in conformity with the mandatory procedure prescribedCin Section 260-A of the Act.27. Fourth, the High Court should have seen that followingsubstantial questions of law do arise in the appeal for being answered ontheir respective merits: D(i) Whether the reasons contained in Notice under Section148 are relevant and sufficient for issuance of the saidNotice dated 22.09.2010 ? (ii) Whether any case of escaped assessment within themeaning of Section 147 read with Section 148 of the Act forEthe assessment year in question is made out by theCommissioner of Income Tax on the basis of the reasonsset out in the notice ? (iii) Whether a case of presumption as contemplated underSection 132(4A) of the Act could be drawn against therespondent-assessee on the basis of a document (AnnexureFAB-1) which was seized in search operation carried in thebusiness premises of another assessee - M/s Ashokbuildcom by adding a sum of Rs.1,70,94,000/- fordetermining the total tax liability of the respondent for theyear in question as an escaped assessment so as to enableGthe Department to issue notice dated 22.09.2010 underSection 148 of the Act to the respondent? 28. In the light of the foregoing discussion, we consider it just andproper to remand the case to the High Court for deciding the appealafresh to answer the questions framed above on merits in accordanceHwith law. PR. COMMISSIONER OF INCOME TAX CENTRAL 2 v.M/S A.A. ESTATE PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 29. The appeal thus succeeds and is accordingly allowed. Theimpugned order is set aside. The case is remanded to the High Courtfor deciding the appeal filed by the Commissioner of Income Tax-Mumbaiafresh on merits as provided under Section 260-A(4) of the Act to answerthe three questions framed by this Court under Section 260-A(3) of theAct. 30. The High Court will decide the appeal uninfluenced by anyobservations made in the impugned order and in this order because havingformed an opinion to remand the case, we have not expressed any opinionon the merits of the case. Nidhi Jain Matter remanded to High Court. Tarun Mehra (ID No.U.P.-5974)