PR. COMMISSIONER OF INCOME TAX CENTRAL 2 vs. M/S A.A. ESTATE PVT. LTD

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL  APPEAL No.3968  OF 2019 (Arising out of S.L.P.(C) No.29524 of 2017) PR. Commissioner of Income Tax  Central 2  ….Appellant(s) VERSUS M/s A.A. Estate Pvt. Ltd.                   ….Respondent(s) [[                   J U D G M E N T Abhay Manohar Sapre, J. 1. Leave granted. 2. This appeal is filed against the final judgment and   order   dated   09.01.2017   passed   by   the   High Court of judicature at Bombay in ITA No.1239 of 2014 whereby the High Court dismissed the appeal Signature Not Verified Digitally signed by ASHOK RAJ SINGH Date: 2019.04.16 16:51:42 IST Reason: of   the   Revenue­Commissioner   of   Income   Tax­ Mumbai(appellant herein). 1 3. A few facts need mention hereinbelow for the disposal of this appeal, which involves a short point. 4. The appellant is the Revenue­Commissioner of Income Tax, Mumbai, whereas the respondent is an assessee.  5. The   respondent­assessee   is   a   Company engaged   in   the   business   of   development   and building   of   properties.   The   dispute   relates   to   the assessment year 2008­09. 6. On   24.12.2009,   the   Assessing   Officer   (for short, “the AO”) completed the assessment under Section 143(3) read with Section 153A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and   determined   the   total   income   at Rs.7,77,49,790/­. 7. On 22.09.2010, the AO issued a notice under Section 148 of the Act seeking therein to re­open the assessment of the respondent­assessee which was made on 24.12.2009. This notice was issued by 2 the AO on the basis of information received from ADIT (investigation) Unit II (2).  8. By this notice, the AO proposed to make an addition of Rs.1,70,94,000/­ towards unaccounted sale   proceeds   alleged   to   have   been   made   by   the respondent­assessee   in   the   assessment   year   in question (2008­2009) because, in his opinion, it was in the nature of escaped assessment.  9. The AO proposed this addition on the basis of one document (Annexure–AB­1), which was seized by   the   Revenue   Department   in   their   search operation   carried   on   30.11.2007   in   the   business premises of another assessee by name­M/s Ashok Buildcom Ltd.  10. In other words, the foundation for issuance of notice   under   Section   148   of   the   Act   to   the respondent­assessee for adding the aforementioned sum was the document­Annexure­AB­1.  3 11. The respondent­assessee objected to issuance of notice contending  inter alia  that first, there is no factual foundation for issue of notice; Second, there is no case for any “escaped assessment”, and Third, there is no case to “reason to believe”.  12. By order dated 30.12.2011, the AO overruled the   objections   raised   by   the   respondent­assessee and  passed a re­assessment order by adding a sum of   Rs.1,70,94,000/­   in   the   total   income   of   the respondent­assessee.  He held that, in his opinion, it was a case of escaped assessment and secondly, there was enough material to add the said sum in the total income of the respondent­assessee for the assessment year under consideration.   13. The   respondent­assessee   felt   aggrieved   and filed appeal before the CIT (appeal). By order dated 21.02.2013, the CIT (appeal) dismissed the appeal and   upheld   the   addition   made   by   the   AO.     The respondent­assessee felt aggrieved and filed second 4 appeal before the ITAT.  By order dated 05.02.2014, the Tribunal allowed the appeal and set aside the order of the CIT (appeals).  14. The Commissioner of Income Tax felt aggrieved and   filed   appeal   before   the   High   Court   under Section 260­A of the Act. By impugned order, the High Court dismissed the appeal and affirmed the order   of   the   Tribunal   giving   rise   to   filing   of   the special   leave   to   appeal   by   the   Commissioner   of Income Tax in this Court. 15. So,   the   short   question,   which   arises   for consideration in this appeal, is whether High Court was justified in dismissing the appeal filed by the Commissioner of Income Tax (appellant herein). 16. Heard Mr. H.R. Rao, learned counsel for the appellant and Mr. Salil Kapoor, learned counsel for the respondent. 17. Having   heard   the   learned   counsel   for   the parties and on perusal of the record of the case and 5 the   written   submissions   filed   by   the   learned counsel, we are inclined to allow this appeal and while setting aside the impugned order, remand the case   to   the   High   Court   for   deciding   the   appeal afresh. 18. In our view, the need to remand the case to the High   Court   has   occasioned   for   more   than   one reason as stated hereinbelow. 19. First, the  High Court did not formulate any substantial question of law as was required to be framed under Section 260­A of the Act.  20. Second, in Para 2 of the impugned order, the High Court observed that “ Revenue urges following questions of law for our consideration ”.   21. As  is  clear  from  reading  of  Para 2,  the  two questions set out in Para 2 were not the questions framed by the High Court as was required to be framed under Section 260­A(3) of the Act for hearing 6 the   appeal   but   were   the   questions   urged   by   the appellant.  22. In our view, there lies a distinction between the   questions   proposed   by   the   appellant   for admission of the appeal and the questions framed by the Court. 23. The   questions,   which   are   proposed   by   the appellant, fall under Section 260­A (2) (c) of the Act whereas the questions framed by the High Court fall under Section 260­A (3) of the Act. The appeal is heard on merits only on the questions framed by the   High   Court   under   sub­section   (3)   of   Section 260­A of the Act as provided under Section 260­A (4) of the Act.  In other words, the appeal is heard only on the questions framed by the Court. 24. Third, if the High Court was of the view that the appeal did not involve any substantial question of law, it should have recorded a categorical finding to that effect saying that the questions proposed by 7 the appellant either do not arise in the case or/and are not substantial questions of law so as to attract the   rigor   of   Section   260­A   of   the   Act   for   its admission and accordingly should have dismissed the appeal  in limine .  25. It was, however, not done and instead the High Court without admitting the appeal and framing any question   of   law   issued   notice   of   appeal   to   the respondent­assessee, heard both the parties on the questions urged by the appellant and dismissed it. In our view, the respondent had a right to argue “at the time of hearing” of the appeal that the questions framed were not involved in the appeal and this the respondent could urge by taking recourse to sub­ section   (5)  of   Section   260­A  of   the   Act.   But  this stage   in   this   case   did   not   arise   because   as mentioned above, the High Court neither admitted the   appeal   nor   framed   any   question   as   required under sub­section (3) of Section 260­A of the Act. 8 The expression “such question” referred to in sub­ section (5) of Section 260­A of the Act means the questions   which   are   framed   by   the   High   Court under sub­section (3) of Section 260­A  at the time of admission of the appeal and not the one proposed in Section 260­A (2) (c) of the Act by the appellant.  26. We are, therefore, of the view that the High Court did not decide the appeal in conformity with the mandatory procedure prescribed in Section 260­ A of the Act.  27. Fourth, the High Court should have seen that following substantial questions of law do arise in the appeal for being answered on their respective merits:  (i) Whether the reasons contained in Notice under Section 148 are relevant and sufficient for   issuance   of   the   said   Notice   dated 22.09.2010 ? (ii) Whether any case of escaped assessment within the meaning of Section 147 read with Section  148  of  the  Act  for  the   assessment year   in   question   is   made   out   by   the 9 Commissioner of Income Tax on the basis of the reasons set out in the notice ? (iii)   Whether   a   case   of   presumption   as contemplated  under Section  132(4A)   of  the Act could be drawn against the respondent­ assessee   on   the   basis   of   a   document (Annexure AB­1) which was seized in search operation carried in the business premises of another   assessee   ­   M/s   Ashok   buildcom  by adding   a   sum   of   Rs.1,70,94,000/­   for determining   the   total   tax   liability   of   the respondent   for   the   year   in   question   as   an escaped   assessment   so   as   to   enable   the Department to issue notice dated 22.09.2010 under   Section   148   of   the   Act   to   the respondent? 28. In   the   light   of   the   foregoing   discussion,   we consider it just and proper to remand the case to the  High Court  for  deciding the  appeal afresh to answer   the   questions   framed   above   on   merits   in accordance with law.  29. The appeal thus succeeds and is accordingly allowed.  The impugned order is set aside.  The case is   remanded   to   the   High   Court   for   deciding   the appeal filed by the Commissioner of Income Tax­ Mumbai afresh on merits as provided under Section 10 260­A(4) of the Act to answer the three questions framed by this Court under Section 260­A(3) of the Act.   30. The   High   Court   will   decide   the   appeal uninfluenced   by   any   observations   made   in   the impugned order and in this order because having formed an opinion to remand the case, we have not expressed any opinion on the merits of the case.                                      .………...................................J.                                     [ABHAY MANOHAR SAPRE]                                            …...……..................................J.              [DINESH MAHESHWARI] New Delhi; April 16, 2019 11