There is distinction between questions of law proposed & questions framed by  Court – SC

There is distinction between questions of law proposed by appellant for admission of  appeal and  questions framed by  Court – Supreme Court

ABCAUS Case Law Citation:
ABCAUS 2880 (2019) (04) SC

In the instant case, the appeal was filed against the judgment passed by the High Court dismissing the appeal of the Income Tax Department.

The controversy was related to the issuance of notice u/s 148  of the  Income Tax Act, 1961 (the Act) to the respondent­ assessee who had objected to issuance of notice contending inter alia that first, there was no factual foundation for issue of notice, there was no case for any “escaped assessment” and there was no case to “reason to believe”.    

However, the AO overruled the objections and  passed the re­assessment order by making an addition to the total income of the respondent ­assessee.  

The CIT (appeals) dismissed the appeal and upheld the additions. However the Tribunal allowed the appeal of the assessee.

On further appeal by the Revenue, the High Court by the impugned order, 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 Hon’ble Supreme Court.

The Hon’ble Supreme Court observed that the High Court did not formulate any substantial question of law as was required to be framed under Section 260­A of the Act. Instead, the High Court had merely observed that “Revenue urges following questions of law for our consideration”

The Hon’ble Supreme Court observed that the said two questions urged by the Revenue were  not the questions framed by the High Court as was required to be framed under Section 260­A(3) of the Act for hearing the appeal but were the questions urged by the appellant. 

The Hon’ble Supreme Court clarified that there lies a distinction between the questions proposed by the appellant for admission of the appeal and the questions framed by the Court.

The Hon’ble Supreme Court pointed out that the questions, which were 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 was 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 was heard only on the questions framed by the High Court.

The Hon’ble Supreme Court opined that 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 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. 

The Hon’ble Supreme Court observed that instead the High Court without admitting the appeal and framing any question of law issued notice of appeal to the respondent­ assessee, heard both the parties on the questions urged by the appellant and dismissed it. The Hon’ble Supreme Court opined that 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 subsection (5) of Section 260­A of the Act. But this stage in this case did not arise because the High Court neither admitted the appeal nor framed any question as required under sub­section (3) of Section 260­A of the Act.

The Hon’ble Supreme Court stated that 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 undersub­section (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. Therefore, the High Court did not decide the appeal in conformity with the mandatory procedure prescribed in Section 260­ A of the Act. 

The Hon’ble Supreme Court itself framed the questions of law and allowed the appeal. The order was set aside and remanded to the High Court for deciding the appeal afresh to answer the  questions framed on merits in accordance with law. 

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