Income tax law on substantial question of law – Supreme Court explains options available before the High Court when no question of law is urged or framed
ABCAUS Case Law Citation:
ABCAUS 2803 (2019) (02) SC
Important Case Laws Cited/relied upon by the parties
State of Maharashtra vs. Vithal Rao Pritirao Chawan, (1981) 4 SCC 129,
Jawahar Lal Singh vs. Naresh Singh & Ors., (1987) 2 SCC 222,
State of U.P. vs. Battan & Ors., (2001) 10 SCC 607,
Raj Kishore Jha vs. State of Bihar & Ors., (2003) 11 SCC 519
State of Orissa vs. Dhaniram Luhar, (2004) 5 SCC 568)
In the instant case, the Revenue had filed this appeal against the final judgment and order passed by the Division Bench of the High Court in confirming the order passed by the Income Tax Appellate Tribunal (ITAT).
The main issue was initiation of assessment proceedings for the block period against the assessee to determine their tax liability as a result of search operations carried in their premises.
The matter out of the block assessment proceedings, reached to the ITAT which decided the case in favour of the assessee.
The Revenue approached the High Court under Section 260A of the Income Tax Act, 1961 (the Act). However, the High Court by impugned judgment dismissed the Revenue’s appeal, which gave rise to filing of this appeal by way of special leave by the Revenue in the Supreme Court.
The Hon’ble Supreme Court allowed the appeal and remanded the case to the High Court for deciding the appeal afresh on merits in accordance with the law.
The Hon’ble Supreme Court pointed out the reasons for the remand as under:
(1) The High Court had neither discussed and nor assigned any reason in support of its conclusion for the dismissal of the appeal.
(2) The High Court committed error in not framing any substantial question of law arising in the case.
The Hon’ble Supreme Court observed that Section 260A of the Act is similar to Section 100 of the Code of Civil Procedure, 1908 (the Code) with addition of subsections (6)(a),6(b) and (7) of Section 260A of the Act.
The Hon’ble Supreme Court explained the possible three course of action available to the High Court as under:
(i) The High Court has jurisdiction to dismiss the appeal filed under Section 260A of the Act on the ground that it does not involve any substantial question of law which is considered as a dismissal of the appeal in limine, i.e., dismissal without issuing any notice of appeal to the respondent and without hearing the respondent.
(ii) The High Court has also the jurisdiction to dismiss appeal by answering the question(s) framed on merits or by dismissing the appeal on the ground that the question(s) though framed not arise in the appeal. The High Court, though may not have framed any particular question at the time of admitting the appeal along with other question, yet it has the jurisdiction to frame additional question at a later stage before final hearing of the appeal by assigning reasons as provided in proviso to Section 260A(4) and Section 260A(5) of the Act, and
(iii) lastly, the High Court has jurisdiction to allow the appeal but this the High Court can do only after framing the substantial question(s) of law and hearing the respondent by answering the question(s) framed in appellant’s favour.
However, the Hon’ble Supreme Court noted that in the instant case, the High Court did not dismiss the appeal in limine but dismissed it after hearing both the parties without framing the question(s) and answering them by assigning the reasons accordingly one way or the other by exercising powers under subsections (4) and (5) of Section 260A of the Act
The Hon’ble Supreme Court opined that in the absence of any discussion or/and the reasoning /ground as to why the order of ITAT did not suffer from any illegality and why the grounds of Revenue were not acceptable and why the appeal did not involve any substantial question(s) of law or though framed cannot be answered in Revenue’s favour, the impugned order suffered jurisdictional errors and, therefore, legally unsustainable for violation of the subsections (4) and (5) of Section 260A of the Act.
The Hon’ble Supreme Court pointed out that it has consistently laid emphasis that every order/judgment, which decides the lis between the parties, must contain the reason(s)/ground(s) for arriving at a particular conclusion.
The Hon’ble Supreme Court stated that in order to decide as to whether the impugned order is legally sustainable or not, the Appellate Court is entitled to know as to what impelled the Court below to pass such order in favour of one party and against the aggrieved party.
In view of the above, the Hon’ble Supreme Court allowed the appeal of the Revenue and set aside the impugned order passed by the High Court and remanded the case.