The Supreme Court sent back matter to High Court, because of short order passed by High Court holding no substantial question of law arose.

[DEV KUMAR KOTHARI]

The Supreme Court sent back matter to High Court, because of short order passed by High Court holding no substantial question of law arose.

Chain of related judgments:

PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) VERSUS M/S. MOTISONS ENTERTAINMENT INDIA PVT. LTD. [ 2022 (3) TMI 571 - SUPREME COURT ]   

PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL, JAIPUR VERSUS M/S MOTISONS ENTERTAINMENT INDIA PVT. LTD., M/S RAINBOW BUILDCON PRIVATE LTD., M/S SHIVANSH BUILDCON PVT. LTD., M/S BHOLENATH REAL ESTATE PRIVATE LTD. [2018 (11) TMI 1329 - RAJASTHAN HIGH COURT]

M/S. MOTISONS ENTERTAINMENT (INDIA) PVT. LTD. VERSUS THE ACIT CENTRAL CIRCLE-2 JAIPUR AND THE DCIT CENTRAL CIRCLE-2 JAIPUR VERSUS M/S. MOTISONS ENTERTAINMENT (INDIA) PVT. LTD. [2017 (11) TMI 1927 - ITAT JAIPUR]

Provisions under consideration:

Appeal us 260A related to issues on S. 56, 68 of Income-tax Act,1961

The Supreme Court referred back to the High Court for passing fresh detailed order  and on merit of  the case.

In assessment ,addition u/s 56(1)/ 68 was made for alleged  unaccounted or unexplained  money of the assessee company  with allegation that this  been introduced in the garb of share application money.

CIT(A) allowed some amounts and confirmed some amounts.

Tribunal confirmed  relief allowed in order of CIT(A) and further deleted addition which was confirmed by the CIT(A).

Issue  before Tribunal were

Whether relevant  amendment of S.56 applied retrospectively or not, and  could be applied  in some cases in some years – Tribunal held no.

Whether money remained unexplained - Tribunal held no.

Whether CIT(A) can make addition us 68 – Tribunal held no, because  satisfaction of AO is relevant and not of  CIT(A).

High Court found that Tribunal have passed  detailed and speaking orders and found facts and applied law correctly, hence held that ‘no substantial question of law’ (SQL in short) arises from order of the Tribunal , hence dismissed appeal of revenue. However, as usual in such cases, the High Court passed a short order in one paragraph.

On appeal of revenue the Supreme Court considered submissions of counsels of revenue.

There was no representation on behalf of assesse, therefore, judgment was based on one sided representations of the revenue. The Supreme Court decided that:

1. The High Court was not right and justified in disposing of the appeal with one paragraph order without discussing the issues which arose for consideration.
2. Allowed   appeals of revenue and  set-aside the view taken by the High Court and remit the matter back to the High Court for fresh consideration.
3. Income Tax Appeal was  thus restored to the file of the High Court to be decided afresh and purely on its own merits.

Analysis and observations of the Author:

Facts found by Tribunal were not challenged as perverse:

 We find that there is No WORD FOUND ABOUT perversity:  

In  questions of law, as framed by revenue there is no challenge about facts found by the Tribunal as perverse.

We do not find even use of any of words and phrases like ‘perverse’, ‘perversity’, ‘facts found are wrong’  and use of words wrong or incorrect in relation to facts found by  ITAT read with facts found by CIT(A).  in any of substantial questions of law framed by appellant / revenue / PR.CIT

The Tribunal has passed elaborate and speaking orders giving facts found and applicable law applied and judgments relied.

Order of the High Court in short one paragraph is as per usual practice found when facts are not challenged and the matter involves question of facts .  Thus this cannot be faulted merely because it is by a short paragraph in order of High Court.

Facts are found and decided by appellate authority and ITAT. Facts as found by Tribunal are final and High Court generally do not go into question of correctness, unless facts are challenged  as perverse or wrong by appellant by proper questions.

In substantial question of law as made out by the appellant, in fact , only conclusions of AO have been incorporated  all of which are based on presumption and not understanding of issues for examination us 56 and or  us 68 about  sources of funds  in case of investors.

For illustration  SQL as framed in appeal of revenue are reproduced with high lights added:

In D.B. ITA No. 136/2018:-

1. whether, on the fact and the circumstances of the case the Hon’ble ITAT was justified in upholding the decision of the CIT(A) which erred in deleting the addition of ₹ 1.95 crore/- made under section 56(1) of the Act ignoring the fact that neither any business activity was performed nor any business income has been shown by these concerns from whom share application money has been received, hence, it is the unaccounted money of the assessee company which have been introduced in the garb of share application money by these concerns which don’t have any worth to invest at such high premium.

 

In D.B. ITA No.129/2018:-

1. question ins on the  on the same lines as in  D.B.ITA no. 136/2018 appeal.
2. Whether, on the fact and the circumstances of the case the Hon’ble ITAT was justified in deleting the entire addition of ₹ 42,07,29,600/- made under section 56(1) of the Act ignoring the fact that assets of the assessee company don’t commensurate to premium charged and further ignoring the fact that the neither any business activity was performed nor any business income has been shown by the assessee.

2. Whether on the facts and the circumstances of the case the Hon’ble ITAT was justified in holding that section 68 of the IT Act does not empower the CIT(A) to make addition under this Act, as the section 68 empowers only the assessing officer to make addition.

3. whether on the facts and the circumstances of the case the Hon’ble ITAT was justified in holding that the addition under section 68 of the IT Act can only be made by the assessing officer by relying upon the definition of assessing officer as provided in section 2(7A) of the IT Act.

4. whether on the facts and the circumstances of the case the Hon’ble ITAT was justified ignoring the provisions of section 251(1)(a) of the IT Act, 1961 which specifically empowers the CIT(A) in an appeal to confirm, reduce, enhance or annual the assessment;

5. whether on the facts and the circumstances of the case of the Hon’ble ITAT was justified in ignoring the explanation of section 251(2) of the IT Act which states that in disposing of an appeal, the [commissioner (appeal)] may consider and decide any matter arising out of the proceeding in which the order appealed against was passed notwithstanding that such matter was not raised before the [commissioner (appeal)] by the appellant.

In all other appeals also SQL framed are on similar lines as in above appeals.

In view of author, in  any question facts found are not challenged. The questions are made based on conclusions of lower authority mainly the AO.

Furthermore, on reading of the orders of Tribunal also we find that revenue has not challenged order of CIT(A) as perverse. There we find that finding of AO were challenged by assesse as perverse. Therefore , finding being perverse has not been issue raised by revenue in these matters.

Honorable High Court has noted as follows in paragraph 5 and 6:

         5. Counsel for the appellant has taken us to the order of AO, CIT(A) and tribunal and thereafter contended that both CIT(A) as well as Tribunal have erred in deleting the addition of ₹ 1.95 crore which was made u/s 56(1). However, the tribunal while considering the matter has discussed the law as well as factual matrix of the case. In our considered opinion, this is more an appreciation of facts rather question of law.

6. In that view of the matter, no substantial question of law arises.”

Un quote:

On reading of above paragraph no. 5  and 6 we find that even during hearing before the High Court, Counsel of the appellant  / revenue has not challenged finding as perverse. He has only challenged correctness of the orders of CIT(A) and  /or ITAT by which addition made by AO were deleted.  

It seems that after the matter has been restored, revenue cannot improve its position because facts found  are clear and not challenged.

Before the Supreme Court, assesse was not represented. If it was a case duly represented suitably through counsels, perhaps , honorable Supreme Court  would not have restored the matter to the High Court.

Therefore, in second round before the High Court, assesse must properly represent through counsels.

Thinking expressed by Supreme Court:

It seems that the thinking expressed by the Supreme Court is that even order not admitting SQL should be after discussion and with reasoning. Short order simply saying no SQL or merely Question of fact is involved are not enough? This is for the reason that order of High Court is appealable.

Earlier Article by the same author on similar subject:

S.260A – ‘substantial question of law’, framed by High Court is essential, otherwise order or judgment is liable to be set aside rules the Supreme Court.  An Article By: - DEV KUMAR KOTHARI  July 28, 2020

S.40 (a) (ia) r.w.s 194C - SHREE CHOUDHARY TRANSPORT COMPANY (SC) – COUNSELS MISSED TO POINT OUT THAT NO SUBSTANTIAL QUESTIONS OF LAW WERE FRAMED BY HIGH COURT and did not request for restoration of appeal to High Court- a fit case for review.

And some other articles which one can find in search of articles.