SLP DISMISSAL IN CASE OF SUMAN PODDAR , AND HIGH COURTS DISMISSING APPEAL WITHOUT FRAMING AND ANSWERING SUBSTANTIAL QUESTION OF LAW NEED RECONSIDERATION

[DEV KUMAR KOTHARI]

Related judgments / orders:

Provisions: S.260A, 10.38, Indian Evidence Act.

SUMAN PODDAR VERSUS INCOME TAX OFFICER 2019 (11) TMI 1237 – SC ORDER  Special Leave to Appeal (C) No. 26864/2019 Dated: - 22 November 2019

Suman Poddar Versus Income Tax Officer - 2019 (9) TMI 1089 - DELHI HIGH COURT

Suman Poddar Versus Income Tax Officer, Ward-39 (5) , New Delhi - 2019 (7) TMI 1514 - ITAT DELHI

2019 (5) TMI 201 - SUPREME COURT - RYATAR SAHAKARI SAKKARRE KARKHANE NIYAMIT VERSUS ASST. COMMISSIONER OF INCOME TAX-C-1 & ORS.

2019 (4) TMI 957 - SUPREME COURT - PR. COMMISSIONER OF INCOME TAX, CENTRAL 2 VERSUS M/S A.A. ESTATE PVT. LTD.

SUBSTANTIAL  QUESTION OF LAW  (in short SQL)

On reading of the order/ judgment of the honorable  High Court  (HC in short) we find that SQL before HC are  not mentioned in the order or  judgment of HC. These are also not found on website of Delhi High Court in interim orders. Even counsels have not referred to particular questions of law proposed in appeal memo and framed  by the HC.

The HC at preliminary stage asked the counsels as to why the issue is only a question of facts, particularly when findings are concurrently recorded by the AO, CIT(A) and the ITAT.

Substantial Question of Law (SQL):

 Counsels did not refer to SQL. Counsels did not refer to any SQL, they just pleaded  that concurrent orders of lower authorities and Tribunal are perverse.

How the orders are perverse are not found in the order in totality. Only observations of lower authorities and Tribunal are considered.

With due respect author feels that that HC has also passed order just on reading of the orders of lower authorities and Tribunal , without considering all related aspects.

On reading of the order/ judgment of the honorable Supreme Court also  we find that SQL are not mentioned in the order and same are also not available on the website in any interim or interlocutory orders.

SQL is essential:

Now it is as well settled that as per law laid down by the SC  in relation to S.260A that when notices are issued and parties have appeared, HC is required to frame SQL  and appeal cannot be dismissed by saying that there is no SQL.

 SQL must be framed and each question need to be considered .

In this case before the HC both parties were represented and heard. Therefore, it was necessary for the HC to formulate SQL and then hear the appeal.

Even the SC has not framed SQL, as we find in some other cases SC did as referred in this article lateron.

The assesse and revenue both were given notices by the HC. Both sides were heard. Therefore, it was necessary for the HC to frame SQL . In this regard we can refer to the following judgments, summary head notes of which are reproduced with highlights added:

2019 (5) TMI 201 - SUPREME COURT

RYATAR SAHAKARI SAKKARRE KARKHANE NIYAMIT VERSUS ASST. COMMISSIONER OF INCOME TAX-C-1 & ORS.

CIVIL APPEAL Nos. 4515-4524 OF 2019 (Arising out of S.L.P.(C) Nos.14053-14062 of 2017)

Dated: - 01 May 2019

Hearing of appeal by High Court - framing of substantial question(s) of law u/s 260A (3) - appeal heard on merit without framing questions, on the basis of questions of law raised in appeal - interpretation of language of section 40(a)(ia) - TDS u/s 194C - payments made to the harvesters and transporters - HELD THAT:- We find that in Para 4, the High Court observed, "Assessee has raised the following questions of law in its appeals” and then set out four questions. Likewise, in Para 5, the High Court observed, "Revenue has raised the following questions of law in its appeals” and then set out three questions.

It is not in dispute that the High Court did not frame any question as required u/s 260A (3)

As relying on M/s A.A. Estate Pvt. Ltd. . [2019 (4) TMI 957 - SUPREME COURT] these appeals have to be allowed and the case needs to be remanded to the High Court for hearing afresh on merits.

Appeals allowed. The impugned order is set aside. The appeals are remanded to the High Court for hearing afresh only after framing appropriate substantial question(s) of law as required u/s 260A( 3).

 2019 (4) TMI 957 - SUPREME COURT

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

CIVIL APPEAL No.3968 OF 2019 (Arising out of S.L.P.(C) No.29524 of 2017)

Dated: - 16 April 2019

Mandatory procedure u/s 260A for appeal before High Court - reopening u/s 147 - no factual foundation for issue of notice - no “escaped assessment” - no valid “reason to believe” - High Court dismissed the appeal stating no substantial question of law arises - distinction between the questions proposed by the appellant for admission of the appeal and the questions framed by the Court - HELD THAT:- 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 u/s 260A (4). In other words, the appeal is heard only on the questions framed by the Court.

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.

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 subsection (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. The expression “such question” referred to in subsection (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.

High Court should have seen that substantial questions of law do arise in the appeal for being answered on their respective merits. 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 u/s 260A( 4) of the Act to answer the three questions framed by this Court under Section 260A( 3).

Case of Suman Poddar:

On reading of the judgment, it is observed that during hearing counsels have raised issue that findings of authorities and Tribunal are perverse.

It seems that only during hearing before HC issue of perversity was raised. How the findings are perverse is not discussed. The HC has jumped to conclusion that there is no perversity and there is no SQL.

As per author, it appears that the AO, CIT(A) and the ITAT were unduly influenced by sharp increase in price of shares. We can find several companies with low fundamentals but still higher price even heavy loss making companies are quoted ar very high price. It is interesting that in case of start-up companies also high share price is allowed for issuing shares.

An important aspect of floating stock and price movement, technical analysis of price movement etc. have not been considered.

Prices of shares and there day to day movement are looked after and close surveillance methodology are followed by stock exchange and SEBI. These are through several tools and mechanism like (a)  grouping of shares ( different groups like A, B, T, T to T, Z, and shares having trading in options , shares being part of indices, (b)   margin requirement ( c ) , price movement allowed by way of circuit filters, (d) suspensions of trading in some circumstances, (e )  carry forward allowed or not and suspension of carry forward facility , squire off of transactions allowed or not etc are direct tools for monitoring share price movements.

The fact that a shareholder like assesse has hardly any control over price in share market was also not considered.

From the documents, it cannot be said that the transactions were bogus because all legally prescribed documents or customary documents were produced before authorities.

Therefore, merely because share price increased several times, cannot be a reason to doubt genuineness of transaction. Because documentations, mechanism of surveillance of stock prices by stock exchanges (S/E) and SEBI important factors to understand the share market activities.

Genuineness cannot be doubted when there is no finding that the assesse had paid cash in exchange of cheque for sale proceeds of shares. This aspects is well settled that unless there is evidence of cash payment in exchange of cheque, transactions cannot be doubted when it is supported by documentary evidences.

Documentary and prime evidences ignored:

It is clear case that the AO, CIT(A) and Tribunal have not considered primary documentary evidences. Their decisions are based on presumptions and conjecture and in complete disregard of primary and statutory evidences. They have relied on some reports of investigation wings , which are also based on bias and are in disregard of ground reality about share market activity in different kind of shares.

Judgments of High Courts, in favour of assesses are not considered:

Various  judgments of HC and Tribunals which have attained finality and are in favour of assesse have also not been properly considered.

Therefore this is a case where the assesse can make a proper application for reconsideration of the short order of the SC by which SLP has been dismissed without framing SQL and without considering submissions before lower authorities and judgments of SC on S.260A, as discussed earlier.

Readers can refer to articles written by the same author and other authors including compilations of judgments on LTCG  and can also search latest judgments on related issues by searching this website with different criterion like section of IT Act – 10.38, 45, 48, 260A, expressions like shares, long-term capital gains on shares, exempted capital gains…. Etc.