2013 (11) TMI 282 - HC - Income Tax

Whenever a legal question arises, the assessee need not plead it as a ground. Legal point can be raised at the time of arguments also and the Tribunal was required to consider the same? - Purchase the shares from the shareholders amounts to distribution of dividends and the same has to be considered as accumulated profits in the hands of the assessee bringing the same within the meaning of Section 2(22)(d) of the Income-tax Act Held that - Legal question can be raised at the stage of the appeal and such a question need not be raised as a ground. It can be argued by a counsel at the time of hearing. When the legal question is raised, the Tribunal has to consider the same in accordance with law. In the instant case the Tribunal has committed an error in not considering the question of law raised by the appellant. Therefore, this Court has to allow the appeal and remand the matter to the Income Tax Appellate Tribunal in order to consider this question Decided in favor of Assessee.

Summary

Issues:
- Questioning concurrent findings of authorities by the appellant.
- Dispute regarding assessment year 2004-05.
- Applicability of Section 2(22)(d) of the Income-tax Act.
- Consideration of legal question for the first time before the Income Tax Appellate Tribunal.

Analysis:
1. The appellant, engaged in printing and publishing, filed a return of income for the assessment year 2004-05, declaring total income. The assessment concluded that the amount paid to purchase shares amounted to distribution of dividends, falling under Section 2(22)(d) of the Income-tax Act. The appellant's appeal to the CIT (Appeals) was dismissed.

2. Subsequently, an appeal was made to the Income Tax Appellate Tribunal, questioning the applicability of Section 77-A of the Companies Act to the buyback of shares and its impact on Section 2(22)(d) of the Income-tax Act. However, this contention was not raised before the Assessing Officer or the Commissioner of Income Tax (Appeals) but was first brought up before the Tribunal.

3. The Tribunal dismissed the appeal, citing the failure to raise the point earlier in the proceedings. The key issue before the High Court was whether an assessee could introduce a legal question for the first time before the Tribunal, and if the Tribunal could decline to address it due to lack of prior mention in earlier stages of the appeal.

4. The appellant argued that legal questions could be raised during arguments and need not be specifically pleaded as grounds. The High Court acknowledged the validity of this argument, stating that legal points could indeed be raised during the appeal process without being explicitly included as grounds.

5. The High Court found merit in the appellant's argument, emphasizing that legal questions could be raised during the hearing and should be considered by the Tribunal. The Court held that the Tribunal erred in not addressing the legal question raised by the appellant, leading to the decision to allow the appeal and remand the matter to the Income Tax Appellate Tribunal for consideration of the legal question raised by the appellant in accordance with the law and on its merits. The High Court did not interfere with the orders of the lower authorities, leaving it to the Tribunal to address the legal issue raised by the appellant.