2023 (12) TMI 37 - SC - Income Tax

Substantial questions of law sought to be raised were not formulated by the High Court - Interest disallowance on account of interest bearing funds diverted to associate companies and addition of difference between stock as per the books of account and as per the stock statements submitted to the Bank - Additions were deleted by the ITAT - HELD THAT - High Court to consider the submissions to be made by the respective parties and to raise the above substantial questions of law if they so arise. It is needless to observe that on hearing the learned counsel for the respective parties, the High Court is also empowered to raise any other substantial question of law which may arise in the matter(s). The aforesaid questions are stated to be substantial questions of law by learned counsel for the appellant(s). It is needless to observe that the respondent(s) is at liberty to contend that the aforesaid questions are not substantial questions of law and therefore do not require to be entertained in this appeal.

Summary

Issues involved:
The High Court's failure to include all substantial questions of law raised by the appellant in Tax Appeal No. 1096/2011.

Judgment Summary:

The appellant(s) raised concerns regarding the High Court's omission of two substantial questions of law in Tax Appeal No. 1096/2011. The Supreme Court, after hearing both parties, granted liberty to the appellant(s) to present the following questions before the High Court:
1. Whether the Appellate Tribunal was correct in deleting the interest disallowance of Rs. 47,40,000/- on account of interest-bearing funds diverted to associate companies?
2. Whether the Appellate Tribunal was correct in deleting the addition of Rs. 9,41,43,486/- made due to the difference between stock as per the books of account and as per the stock statements submitted to the Banks? The appellant(s) highlighted that the total tax effect related to the disputed issue amounted to Rs. 3,63,39,680/- for the assessment year 2003-2004 with recurring effect. The High Court was directed to consider these questions and any other substantial question of law that may arise.

It was emphasized that the mentioned questions were deemed substantial by the appellant(s), while the respondent(s) had the liberty to argue otherwise. The Supreme Court clarified that the High Court had the authority to raise additional substantial questions of law if necessary. The appeal was disposed of with these instructions, and any pending applications were also resolved accordingly.