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TMI Blog2021 (4) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... itted by order dated 15th June 2017 on the following substantial questions of law : 1. Whether in the facts and in the circumstances of the case and in law, the Appellate Ld Tribunal was right in invoking the provision of Section 2(22)(e) of the Act and making an addition of deemed dividend in the hands of the Appellant? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in holding that the transactions which are recorded in the books of accounts of the Company and the Firm would be regarded as incriminating material in the case of the Appellant when the Appellant was not a party to the said transactions? 3. Whether on the facts and in the circumstances of the case and in law the Ld. Tribunal was justified in holding that the provision of Section 2(22)(e) are applicable without considering the argument of the appellant that the account between the Company and the Firm was a running current account? 4. Whether on the facts and circumstances of the case and in law, the Appellate Ld. Tribunal was correct in rejecting the cross objections filed by the appellant solely on the ground of delay, when admittedly, the Appellate Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id firm should not be treated as 'deemed dividend' in the hands of Peter Vaz and Edgar Afonso in terms of Section 2(22)(e) of the IT Act. Both of them filed detailed responses submitting how according to them, the provisions of Section 2(22)(e) of the IT Act were not at all attracted in the facts and circumstances of the case. 11. Assessing Officer vide Assessment Order dated 31.03.2014 however held that the amounts reflected in the books of the said firm as payable to the company were like 'loans and advances' and accordingly, directed that the same be treated as 'deemed dividend' under Section 2(22)(e) of the IT Act. These amounts were added to the income of the assessees' Peter Vaz and Edgar Afonso and brought to additional tax. 12. Being aggrieved by the Assessment Orders dated 31.03.2014, the assessees' Peter Vaz and Edgar Afonso appealed to the Commissioner of Income Tax (Appeals). By order dated 28.07.2015, the CIT (Appeals) allowed the appeals and held that the amounts reflected in the books of the said firm could not be treated as 'deemed dividend' under Section 2(22)(e) of the IT Act. Accordingly, the Assessment Orders dated 31.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'pertains or pertain to', or any information contained therein relates to a person other than the person referred to in Section 153A of the IT Act. 17. Mr. Pardiwala submitted that since these matters concern the Assessment Years 2006-2007 to 2011-2012, the provisions of Section 153C as amended up to the year 2013, were attracted. He submitted that from the material available on record, including the satisfaction note submitted to the assessees, it is apparent that the books of accounts belonging to the said firm or the said company were found in the course of a search under Section 132 of the IT Act. There is no material on record to hold that any books of accounts belonging to either Peter Vaz and Edgar Afonso, assessees herein were ever found in the course of a search under Section 132 of the IT Act. He submits that in the absence of satisfaction on this jurisdictional aspect, no action in terms of Section 153C of the IT Act was competent. He, therefore, submits that the action under Section 153C of the IT Act was without jurisdiction and this ground was required to be considered by the ITAT, irrespective of whether or not any cross objections were filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Standing Counsel for the Revenue defended the impugned orders made by the ITAT based upon the reasoning reflected therein. She submitted that in this case, it was necessary to file cross-objections and since no sufficient cause was shown by the assessees, the application seeking condonation of delay was quite rightly rejected. She referred to the provisions of Section 124(3) of the IT Act to point out that no objection to jurisdiction could have been raised in these matters after the conclusion of the assessment proceedings under Section 153C of the IT Act. She submitted that the condonation of delay might have resulted in depriving the Revenue of resorting to an alternate remedy, assuming that the ITAT was to hold that there was no jurisdiction to proceed under Section 153C of the IT Act. She submits that the assessees were advised by several legal professionals and the plea of incorrect legal advice was rightly rejected by the ITAT in the facts and circumstances of the present case. She relied on Commissioner of Income Tax, Gujarat Vs Vijaybhai N. Chandrani 2013(14) SCC 661, Municipal Commissioner, Calcutta and others Vs Salil Kumar Banerjee and others (2000) 4 SCC 108, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favor of the assessees and even set aside the orders made by the Assessing Officers. Therefore, the assessees did not have to institute any further appeals to the ITAT. The Revenue in this case had appealed to the ITAT against the orders made by the CIT (Appeals). Therefore, the issue is, whether the assessees could have raised the issue of noncompliance with jurisdictional parameters set out under Section 153C of the IT Act, before the ITAT, even without filing any cross-objections before the ITAT. 28. At least, prima facie, non-compliance with jurisdictional parameters set out under Section 153C of the IT Act, if established, will go to the root of the matter and even nullify the very action initiated under Section 153C of the IT Act. Based on the material furnished to the assessees, it was the case of the assessees that what was found in the course of search proceedings under Section 132 of the IT Act in the premises of the said firm and the said company, were the books of accounts belonging to the said firm and the said company. It is the case of the assessees that no books of accounts belonging to the assessees i.e. Peter Vaz and Edgar Afonso were found in the search proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court was deciding whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee needed to file cross-objections despite fully succeeding in appeal and therefore, being unable to challenge the finding of the CIT (Appeals) that the assessee was guilty of concealment of income and/or furnishing inaccurate particulars. 33. In the above case, the CIT (Appeals) recorded a finding that the assessee had concealed particulars of his income or furnished inaccurate particulars of his income but for detailed reasons set out, the CIT (Appeals) quashed the penalty imposed upon the assessee under Section 271 of the IT Act. In the appeal filed by the Revenue before the ITAT, the assessee sought to assail the finding of concealment but the ITAT did not permit the assessee to do so, on the ground that the assessee had failed to file any cross-objections. 34. The Division Bench of Gujarat High Court however held that the ITAT committed an error in law in not permitting the assessee to assail the finding of the concealment without filing cross-objections. The Court held that the ITAT apparently lost sight of the fact that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dure, 1908, relating to appeals to the High Court shall, as far as may apply in the case of appeals under this Section. Now in the context of the provisions of Order XLI Rule 22 of the CPC dealing with the cross-objections, the Hon'ble Supreme Court in the case of S. Nazeer Ahmed (supra) has held that the High Court was clearly in error in holding that the appellant not having filed a memorandum of cross-objections in terms of Order XLI Rule 22 of the Code, could not challenge the finding of the trial Court that the suit was not barred by Order II Rule 2 of the Code. The respondent in an appeal is entitled to support the decree of the trial Court even by challenging any of the findings that might have been rendered by the trial Court against himself. For supporting the decree passed by the trial Court, it is not necessary for the respondent in the appeal, to file a memorandum of cross-objections challenging a particular finding that is rendered by the trial Court against him when the ultimate decree itself is in his favor. A memorandum of cross-objections is needed only if the respondent claims any relief which had been negatived to him by the trial Court and in addition to wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be condoned. The Hon'ble Supreme Court has observed that during these days when everybody is fully occupied with his avocation of life an omission to adopt such extra vigilance need not be used as a ground to depict him as a litigant not aware of his responsibilities and to visit him with drastic consequences. 41. The Hon'ble Supreme Court has also held that it is axiomatic that the condonation of delay is a matter of discretion and Section 5 of the Limitation Act does not say that such discretion can be exercised only if the delay is within a certain limit. The length of the delay is no matter, acceptability of the explanation is the only criterion. 42. The Hon'ble Supreme Court has reasoned that the primary function of the Court is to adjudicate the dispute between the parties and to advance substantial justice. The time limit fixed for approaching the Court in different situations is not because on the expiry of such time a bad cause would transform into a good cause. Rules of limitation are not meant to destroy the right of parties but they are meant to see that parties do not resort to dilatory tactics. The Hon'ble Supreme Court has also held that in every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ameters prescribed therein. 45. In Vijaybhai N. Chandrani (supra), the Hon'ble Supreme Court held that the High Court must not ordinarily entertain the writ petitions against notices under Section 153C of the IT Act when the assessees have the remedy of filing response before the Assessing authorities and thereafter appealing against the decision of Assessing authority, should be the same adverse to the assessee. This decision, therefore, is not authority for the proposition that the jurisdictional issue cannot be raised in an appeal before the ITAT, without such issue being raised before the Assessing Officer in the first instance. This decision, in fact, indicates the jurisdictional issue was specifically kept open by the Hon'ble Supreme Court so that the same could be raised at the appropriate stage before the appropriate forum. 46. In Municipal Commissioner, Calcutta (supra), the objection raised was to the constitution of the Tribunal itself after the party took its chance of securing a favorable order before the very Tribunal. Such issue is not involved in the present matter and therefore, this decision does not apply to the present matter. 47. In Ng Technologies Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer of the person searched. The order records that the departmental representative submitted that the assessment files are not immediately available, but in the event, the Tribunal was pleased to admit the cross-objections, then, the same will be produced as the files were split and were at the office of the Assessing Officer at Central Circle as also the Assessing Officer of the assessees. The impugned order of the ITAT also refers to verification of certain facts in the context of action under Section 153C of the IT Act. 51. Having regard to the aforesaid, we agree with Ms. Linhares that the matter will have to be remanded to the ITAT for fresh consideration of appeals instituted by the Revenue after permitting the assessees to raise the issue of non-compliance with the jurisdictional parameters of Section 153C of the IT Act. 52. Accordingly, we set aside the impugned judgment and order in so far as it concerns the present assessees and remand the matters to the ITAT with a direction to permit the assessees to raise the issue of compliance or non-compliance with the jurisdictional parameters necessary to initiate action under Section 153C of the IT Act. At the same tim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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