Principal Comissioner Of Income Tax vs. Kailash Narayan Patidar

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ITA/18/2023HC Madhya Pradesh22 August 2024Bench: HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI6 pages
For Petitioner: Siddharth Sharma
AI SummaryRemanded

What did the High Court hold?

The High Court held that a pure question of law can be examined at any stage, even before the High Court, if the factual foundation has been laid and the legal consequences have not been examined. The Court referred to the Supreme Court's decision in K. Lubna vs. Beevi & ors. and Lord Watson's observation in Connecticut Fire Insurance Co. v. Kavanagh. The Court found that the Revenue had raised substantial questions of law which were not decided by the ITAT because there were no averments or arguments to that effect before the ITAT. Therefore, the High Court was of the view that the appeal deserved to be remanded back to the ITAT for fresh adjudication. The order dated 10.08.2022 passed by the ITAT was quashed, and the appeal was remanded back to the ITAT with directions to decide the appeal afresh after giving an opportunity of hearing to the parties and passing a speaking and well-reasoned order on merits within two months.

What were the facts?

The Principal Commissioner of Income Tax (Revenue) filed an appeal against an order dated 10.08.2022 passed by the ITAT, Indore. The ITAT had dismissed the Revenue's appeal. The Assessing Officer had passed an assessment order under Section 153C read with Section 143(3) of the Income Tax Act, 1961, against the assessee, Kailash Narayan Patidar. The assessee appealed to the CIT(Appeals), who partly allowed the appeal. Both the Revenue and the assessee then filed appeals before the ITAT. The ITAT dismissed the Revenue's appeal, noting that the CIT(A) had quashed the assessment order for AY 2011-12, and the Revenue should have challenged this quashing on maintainability grounds rather than focusing on additions/deletions made by the CIT(A).

What were the issues?

1. Whether the ITAT was justified in not deciding the appeal on merits, on the ground that the validity of the assessment order quashed by the CIT(A) for lack of satisfaction of the AO of the searched person was not specifically challenged by the Revenue, despite the Supreme Court decision in Super Malls Vs PCIT which settled the issue of separate satisfaction in favour of the Revenue when the AOs are the same, thus requiring the ITAT to decide additions on merits. 2. Whether the ITAT erred in not examining the material (satisfaction note) available in the assessment order to render substantial justice, instead of declining to decide on technicalities. 3. Whether the ITAT, as the final fact-finding authority, erred in not going into the legal question on its own to dispose of the appeal with substantial justice, especially when legal grounds can be raised at any stage (NTPC vs CIT) and the Revenue was not represented before the ITAT. Assessee's contentions: The grounds raised by the Revenue were not pleaded before the ITAT or CIT(A) and cannot be raised before the High Court. The Revenue was not represented before the ITAT. The appeal is based on a question of fact, not a substantial question of law. Revenue's contentions: The ITAT erred in not deciding the appeal on merits. The issue of separate satisfaction when AOs are the same is settled in favour of the Revenue by the Supreme Court in Super Malls vs. PCIT. The ITAT should have examined the satisfaction note and decided on merits. The Revenue seeks remand for de novo hearing on merits.

Which sections of the Income-tax Act were involved?

Section 153C,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR BEFORE HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI & HON'BLE SMT. JUSTICE ANURADHA SHUKLA ON THE 22nd OF AUGUST, 2024 INCOME TAX APPEAL No. 18 of 2023 PRINCIPAL COMISSIONER OF INCOME TAX Versus KAILASH NARAYAN PATIDAR Appearance: Shri Siddharth Sharma - Advocate for the appellant. Shri Ashish Goyal - Advocate for the respondent through video conferencing. ORDER Per: Justice Sushrut Arvind Dharmadhikari The present Income Tax Appeal has been filed by the Revenue against the order dated 10.08.2022 passed by ITAT, Indore in IT (SS) A No.113/IND/2020 by which the Appellate Tribunal has dismissed the appeal filed by the Revenue. 2. Brief facts of the case are that on 25.03.2014 the Assessing Officer passed an order under Section 153C read with Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act of 1961') against the respondent. Being aggrieved by the same, respondent preferred an appeal against the aforementioned assessment order before the Court of learned Commissioner of Income Tax, (Appeals) Bhopal which was partly allowed. Being aggrieved by the said order, the Revenue as well as the respondent both filed appeals before the ITAT which were heard analogously and 1 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified disposed of vide order dated 10.08.2022 in the following manner : "8. However, it appears that page 137 of the order passed by the ld. CIT(A) speaks of quashing of the assessment order for A.Y. 2011-12 holding the same unsustainable in law. Therefore, the right course of action on behalf of the Revenue would have been to challenge the said order of quashing of the assessment order on maintainability ground instead of deletion or addition made by the CIT(A) which is wholly academic. Hence, we do not find any merit in the appeal preferred by the Revenue. Thus, the same is dismissed." 3. Learned counsel for the appellant has proposed the following substantial questions of law : 1. Whether on facts and circumstances of the case and in law, the Hon'ble ITAT was justified in not deciding the appeal on merits, on ground that the validity of assessment order quashed by CIT(A) for reasons that there was no satisfaction of AO of searched person was not specifically challenged by Revenue, without appreciating that in view of decision of SC in Super Malls Vs PCIT [2020] 115 taxmann.com 105 (SC)/[2020] 273 Taxman 556 (SC) the question of recording of separate satisfaction when AO of searched person and other person was the same was already settled in favour of revenue and hence the ITAT was bound to decide the additions emerging from assessment order on merits also as per grounds raised by revenue? 2. Whether on facts and circumstances of the case and in law, the Hon'ble ITAT erred in not examining and considering the material (satisfaction note) 2 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified already available in the assessment order of AO to render the substantial justice instead of declining to decide the appeal merely on technicalities? 3. Whether on facts and circumstances of the case and in law, the Hon'ble ITAT being the final fact finding authority, erred in not going into the legal question on its own to dispose the appeal with substantial justice, more so when it is trite that a legal ground can be raised at any stage in view of SC decision in case of NTPC vs CIT (1998)229 ITR 383 SC and that the revenue was not represented on the date of hearing before the ITAT? 4. Learned counsel for the appellant submitted that while adjudicating the appeal, the learned ITAT erred in passing the impugned order and failed to consider the fact that there was sufficient compliance of Section 153C of the Act of 1961. When the satisfaction note is prepared by the AO of the assessee and the AO of the search person are same and already settled in favour of the Revenue, the learned ITAT erred in not examining and considering the material (satisfaction note) while passing the impugned order. It is further submitted that the Apex Court in the case of Super Malls vs. PCIT (2020) 115 Taxmann.com 105 has held the question of recording of separate satisfaction when AO of searched person and other person was the same in favour of Revenue but the ITAT without considering the aforementioned preposition of law has passed the impugned order and prayed to remand back the same to the ITAT for de novo hearing on merits. 5. On the other hand, learned counsel for the respondent vehemently opposed the prayer and submitted that the ground raised by the appellant is being raised only before this Court and was never ever averred before the 3 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified appellant Tribunal or before the CIT(A). He further submitted that if any point has not been raised before the ITAT cannot be raised before this Court. He also submitted that despite appeal being filed by the Revenue, no one was present before the ITAT to represent the Revenue. In such a condition, prayer made by the Revenue to raise such questions at this stage shall not be permitted and the present appeal is based on mere question of fact and no substantial question of law can be framed herein and prayed for dismissal of the appeal. 6. Heard counsel for both the parties. 7. Upon perusal of the record it reveals that present appeal involves substantial question of law which is framed herein : 1. Whether on facts and circumstances of the case and in law, the Hon'ble ITAT was justified in not deciding the appeal on merits, on ground that the validity of assessment order quashed by CIT(A) for reasons that there was no satisfaction of AO of searched person was not specifically challenged by Revenue, without appreciating that in view of decision of SC in Super Malls Vs PCIT [2020] 115 taxmann.com 105 (SC)/[2020] 273 Taxman 556 (SC) the question of recording of separate satisfaction when AO of searched person and other person was the same was already settled in favour of revenue and hence the ITAT was bound to decide the additions emerging from assessment order on merits also as per grounds raised by revenue? 3. Whether on facts and circumstances of the case and in law, the Hon'ble ITAT being the final fact finding authority, erred in not going into the legal 4 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified question on its own to dispose the appeal with substantial justice, more so when it is trite that a legal ground can be raised at any stage in view of SC decision in case of NTPC vs CIT (1998)229 ITR 383 SC and that the revenue was not represented on the date of hearing before the ITAT? 8. In the present case, the issue involved is that whether question of law can directly be raised before this Court without being averred or pleaded before the ITAT ? 9. The Apex Court in the case of K.Lubna vs. & ors. vs. Beevi & ors. Civil Appeal No.2442-2443 of 2011, has held :

"9. On the legal principle, it is trite to say that a pure question of law can be examined at any stage, including before this Court. If the factual foundation for a case has been laid and the legal consequences of the same have not been examined, the examination of such legal consequences would be a pure question of law. 11. We may also usefully refer to what has been observed by Lord Watson in Connecticut Fire Insurance Co. v. Kavanagh3 in the following words: “….When a question of law is raised for the first time in a court of last resort upon the construction of a document or upon facts either admitted or proved beyond controversy, it is not only competent but expedient in the interests of justice to entertain the plea. The expediency of adopting that course may be doubted when the plea cannot be disposed of without deciding nice questions of fact in considering which the court of ultimate review is placed in a much less advantageous position than the courts below.”

10.

In view of the aforesaid, it is settled that the parties cannot be restrained to raise a question of law even at the last stage of adjudication. 11. In the present case, the Revenue has raised substantial questions of 5 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified (SUSHRUT ARVIND DHARMADHIKARI) JUDGE (ANURADHA SHUKLA) JUDGE law which were not decided by the ITAT because there was no averment or arguments to that effect before the ITAT. Therefore, this Court is of the view that the present appeal deserves to be remanded back to the ITAT for fresh adjudication. As the matter is being remanded back to the ITAT, therefore, order dated 10.08.2022 passed by ITAT, Indore in IT (SS) A No.113/IND/2020 is hereby quashed. Accordingly, the Appeal is remanded back to the ITAT with direction to decide the appeal afresh after giving opportunity of hearing to the parties and pass a speaking and well reasoned order on merits within a period of two months from the date of receipt of certified copy of this order. 12. Present ITA is disposed of accordingly. anand

6 ITA-18-2023 NEUTRAL CITATION NO. 2024:MPHC-JBP:42203 Signed by: ANAND KRISHNA SEN Signing time: 8/24/2024 6:36:52 PM Signature Not Verified

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