M/S. CHOWGULE BROTHERS PVT. LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2, MARGAO AND ANR.,

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TXA/38/2016HC BombayHCBM05001565201601 August 2016Author: F. M. REIS,HON'BLE KUM. JUSTICE NUTAN D. SARDESSAI4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the appellant's apprehension regarding the ITAT's findings of fraud was justified. It was noted that the Revenue had not raised the contention of fraud before the ITAT, and the finding appeared to arise from queries made during the hearing. The Court observed that the appellant had not been afforded an appropriate opportunity to dispute the correctness of the fraud contention. Therefore, the High Court directed that the Assessing Officer, while examining the issue afresh based on the ITAT's order, shall not be influenced by the findings of fraud and malafide intention made in the impugned order. These findings were characterized as tentative and prima facie. The Court confirmed the ITAT's order but remitted the matter to the Assessing Officer with the specific observation to avoid being influenced by the fraud findings. All contentions of both parties on merits were kept open.

What were the facts?

The appeal was filed by M/s. Chowgule Brothers Private Limited, as successor to M/s. Chowgule Brothers, against an order passed by the Income Tax Appellate Tribunal (ITAT). The appellant's primary concern was that the ITAT's finding of fraud in its order dated 03.02.2016 would prejudice their defense before the Assessing Officer. The appellant did not dispute the possibility of the Assessing Officer re-examining the matter. The Revenue, in its appeal before the ITAT, had not raised the contention of fraud. The ITAT's finding of fraud appeared to stem from queries put to the appellant's authorized representative during the hearing. The appellant argued that this finding, made without a proper opportunity to dispute it, could unduly influence the Assessing Officer.

What were the issues?

1. Whether the impugned order dated 03.02.2016 passed by the learned Income Tax Appellate Tribunal stands vitiated to the extent that it has examined matters which were not germane to the issues raised by the Respondents before such Tribunal? Assessee's Contentions: The appellant argued that the ITAT's finding of fraud was not germane to the issues before it, as the Revenue had not raised this contention in its appeal. The appellant contended that such findings, made without an adequate opportunity to be heard on the specific issue of fraud, could prejudice their case before the Assessing Officer. They did not object to the Assessing Officer re-examining the matter but sought to protect their defense from the ITAT's adverse findings. Revenue's Contentions: The Revenue contended that as the ITAT found material suggesting fraud during the hearing, it was within the Tribunal's power to direct the Assessing Officer to re-examine the transaction. They argued that the ITAT's finding of fraud did not preclude directing a re-examination of the contention.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL No. 38 OF 2016 1. M/s. Chowgule Brothers Private Limited as Successor of M/s. Chowgule Brothers, Chowgule House, Mormugao Harbour, Goa. PAN: AABCC7536P. ….. Appellant V e r s u s 1. Assistant Commissioner of Income Tax, Circule 2, Margao, Goa 2. Union of India, Through the Secretary (Revenue), Ministry of Finance, North Block, New Delhi. …. Respondents Mr. Mihir Nanewadekar, Advocate with Mr. Purushottam R. Karpe, Advocate for the Appellant. Ms. Asha Desai, Advocate for the Respondents. CORAM :- F.M. REIS & NUTAN D. SARDESSAI, JJ. Date :- 01 st AUGUST, 2016 .

ORAL JUDGMENT: (PER F.M. REIS, J.) Heard Mr. Mihir Nanewadekar, the learned Counsel appearing for the Appellant and Ms. Asha Desai, learned Counsel appearing for the Respondents.

2

2.

Admit on the following substantial question of law: Whether the impugned order dated 03.02.2016 passed by the learned Income Tax Appellate Tribunal stands vitiated to the extent that it has examined matters which were not germane to the issues raised by the Respondents before such Tribunal.

3.

Heard forthwith with the consent of learned Counsel appearing for the Respondents. The learned Counsel for the Respondents waives service.

4.

Upon hearing the learned Counsel appearing for the Appellant and the Respondents, though the learned Counsel for the Appellant has seriously raised objections to the findings of the learned Tribunal that such transaction is a fraud which requires to be re-examined by the Assessing Officer afresh and that three was no challenge as to whether such amount was a business or income from other sources before the learned Tribunal, we find that the main apprehension of the Appellant is that though he does not seriously object that the Assessing Officer may proceed to re-examine the matter, nevertheless, the findings of the learned Tribunal to the effect that such transaction is a fraud would seriously

3 affect the defence of the Appellant before the Assessing Officer.

5.

The learned Counsel appearing for the Respondent points out that as the learned Tribunal during the course of the hearing found material to hold that such transaction is a fraud, it would not preclude the Tribunal from directing the Assessing Officer to re-examine such contention.

6.

It is not disputed that while assailing the order passed by the CITA, the Revenue Respondent herein has not raised such contention either in the appeal memo or during the course of the hearing. It appears that some queries were put to the authorised representative of the Appellant which led to the findings in the impugned order. The learned Counsel for the Appellant, as such, is justified to contend that such findings by the learned Tribunal may influence the Assessing Officer while examining the matter afresh. As there was no appropriate hearing or opportunity to the Appellant to dispute the correctness of such contention, we find it appropriate to observe that the Assessing Officer while examining the issue afresh based on the impugned order of the learned Income Tax Appellate Tribunal, shall not be influenced by the findings of fraud and malafide intention arrived at in the impugned order passed by the learned

4 Tribunal as they are only tentative and prima facie findings with that regard.

7.

With the above observations, the impugned order passed by the Tribunal stands confirmed and consequently remitted to the Assessing Officer. The substantial question of law is answered accordingly.

8.

In view of the above, the Assessing Officer shall, accordingly, proceed to consider the matter based on the impugned order passed by the Income Tax Appellate Tribunal without in any way being influenced with the findings of fraud and malafide intention as noted in therein. All contentions of both the parties on merits are kept open.

9.

The Appeal stands disposed of accordingly. Consequently, Civil Application No. 85/2016 stands disposed of. NUTAN D. SARDESSAI, J.

F.M.REIS, J. msr

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