PR. COMMISSIONER OF INCOME TAX CENTRAL 2versusM/S A.A. ESTATE PVT. LTD.

188                       [2019]
               SUPREME COURT     6 S.C.R. 188
                              REPORTS                     [2019] 6 S.C.R.


A          PR. COMMISSIONER OF INCOME TAX CENTRAL 2
                                       v.
                        M/S A.A. ESTATE PVT. LTD.
                        (Civil Appeal No. 3968 of 2019)
B                               APRIL 16, 2019
                    [ABHAY MANOHAR SAPRE AND
                       DINESH MAHESHWARI, JJ.]
             Income Tax Act, 1961: ss. 260-A, 260-A(3), 260-A(4) – Appeal
C     to High Court – Formulation of substantial question of law – On
      facts, non-formulation of any substantial question of law by the
      High Court as required to be framed u/s.260-A – Held: Questions
      framed by the High Court were not as was required to be framed u/
      s 260-A(3) for hearing the appeal but were the questions urged by
      the appellant – There lies a distinction between the questions
D
      proposed by the appellant for admission of the appeal and the
      questions framed by the Court – Questions, which are proposed by
      the appellant, fall u/s 260-A(2)(c) whereas the questions framed by
      the High Court fall u/s 260-A(3) – Appeal is heard on merits only
      on the questions framed by the High Court u/s. 260-A(3) as provided
E     u/s. 260-A (4) – Further, if the High Court was of the view that the
      appeal did not involve any substantial question of law, it should
      have recorded a categorical finding to that effect and dismissed the
      appeal in limine – However, the High Court without admitting the
      appeal and framing any question of law, issued notice of appeal to
      the assessee, heard both the parties on the questions urged by the
F
      appellant and dismissed it – Thus, the High Court did not decide
      the appeal in conformity with the mandatory procedure prescribed
      in s.260-A – High Court should have seen that the substantial
      questions of law did arise in the appeal for being answered on
      their respective merits – Matter remanded to the High Court to answer
G     the questions framed by this Court u/s. 260-A(3) of the Act.
            CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3968
      of 2019.
            From the Judgment and Order dated 09.01.2017 of the High
      Court of Judicature at Bombay in Income Tax Appeal No. 1239 of 2014.
H
                                      188
    PR. COMMISSIONER OF INCOME TAX CENTRAL 2 v.                            189
              M/S A.A. ESTATE PVT. LTD.

      H. R. Rao, P. V. Yogeswaran, Mrs.Anil Katiyar, Advs. for the         A
Appellant.
     Salil Kapoor, Sumit Lalchandani, Praveen Swarup, Advs. for the
Respondent.
      The Judgment of the Court was delivered by
                                                                           B
      ABHAY MANOHAR SAPRE, J.
      1. Leave granted.
      2. This appeal is filed against the final judgment and order dated
09.01.2017 passed by the High Court of judicature at Bombay in ITA
No.1239 of 2014 whereby the High Court dismissed the appeal of the         C
Revenue-Commissioner of Income Tax-Mumbai(appellant herein).
      3. A few facts need mention hereinbelow for the disposal of this
appeal, which involves a short point.
    4. The appellant is the Revenue-Commissioner of Income Tax,
                                                                           D
Mumbai, whereas the respondent is an assessee.
      5. The respondent-assessee is a Company engaged in the business
of development and building of properties. The dispute relates to the
assessment year 2008-09.
       6. On 24.12.2009, the Assessing Officer (for short, “the AO”)       E
completed the assessment under Section 143(3) read with Section 153A
of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and
determined the total income at Rs.7,77,49,790/-.
       7. On 22.09.2010, the AO issued a notice under Section 148 of
the Act seeking therein to re-open the assessment of the respondent-       F
assessee which was made on 24.12.2009. This notice was issued by the
AO on the basis of information received from ADIT (investigation)
Unit II (2).
      8. By this notice, the AO proposed to make an addition of
Rs.1,70,94,000/- towards unaccounted sale proceeds alleged to have         G
been made by the respondent-assessee in the assessment year in question
(2008-2009) because, in his opinion, it was in the nature of escaped
assessment.
     9. The AO proposed this addition on the basis of one document
(Annexure–AB-1), which was seized by the Revenue Department in
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190             SUPREME COURT REPORTS                            [2019] 6 S.C.R.


A     their search operation carried on 30.11.2007 in the business premises of
      another assessee by name-M/s Ashok Buildcom Ltd.
            10. In other words, the foundation for issuance of notice under
      Section 148 of the Act to the respondent-assessee for adding the
      aforementioned sum was the document-Annexure-AB-1.
B           11. The respondent-assessee objected to issuance of notice
      contending inter alia that first, there is no factual foundation for issue of
      notice; Second, there is no case for any “escaped assessment”, and
      Third, there is no case to “reason to believe”.
            12. By order dated 30.12.2011, the AO overruled the objections
C     raised by the respondent-assessee and passed a re-assessment order
      by adding a sum of Rs.1,70,94,000/- in the total income of the respondent-
      assessee. He held that, in his opinion, it was a case of escaped assessment
      and secondly, there was enough material to add the said sum in the total
      income of the respondent-assessee for the assessment year under
D     consideration.
             13. The respondent-assessee felt aggrieved and filed appeal
      before the CIT (appeal). By order dated 21.02.2013, the CIT (appeal)
      dismissed the appeal and upheld the addition made by the AO. The
      respondent-assessee felt aggrieved and filed second appeal before the
E     ITAT. By order dated 05.02.2014, the Tribunal allowed the appeal and
      set aside the order of the CIT (appeals).
             14. The Commissioner of Income Tax felt aggrieved and filed
      appeal before the High Court under Section 260-A of the Act. By
      impugned order, the High Court dismissed the appeal and affirmed the
F     order of the Tribunal giving rise to filing of the special leave to appeal by
      the Commissioner of Income Tax in this Court.
             15. So, the short question, which arises for consideration in this
      appeal, is whether High Court was justified in dismissing the appeal filed
      by the Commissioner of Income Tax (appellant herein).
G           16. Heard Mr. H.R. Rao, learned counsel for the appellant and
      Mr. Salil Kapoor, learned counsel for the respondent.
             17. Having heard the learned counsel for the parties and on perusal
      of the record of the case and the written submissions filed by the learned
      counsel, we are inclined to allow this appeal and while setting aside the
H
    PR. COMMISSIONER OF INCOME TAX CENTRAL 2 v.                               191
 M/S A.A. ESTATE PVT. LTD. [ABHAY MANOHAR SAPRE, J.]

impugned order, remand the case to the High Court for deciding the            A
appeal afresh.
      18. In our view, the need to remand the case to the High Court
has occasioned for more than one reason as stated hereinbelow.
      19. First, the High Court did not formulate any substantial question
of law as was required to be framed under Section 260-A of the Act.           B

      20. Second, in Para 2 of the impugned order, the High Court
observed that “Revenue urges following questions of law for our
consideration”.
       21. As is clear from reading of Para 2, the two questions set out      C
in Para 2 were not the questions framed by the High Court as was
required to be framed under Section 260-A(3) of the Act for hearing the
appeal but were the questions urged by the appellant.
      22. In our view, there lies a distinction between the questions
proposed by the appellant for admission of the appeal and the questions       D
framed by the Court.
       23. The questions, which are proposed by the appellant, fall under
Section 260-A (2) (c) of the Act whereas the questions framed by the
High Court fall under Section 260-A (3) of the Act. The appeal is heard
on merits only on the questions framed by the High Court under sub-
                                                                              E
section (3) of Section 260-A of the Act as provided under Section 260-
A (4) of the Act. In other words, the appeal is heard only on the questions
framed by the Court.
       24. Third, if the High Court was of the view that the appeal did
not involve any substantial question of law, it should have recorded a
                                                                              F
categorical finding to that effect saying that the questions proposed by
the appellant either do not arise in the case or/and are not substantial
questions of law so as to attract the rigor of Section 260-A of the Act for
its admission and accordingly should have dismissed the appeal in limine.
       25. It was, however, not done and instead the High Court without
admitting the appeal and framing any question of law issued notice of         G
appeal to the respondent-assessee, heard both the parties on the questions
urged by the appellant and dismissed it. In our view, the respondent had
a right to argue “at the time of hearing” of the appeal that the questions
framed were not involved in the appeal and this the respondent could
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192             SUPREME COURT REPORTS                           [2019] 6 S.C.R.


A     urge by taking recourse to sub- section (5) of Section 260-A of the Act.
      But this stage in this case did not arise because as mentioned above, the
      High Court neither admitted the appeal nor framed any question as
      required under sub-section (3) of Section 260-A of the Act. The expression
      “such question” referred to in sub- section (5) of Section 260-A of the
      Act means the questions which are framed by the High Court under
B
      sub-section (3) of Section 260-A at the time of admission of the appeal
      and not the one proposed in Section 260-A (2) (c) of the Act by the
      appellant.
            26. We are, therefore, of the view that the High Court did not
      decide the appeal in conformity with the mandatory procedure prescribed
C     in Section 260-A of the Act.
             27. Fourth, the High Court should have seen that following
      substantial questions of law do arise in the appeal for being answered on
      their respective merits:
D           (i) Whether the reasons contained in Notice under Section
            148 are relevant and sufficient for issuance of the said
            Notice dated 22.09.2010 ?
            (ii) Whether any case of escaped assessment within the
            meaning of Section 147 read with Section 148 of the Act for
E           the assessment year in question is made out by the
            Commissioner of Income Tax on the basis of the reasons
            set out in the notice ?
            (iii) Whether a case of presumption as contemplated under
            Section 132(4A) of the Act could be drawn against the
F           respondent-assessee on the basis of a document (Annexure
            AB-1) which was seized in search operation carried in the
            business premises of another assessee - M/s Ashok
            buildcom by adding a sum of Rs.1,70,94,000/- for
            determining the total tax liability of the respondent for the
            year in question as an escaped assessment so as to enable
G           the Department to issue notice dated 22.09.2010 under
            Section 148 of the Act to the respondent?
             28. In the light of the foregoing discussion, we consider it just and
      proper to remand the case to the High Court for deciding the appeal
      afresh to answer the questions framed above on merits in accordance
H     with law.
    PR. COMMISSIONER OF INCOME TAX CENTRAL 2 v.                                193
 M/S A.A. ESTATE PVT. LTD. [ABHAY MANOHAR SAPRE, J.]

       29. The appeal thus succeeds and is accordingly allowed. The            A
impugned order is set aside. The case is remanded to the High Court
for deciding the appeal filed by the Commissioner of Income Tax-Mumbai
afresh on merits as provided under Section 260-A(4) of the Act to answer
the three questions framed by this Court under Section 260-A(3) of the
Act.
                                                                               B
      30. The High Court will decide the appeal uninfluenced by any
observations made in the impugned order and in this order because having
formed an opinion to remand the case, we have not expressed any opinion
on the merits of the case.
                                                                               C
Nidhi Jain                                    Matter remanded to High Court.




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