A remedy by way of appeal from the orders of ITAT is provided both u/s.260A of the Income-tax Act, 1961 and u/s.15 (w.e.f. 6-1- 2006) of the N.T.T. Act, 2005. Although appeals from the orders of ITAT are supposed to be filed only in the National Tax Tribunal from 6-1-2006, yet appeals are being filed in the High Court for good reasons. Hence, wherever reference is made to N.T.T, it may be taken/understood that the date of filing the appeal would have to be on or after 6-1-2006.
2. The provisions of S. 260A in the Income-tax Act, 1961 and of S. 15 in the N.T.T. Act, 2005 are similar in many aspects and respects. The salient features of these provisions, relevant to the subject on hand, are as follows :
- An appeal shall lie from every order passed in appeal by the ITAT to the High Court or to the N.T.T, if the High Court or the N.T.T., as the case may be, is satisfied that the case involves a substantial question of law.
- Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question and the High Court may determine any issue which either has been wrongly determined or has not been determined by the ITAT.
- Where an appeal is admitted, the N.T.T shall formulate the question of law for hearing the appeal and the N.T.T. may also determine any relevant issue in connection with the question so formulated, which either has been wrongly determined or has not been determined by the ITAT.
3. Thus, in terms of S. 260A(6) of the Income-tax Act, 1961 the High Court and in terms of S. 15(3) of N.T.T. Act, the N.T.T. may determine any issue which has either wrongly been determined or has not been determined by the ITAT. In other words, only issues raised but not determined or wrongly determined by the ITAT, were contemplated under these provisions. What about those issues which are not raised before the ITAT at all ?
4. This issue was first raised before the Bombay High Court in the case of CIT v. Tata Chemicals Ltd., reported in (2002) 256 ITR 395, wherein it is ruled that if a contention is not advanced before the ITAT, it cannot be contended before the High Court. The Madras High Court also in the case of CIT v. Janakiram Mills Ltd., reported in  275 ITR 403, held that since the Department did not raise any ground/objection before the Tribunal, it was not allowed to be raised before the High Court u/s.260A. This was relied on, followed and applied by the High Court in other two cases reported in 292 ITR 605 and in 292 ITR 655, to the effect that questions not raised before nor considered by the Tribunal cannot be considered by the High Court in an appeal u/s.260A. These judgments are against the judgment of the High Court of Karnataka, which has recently been reported as annexure to the decision of the Apex Court in the case of CIT v. Distillers Co. Ltd., [290 ITR 419 (SC)].
5. The decision of the Karnataka High Court, reported as annexure [on page 421] to the decisionof the Apex Court in the case of CIT v. Distillers Co. Ltd., [290 ITR 419 (SC)], has enlarged the scope of appeal even to cover those issues which have not been urged before the ITAT.
It was laid down thus :
“Therefore, even if the contention is not urged before the Appellate Authority, but on the basis of the records, without investigation of any facts, if the substantial question of law is made out by the appellant before the High Court, in our view, it would be permissible for the High Court to entertain an appeal for consideration of such a question.”
6. Now, the important question is whether these judgments are conflicting decisions on the subject matter. It appears they are not; because the judgment of the Bombay High Court was relied on before the High Court of Karnataka and the High Court having considered the same and after giving reasons has concluded thus :
“In our considered view, if a question urged before this Court involves a substantial question of law, even if it is not raised before the Appellate Tribunal, the said question could be raised and urged before this Court and in that event the same is required to be considered by this Court.”
The Department has not contested this issue/proposition which was decided by the High Court of Karnataka in their favour, before the Apex Court, although the judgment of the High Court on merits was in favour of the assessee. The Supreme Court has affirmed the said judgment on merits and has not explicitly decided against the conclusion of the High Court on this issue/proposition. With the affirmation of the judgment of the Karnataka High Court by the Supreme Court, it may be presumed that this issue is also affirmed by the Apex Court by implication.
7. However, the Madras High Court did not have the benefit of the above conclusion of the Karnataka High Court. Probably, the Madras High Court would have concurred with the above conclusions of the Karnataka High Court. Hence, the proposition laid down by the Madras High Court in the three decisions cited above, may require reconsideration in the light of the judgment of the Apex Court in the case of CIT v. Distillers Co. Ltd., [290 ITR 419 (SC)] which has affirmed (impliedly) the law laid down by the Karnataka High Court on this issue.
8. Thus any legal issue, in a given case, may be agitated if it is couched or formulated into a substantial question of law before the High Court. The proposition laid down by the High Court of Karnataka is akin to the well-accepted proposition that a fresh ground which involves a legal issue can be raised for the first time before the Appellate Tribunal. Hence, any relevant issue which is connected to the question formulated may be determined by the N.T.T. also on the basis of the above judgment. Thus, relying on the above decision, there is no hindrance to raise a legal issue afresh in the appeal before the High Court or the N.T.T, even if it is not urged before the ITAT.
Author/s: N. Nagaraju, Advocate