Case Law Details
Naresh Manakchand Jain Vs Registrar, Income-tax Appellate Tribunal (Bombay High Court)
The Bombay High Court recently rendered a crucial decision, quashing an order by the Income-tax Appellate Tribunal (ITAT) that directed the Assessing Officer (AO) to share information with SEBI, ED, MCA, and ROC. The case involves alleged bogus accommodation entries, money laundering, and a significant number of beneficiaries.
Background and Appeals: The petitioner, Naresh Manakchand Jain, filed appeals (ITA Nos. 1945 and 1946 of 2023) with the ITAT challenging the Commissioner of Income-tax (Appeals) [CIT(A)] order dated March 27, 2023. However, due to unforeseen circumstances, the petitioner was unrepresented during the hearing on August 29, 2023, leading to an ex-parte order by the ITAT.
ITAT Order and Court’s Observations: The ITAT not only upheld the findings against the petitioner but also issued directions to the AO to share information about beneficiaries involved in the alleged racket. The Bombay High Court, upon careful consideration, observed that these directions were inappropriate as the appeal was filed by the assessee, not the Revenue.
Legal Precedent and Cautions: The High Court referred to the case of Indira Balakrishna, emphasizing the need for tribunals to refrain from expressing opinions that go beyond the appeal’s scope. The court highlighted the potential prejudice caused by such opinions, urging tribunals to confine themselves to the specific questions arising in the appeal.
Court’s Decision: Given the strong observations against the petitioner and the inappropriate directions issued by the ITAT, the High Court quashed the order dated August 31, 2023. The court stressed that the matter should be remanded for fresh consideration, emphasizing a de-novo approach.
Conclusion: The Bombay High Court’s decision to set aside the ITAT order and remand the matter for fresh consideration underscores the importance of procedural fairness. The court’s cautionary stance on tribunals expressing opinions beyond the appeal’s scope serves as a reminder of the potential consequences on the parties involved. As the case returns to the ITAT, the petitioner’s right to a fair hearing remains intact, and the legal process will unfold with due diligence.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The prayer in the Petition is primarily to quash and set aside the order dated 31st August 2023 passed by the Income-tax Appellate Tribunal (“ITAT”) under Section 254(1) of the Income-tax Act, 1961 (“Act”) and to remand the matter to the ITAT for fresh consideration of the appeals bearing ITA Nos. 1945 of 2023 and 1946 of 2023.
2. Petitioner had filed aforesaid two appeals before the ITAT against an order dated 27th March 2023 that was passed by the Commissioner of Income-tax (Appeals) [CIT(A)]. Petitioner received a notice of hearing dated 3rd August 2023 informing him that both the appeals were fixed for hearing on 29th August 2023. It is stated in the Petition that on 10th August 2023 this notice was forwarded by Petitioner to his Chartered Accountant. It is further stated in the Petition that Petitioner was, however, unaware that the Chartered Accountant was unwell and had undergone a surgery on 3rd August 2023 and the Chartered Accountant had been advised complete rest. The office of the Chartered Accountant also did not bring to the notice of the Chartered Accountant, and, therefore, Petitioner was unrepresented on 29th August 2023.
3. The ITAT proceeded to hear the matter in the absence of Petitioner and after hearing only the departmental representative passed the order pronounced on 31st August 2023, which is impugned in this Petition.
4. On 7th October 2023, an order came to be passed by this Court staying the operation of the impugned order. Mr. Sharma, who is appearing for Respondents states that if the Court feels the matter is to be remanded, the Court may in its wisdom pass such order as it deems fit.
5. We have considered the impugned order with the assistance of Mr. Gandhi and Mr. Sharma and we find that very strong observations have been made against Petitioner. Apart from these observations, directions have been passed to the Assessing Officer to complete the directions given therein, within 90 days of the receipt of the order. Those directions are contained in paragraph 17(i) to (viii).
6. In our view, these directions could not and in any case should not have been passed because this was an appeal that was filed by assessee and not an appeal that was filed by the Revenue.
7. Having considered the impugned order and the averments made in the Petition, in our opinion, the order passed in the absence of Petitioner has to be quashed and set aside and the matter should be remanded for de-novo
Ordered accordingly.
8. It will be apposite to re-produce the following paragraph from the judgment of this Court in Indira Balakrishna, Manager of Estate of Balakrishna Purshottam Purani v. CIT1. It reads as under:
“Now, it is never desirable for any Judge to express an opinion which is not necessary for the decision of a case; even so judges, and some of them very eminent judges, have indulged from time to time in obiters. But the only result of their doing so is possibly to encumber law reports and the giving expression to these obiters has not resulted in any prejudice to any party. But in the case of the Tribunal the position is entirely different. Every expression of opinion by them is likely seriously to prejudice the assessee. In this very case because they took the view that the Appellate Assistant Commissioner was in error in considering that the income from property fell under section 9(3), the Income-tax Officer has, as pointed out by Mr. Palkhivala, issued a notice against the assessees under section 34(1)(b). The Tribunal being the highest authority under the Income-tax Act, the Income-tax Officer is bound to respect any opinion expressed by it, and if it says that an assessee has been under-assessed or there has been a failure to assess properly, the Income-tax Officer is bound to take action under section 34, and that is exactly what has happened in this case. Therefore, in our opinion, with respect to the Tribunal, it should be very careful in giving findings and in expressing opinions. It must try and confine itself to the question that really arises in the appeal before it and not travel outside the ambit of its jurisdiction and express opinions prejudicial to the assessee which may help the Department in taking proceedings against the assessee. It may be said that if the Income-tax Officer is in error in issuing the notice under section 34 or that the view expressed by the Tribunal was not correct, the assessee would always have his remedy. But that is not the point. The assessee is harassed by a notice issued against him under section 34 and he has got to run the gamut of several income- tax authorities before ultimately he gets justice, and all this arises because the Tribunal overlooks its own responsible position and the serious consequences of expressing opinions which do not really arise for the decision of the appeal before it.”
(emphasis supplied)
9. The Tribunal that would hear the matter afresh shall be uninfluenced by the impugned order in this Petition. We shall also hasten to add that we have not made any observations on the merits of Petitioner’s appeals that are pending before the ITAT.
10. Petition disposed accordingly.
11. All rights and contentions of the parties are kept open.
Notes:
1 [1956] 30 ITR 320
