Case Law Details
Incredible India Projects Private Limited Vs ACIT (Telangana High Court)
In Incredible India Projects Private Limited vs. ACIT, the Telangana High Court addressed the appropriateness of the Income Tax Appellate Tribunal (ITAT) remanding a penalty case back to the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant, engaged in real estate, faced scrutiny after a search under Section 132 of the Income Tax Act revealed unaccounted cash payments and other discrepancies. The dispute primarily centered on whether the ITAT, as a final fact-finding body, should have decided the issues instead of remanding them.
The ITAT had remanded the case to the CIT(A) for fresh adjudication on preliminary legal issues, including the validity of penalty notices issued under Sections 274 and 270A of the Income Tax Act. The appellant contended that the Tribunal should have resolved these matters independently, as the facts and legal issues were already on record. The High Court noted that remanding the matter would only lead to further rounds of litigation, contrary to the Tribunal’s role as emphasized by the Supreme Court in Commissioner of Customs, Kandla vs. Lucky Steel Industries.
Citing judicial precedents, the High Court reiterated that the ITAT is a final fact-finding authority and is obligated to examine both legal and factual issues comprehensively. The Court criticized the Tribunal for failing to exercise its powers, referring to similar observations by the Orissa High Court in Siksha ‘O’ Anusandhan vs. CIT, where it was held that the Tribunal must adjudicate issues when materials are available on record. Accordingly, the Telangana High Court set aside the remand order and directed the ITAT to resolve the matter on its merits, including all grounds raised by the revenue and the appellant.
This judgment underscores the judiciary’s emphasis on ensuring efficiency in tax adjudication and minimizing unnecessary delays. By holding the ITAT accountable for its fact-finding duties, the Court aims to reduce repetitive litigation and promote judicial clarity in taxation matters.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. Sandeep Goel, learned counsel representing Ms. Shraddha Gupta, learned counsel for the appellant and Ms. K. Mamata, learned Senior Standing Counsel for the Income Tax Department for the respondent. Perused the record.
2. Upon hearing the learned counsel for the appellant as also the learned Standing Counsel for Revenue, we find that the appellants have made out a case for admission on the following substantial question of law in both the appeals:
“Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in remanding the matter back to the file of Commissioner of Income Tax Appeals to decide the purely legal issue even after admitting the additional ground as purely legal ground under Rule 27 itself?
3. The facts of the case, in brief, is that the appellant which is a private limited company engaged in the business of real estate was subjected to search and seizure under Section 132 of the Income Tax Act, 1961 (for short ‘the Act’). The appellant-assessee had originally filed the return of income on 01.02.2018 showing their income at Rs.2,01,44,670/-. However, during the search proceedings, it was reflected that cash payments to the tune of Rs.3,358,51,191/- and Rs.1,25,00,000/- were debited to the profit and loss account under the head “development expenses and site salaries’. Later on, the Department found that such expenses are not allowable within the provisions of Section 40A (3) of the Act. Subsequently, the assessee disclosed the additional income admitting a total income of Rs.6,84,95,860/-. The case was taken up for scrutiny and notice under Section 143(2) of the Act was issued and served on the assessee. Subsequently, penalty proceedings under Section 270A was initiated separately for the alleged misrepresenting of income and the order of penalty was passed on 30.03.2022. The appellant aggrieved by the penalty order preferred an appeal before the Commissioner of Income Tax (Appeals) [for short ‘the CIT(A)]’ and challenged the same. In the course of challenge to the penalty proceedings it was also assailed that notice dated 31.12.2019 issued under Section 274 read with Section 270A of the Act for the assessment year 2017-18 was being vague and without specific details being provided. However, the CIT(A) allowed the appeal of the assessee without dealing with the aspect whether the notice issued under Section 270A being vague or not, vide order dated 31.12.2019. Aggrieved by the said order of the CIT(A), the Revenue preferred two appeals before the Income Tax Appellate Tribunal in ITA Nos.604 and 605 of 2022.
4. The learned Income Tax Appellate Tribunal, after considering the submissions of the Revenue, remanded the matter back to the CIT(A), by making the following observations:
“Having admitted the application filed by the assessee under Rule 27 of ITAT Rules, 1963, we find that the assessee has challenged the issue of legality of notice issued u/s 274 r.w.s. 270A/271AAB for both the assessment years for the first time before the Tribunal and the facts with regard to said legal issue are not on record. Further, the assessee had also raised the above issue before the Ld. CIT(A) by way of written submission for both the assessment years and challenged the validity of order passed by the Assessing Officer, imposing penalty u/s 2701/271AAB of the Act. Since the Ld. CIT(A) has not discussed the issue or decided the issue raised by the assessee and further the assessee has raised the issue for the first time before the Tribunal, in our considered view, first appellate authority should get an opportunity to consider the legal issue raised by the assessee from his perspective and thus, we are of the considered view that, the issue needs to go back to the file of the Ld.CIT(A) for considering the preliminary legal issue raised by the assessee on validity of penalty proceedings initiated on the basis of vague notice issued u/s 274 r.w.s.270A/271AAB of the Act. Thus, we set aside the orders passed by the Ld. CIT(A) for both the assessment years and restore the issue to the file of the Ld. CIT(A) and also direct the Ld. CIT(A) to decide the preliminary issue raised by the assessee by way of application under Rule 27 of ITAT Rules 1963 and also written submissions filed before the first appellate authority as reproduced in para 6.1 of the order of the Ld. CIT(A). Ld. CIT(A) is also directed to consider the issue on merits after deciding the preliminary legal issue raised by the assessee for both the assessment years”.
5. It is this order which is under challenged by the assessee so far as the Tribunal having remanded the matter back to the CIT(A).
6. It is the contention of the learned counsel for the appellant that the Appellate Tribunal since had the jurisdiction of entering into the facts while deciding the appeal and the grounds and facts being explicit before the Appellate Tribunal, should not have remanded the matter beck to the CIT(A) rather should have decided the matter on its own, including the question of the applicability of Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 (for short ‘the Rules’).
7. Though the learned counsel for the Revenue contended that no prejudice would be caused to the interest of the appellant and that these grounds which have been raised and left to be agitated and adjudicated upon would still be decided by the CIT (A) and either of the parties would still have the remedy of preferring appeal against such order. The impugned order does not warrant interference and prayed for rejection of the same.
8. Having considered the contentions put-forth on either side and on perusal of the record, what is reflected from the findings given by the Appellate Tribunal is that the Tribunal itself has reached to the conclusion that there does not seem to be any dispute so far as the legal issues raised before the CIT(A) are concerned. There is also no dispute so far as the assessee having raised the ground of applicability of Rule 27 of the Rules. The Tribunal also does not seem to be in quarrel to the contention of the appellant that they had, in fact, raised the ground of Rule 27 before the Tribunal and which has been left undecided, though the CIT (A) had decided the matter in favour of the assessee.
9. In the given factual matrix, we are the considered opinion that rather than again remitting the matter back to the CIT (A) for fresh adjudication of the matter and thereafter again facing another round of appeals by either of the parties, it would have been more appropriate if the Tribunal itself would had decided the said issue rather than remitting the matter back to the Tribunal.
10. The view of the Court stands fortified in the teeth of the judgment of the Hon’ble Supreme Court in a decision in Civil Appeal No(s).3237-3238 of 2019 in the case of Commissioner of Customers, Kandla vs. M/s Lucky Steel Industries wherein the Hon’ble Supreme dealing with the powers of the Appellate Tribunal has made the following observations:
“The Appellate Tribunal is a final fact-finding body and therefore, should have examined the facts as well as the legal position before pronouncing the final outcome”.
11. Similar view has been taken by the Orissa High Court in the case of Siksha “O’ Anusandhan vs. Commissioner of Income Tax and others1 wherein in paragraph 21 held as under:
“Admittedly, the Tribunal after being satisfied that the additional ground taken by the appellant before it to be a question of law and goes to the root of the matter vide order dated May 5, 2009 (annexure 8) directed the learned Departmental representative to produce the records of search to examine as to whether a search warrant was issued in the name of the assessee or not and adjourned the case to May 6, 2009. At this stage, there is no reason as to why the Tribunal being the final fact finding authority could not have recorded its finding on the aforesaid vital jurisdictional issue when consciously the Tribunal called for the record of search. This action of the learned Tribunal, in our view, seems to be unjust.
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Law is well-settled that once the materials are available on record, the appellate court should have disposed of the case on the merits taking those materials into consideration and there is no need to direct remand.
The apex court in Indian Bank v. K. S. Govindan Nair [2004] 13 SCC 697, held that once the materials are available on record, it was for the High Court to have decided the matter on the basis of that materials after appreciation of evidence, and there was no need for directing remand.
The apex court in Gowrammanni v. V. V. Patil (D) [2009] (II) OLR SC 465, held that the appellate court should have itself disposed of the case on the merits taking into consideration the evidence adduced before the trial court as on the question of identity of disputed land the parties have adduced evidence, the court commissioner was appointed and submitted a report, and he was examined as a witness and duly cross-examined and thereupon the suit was disposed of by the trial court.
The Allahabad High Court in Mohd. Ayyub and Sons Agency’s case [1992] 197 ITR 637 (All), held that the power of the Tribunal to permit any party to the appeal to raise the question of jurisdiction, which goes to the root of the matter and does not involve further investigation into facts, cannot be disputed on the plain reading of rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. Indeed, on such a plea being taken, the Tribunal is under a statutory obligation not only to entertain the plea but also to decide the same after providing sufficient opportunity of being heard to the other side”.
12. Taking into consideration the aforesaid legal precedents on the power vested with the fact-finding Appellate Tribunal, we are of the considered opinion that the view taken by the Income Tax Appellate Tribunal in the instant case does not seem to be proper, legal and justified. The Tribunal should have itself decided the said matter on merits in accordance with law. Hence, the order of remand by the impugned order deserves to be and is, accordingly, set aside and the matter stands remitted back to the Income Tax Appellate Tribunal for the Tribunal itself to decide the grounds on which the matter has been remanded by the Tribunal to the CIT(A). In addition, the Tribunal would also decide the other grounds raised by the Revenue in its appeal.
13. The appeals are allowed as stated above. There shall be no order as to costs.
Consequently, miscellaneous petitions pending, if any, shall stand closed.
Notes:-
1 20110 336 ITR 112 (Orissa)
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