Part-I-Preliminaries for reading judgement

Audience

This article is not for a senior-practitioners whether in taxation or otherwise. It is more for students or for beginners in law practice. Of course advice from seniors is welcome.

In this article, reading judgement means absorbing the contents thereof. Today, for text file, there is a text-to-speech facility whereby your mobile / laptop / desktop will do the job of “reading out” for you.

Also Read: How to read tax judgements – bibliography

Take away

“Read a judgement like a novel / story”. Take a virtual walk-through of the contents of the judgement just like you did in your school days.

Based on my experience and my discussion with senior counsel, I can assure you that, it is stranger than a fiction. No fiction writer will ever be able to match what happens in reality.

Like any subject, it may take time, but it is more dependent on your interest in the subject than the judgement.

You will also realise that you will have different experience and insight when you read the same judgement as you proceed in your professional life. It is so because your ability to visualize has improved and it will show you different colours, angels, aspects of the same judgement.

You can read and understand any Judgement

To read any novel / story, one needs to get acquainted with the background or environment or underlying theme, the characters thereof.

I can assure you that with some efforts, everyone can read any judgement and understand it correctly.

I have this confidence from the fact that, with all probabilities, each of you would be knowing “Mahabharat”. If you can understand such a complex journey of a “State” with so many characters etc. you can surely read and understand any judgement.

Caveat

Though this article will explain as to how to read tax judgements, I must point out that over reliance on judgements is detrimental to own thinking.

When you are confronted with any question, it is strongly advisable that you read the bare text i.e. the bare Act or rules, circular, instructions etc.

Any Court (including Supreme Court) only interprets the Legislation and do not make any legislation. One should also firstly interpret the legislation on his / her own. If the interpretation matches with the one delivered by a court, it will boost his / her confidence. Evenif it does not, there is always a room for difference of opinion but you can cross check the thinking pattern.

Even criticising a judgement or even a supreme court of India is not a contempt of court. Those interested, may please read Arun Jaitley vs State Of U.P. on 5 November, 2015 Application u/s 482 No. – 32703 of 2015 read with Complaint Case No. 382 of 2015 and an order dated 19.10.2015. It is in relation to an article authored by Mr. Jaitley on the SC decision in the case of National Judicial Accounting Commission i.e. striking down the constitutional validity thereof.

Index

Part – II-A

Procedure for block assessment.
Judgement for reading Cash credits.
Reason for taking this case Assessment in case of search or requisition.
Preliminary reasons Judgement of each of the members
Qualitative reasons Judgement of AM
Author and Date of the Judgement Requirement of notice u/s 143(2)
How the judgement is typed and tracked Additions eclipsed by incriminating material
Warming up Conclusion of the AM
Approach to reading this judgement. Judgement of JM
Part – II-B – Actual reading of Judgement Requirement of notice u/s 143(2)
As authored by Shri Ramit Kochar,  (AM) Additions eclipsed by incriminating material
Facts of the case Conclusion of the AM
Facts of the case (undisputed facts) Judgement of TM
Facts that were not before AO Index to judgement of TM
Context of objections to Facts Requirement of notice u/s 143(2)
Revenue’s objections to facts Additions eclipsed by incriminating material
Assessee’s objections to Facts Doctrine of merger
Application of the law to the facts of the case Conclusion of the AM
Inquiry before assessment. Repetition of information
Assessment Final order – different reason but same reasons
Best Judgement Assessment Final order – finally the curtains down

Why read a judgement

There are multiple reasons as to why one should read a judgement.

1) Firstly, it has a binding force for prescribed geographical / jurisdictional area.

2) Secondly, it will show you different colours, angels, aspects of the same judgement.

3) Thirdly, to gain wisdom from somebody else’s experience.

Essential components of charge of tax

Whether for reading a tax judgement or for study of any tax law, understanding of essential components of taxation is inevitable.

The creation of a charge of levy of tax follows the essential components of taxation identified by a Constitution Bench in Mathuram Agrawal v. State of Madhya Pradesh 1999 (8) SCC 667 and further elaborated on by this Court in Gobind Saran Ganga Saran v. Commissioner of Sales Tax AIR 1985 SC 1041.

The four fundamental principles of a taxing enactment are:

1) the taxable event,

2) the person on whom the levy is imposed,

3) the rate at which the levy is imposed and

4) the base or measurement mechanism to arrive at a value to which the rate will be applied;

The charge created by Section 5(1) of the Integrated Goods and Services Tax Act, 2017 can extend to an ocean freight transaction to be taxed in the hands of the importer.

Section 5(1) fulfils the above components of taxation:

1) Taxable event  “There shall be levied a tax called integrated goods and services tax on all inter-State supplies of goods or services or both except on the supply of alcoholic liquor for human consumption.”

2) Taxable person  “Shall be paid by the taxable person”

3) Taxable rate  “At such rates not exceeding 40% as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed”

4) Taxable value  “On the value determined under Section 15 of the CGST Act”

Guidelines by President, ITAT

Shri Vimal Gandhi, President, The Income Tax Appellate Tribunal (as he was then) way back in 2008 had issued guidelines as to how to write a judgement.

https://itatonline.org/info/guidelines-to-honble-members-of-itat-for-drafting-orders/

Citation-:

If is an identification number / phrase of a judgement. For example, somebody states a judgement as 428 ITR 234. In this case, the number 428 stands for the volume number of ITR which is acronym for Income Tax Reporter and 234 stands for page number of that volume.

The Indian Law Reports Act 1875

There were a large number of private publications entered in law, created complexity, Competition and manifold drawbacks. Some of the cases reported were good and genuine, but majority of the cases reported contained nothing new law points but repetition. To charge high, the private publication accumulated every case and began to sell in bounded volumes at the rate of Rs. 250/- per one year. Like this, they began to exploit the legal practitioners. Some of the law reporters were not giving case facts, and simply giving Judgments.

They did not mention what the actual new points were delivered by the judgments and how they would act as precedents in future. Their motto was profit only. To curb such practice, the India Law Reports Act, 1875 was enacted. Its section 3 reads as follows;

How to read tax judgements

3. Authority given only to authorized reports. –

No Court shall be bound to hear cited, or shall receive or treat as an authority binding on it, the report of any case [decided by any High Court for a Part A or a Part B State], other than a report published under the authority of [any State Government].

Popular law reporting agencies are

SCC – Supreme Court cases

CTR = Commercial Tax Reports

TAXMANN = Name of company

ITR = Income Tax Reporter

Taxsutra – Name of company

Tax-management-India

ITD = Income Tax Digest =

An exhaustive list is given in bibliography and material relied upon

Generally, in civil matters, there is no different in Judgement and order. The things that are expected to be done are included in Judgement itself. In case of Criminal appeals, after the judgement, it is followed by Order. A sample is re-produced herein below.

After the judgement, there is an order like

Both the appeals are allowed.

The impugned judgement and order dated 24.02.2012 passed by Additional District and Session Judge, T.E.C.P., 7 Court No. 1, Azamgarh in S.T. No. 151 of 2009 is hereby set aside.

Appellant Santosh Singh in Criminal Appeal No. 1083 of 2012 is on bail. He need not surrender. His bail bonds are cancelled and his sureties discharged.

Appellant Avdhesh Singh @ Chhunnu Singh in connected Criminal Appeal No. 1178 of 2012 is in jail. He shall be released forthwith unless he is wanted in some other case.

Both the appellants shall comply with the provisions of Section 437A Cr.P. C. within one month from today.

There shall however, be no order as to costs.

Facilities now available

Especially due to the boom of information and communication technology and Covid-19 forcing the world at large to use the same, much more relevant data is now available.

Refer the link https://www.scobserver.in/cases/jairam-ramesh-union-of-india-tribunals-reforms-act-2021-case-background/

It gives submission of both the parties and a summary of oral submissions. It gives much more insight into understanding the judgement.

Today various high courts and Supreme Court and various courts are conducting hearing through video conferencing. Refer the YouTube channel of Gujrat high court

Refer https://www.youtube.com/c/GujaratHighCourtLive/videos

Income Tax Appellate Tribunal is no exception to that.

Knowing the judge(s)

Knowing the thinking pattern of a judge will definitely give the reader an edge while reading the judgements. A judge is also a human being and experience says that every judge has his own inimitable style of writing his judgement.

On a lighter note, there is a proverb that, a good lawyer knows the law and a very good lawyer knows the judges!!!!

Submissions made before Court / authority

If the submissions are available for reading as is available in scobserver.in, it is definitely advisable to read the same. Refer the website scobserver.in. It makes available, to the extent possible, submissions from both sides.

Components of judgement

1) Reference to order or sub-ordinate court / authority / assessing officer etc.

2) Facts of the case

a. Un-disputed Facts

b. Disputed Facts

3) Arguments of the Applicant

4) Arguments of the Respondent

5) Analysis of the Bench

6) Conclusion of the bench

There is a mandate that every judicial and quasi-judicial authority must pass a speaking order i.e. it should contain such particulars whereby an unconnected person should be able to understand;

  • the underlying facts and circumstances,
  • applicable framework of law,
  • contentions raised by both the parties,
  • how the authority has dealt with contentions
  • Authority’s own analysis of the case
  • Conclusion reached by the authority.

Thus, it is inevitable that there will be some repetition either of the facts and more importantly, the position of law, the arguments etc.

Part –I-B– Sample of header

The sample has been taken of header portion of any judgement. The contents are taken in bits and pieces from different judgements so please do not try to search for below mentioned judgement. The only reason the upper portion is separate from the sample case taken up for explanation is that there are 2 attributes which are not there for a judgement of tribunal

[1]

REPORTABLE
[2] In the  High Court of Judicature of Bombay Nagpur Bench
[3] Civil Appellate Jurisdiction
[4] Civil Appeal No. 0786 of 2022
[5] C.C.,C.E. & S.T. – Bangalore (Adjudication) etc. .. .Appellant(s)
Versus
[6] M/S ABC Systems Pvt. Ltd.
[7]  WITH , C.A. No. 1390/2022, C.A. No. 1394/2022, C.A. No. 1417/2022, C.A. No. 1419/2022

CA = Civil Appeal. There can be other types of appeal like

CrA = Criminal Appeal, WP = Writ Appeal, SLP = Special Leave Petition SLA = Special Leave Application, IA – Interlocutory Application

[1]

Reportable “Reportable” – It simply means that this judgement, in the opinion of the bench is worth reporting in law journals. You may find a word “unreportable” which will have multiple meanings. It may mean that, this judgement is not as important to be reported in any judgement reporting journals. It may also mean that, the judgement includes express directions not to disclose especially the name of the victim. In the cases of matrimonial matters, these kinds of directions are routinely included in judgement as to not to disclose the identity of either the petitioner of respondent or both. Refer a supreme court judgement which is titled as Mr. ‘X’ vs Hospital ‘Z’ on 21 September, 1998 – the link is – https://indiankanoon.org/doc/382721/
[2] Name of Court Please observe how the name of the Bombay High Court is written. This has not been changed even after change of name of city from “Bombay” to “Mumbai”. It is so because the names of the High Courts are there in Constitution.
[3] Type of Appeal Civil Appellate Jurisdiction. The words “Civil” and “appellate” both are important. The word “Civil” indicate it is a civil matter as contrary to “criminal”. The word “appellate” is important as contrary to “administrative” to indicate that the judges are exercising their powers as per “appellate” proceedings. There exists “administrative jurisdiction” which has completely different law framework.
[4] Case Number Case number taken a lead case or sample case when a batch of cases are decided (disposed off) by way of a common judgement / order. Though here the word “judgement” and “order” are being used inter-changeably, there is a difference in the two. The same is explained below.
[5] Applicant Appellants also known as Applicants or Petitioners or plaintiff. The party that has filed (instituted) the suit.
[6] Respondent Respondents. This word is generally common to indicate the party against whom the suit is filed.
[7] Other case references Other Case numbers are those cases which are also decided vide this judgement / order.

Part – II-A – Judgement under consideration in this article

This is a framework of the judgement that we are going to read together in this article.

Judgement for reading

Judgement of Income Tax Appellate Tribunal, Allahabad in the case of M/s. Sunshine Infra-estate Private Limited v The Asstt.Commissioner of Income-tax when the matter was third member as there was a difference of opinion between the bench members.

Reason for taking this case

Preliminary reasons

  • A reasonably complicated case.
  • In fact, there is a difference of opinion among various high courts.
  • The same got reflected in the differing views of the bench members.
  • Thus, the matter was referred to a third member for resolving the difference of opinion as per section 255(4) of the Income Tax Act, 1961.

Qualitative reasons

  • The scholarly written judgement by the TM, Shri. R. S. Syal, VP which has pointed out
  • As to which of the decisions of the supreme court does not have any precedential value or where doctrine of merger i.e. order of high court getting merged into that of supreme court does not apply.
  • As to how to interpret article 136 of constitution of India dealing with Special Leave Petition which is a rare phenomenon in normal tax cases.
  • that where there are two schools of thoughts, how a person be it a normal assessee or even a bench member of ITAT, is expected to follow dictum of jurisdictional high court.

Author and Date of the Judgement

Details of Judge authoring his portion

Signing Date
Shri Amit Kochar, Accountant Member (AM) 09-Sep-2021
Shri Vijay Pal Rao, Judicial Member (JM) 16-Sep-2021
In view of difference of opinion,
Shri R. S. Syal, Vice President as third member (TM) 12-Apr-2022
Final order authored by Shri Amit Kochar, (AM) as directed by TM 4-May-2022

How the judgement is typed and tracked

Copy to :

1. The Appellant.

2. The Respondent.

3. The CIT concerned

4. The CIT(A)-, Delhi.

5. The DR/ITAT, Delhi.

6. Guard File.

TRUE COPY.

By Order

Assistant Registrar, ITAT, Delhi.

6. Guard File-: A system / file where authentic copy of each and every judgement or order is kept.

Date

Initials By Whom
1 Draft dictated on different dates Sr. PS
2 Draft placed before author 26.11.2012 Sr.PS
3 Draft proposed and send to the Hon’ble VP 26.11.2012 (through email)
4 Draft proposed and placed before the Hon’ble J.M. 26.11.2012 (hard copy after discussion)
5 Draft discussed/approved by Hon’ble VP 13.12.2012 (through email)
6 Draft discussed/approved by Hon’ble JM JM / AM
7 Approved Draft comes to the Sr.PS/PS Sr.PS / PS
8 Kept for pronouncement on
9 File sent to the Bench Clerk
10 Date on which file goes to the AR
11 Date on which file goes to the Head Clerk
12 Date of dispatch of Order.

Sr. PS = Sr. Principle Secretary

AR = Assistant Registrar

Warming up

Now is the time to start reading the judgement. It is better to get acquainted himself with the broad issues involved and concerned relevant law to adjudicate upon. It can be done by skimming through the judgement whereby one will get an over-view as to how the judgement is authored.

As already noted, there is a difference of opinion between the bench members. Shri Ramit Kochar, AM has authored his opinion extensively covering the facts of the case. Shri Vijay Pal Rao, JM while dissenting from the conclusions drawn have used the same set of facts recorded by Shri Ramit Kochar, AM.

For understanding any judgement, it is imperative to understand

  • the judges,
  • the facts of the case.
  • the legislative enactments i.e. relevant rules, sections, notifications, circulars etc. and lastly
  • judicial pronouncements i.e. judgements referred to of various judicial forums.

The above ingredients are like, the theme, the environment, the characters, be it a hero or a villain etc. in the novel will enable us to read the “novel” called “Judgement”.

The author has intentionally parked all the judgements relied upon separately so that a reader will be able to apply his / her mind independently of being influenced by the analysis of those judgements.

Approach to reading this judgement.

The reading approach that is adopted is that,

  • Firstly, we will understand the facts of the case from the judgement as authored by Shri Ramit Kochar, AM
  • Secondly, we based on set of facts, we will read the opinion formed by all three members in following manner
  • Shri Ramit Kochar, AM
  • Shri Vijay Pal Rao, JM
  • Shri R S Syal, VP, TM

Part – II-B – Actual reading of Judgement

As authored by Shri Ramit Kochar, AM

Para

Particulars
No
1 Introduction
2 & 2b Preliminary objection of Revenue. The whole contention is that the addition of Rs. 2.50 Cr u/s 68 shown as payable
3
  • The brief facts of the case are that the assessee is engaged in the business of real estate. There was a search and seizure operations conducted by Revenue u/s 132(1) of the 1961 Act in Hemant Kumar Sindhi , Dinesh Kumar Pahuja group, residential premises of partners, directors and various residential and business premises of partners , directors and proprietors of the group on 05.12.2013.
  • The warrant of authorization was executed at the office premises of the assessee company.
  • Thereafter notice dated 05.09.2014 u/s 153A of the 1961 Act was issued by the AO, requiring assesse to furnish return of income within 15 days.
  • The assessee failed to furnish return of income within the aforesaid stipulated time.
  • Thereafter several statutory notices were issued by AO u/s 142(1) from time to time.
  • The assessee finally filed return of income on 15.02.2016 in response to notice issued by AO u/s 153A, which return of income was filed belatedly beyond the time stipulated for
  • filing of return of income in the aforesaid notice issued by the AO u/s 153A.

Observation of AO

  • the assessee has shown sundry creditors to the tune of Rs. 2,50,00,000/- in the name of Shri Ajeya Singh, which the assessee was not able to explain satisfactorily;
  • it appears that it is the unsecured loan which the assessee has not shown as loan nor filed evidence of identity, genuineness and creditworthiness of the person.
  • the assessee has failed to adduce any corroborative evidence in support to furnish the evidence of identity, genuineness and creditworthiness of the Shri Ajeya Singh to prove the genuineness of transaction;
  • the assessee has shown the amount as sundry creditors in the name of Shri Ajeya Singh of Rs.2.50 crore;
  • the assessee has not explained the genuineness of transaction and failed to furnish identity and creditworthiness of Shri Ajeya Singh;
  • the assessee has failed to satisfactory explain the transaction of Rs. 2.50 crore.

Order

Taxed the Rs. 2.5 crores u/s 68 of the Act vide assessment order dated 29.03.2016 u/s 153A r.w.s. 144.

4 Happening before CIT(A)

  • the assessee is maintaining regular books of accounts which are audited, and audit report was duly filed with Revenue along with return of income filed by the assessee company.
  • It was submitted that return of income was originally filed by assessee u/s 139(1) of the 1961 Act with Revenue on 30.09.2011, declaring income of Rs. 4,17,790/-.
  • Return was processed u/s 143(1)(a)
  • It was submitted that in the course of search and seizure operations conducted by Revenue u/s 132(1), no incriminating material about any undisclosed income / any document connected with the assessee company for the ay in question was found by the search party.
  • The AO has not considered above aspects.

Order of CIT(A)

The ld. CIT(A) was pleased to allow the appeal filed by assessee. He observed that by holding that

  • In view of 05-12-2013 being date of search, no assessment was pending for AY 2011-12 before AO on date of search;
  • No assessment got abated on the date of search for the year under consideration;
  • the AO can make addition only on the basis of incriminating documents;
  • reliance was placed on decision of juris’nal HC in the case of Smt. Shaila Agarwal
  • the audited accounts of the assessee which were filed along with the return of income filed u/s 139(1) on 30.09.2011 and
  • also return of income filed on 15.02.2016 in response to notice u/s 153A , observed that Rs. 2.50 crores was shown by assessee in the name of Shri Ajeya Singh as sundry creditor as on 31.03.2011.
  • Shri Ajeya Singh had deposited Rs. 2,50,00,000/- with the company for purchase of land through cheque number 000124 of Rs. 2,50,00,000/- of Kotak Mahindra Bank Limited, which has been credited in the account of the assessee company on 06.07.2010.
  • the advance has been made for the purchase of land and the same is appearing in the books of accounts
  • the said amount was received back by Shri Ajeya Singh through banking channel.
  • that no incriminating document was found during the course of search(as none has been referred to in the assessment order) which has any bearing on the addition made by the AO.

Author’s note-: It is unclear whether the above factual matrix was ignored by AO or otherwise. But apparently, these facts were not there in order of AO.

5.0 & 5.1 Revenue approached ITAT and primarily iterated the happenings till order of CIT(A)

Later the CIT(DR) took up legal issues i.e. requirement or otherwise of notice u/s 143(2) and limitation of assessment u/s 153A as eclipsed by requirement of “incriminating material”

It drew attention to the following facts;

that the balance sheet has figure of sundry creditors as a total and it does not separately mention name of Mr. Ajey Singh.

that even assuming to be so, an explanation that it was an advance for land is contradictory to the disclosure in balance sheet.

that there exist a confirmation of Mr. Ajey Singh being only evidence.

that there is no evidence of nature of transaction and remittance of money

5.2 Assessee submitted that as on date of search, AY 2011-12 was a concluded year. The ld. Counsel for the assessee submitted that in large number of cases across India, decision has been taken by Hon’ble Courts that no addition can be made in proceedings u/s 153A, otherwise than based on incriminating material found during the course of search operations.

To prove the creditworthiness, the assessee submitted that,

  • there is no evidence brought on record by the AO that cash was deposited by Shri Ajeya Singh before issuing cheque of Rs. 2,50 crores in favour of the assessee.
  • Shri Ajeya Singh belongs to respectable family and is son of Former Prime Minister of India, Shri V.P. Singh.
  • No incriminating material seized during search operations, are brought on record by
  • the authorities below.
  • the AO did not call for the bank statement of Shri Ajeya Singh.
5.3 CIT(DR) pointed out following Onus is on the assessee to bring on record following documents of Shri Ajey Singh namely

  • the Income Tax return
  • bank statements
  • the amount was repaid just before and after the date of the search
6 The AM briefly recorded facts along with the dates of show cause notices etc. and framed the three questions, first two being question of law and third being question of fact that whether the sum of Rs. 2.50 crores is received through banking channels.

The AM has noted that

  • there is no assessment u/s 143(3) of the Act.
  • the assessee has reflected the said amount in its audited financial statement for the fy: 2010-11, under the ‘Schedule E: Current Liabilities and Provisions’ under the head ‘Sundry Creditors’ ,sub-head ‘Others’ –Rs. 2.50 crores
  • there is a sub head namely ‘Advance Against Land and Property’ – Rs. 1.48 crores but the amount of Rs. 2.50 crores was disclosed under the heading “others”.
  • There was no disclosure of the name of the creditors in the audited statements.
  • the land deal did not materialize and hence the said amount received by the assessee on 06th July 2010, was refunded by assessee to Shri Ajeya Singh, from 12th December , 2013 to 08th March , 2014 , in three tranches viz. after a gap of three years.
  • the amount was refunded post search operations, after a gap of more than three years.
  • Confirmatory letter dated 19.02.2016 issued by Shri Ajeya Singh (PAN
  • ALUPS0807N),in which Shri Ajeya Singh confirmed that he advanced Rs. 2,50,00,000/- vide cheque number 000124 drawn on Kotak Mahindra Bank Limited  as advance against land Bungalow No. 21 , Colvin Road, Dr. Ram Manohar Lohia Marg ,Allahabad built over Part of Nazul Plot No. 21/1, Clive Road, Village Chikatpur Nasibpur Bakhtiyara , Allahabad , on 05th July 2010( the amount stood credited in assessee’s bank account on 06th July , 2010).
  • The assessee has also filed copy of account of Shri Ajeya Singh in its books of accounts from 01.04.2011 to 31.03.2014(page 40/pb).
  • The assessee has also filed an affidavit dated 10.01.2017 before ld. CIT(A), executed by its Director Shri Hemant Kumar Sindhi averring as follows; It is important to note that, this affidavit came as an additional evidence before CIT(A)

→ that the aforesaid amount of Rs. 2,50 crores was received by assessee from Shri Ajeya Singh for purchase of land by Shri Ajeya Singh with the assessee.

→ that the said amount was received through banking channel.

→ that the deal was not materialized and hence the said amount was returned to Shri Ajeya Singh through banking channel.

  • The ld. CIT(A) did not forwarded the additional evidences to AO for his comments/remand report and hence principles of natural justice are breached. Reference is drawn to Rule 46A of the Income-tax Rules, 1962.
  • The AO invoked provisions of Section 68 of the 1961 Act, as in the opinion of the AO ingredients of Section 68 being identity as well creditworthiness of the creditor are not proved, and also genuineness of the transaction is not proved.
  • The ld. CIT(A), on the strength of aforesaid documents/ explanations submitted by assessee during appellate proceedings, decided the appeal in favour of the assessee.

Some more relevant facts are noted as follows;

Non submission of following documents

  • Copies of bank statement of the creditor Mr. Ajeya Singh.
  • the agreement to sale entered into with Mr. Ajeya Singh for sale of property viz. land Bungalow No. 21, Colvin Road, Dr. Ram Manohar Lohia Marg ,Allahabad built over Part of Nazul Plot No. 21/1, Clive Road, Village Chikatpur Nasibpur Bakhtiyara , Allahabad ,
  • the terms and conditions of the proposed sale of said property are unknown.
  • Cancellation deed for cancelling the deal for sale of land and reasons for such cancellation.
  • Any documentation explaining whether these deeds were registered or otherwise

Facts of the case

1) ITAT is the final fact finding authority. If one has to understand as to what is a fact, one may usefully refer to https://taxguru.in/corporate-law/what-is-a-fact.html.

2) If one wants to understand the importance thereof, one may refer to Madras High Court in the case of Pr. CIT v. Rakesh Sarin I.T.(SS)A.No.66/Chny/2007 dated 11-3-2019 for the Block Period 1997-98 to 2002-03 and part of 2003- 2004 and TCA No. 1060 of 2019 wherein the Madras High Court in a detailed and well-reasoned judgment dated 16th October 2020 has high-lighted the importance by observing at para 65 that

“the order of the Commissioner of Income-tax (Appeals) suffers from perversity, which has travelled up to the Tribunal, which confirmed the order of the Commissioner of Income-tax (Appeals) . Therefore, the argument that generally, the Court under section 260A would not interfere with the Tribunal’s finding of fact cannot be applied to the facts of this case because the Tribunal did not record any finding of fact that the finding of fact recorded by the assessing officer is erroneous and not borne out by records” and held that ” the Revenue has to succeed in these Appeals, accordingly, the tax case appeals are allowed and the impugned orders passed by the Tribunal are set aside and the substantial questions of law are answered in favour of the Revenue.”

3) Generally, all the facts remain there before the AO or the CIT(A) i.e. adjudicating authority below ITAT. In this case, the assessee filed very important material as additional evidence u/r 46A. the CIT(A) was under obligation to send it to the AO and ask for his response (popularly known as remand report).

4) In this case, there was a failure to do the same and this breach of law has been addressed by the AM in reaching his conclusion

Facts of the case (undisputed facts)

5) The undisputed facts are as follows;

a) The assessee is engaged in the business of real estate. There was a search and seizure operations conducted by Revenue u/s 132(1) of the 1961 Act in Hemant Kumar Sindhi , Dinesh Kumar Pahuja group, residential premises of partners, directors and various residential and business premises of partners , directors and proprietors of the group on 12.2013.

b) The warrant of authorization was executed at the office premises of the assessee company.

c) Thereafter notice dated 05.09.2014 u/s 153A of the 1961 Act was issued by the AO, requiring assessee to furnish return of income within 15 days.

d) The assessee failed to furnish return of income within the aforesaid stipulated time.

e) Thereafter several statutory notices were issued by AO u/s 142(1) from time to time.

f) The assessee finally filed return of income on 15.02.2016 in response to notice issued by AO u/s 153A, which return of income was filed belatedly beyond the time stipulated for filing of return of income in the aforesaid notice issued by the AO u/s 153A.

g) the assessee is maintaining regular books of accounts which are audited and audit report was duly filed with Revenue along with return of income filed by the assessee company.

h) It was submitted that return of income was originally filed by assessee u/s 139(1) of the 1961 Act with Revenue on 30.09.2011, declaring income of Rs. 4,17,790/-.

i) Return was processed u/s 143(1)(a) of the Act

j) It was submitted that during the course of search and seizure operations conducted by Revenue u/s 132(1), no incriminating material about any undisclosed income / any document connected with the assessee company for the ay in question was found by the search party.

k) On facts, 05-12-2013 being date of search, no assessment was pending for AY 2011-12 before AO on date of search

l) The AO passed the order u/s 153A read with section 144, best judgement assessment.

Facts that were not before AO

6) The total factual matrix is more important in this case. The assessee filed additional evidence before CIT(A). CIT(A) did not send the additional evidence to AO for his response (popularly called as remand report) and decide the matter.

a) the audited accounts of the assessee which were filed along with the return of income filed u/s 139(1) on 30.09.2011 and also return of income filed on 15.02.2016 in response to notice u/s 153A , observed that Rs. 2.50 crores was shown by assessee in the name of Shri Ajeya Singh as sundry creditor as on 31.03.2011.

b) Shri Ajeya Singh had deposited Rs. 2.50 crores with the company for purchase of land through cheque number 000124 of Rs. 2.50 crores of Kotak Mahindra Bank Limited, which has been credited in the account of the assessee company on 06.07.2010.

c) the advance has been made for the purchase of land and the same is appearing in the books of accounts

d) the said amount was received back by Shri Ajeya Singh through banking channel.

e) there is no assessment u/s 143(3) of the Act.

f) the assessee has reflected the said amount in its audited financial statement for the FY: 2010-11, under the ‘Schedule E: Current Liabilities and Provisions’ under the head ‘Sundry Creditors’, sub-head ‘Others’ –Rs. 2.50 crores

g) there is a sub head namely ‘Advance Against Land and Property’ – Rs. 1.48 crores

h) the amount of Rs. 2.50 crores was disclosed under the heading “others”.

i) There was no disclosure of the name of the creditors in the audited statements.

j) the land deal did not materialize and hence the said amount received by the assessee on 06th July 2010, was refunded by assessee to Shri Ajeya Singh, from 12th December, 2013 to 08th March , 2014 , in three tranches viz. after a gap of three years.

k) the amount was refunded post search operations, after a gap of more than three years.

l) Confirmatory letter dated 19.02.2016 issued by Shri Ajeya Singh (PAN ALUPS0807N ), in which Shri Ajeya Singh confirmed that he advanced Rs. 2.5 crores vide cheque number 000124 drawn on Kotak Mahindra Bank Limited as advance against land Bungalow No. 21 , Colvin Road, Dr. Ram Manohar Lohia Marg ,Allahabad built over Part of Nazul Plot No. 21/1, Clive Road, Village Chikatpur Nasibpur Bakhtiyara , Allahabad , on 05th July 2010( the amount stood credited in assessee’s bank account on 06th July , 2010).

m) The assessee has also filed copy of account of Shri Ajeya Singh in its books of accounts from 01.04.2011 to 31.03.2014.

n) that the aforesaid amount of Rs. 2,50 crores was received by assessee from Shri Ajeya Singh for purchase of land by Shri Ajeya Singh with the assessee.

a. that the said amount was received through banking channel.

b. that the deal was not materialized and hence the said amount was returned to Shri Ajeya Singh through banking channel.

Context of objections to Facts

7) Before entering into the area of Revenue’s / assessee’s objections to Facts, the author would like to clear the implied underline meaning / accusation.

8) Revenue had a case that the contradiction in the signed balance sheet itself indicates that the theory of advance against sale of property is an after-thought theory. Secondly, had the seach not taken place, the assessee would never have repaid the loan because the assessee has already received money for value.

9) Assessee had stated that generally in this kind of transactions, the revenue failed to prove that value for money [cash as referred 14(a)] was already exchanged and this is not an advance of Rs. 2.5 crores.

10) Shri Ajeya Singh being son of former prime minister of India is a sufficient proof to prove the credit-worthiness for an amount of Rs. 2.5 crores.

11) There is no requirement to prove source of source in this case. Thus the AO should have called for return of income and other related documents and bank statements of Mr. Ajey Singh u/s 133(6) of the Act.

Revenue’s objections to facts

12) Revenue drew attention to the following facts;

a) that the balance sheet has figure of sundry creditors as a total and it does not separately mention name of Mr. Ajey Singh.

b) that even assuming to be so, an explanation that it was an advance for land is contradictory to the disclosure in balance sheet.

c) that there exists a confirmation of Mr. Ajey Singh being only evidence.

d) that there is no evidence regarding nature of transaction and remittance of money through banking channels.

e) That the amount has been repaid after three years

Assessee’s objections to Facts

13) The assessee objected as follows;

a) That there is no evidence brought on record by the AO that cash was deposited by Shri Ajeya Singh before issuing cheque of Rs. 2,50 crores in favour of the assessee.

b) Shri Ajeya Singh belongs to respectable family and is son of Former Prime Minister of India, Shri V.P.Singh.

c) No incriminating material seized during search operations, are brought on record by the authorities below.

d) the AO did not call for the bank statements or the return of income of Shri Ajeya Singh

With this we have the requisite things to interpret the judgement i.e. the facts and governing law.

 

Application of the law to the facts of the case

Before understanding viewpoint of each of the members, let’s understand what the relevant section says.

The author has not included the section 132 which authorizes carrying out search (raid). It will go more into gossip mongering.

Inquiry before assessment.

142. (1) For the purpose of making an assessment u/ this Act, the Assessing Officer may serve on any person who has made a return u/ sec. 115WD or sec. 139 or in whose case the time allowed u/ sub-sec. (1) of sec. 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified,—

….

Provided that—

(2) For the purpose of obtaining full information in respect of the income or loss of any person, the Assessing Officer may make such inquiry as he considers necessary.

Assessment

143. (1) Where a return has been made u/ sec. 139, or in response to a notice u/ sub-sec. (1) of sec. 142, such return shall be processed in the following manner, namely:—

….

….

(2) Where a return has been furnished u/ sec. 139, or in response to a notice u/ sub-sec. (1) of sec. 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not u/stated the income or has not computed excessive loss or has not u/-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

Provided that no notice u/ this sub-sec. shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished.

Best judgment assessment.

144. (1) If any person—

(a)  fails to make the return required u/ sub-sec. (1) of sec. 139 and has not made a return or a revised return u/ sub-sec. (4) or sub-sec. (5) or an updated return u/ sub-sec. (8A) of that sec., or

(b)  fails to comply with all the terms of a notice issued u/ sub-sec. 142(1) or fails to comply with a direction issued u/ sub-sec. 142(2A) or

(c) having made a return, fails to comply with all the terms of a notice issued u/ sec. 143(2),

the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment :

Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment :

Provided further that it shall not be necessary to give such opportunity in a case where a notice u/ sub-sec. (1) of sec. 142 has been issued prior to the making of an assessment u/ this sec..

(2) …Not required for this article….

Procedure for block assessment.

158BC. Where any search has been conducted u/ sec. 132 or books of account, other documents or assets are requisitioned u/ sec. 132A, in the case of any person, then,—

(a)  the Assessing Officer shall—

(i) …..;

(ii)  in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st day of January, 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under 142(1)(i), setting forth his total income including the undisclosed income for the block period :

Provided that …:

Provided further…;

Cash credits.

68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of sec. 10.

Assessment in case of search or requisition.

153A. (1) Notwithstanding anything contained in sec. 139, sec. 147, sec. 148, sec. 149, sec. 151 and sec. 153, in the case of a person where a search is initiated u/ sec. 132 or books of account, other documents or any assets are requisitioned u/ sec. 132A, the Assessing Officer shall—

(a)

issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall,  so far as may be, apply accordingly as if such return were a return required to be furnished u/ sec. 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years] :

Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years] :

Provided further …:

Provided also that ….

Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless—

(a)

the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;
(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and
(c) the search u/ sec. 132 is initiated or requisition u/ sec. 132A is made on or after the 1st day of April, 2017.

Explanation 1.—For the purposes of this sub-sec., the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.

Explanation 2.—For the purposes of the fourth proviso, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.]

(2) If any proceeding initiated or any order of assessment or reassessment made u/ sub-sec. (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-sec. (1) or sec. 153, the assessment or reassessment relating to any assessment year which has abated u/ the second proviso to sub-sec. (1), shall stand revived with effect from the date of receipt of the order of such annulment by the 61[Principal Commissioner or] Commissioner:

Provided that such revival shall cease to have effect, if such order of annulment is set aside.]

Explanation.—For the removal of doubts, it is hereby declared that,—

(i)

save as otherwise provided in this sec., sec. 153B and sec. 153C, all other provisions of this Act shall apply to the assessment made u/ this sec.;
(ii) in an assessment or reassessment made in respect of an assessment year u/ this sec., the tax shall be chargeable at the rate or rates as applicable to such assessment year.

Procedure of Appellate Tribunal.

255.(1)…

(2)…

….

(4) If the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it.

Judgement of each of the members i.e. JM, AM and TM is classified under following categories.

1. Requirement of notice u/s 143(2) -:

2. Additions eclipsed by incriminating material-:

3. Conclusion-:

Judgement of AM

14) The AM recorded the facts at length as discussed by us above.

Requirement of notice u/s 143(2)

15) One of the claims was that the return in response to notice u/s 153A was filed belatedly and hence invalid. Madras HC in case of Kubendran distinguishing decision of SC in the case of Hotel Blue Moon has held that once due regards are given to principles of natural justice. Thus, notice u/s 143(2) is not mandatory.

16) Accordingly, the AM held that, non-issue of notice u/s 143(2) does not vitiate the proceedings.

Additions eclipsed by incriminating material

17) The AM has not specifically addressed this issue. The AM has dealt with the requirements of section 68 and has come to a conclusion that the assessee has not discharged the burden of proof.

Conclusion of the AM

18) The AM concluded that there is a breach of rule 46A of the IT Rules, 1962 regarding additional evidence and the matter deserves to be restored back to the file of AO for re-adjudication and more importantly on facts. This is based on decision of Govindarajulu Mudaliar v. CIT.

Judgement of JM

19) The JM recorded a dissenting opinion. The JM started with the same set of facts as recorded by the AM and proceeded to deal with the questions of law.

Requirement of notice u/s 143(2)

20) The JM has reproduced section 153A in para 2.

21) The JM has in para 3 observed as follows “…The plain language of Clause (a) of section 153A(1) makes it clear that relevant provisions of the Act shall apply to the return of income filed in response to the notice under section 153A(1) by treating the same as return filed under section 139 of the Act. This means the manner and limitation as prescribed under section 139 of the Act are not applicable to the return of income filed under section 153A of the Act but the provisions of section 142 and 143 of the Act are applicable for scrutiny / process of such return of income..”

22)  In the same para, the JM has re-produced section 148 and has discussed regime applicable to re-assessment u/s 147/148.

23) The JM has, from para 4 to 9, discussed the judgement of Hotel Blue moon to come to a conclusion that non-issue of notice u/s 143(2) will make the assessment as invalid and void ab initio. [Para 9]

Additions being eclipsed by incriminating material

The JM starts this issue in para 10 and makes an important observation about fact and the issue of abatement of an assessment. Refer The only addition made by the Assessing Officer to the total income of the assessee declared in the return of income is on account of sundry creditors of Rs. 2.5 Crores treated as unexplained. It is also not the case of the Assessing Officer that the sundry creditors as recorded in the books of accounts was either detected or questioned during the course of search and seizure action or post search enquiry. Therefore, the claim of sundry creditors as reported by the assessee in its books of accounts was never questioned by the department prior to the assessment proceedings under section 153A of the Act. Once there was no incriminating material found during the course of search and seizure action disclosing any undisclosed income of the assessee and assessment for a particular year falling within six years as prescribed under section 153A of the Act has not got abated by virtue of search then the Assessing Officer though is under the obligation to reassess the total income of the assessee cannot make an addition which is not in the nature of undisclosed income and that too is not based on any incriminating material found and seized the during the course of search”.

24) In concluding, the JM relied upon various judgements

a) Jai Steel India

b) Kabul Chawla

c) Kurli Paper Mills

d) Meeta Gutgutiya

e) Jet Airways

25) The JM specifically addressed the judgement of The Hon’ble Jurisdictional High Court in case of CIT vs. Raj Kumar Arora (supra) as relied upon by the learned DR and distinguished the same by observing as follows in para 14.

The Assessing Officer would be competent to reopen the assessment proceedings already made and determining the total income of the assessee. The Assessing Officer while exercising the power under section 153A would make assessment and compute the total income of the assessee including undisclosed income notwithstanding the assessee has filed return of income before the date of search which stood processed under section 143(1)(a) of the Act. Therefore, the Hon’ble High Court has held that the Assessing Officer has power to re-assess return of income of the assessee not only for undisclosed income which was found during the search operation but also with regard to the material that was available at the time of original assessment. That finding of the Hon’ble High Court is in the context of assessing the total income of the assessee which includes undisclosed income and disclosed income both. Therefore, the income which can be assessed during the proceedings under section 153A of the Act must be undisclosed unearthed during the course of search and seizure action, the disclosed income as declared in the return of income as well as the income which has escaped assessment and came to light during the course of search and seizure action.

Conclusion of the JM

26) Non-issue of notice u/s 143(2) makes the assessment invalid.

27) In case of search, the assessment u/s 153A is eclipsed by “incriminating material” and in the absence of the same, there can not be any addition.

Judgement of TM

Description

Paragraph Nos. Description Paragraph Nos.
from To from To
Proposed Question by AM 1 3 Existence of two views 7.3 7.3
Proposed Question by JM 3 3 Jurisdictional judgement 7.4 7.5
Proposed Question by TM and accepted by others 4 5 Recognizing the TM himself authored ITAT decision in Kabul chawla 7.6 7.10
Facts by TM 6.1 Analysis of Rajesh Kumar Arora 7.11 7.12
Preliminary issue notice u/s 143(2) 6.1 Meeta Gutgutia 7.13 7.14
Requirement of section 153A 6.2 6.3 Role of Kunhayammed starts 7.14 7.14
Contention of Assessee on notice u/s 143(2) 6.4 6.5 Meeta Gutgutia – again 7.15 7.15
Decision on issue of requirement of notice u/s 143(2) 6.6  6.6 Special Leave Petition 7.16 7.16
Issue of incrementing material 7.1 7.2 Issue of 2.5 crores on merits 8.1 9.0

28) The TM has briefly described the interpretation portion of the opinions of the JM and the AM because it has been elaborately dealt with by the TM. Incidentally in case of decision of Kabul Chawla (Delhi HC) which emerged from a third member decision of Delhi ITAT, the very same TM has acted as TM in that case and has taken a somewhat different view.

Whether notice u/s 143(2) is mandatory in nature

29) It is no doubt true that section 147 also requires issuance of a notice u/s 143(2) as a pre-condition for making assessment or reassessment. However, in view of the fact that section 153A contains non-obstante clause qua section 147, the consequential requirement of issuing notice u/s 143(2) before making assessment u/s 147, also gets obliterated in an assessment u/s 153A. Moreover, section 153A directly empowers the AO to take up the assessment without acquiring any separate jurisdiction.

30) For other assessments, notice u/s 143(2) gives jurisdiction to the AO. Notice u/s 142(2) has character of requiring assessee to do something like file return, show cause for some action etc. Also making of assessment for all years is also not mandatory. In case of assessment u/s 147 issuance of a notice u/s 143(2) is a pre-condition for making assessment or reassessment.

31) Section 153A starts with non obstante clause which mandates assessment for all the 6 assessment years. The very factum of search confers jurisdiction on the AO to make assessment under section 153A of the Act.

32) The TM distinguished the decision of Hotel Blue moon by comparing the wording of erstwhile section 158BC and that of section 153A starting with non obstante clause and relied upon following decisions which are delivered after considering the decision of Hotel Blue Moon which are favourable to revenue like that of

  • Ashok Chaddha,
  • Tarsem Singla,
  • Promy Kuriakose,
  • Kubendran,
  • Sumanlata Bansal.

33) The TM decided the issue in favour of the revenue by relying on 4 decisions of High courts which have considered the decision of SC in Hotel Blue Moon and the decision of ITAT in case of Sumanlata stating that notice u/s 143(2) is not mandatory.

Additions eclipsed by incriminating material

34) The TM noted that there are two school of thoughts as to whether “incriminating material” will eclipse the additions that can be made by AO in case of completed years, one saying that incriminating material is essential and another saying that there are no restrictions on assessing total income.

35) The TM himself has taken a view as third member in Kabul Chawla at ITAT that incriminating material is a necessary condition.

Doctrine of merger

36) The very basis of all arguments of the assessee is SC decision in the case of Meeta Gutgutia with its full text reading as under:

“1. Delay condoned.

2. We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.

3. Pending application stands disposed of.”

[Emphasis by author]

37) The TM analysed various decisions relating to SLP under article 136 of the constitution of India, in terms of following attributes

a. the manner of disposal

b. cases where it becomes a ratio under article 141 of the Constitution

c. cases where it does not become a ratio under article 141.

d. Status where SLP is admitted but disposed off

i. without speaking order

ii. with speaking order

e. Status of decision of HC / ITAT when SLP is dismissed

i. without a speaking order

ii. with a speaking order

38) When an SLP is dismissed without its admission or even after admission without going into the merits and in the absence of reasoned order, the doctrine of merger does not apply, and that order does not become an order under article 141 of the constitution.

39) The above mentioned observations have been clarified in Kunhayammed stating that even after such order of supreme court, the driving force of the judgement of the high court remains the same i.e. binding on jurisdictional high court. Reliance was placed on following SC judgements;

  • Kunhayammed
  • Bakshi Dev Raj
  • Khoday Distilleries Ltd.

Repetition of information-:

40) On concurrent reading, you would have observed that there is a repetition. To map repetition, the following table will be a guiding factor.

41) Refer the chart below. For example, A11 is facts relating to notice u/s 143(2). Each of the members will have address the facts in brief, then A12 adjudicate upon the question by addressing the arguments of both sides and giving his own analysis.

42) I think the audience is more mature in using the “find” facility to accurately point out the repetition portion and cull out the relevant portion by ignoring the duplication.

Judgement of AM

Judgement of JM Judgement of AM
Particulars Facts Q-1 Q-2 End Facts Q-1 Q-2 End Facts Q-1 Q-2 End
1 Reference to order or sub-ordinate court / authority / assessing officer etc. NA NA NA NA NA NA NA NA NA NA NA NA
2 Facts of the case Y A11 A21 X X A11 A21 X A A11 A21 X
a Un-disputed Facts Y A11 A21 X X A11 A21 X X A11 A21 X
b          Disputed Facts Y A11 A21 X X A11 A21 X X A11 A21 X
3 Arguments of the Applicant X A12 A22 X A12 A22 X A12 A22
4 Arguments of the Respondent X A12 A22 X A12 A22 X A12 A22
5 Analysis of the Bench X A12 A22 X A12 A22 X A12 A22
6 Conclusion of the bench X Y X X

Facts

Facts in brief
Q-1 Notice u/s 143(2)
Q-2 Incrimi-nating material Need
End Conclusion
A11 Facts in brief relating to Q-1 i.e. notice u/s 143(2)
A12 Law relating to Q-1 i.e. notice u/s 143(2)
A21 Facts in brief relating to Q-2 i.e. Incriminating material
A22 Law relating to  Q-2 i.e. Incriminating material

Each component can be divided as follows AM JM TM Final
result
A11 Facts in brief relating to Q-1 i.e. notice u/s 143(2)
Interplay between various aspect and weightage attached thereto
A12 Law relating to Q-1 i.e. notice u/s 143(2)
Interplay between concerned
Sections
Rules
notifications
Circulars
Interplay between concerned judgements of
High courts
Tribunals
A21 Facts relating to Q-2 i.e. Incriminating material
Interplay between
various aspect and
weightage attached thereto
A22 Law relating to  Q-2 i.e. Incriminating material
Interplay between concerned
Sections
Rules
notifications
Circulars
Interplay between concerned judgements of
High courts
Tribunals

Final order – Different reasoning same outcome.

43) In this case, the TM has come to the same conclusion as that of the AM but entirely for different reasons.

44) Though, each of the members, adjudicated upon the two issues i.e. notice u/s 143(2) and incriminating material, concluding on one side or the other, each of them gave importance for some other aspect. This additional aspect also played an important role whereby the decision culminated into the final decision for restoring the matter to the file of AO

AM

JM TM
Breach of rule 46A regarding additional evidence. Yes N.C. N.C.
distinguished the decision of jurisdictional high court of Allahabad in the case of Raj Kumar Arora and declined to follow the same. N.C. Yes N.A.
Relied upon the decision of jurisdictional high court of Allahabad in the case of Raj Kumar Arora and followed the same. N.C. As above Yes
Impact of SLP when dismissed without speaking order e.g. Meeta Gutgutia judgement N.C. N.C. Yes

N.C. = No Cognizance     |    N.A. = Not Applicable

45) These reasoning is extremely important in deciding the driving force of the judgement.

Finally – the curtains are down

46) Let’s read the full order

PER SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER:

Since there was a difference of opinion between the ld. Members constituting the Division Bench of Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, the matter was referred to Hon’ble President for nomination of Third Member u/s 255(4) of the Income-tax Act, 1961. Both the ld. Members framed separate questions of differences.

2. Hon’ble President , Income Tax Appellate Tribunal nominated Shri R. S. Syal, Hon’ble Vice President as Third Member. Since, separate questions of differences were framed by both the ld. Members, the Hon’ble Vice President, in consultation and concurrence with both the parties, finalized the following question of differences, for adjudication:

a) Whether on the facts and in law , the issuance of notice u/s 143(2) is a mandatory jurisdictional requirement for making assessment u/s 153A of the Act, in the absence of which the assessment order became null and void?

b) Whether on the facts and in law, the ld. CIT(A) was justified in holding that no addition, based otherwise than on an incriminating document or material etc. found during the course of search, can be made in the assessment relating to any assessment year falling within the period of six assessment years as prescribed u/s 153A of the Act which is not pending on the date of initiation of the search?

c) Whether on the facts and in law, the ld. CIT(A) was justified in deleting the addition rather than restoring the matter to the Assessing Officer for a fresh decision?

3. The Hon’ble Vice President vide his appellate order dated 12.04.2012 has concurred with the view taken ld. Accountant Member on the first two questions of differences at para 2(a) and 2(b) above, by answering both the questions in negative. The Hon’ble Vice

“8.1 Now, I take up the third question as to whether the ld. CIT(A) was justified in deleting the addition of Rs. 2.50 crore rather than restoring the matter to the file of AO for a fresh consideration. In this regard, it is observed that the ld. AM, for the reasons given in his opinion, restored the matter of addition of Rs. 2.50 crore to the file of the AO for a fresh adjudication after allowing adequate opportunity of hearing to the assessee. The ld. JM countenanced the deletion of addition on the two legal issues discussed above, viz., the failure of the AO to issue notice u/s 143(2) before making assessment u/s 153A and the addition being not based on any incriminating material. Neither did he go into the merits of the addition , nor record his disagreement with the ld. AM on the issue of restoration of the matter to the AO. In the absence of any difference of opinion between the ld. Members on this issue , a fortiori, is that the view taken by the ld. AM restoring the matter to the AO for fresh decision will prevail as the same has not been dissented with by the ld. JM. I answer this question in negative by holding that the ld. CIT(A) was not justified in deleting the addition . Rather he should have restored the matter to the file of AO.

9. The Registry of the Tribunal is directed to list this matter before the Division Bench for passing an order in accordance with the majority view.”

4. Therefore, in accordance with the majority view, the appeal of the Revenue is partly allowed for statistical purposes, while the C.O. (Cross Objection) filed by the assessee is dismissed.

Order pronounced on 04/05/2022 in Open Court at Allahabad

Sd/- Sd/-
[VIJAY PAL RAO] [RAMIT KOCHAR]
JUDICIAL MEMBER ACCOUNTANT MEMBER

DATED: 04/05/2022

Post Script

47) Ideally, at this point, the article ends but the author could not desist from referring to two judgements judgement ends namely

1) Justice K.S. Puttaswamy vs. Union of India

2) Kesavananda Bharati & others Versus State of Kerala

Justice K.S. Puttaswamy vs. Union of India

On 24th August, 2017 a 9 Judge Bench of the Supreme Court delivered a unanimous verdict in the case of Justice K.S. Puttaswamy vs. Union of India and other connected that Right to Privacy is very much a fundamental. A nine-member bench comprising of 6 opinions / judgements.

Author of the judgment

Authored for
1) Shri Justice J Chelameswar,

2) Shri Justice S A Bobde,

3) Shri Justice Abhay Manohar Sapre,

4) Shri Justice Rohinton Fali Nariman

5) Shri Justice Sanjay Kishan Kaul

1) Shri Justice J Chelameswar,

2) Shri Justice S A Bobde,

3) Shri Justice Abhay Manohar Sapre,

4) Shri Justice Rohinton Fali Nariman

5) Shri Justice Sanjay Kishan Kaul

6) Dr Justice D Y Chandrachud. 6) Shri Justice Jagdish Singh Khehar, CJI

7) Shri Justice R K Agrawal,

8) Shri Justice S Abdul Nazeer and

9) Dr Justice D Y Chandrachud

Please do read the separate but concurring judgement of Dr. Dhananjay Chandrachud and Mr. Rohinton Nariman. This does not mean that other opinions have any inferior quality. But it is not possible for us to read judgement by all the honourable learned judges.

Journey of the case

1) In 2012, Justice K S Puttaswamy, a retired judge of the High Court, filed a writ petition in the Supreme Court challenging the constitutional validity of the Aadhaar scheme introduced by the UPA Government.

2) On August 11th 2015, a Bench of three judges comprising Justices Chelameswar, Bobde, and C. Nagappan passed an order that a Bench of appropriate strength must examine the correctness of the decisions in M P Sharma v Satish Chandra, District Magistrate, Delhi1954 (Eight Judge Bench) and Kharak Singh v State of Uttar Pradesh, 1964 (Six Judge Bench). In particular it ordered that the Court must decide whether we have a fundamental right to privacy.

3) This matter was first placed before a Five Judge Bench headed by the then Chief Justice Khehar. Subsequently, the matter was referred to a Nine Judge Bench on July 18th 2017. The Bench comprised Chief Justice Khehar and Justices Jasti Chelameshwar, A. Bobde, Dr. D Y Chandrachud, Abdul Nazeer, Nariman, R.K. Agarwal, Abhay Manohar Sapre, andSanjay Kishan Kaul. Arguments began on July 19th 2017 and concluded on August 2nd 2017.

4) In a historic decision delivered on August 24th 2017, the Bench unanimously recognised a fundamental right to privacy of every individual guaranteed by the Constitution, within Article 21 in particular and Part III on the whole. The decisions in P. Sharma and Kharak Singhwere overruled.

If possible, do read the submissions and oral arguments in the case. Refer Fundamental Right to Privacy – Supreme Court Observer (scobserver.in)

Kesavananda Bharati & others Versus State of Kerala

Whenever you get time, try, and read whether in bits and pieces, the judgement of Kesavananda Bharati & others Versus State of Kerala. Writ Petition (civil)  135 of 1970 dated 24-April-1973

Warming up

You may consider reading a book titled as “The Kesavananda Bharati Case :The Untold Story of Struggle For Supremacy by Supreme Court and Parliament” by T.R. Andhyarujina. Index of the book is given at the end of this note.

One may usefully refer the book by Mr. Prashant Bhushan titled as “the case that shook India, the verdict that led to the Emergency” by Penguin Viking. Appendix 3 contains review attempt of the Kesavanand Bharati judgement by a bench of 15 judges on 10-12 November-1975.

Question

1. The extent to which the Parliament can exercise its power to amend the Constitution.

2. The question underlying the case also included: Was the power of Parliament to amend the Constitution unlimited? In other words, could Parliament alter, amend, abrogate any part of the Constitution even to the extent of taking away all fundamental rights?

Decision

The majority held that any provision of the Indian Constitution can be amended by the Parliament in order to fulfill its socio-economic obligations that were guaranteed to the citizens as given in the Preamble, provided that such amendment did not change the Constitution’s basic structure. The minority, however, in their dissenting opinion, were wary of giving the Parliament unlimited amending power.

The answer to the question was found in the present case and it was deduced by the court that the Parliament has the power to amend the Constitution to the extent that such amendment does not change the basic structure of the Indian Constitution. It was laid down by the court that the Doctrine of Basic Structure is to be followed by the Parliament while amending the provisions of the Constitution.

You will be amazed to know that the concept of basic structure theory was propounded by in Pakistan even before the Kesavanand Bharati case by Justice Alvin Robert Cornelius, Former Chief Justice of Pakistan

Majority decision

The judgement runs into 703 pages. A lot of tussles went when the case was argued in the court.

The majority decision was delivered by S.M. Sikri CJI, K.S. Hegde, B.K. Mukherjea, J.M. Shelat, A.N. Grover, P. Jagmohan Reddy JJ. & Khanna J.

Whereas, the minority opinions were written by A.N. Ray, D.G. Palekar, K.K. Mathew, M.H. Beg, S.N. Dwivedi & Y.V. Chandrachud.

The minority bench wrote different opinions but was still reluctant to give unfettered authority to the Parliament. The landmark case was decided on 24th April 1973.

The Judgement of H R Khanna has acted as final say in deciding the ratio of the judgement.

Index to the Book

Cha-pter

Description
I The Political Overtones of The Kesavananda Case
II Tensions and Conflicts in The Case
III Justice Beg’S Illness and Hospitalization
IV Was There a Ratio in Kesavananda Case That “Parliament Has No Power To Amend The Basic Structure Of The Constitution”?
V Did Justice Chandrachud Change His Judgment?
VI Were Fundamental Rights Held to Be a Part of The Basic Structure in The Kesavananda Case?
VII The Immediate Response of Government to The Kesavananda Judgments
VIII How the Kesavananda Case Survived an Attempt to Reverse it by The Court
IX Parliament/Governments Attempt to Overcome the Kesavananda “Majority View”
X Did the Supreme Court or Parliament Prevail in The Struggle For Supremacy?
XI Basic Structure Later Distilled by The Supreme Court
XII Conclusion

–X–

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