INCOME TAX APPEAL UNDER SECTION 260A OF INCOME TAX ACT,1961
Abhay Manohar Sapre, J.
1. This is an appeal filed by the Revenue (Commissioner of Income Tax) under Section 260-A of the Income Tax Act, against the order dated 7/12/2005 passed by Income Tax Appellate Tribunal (for short called the Tribunal) in IT (SS) A No. 76/Nag/2004.
2. By impugned order, the Tribunal allowed the assessee's appeal and dismissed that of the Revenue which arose out of the order passed by the CIT (appeal).
3. So the question which arises for consideration in this appeal is whether Tribunal was justified in allowing assessee's appeal and was justified in dismissing Revenue's appeal.? and secondly and more importantly that being the sin qua none for hearing the appeal, whether the appeal involves any substantial question of law within the meaning of Section 260-A of the Act.
4. Few facts necessary for the disposal of the appeal need mention infra.
5. A search and seizure operation was carried out under Section 132 of the Act in the residential premises of the assessee (respondent herein) - an individual on 20.12.2001. Simultaneously, similar search operations were also carried out in the premises of his other family members. So far as the assesee is concerned, he is a professor in one college. He also derives income from one business concern by name Chattisgarh Auto Care Raipur.
6. In search operation, cash, jewellery, gold, silver and other valuables were seized. This led to initiation of assessment proceedings for the block period (1.4.95 to 31.3.2001) under Section 158BC/143(3) ibid. The A.O. made the assessment making certain additions .It was then challenged in appeal before the CIT (appeals) by the assessee who got partial relief in the appeal. The assessee then filed further appeal before the Tribunal against that part of the order which declined to grant him the relief whereas revenue filed an appeal against that part of the order of CIT (Appeals) which granted certain relief to the assessee. The Tribunal dismissed the revenue' appeal and allowed in part the appeal of the assessee, which has now given rise to filing of this appeal only by the Revenue (commissioner of Income Tax).
7. At the out set, it may be stated that this appeal was admitted for final hearing on 26.4.2006. The order dated 26.4.2006 reads as under:-
"Heard Shri Amit Choudhary, learned counsel for the appellant. The appeal is admitted for hearing. Issue notice to respondent as per rules. The Substantial questions framed in paragraphs 1.1, 1.2 and 1.3 arise for decision."
8. One can thus take it, that this appeal was admitted for final hearing on substantial questions of law as framed by the appellant in their memo of appeal in Paras 1.1, 1.2, and 1.3. of the memo .These three questions reads as under:-
1.1. Whether on facts and in the circumstances of the case the Tribunal was justified in upholding the order of Commissioner of Income Tax Appeals and whether was justified in confirming his views in deleting the addition made by the A.O. in spite of the fact that excess cash was found in position of the respondent in course of the search.
1.2. Whether on facts in the circumstance of case the Tribunal was justified in confirming the order of the Commissioner of Income tax (Appeals in spite of the fact the respondent had not disclosed Rs. 3,64,830 in the block period return and as such was assessable u/s 158BC (1)( c).
1.3. Whether on facts and circumstances of the case the Tribunal was justified in confirming the order of the Commissioner of Income tax (Appeals) deleting the addition of ignoring the fact that the addition of Rs. 2,36,000/- made on account of unexplained cash by the AO in spite of the fact the such cash was found during the course of search operations and whether it was justified in deleting the addition of Rs. 50,000 which was sustained by the C.I.T.(A) on account of unexplained investment in household goods in spite of specific findings and whether was justified in deleting Rs. 3,37,192 on account of unexplained marriage expenses in spite of the fact that the AO brought on records the evidence to the effect that marriage expenses were suppressed."
9. Learned Counsel for the respondent (assessee) at the threshold urged by raising one preliminary objection that none of the aforementioned three questions framed by the Court at the time of admission can be called as "substantial questions of law" within the meaning of Section 260-A of the Act. Learned Counsel contends that by virtue of Sub Section (4) of Section 260-A ibid, the respondent has a right to raise such objection at the time of final hearing of the appeal and hence even if this court had admitted the appeal on aforementioned three questions of law, yet, admission of appeal on such questions is not binding on the respondent because it was done behind their back. Learned Counsel contends that it is due to this legal right given to the respondent under Section 260-A (4), this court has to re- examine this issue at the instance of the respondent and record a finding as to whether three questions though framed satisfy the requirements of substantial question of law for final hearing of appeal on such questions or not before proceeding to decide the appeal on merits.
Learned Counsel contends that all the three questions framed are essentially the questions of facts and hence the appeal is liable to be dismissed as involving no substantial questions of law within the meaning of section 260-A ibid.
10. In reply, learned Counsel for the appellant almost conceded and rather fairly that it may be difficult for him to support framing of question 1 and 3 as substantial questions of law within the meaning of Section 260-A of the Act, He however contends that so far as question No. 2 is concerned, the same does satisfy the rigour of substantial question of law and hence the appeal was rightly admitted on question no 2. In other words, according to him, this court should examine the finding of the Tribunal on merits treating the said question to be the substantial question of law within the meaning of section 260-A and answer the same on its merits.
11. Having heard the learned Counsel for the parties and on perusal of the record of the case, we are inclined to uphold the preliminary objection of the learned counsel for the respondent.
12. In our opinion, all the three questions proposed by the appellant and framed by this court at the time of admission of appeal on 26.4.2006 terming them as "substantial questions of law "do not satisfy the attributes of substantial question of law but are essentially the questions of facts and does not arise out of the case and hence the appeal is liable to be dismissed as involving no substantial question of law.
13. Indeed, mere perusal of Section 260-A which is modelled on Section 100 of C.P. Code would go to show that even though the appeal might have been admitted for final hearing on certain substantial questions of law framed by the court at the instance of the appellant , yet at the time of final hearing of such appeal, if the respondent raises an objection that the questions framed by the court at the time of admission of the appeal are not "substantial questions of law" or in other words, such questions do not satisfy the attributes of substantial question of law, then it is the duty of the Court to decide such objection by examining the issue again as to whether such questions though framed are substantial questions of law or not? In other words, neither the appellant and nor the Court can say that once the question proposed by the appellant is framed, then it is beyond the Courts power to again decide an issue as to whether such question is substantial question of law or not? If however, on examination of such issue, the Court comes to a conclusion that question framed does constitute a substantial question of law within the meaning of Section 260-A then the court has to overrule the objection raised by the respondent by assigning reasons and then proceed to answer the said question as substantial question of law. But if the court comes to a conclusion that question framed is not a substantial question of law as urged by the respondent then the appeal has to be dismissed as involving no substantial question of law unless the appellant is able to show on the strength of proviso to sub section 4 that appeal involve some other question though not framed at the time of admission and persuade the court to frame such question.
14. So the sin qua none for admitting and deciding the appeal on merits under Section 260-A of the Act is involving and arising of substantial question of law in the appeal. It is only then the appeal can be admitted for final hearing on such question else not.
15. In our opinion, learned counsel for the appellant was not able to substantiate as to how question no 1 can be said to satisfy the rigour of section 260-A ibid and thus can be termed as substantial question of law. In fact, we too are of the considered view on examining the controversy that so far as framing of question no 1 is concerned, it is essentially a question of fact and does not arise out of the case.
16. In the first place, the question No. 1 is general in nature and does not challenge any particular finding of deletion relating to cash seized. Second, it is not shown as to which finding and why such finding is bad and hence constitute substantial question of law?. Third, the question No. 1 apart from being totally vague is equally incapable of being answered on its merits and lastly it has no involvement of any legal issue much less substantial issue of law.
17. In the light of these reasoning, we have no hesitation in upholding the objection of the respondent that question no 1 does not arise out of the case and even if arise, the same is not a substantial question of law within the meaning of section 260-A of the Act but a pure question of fact.
18. Coming to the question no 3, it also suffers from the same infirmities which are noticed by us while examining the question No. 1 supra. In the first place, again it involves question relating to deletion of certain amount which is essentially a question of fact. Second , once the explanation offered by the assessee opposing certain additions made by the authorities was accepted and a finding of fact was returned then such finding becomes finding of fact and binding on the High Court while hearing appeal under Section 260-A of the Act. It is much more so when the appellant has not been able to show that the finding of fact on particular issue is so perverse that no judicial man of average capacity could ever record such finding or that it is against the evidence on record or is against any provision of law.
19. In the light of these reasoning, we hold that question no 3 also does not arise out of the case and even if arise, the same is not a substantial question of law within the meaning of section 260-A of the Act and hence the appeal could not have been admitted for final hearing on such question.
20. Coming to now the second question, it is necessary to mention some facts of this case to appreciate the issue that centres around to this question.
21. In the block assessment period, the A.O. added a sum of Rs. 3, 64,830 treating this sum to be an income from undisclosed source. The case of the assessee on this issue was that this amount was falling in the assessment year 2001-2002 and for that assessment year, he had already paid advance tax and TDS much earlier to commission of raid and secondly had also filed the return under section 139 of the Act for that year disclosing this income. He contended that raid in question was carried out on 20.12.2001 whereas he filed the return though subsequent to date of raid but he could do so because revenue was aware of payment of advance tax and TDS made by him prior to commission of raid.
22. The CIT (appeal) as also Tribunal accepted the stand taken by the assessee and by placing reliance on the decision of Bombay High Court reported in 249ITR 501, held that addition of Rs 3, 64,830 in block period assessment as an income from undisclosed source made by A.O. was bad in law and hence had to be deleted from the total income of the assessee under Section 158BC. It is this finding which is now under challenge by the Revenue in this appeal by framing question no 2.
23. In our considered view, we are inclined to hold that this question also does not involve any question of law much less substantial question of law within the meaning of Section 260-A of the Act .
24. In our considered opinion, the CIT( appeal ) so also the Tribunal were fully justified in coming to this conclusion by rightly placing reliance or the decision of the Bombay High Court reported in 2001(118) Taxman 835 ( Bom) .CIT vs Shamlal Balram that the question proposed is not a substantial question of law.
25. In some what identical facts of the case, which are subject matter of this case, the Bombay High Court held that when the assessee had paid tax such as (TDS) and advance tax and had also filed the regular returns for the year under consideration and further when the finding of addition is not based on any incriminating documents recovered in search operation, then such amount can not be taken as an income from undisclosed sources in hands of assessee in a raid case. It was held that on such facts, no substantial question of law can be said to arise within the meaning of section 260-A ibid.
26. Justice Kapadia, (as his Lordship then was, as judge of the Bombay High Court and presently the Chief Justice of India) speaking for the bench held as under:-
"The representative of the assessee also pointed out to the Tribunal that the returns of the firm for the three years were filed on 31-10-1993, 31-10-1994 and 31-3-1995, respectively.
The Tribunal further found, on facts, that the return of undisclosed income filed before the Assessing Officer under Chapter XIV-B also indicated that income had been disclosed by the firm to the department, that tax deducted at source has been paid, that advance tax has also been paid and, in the circumstances, the Tribunal, on facts, came to the conclusion that the findings of the Assessing Officer regarding undisclosed income were not to be based on any material found in the search operations and that he had taken the total income for the earlier assessment years as undisclosed income without any material being found during the search and, in the circumstances, the Tribunal came to the conclusion that there was no reason for treating the said total income as undisclosed income for the purposes of Chapter XIV-B. Under the above circumstances, the Tribunal allowed the appeal. We do not find any reason to interfere with the findings of fact recorded by the Tribunal. Since, no substantial question of law arises, the appeal is dismissed."
27. Now so far as facts of this case are concerned, as stated supra, they are similar to the facts involved in Bombay case. In this case also, the assessee filed the return under section 139 (1) and much before filing of the return and commission of the raid had already paid advance tax and TDS. In the light of these facts, both CIT (appeals) and Tribunal rightly deleted the addition of Rs. 3, 64, 830 and declined to treat such income as an income from undisclosed sources for the purpose of taxing it under the special provisions of block period in question .That apart, the A.O. also failed to sustain the addition by placing reliance on any evidence seized in raid operation.
28. In the light of these admitted findings, we are of the view that this question also therefore does not involve any substantial question of law within the meaning of Section 260-A as was held by the Bombay High Court in the case of Shamlal (supra) and we respectfully follow the law laid down by the Bombay High Court for holding this issue against the appellant (Revenue).
29. In the light of foregoing discussion, we are of the considered view that all the three questions framed on 26.4.2006 are not substantial questions of law within the meaning of Section 260-A.
30. As a consequence of aforesaid discussion, the appeal is found to be devoid of any merit involving no substantial question of law. It thus fails and is accordingly dismissed.