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2021 Supreme(Bom) 998
IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT GOA
M.S. Sonak, M.S. Jawalkar, JJ.
Peter Vaz - Appellant
Versus
Commissioner Of Income Tax - Respondent
Tax Appeal No. 19 of 2017, 21 of 2017, 22 of 2017, 23 of 2017, 24 of 2017, 25 of 2017, 20 of 2017, 26 of 2017, 27 of 2017, 28 of 2017, 29 of 2017, 30 of 2017
Decided On : 05-04-2021
P. Pardiwala, Advocate, J. Sanghavi, Advocate, H.D. Naik, Advocate, S. Linhares, Advocate
The main legal point established in the judgment is that the assessees were entitled to raise the jurisdictional issue before the ITAT without filing cross-objections and that sufficient cause was shown for condoning the delay in filing cross-objections. The court also found that the ITAT had misconstrued the provisions of Section 124 of the IT Act and failed to consider the principles laid down by the Hon'ble Supreme Court in N. Balakrishnan (supra).
Headnote:
Income Tax - Jurisdictional Parameters - Section 153C - [Section 153C] - The court considered the issue of whether the assessees were justified in raising the jurisdictional issue of compliance with Section 153C of the IT Act before the ITAT without filing cross-objections. The court held that the assessees were entitled to support the order of CIT (Appeals) before the ITAT even without the necessity of filing any cross-objections. The court referred to Rule 27 of the Appellate Tribunal Rules, 1963 and held that the ITAT should not have precluded the assessees from raising the issue in the appeals instituted by the Revenue, even without the necessity of filing any cross-objections. The court also found that sufficient cause was made out by the Appellants to seek condonation of delay of 248 days in filing cross-objections. The court held that the ITAT had misconstrued the provisions of Section 124 of the IT Act and failed to consider the principles laid down by the Hon'ble Supreme Court in N. Balakrishnan (supra). The court remanded the matters to the ITAT with a direction to permit the assessees to raise the issue of compliance or non-compliance with the jurisdictional parameters necessary to initiate action under Section 153C of the IT Act.
Fact of the Case:
The case involved a dispute regarding the jurisdictional parameters of Section 153C of the IT Act. The assessees, Peter Vaz and Edgar Afonso, were partners in a firm and shareholders of a company engaged in real estate business. A search was conducted under Section 132 of the IT Act, and subsequent assessment orders treated certain amounts as 'deemed dividend' under Section 2(22)(e) of the IT Act, adding them to the assesses' income and imposing additional tax. The CIT (Appeals) allowed the appeals and set aside the assessment orders. The Revenue appealed to the ITAT, and the assessees sought to raise the jurisdictional issue without filing cross-objections.
Finding of the Court:
The court found that the assessees were entitled to raise the jurisdictional issue before the ITAT without filing cross-objections and that sufficient cause was shown for condoning the delay in filing cross-objections. The court held that the ITAT had misconstrued the provisions of Section 124 of the IT Act and failed to consider the principles laid down by the Hon'ble Supreme Court in N. Balakrishnan (supra). The court remanded the matters to the ITAT with a direction to permit the assessees to raise the issue of compliance or non-compliance with the jurisdictional parameters necessary to initiate action under Section 153C of the IT Act.
Issues: The main issue was whether the assessees were justified in raising the jurisdictional issue of compliance with Section 153C of the IT Act before the ITAT without filing cross-objections.
Ratio Decidendi: The court held that the assessees were entitled to raise the jurisdictional issue before the ITAT without filing cross-objections and that sufficient cause was shown for condoning the delay in filing cross-objections. The court found that the ITAT had misconstrued the provisions of Section 124 of the IT Act and failed to consider the principles laid down by the Hon'ble Supreme Court in N. Balakrishnan (supra).
Final Decision: The court remanded the matters to the ITAT with a direction to permit the assessees to raise the issue of compliance or non-compliance with the jurisdictional parameters necessary to initiate action under Section 153C of the IT Act.
JUDGMENT
M. S. Sonak, J. - Heard Mr. Pardiwala, learned Senior Advocate along with Mr. J. Sanghavi and Mr. H. D.Naik, learned counsel for the Appellants in each of these appeals.
2. Heard Ms. S. Linhares, learned Standing Counsel for the Income Tax Department in each of these appeals.
3. The learned counsel for the parties agree that these Tax Appeals can be disposed of by a common judgment and order since the issues involved therein are virtually identical.
4. These appeals were admitted by order dated 15th June 2017 on the following substantial questions of law :
1. Whether in the facts and in the circumstances of the case and in law, the Appellate Ld Tribunal was right in invoking the provision of Section 2(22)(e) of the Act and making an addition of deemed dividend in the hands of the Appellant?
2. Whether on the facts and in the circumstances of the case and in law, the Ld. Tribunal was justified in holding that the transactions which are recorded in the books of accounts of the Company and the Firm would be regarded as incriminating material in the case of the Appellant when the Appellant was not a party to the said transactions?
3. Whether on the facts and in the circumstances of the case and in law the Ld. Tribunal was justified in holding that the provision of Section 2(22)(e) are applicable without considering the argument of the appellant that the account between the Company and the Firm was a running current account?
4. Whether on the facts and circumstances of the case and in law, the Appellate Ld. Tribunal was correct in rejecting the cross objections filed by the appellant solely on the ground of delay, when admittedly, the Appellate Ld. Tribunal in the impugned order has come to the conclusion that the issues raised in the cross objection are legal issues?
5. After these appeals were heard for some time, we were satisfied that these appeals involve an additional substantial question of law. Accordingly, by our order dated 30th March 2021, we framed the additional substantial question of law and adjourned the matter to enable the learned counsel for the parties to address us on such additional substantial question of law. The additional substantial question of law framed by us reads as follows:-
"Whether in the facts and circumstances of the present case, it was open to the appellant/assessee to have supported the orders of the Commissioner (Appeals), based on the ground that the jurisdictional parameters prescribed under Section 153C of the I.T. Act were not fulfilled, even without the necessity of filing any cross objections ?"
6. To appreciate the setting in which the aforesaid substantial questions of law arise, it is necessary to refer to some skeletal facts.
7. Peter Vaz, (since deceased and now represented by his legal representatives) and Edgar Afonso were partners holding 50% stake respectively in the partnership firm functioning under the name and style "Models Real Estate Developers" ( the said firm). They also held equal stake as shareholders of the company "Models Constructions Private Limited" ( the said company). Both the firm as well as the company were engaged in the business of real estate, construction, and development.
8. On 31.01.2012, a search was held in terms of Section 132 of the Income Tax Act, 1961 ( IT Act) on the said firm and the said company. Pursuant to such search notices were issued on 30.07.2012 to Peter Vaz and Edgar Afonso calling upon them to file returns of income for the Assessment Years 2006-2007 to 2011-2012. For these Assessment Years, the original assessment had already been completed under Section 143(1) of the IT Act.
9. Both Peter Vaz and Edgar Afonso responded to the notices under Section 153C of the IT Act submitting inter alia the returns originally filed by them under Section 139(1) of the IT Act may be treated as returns in response to the notices under Section 153C of the IT Act.
10. In the course of assessment proceedings, Peter Vaz and Edgar Afonso were required to show
