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2020 Supreme(Del) 1292
IN THE HIGH COURT OF DELHI AT NEW DELHI
Vipin Sanghi, Sanjeev Narula, JJ.
Sanjay Sawhney - Appellant
Versus
Principal Commissioner Of Income Tax - Respondent
Income Tax Appeal No. 834 of 2019
Decided On : 18-05-2020
S. Krishnan, Advocate, Zoheb Hossain, Advocate
Headnote:
The ITAT erred in refusing to consider the assessee's additional grounds challenging the validity of the reassessment proceedings under Section 153C of the Income Tax Act, 1961 (''the Act''), on the basis that the assessee had not filed a cross-appeal or cross-objection under Section 253(4) of the Act. The assessee was entitled to rely on Rule 27 of the Appellate Tribunal Rules, 1963 (''ITAT Rules'') to support the order of the Commissioner of Income Tax (Appeals) (''CIT(A)'') on any of the grounds decided against him, even though he had not filed a cross-appeal or cross-objection. The ITAT's interpretation of Rule 27 was unduly narrow and resulted in the assessee being deprived of an opportunity to challenge the validity of the reassessment proceedings. The matter was remanded back to the ITAT to hear the matter afresh and consider the assessee's additional grounds.
Fact of the Case:
The assessee challenged the validity of the reassessment proceedings under Section 153C of the Act before the CIT(A). The CIT(A) rejected the assessee's pleas and confirmed the reassessment. The assessee appealed to the ITAT, but did not file a cross-appeal or cross-objection under Section 253(4) of the Act. The ITAT refused to consider the assessee's additional grounds challenging the validity of the reassessment proceedings, holding that the assessee was not entitled to do so under Rule 27 of the ITAT Rules.
Finding of the Court:
The ITAT erred in refusing to consider the assessee's additional grounds challenging the validity of the reassessment proceedings under Section 153C of the Act. The assessee was entitled to rely on Rule 27 of the ITAT Rules to support the order of the CIT(A) on any of the grounds decided against him, even though he had not filed a cross-appeal or cross-objection. The ITAT's interpretation of Rule 27 was unduly narrow and resulted in the assessee being deprived of an opportunity to challenge the validity of the reassessment proceedings.
Issues: Whether the ITAT erred in refusing to consider the assessee's additional grounds challenging the validity of the reassessment proceedings under Section 153C of the Act.
Ratio Decidendi: The ITAT erred in refusing to consider the assessee's additional grounds challenging the validity of the reassessment proceedings under Section 153C of the Act. The assessee was entitled to rely on Rule 27 of the ITAT Rules to support the order of the CIT(A) on any of the grounds decided against him, even though he had not filed a cross-appeal or cross-objection. The ITAT's interpretation of Rule 27 was unduly narrow and resulted in the assessee being deprived of an opportunity to challenge the validity of the reassessment proceedings.
Final Decision: The matter was remanded back to the ITAT to hear the matter afresh and consider the assessee's additional grounds.
JUDGMENT
Sanjeev Narula, J. - The present appeal under Section 260A of the Income Tax Act, 1961 (''the Act'') is directed against the order dated 25.03.2019 passed by the Income Tax Appellate Tribunal (''ITAT''), Delhi Bench ''F'' allowing Revenue''s appeal [ITA No. 4856/2015 for the Assessment Year 2008-09] and further remanding the matter to the file of the Assessing Officer (''AO'') for fresh adjudication. Vide the aforesaid impugned order, the ITAT has inter alia rejected additional jurisdictional grounds urged by the Appellant- Assessee under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 (''ITAT Rules'') to assail the findings of Commissioner of Income Tax (Appeals) [''CIT (A)'']. By way of this appeal, the Appellant challenges correctness of the reasoning of the ITAT for declining to consider pertinent issues that go into the root of the matter and relate to assumption of jurisdiction and validity of the reassessment proceedings undertaken by the revenue under Section 153C of the Act.
The Controversy- In brief
2. The revenue-initiated search action under Section 132 of the Act on Kouton Group on 19.02.2009 and during the search proceedings, it inter-alia seized a document described as ''Memorandum of Understanding'' (''MOU'') relating to transaction of sale and purchase of share capital of M/s S.R. Resorts Private Limited. Consequent upon the seizure of the aforesaid document, a notice was issued to the appellant under Section 153C of the Act, calling for filing of return of income. Since there was no compliance to the said notice, another notice was issued under Section 142(1)(ii) of the Act. In response thereto, the appellant filed the original return of income declaring total income of Rs.8,90,760/- and submitted that the same be treated as a return in compliance to notice under Section 153C of the Act. The assessment proceedings culminated in framing of an assessment order dated 28.12.2010 whereby the return of income of the appellant stood assessed at Rs.1,46,15,445/-. In the appeal before CIT(A), besides challenging the additions made by the AO on merits, assessee also raised legal grounds qua the validity of the reassessment proceedings undertaken by the revenue under Section 153C of the Act. The jurisdictional challenge to reassessment proceedings was principally premised on two fundamental legal grounds, viz. (i) the AO failed to record a satisfaction note for initiating proceedings under Section 153C of the Act and, (ii) there was no nexus between the issues in the assessment proceedings and the incriminating material seized during the search. The CIT(A) rejected the aforesaid pleas and inter-alia held that there was no need for recording the satisfaction and that further the law postulated no requirement for existence of nexus between the assessment framed and the incriminating material as a precondition for reassessment proceedings. On merits, CIT(A) allowed the appeal in favor of the assessee and deleted all the additions/disallowances made by the AO.
3. Revenue contested the order passed by the CIT(A) by filing an appeal under Section 253(2) of the Act before the ITAT, contending that the CIT (A) had erred in deleting the additions. In the said proceedings, appellantassessee made an oral application under Rule 27 of ITAT Rules and urged additional grounds against the findings of the CIT(A) pertaining to the issue of recording of satisfaction note, and the necessary condition of existence of nexus between assessment and incriminating material by contending that these findings were in the teeth of the law as settled by various courts in respect of the said issues. The ITAT disagreed with Assessee and on a technical ground refused to consider the legal issues that were premised on Rule 27 of the ITAT Rules. However, at the same time, on merit, the ITAT overturned the decision of the CIT(A) and allowed the appeal in favour of the Revenue and restored the issues to the file of the AO for deciding afr
