1 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL No. 75 OF 2008 Commissioner of Income Tax, Having office at Aayakar Bhavan Patto Plaza, Panaji, Goa. . Appellant. Versus M/s. Fomento Finance and Investment Pvt. Ltd., Villa Flores de Silva Erasmo Carvalho Street Margao, Goa. Respondent. Ms. Susan Linhares, Standing Counsel for Appellant. Mr. Pardiwala, Senior Advocate alongwith Ms. Jasmine Amalsadvala and Ms. Vinita Palyekar, Advocates for Respondents. AND MISCELLANEOUS CIVIL APPLICATION No. 179 OF 2016 Fomento Finance and Investments Pvt. Ltd., Vila Flores Da Silva Erasmo Carvalho Street, Margao, Goa-403601. Applicant. Versus 1. Assistant Commissioner of Income Tax, Circle-I, Blessing Pioneer Complex, Opp: Dist & Session Court, Margao, Goa 403601. 2 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 2. Commissioner of Income-Tax, Aayakar Bhavan, EDC Complex, Patto Plaza, Panaji, Goa 403001. Respondents. Mr. Pardiwala, Senior Advocate alongwith Ms. Jasmine Amalsadvala and Ms. Vinita Palyekar, Advocates for Applicants. Ms. Susan Linhares, Standing Counsel for Respondents. Coram : M. S. SONAK & NUTAN D. SARDESSAI, JJ. Date : 13th September, 2019. Oral Judgment: (Per M. S. Sonak, J.) Heard Ms. Susan Linhares, Standing Counsel for Appellant, Mr. Pardiwala, learned Senior Counel alongwith Ms. Jamsine Amalsadwala and Ms. Vinita Palyekar, Advocates for Respondents. 2. This Appeal was admitted on 27.08.2008 on following substantial questions of law: (A) Whether on facts and in circumstances of case ITAT was right in holding that amount of Rs.11,23,36,500/- representing bogus claim of bad debts was not chargeable to tax as undisclosed income in terms of amended Sections 158B(b) and 158BB(1) of I.T.Act? 3 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 (B) Whether on facts and in circumstances of case ITAT was right in law in holding that sum of Rs.11,23,36,500/- constituted genuine bad debts of assessee, when fact remained that debtor disclosed same as outstanding debts in their accounts? (C) Whether on facts and in circumstances of case ITAT was right in law in holding that surcharge u/s 113 of Act was not leviable on assessee ignoring in process conclusive decisions of Hon'ble Supreme Court of India in "CIT V/s. Suresh N. Gupta" (2008) 297 ITR 322, upholding this levy in all assessments relating to searches? 3. Thereafter, on 11.02.2016, Respondents filed memo of cross-objections alongwith application for condonation of delay. This is numbered as Miscellaneous Civil Application No. 179 of 2016. 4. On 07.03.2016, Division Bench of this Court ordered that application for condonation of delay in filing cross-objections will be examined at stage of hearing of Tax Appeal No. 75 of 2008 as was suggested by learned Counel appearing for both parties. 4 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 5. Today, therefore, Tax Appeal as well as application for condonation of delay as filed in cross-objections are taken up for hearing. 6. Admittedly, substantial questions of law so framed by order dated 27.08.2008 arise in context of special procedure for assessment of such cases under Chapter XIV-B of Income Tax Act, 1961, which includes, inter alia, Section 158BC. This provision relates to provision for block assessment. 7. In present case, before ITAT, there were Appeals filed by both, Assessee as well as Revenue which came to be disposed of by impugned Judgment and Order dated 10.12.2007. Assessee had specifically raised preliminary objection to assessment proceedings on grounds that no notice under Section 143(2) of Income Tax act, 1961 was ever issued to them. This objection was noted by ITAT. However, this objection was not decided by ITAT because ITAT deemed it appropriate to grant Assessee relief on other grounds, i.e. ground that this was not case of undisclosed income , which was regarded as one of prerequisite for assessment under this Chapter. 8. substantial questions of law framed in our Order dated 27.08.2008 therefore, mainly relate to this ground on basis of 5 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 which ITAT chose to grant relief to Assessee. 9. By filing cross-objections, Assessee seeks to urge ground based upon non-service of notice under Section 143(2) of Income Tax Act, 1961. 10. Mr. Pardiwala, learned Counsel for Assessee submits that Hon'ble Apex Court in case of Assistant Commissioner of Income Tax And Another v/s. Hotel Blue Moon 1 has now held that notice under Section 143(2) of Income Tax Act is necessary in case of assessment proceedings under Section 158 BC of Income Tax Act. He submits that this is issue which goes to root of jurisdiction. He submits that in case, if this issue is taken up for consideration and decided in favour of Assessee, then, there will be no necessity to decide substantial questions of law framed at time of admission of this Appeal. He submits that sufficient cause has been shown in application seeking condonation of delay. 11. Mr. Pardiwala, without prejudice, submits that in this case, no cross-objections were filed earlier because at time when this Appeal was admitted, issue as to whether notice under Section 143(2) of Income Tax Act is necessary or not had not been 1 2010 3SCC 259 6 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 decided by Hon'ble Apex Court. Besides, he points out that ITAT in this case, had not given any specific finding on this issue against Assessee. Therefore, it was felt that there was no necessity to file any cross-objections. He submits that there are sufficient powers vested in this Court to frame additional substantial questions of law even at stage of final hearing of Appeal. He refers to decision of this Court in Commissioner of Income Tax v/s. M/s. Sodder Builder and Developers (P) Ltd., in Tax Appeal no. 49 of 2008 decided on 16.07.2019 to submit that additional substantial questions of law precisely on issue of non-issuance of notice under Section 143(2) of Income Tax Act was framed by this Court and answered in favour of Assessee. For all these reasons he submits that either delay in institution of cross- objections be condoned and cross-objections be taken into consideration or at least substantial questions of law be framed at this stage, now that matter is fully covered by decision of Hon'ble Supreme Court in case of Hotel Blue Moon. 12. In addition to aforesaid, Mr. Pardiwala points out in terms of Section 260A(7), provisions of Code of Civil Procedure (CPC) apply to Appeals to High Court. He refers to provisions of Order 41 Rule 33 of CPC to submit that Appellate Court has ample powers to consider question of non- issuance of notice under Section 143(2) and decide matter in 7 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 favour of Assessee. He also refers to provisions of Section 260A(6) of Income Tax Act to submit that High Court may determine any issue which has not been determined by Appellate Tribunal. He submits that in present case ITAT failed to determine issue of necessity of notice under Section 143(2) of Income Tax Act and therefore, this Court may determine same in this Appeal. 13. Mrs. Susan Linhares, learned Standing Counsel for Appellant submits that there is no case made out for condonation of delay which is of over 2000 days in filing cross-objections. She submits that Assessee was represented by Advocate and there is no reason to hold that Assessee was not properly advised in matter. She further points out that ITAT has recorded that no further arguments on any other points raised on behalf of Assessee. 14. In peculiar facts and circumstances of present case, we are satisfied that following substantial question of law does arise for determination in this Appeal: Whether non-issuance of notice under Section 143(2) of Income Tax Act, 1961 vitiates that assessment proceedings under Section 158 BC of Income Tax Act in view of Judgment of Hon'ble Supreme 8 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 Court in Assistant Commissioner of Income Tax And Another v/s. Hotel Blue Moon reported in 2010 3SCC 259? 15. Section 260A reads as follows: 260A. (1) appeal shall lie to High Court from every order passed in appeal by Appellate Tribunal [before date of establishment of National Tax Tribunal], if High Court is satisfied that case involves substantial question of law. (2) Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or assessee aggrieved by any order passed by Appellate Tribunal may file appeal to High Court and such appeal under this sub- section shall be - (a) filed within one hundred and twenty days from date on which order appealed against is received by assessee or Principal Chief Commissioner or Chief Commissioner or Principal Chief Commissioner or Commissioner. (b) [***] 9 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 (c) in form of memorandum of appeal precisely stating therein substantial question of law involved. (2A) High Court may admit appeal after expirty of period of one hundred and twenty days referred to in clause (a) of sub-section (2), if it is satisfied that there was sufficient cause for not filing same within that period. (3) Where High Court is satisfied that substantial question of law is involved in any case, it shall formulate that question. (4) appeal shall be heard only on question so formulated, and respondents shall, at hearing of appeal, be allowed to argue that case does not involve such question : Provided that nothing in this sub-section shall be deemed to take away or abridge power of court to hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it, if it is satisfied that case involves such question. (5) High Court shall decide question of law so formulated and deliver such judgment thereon containing grounds on which such decision is 10 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 founded and may award such cost as it deems fit. (6) High Court may determine any issue which (a) has not been determined by Appellate Tribunal; or (b) has been wrongly determined by Appellate Tribunal, by reason of decision on such question of law as is referred to in sub-section (1). [(7) Save as otherwise provided in this Act, provisions of Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to High Court shall, as far as may be, apply in case of appeals under this section.] 16. Section 260A(3) provides that where the High Court is satisfied that substantial question of law is involved in any case, it shall formulate that question. 17. Section 260A(4) provides that appeal shall be heard only on question so formulated and Respondents shall at time of hearing of appeal be allowed to argue that case does not involve such question. proviso to this sub-section however states that nothing in this sub-section shall be deemed to take away or abridge power of court to hear, for reasons to be recorded, appeal on any other substantial question of law not formulated by it, 11 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 if it is satisfied that case involves such question. 18. According to us, there is no dispute from record that notice under Section 143(2) of Income Tax Act was never issued to Assessee before initiating of proceedings under Section 158 BC of Income Tax Act. Commissioner (Appeals), in his Order dated 13.09.2004 has given several reasons as to why issuance of such notice was not prerequisite for initiating of assessment proceedings under Section 158 BC of Income Tax Act. According to us, such reasoning cannot any longer prevail after ruling of Hon'ble Apex Court in case of Hotel Blue Moon (supra). In this case, Hon'ble Apex Court, in terms has held that requirements of issuance of notice under Section 143(2) within prescribed period is not some procedural formality or procedural irregularity to hold that such requirement is mandatory and non-dispensable. Hon'ble Apex Court had held that such defect of non-issuance of notice under Section 143(2) of Income Tax Act is not even curable defect. Record also indicate that this issue was precisely raised by Assessee before ITAT. ITAT however, after recording that such issue was raised before it, failed to decide such issue one way or other because, ITAT held in favour of Assessee on some other grounds. 19. Upon cumulative consideration of aforesaid 12 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 circumstances, we are quite satisfied that this Appeal involves aforesaid substantial question of law. We are also satisfied that if substantial question of law is decided in favour of Assessee, then, there will be no necessity to decide other substantial questions of law framed by us on 27.08.2008 at time of admission of this Appeal. 20. In M/s. Sodder Builder and Developers (P) Ltd (supra) in similar circumstances, this Court framed additional question of law precisely on issue of absence of notice under Section 143(2) of Income Tax Act in relation to proceedings under Section 158BC of Income Tax Act. In said decision as well, this Court held that if such issue were to be decided in favour of Assessee, then there would arise no question of going into substantial questions of law framed at time of institution of Appeal instituted by and on behalf of Revenue. 21. Now that we have framed aforesaid question of law, which according to us, is certainly involved in matter, we proceed to decide aforesaid substantial question of law with consent of learned Counsel appearing for parties. 22. According to us, aforesaid substantial question of law will have to be decided in favour of Assessee in view of 13 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 decision of Hon'ble Apex Court in Hotel Blue Moon (supra). issue relating to service of notice under Section 1432(2) of Income Tax Act is issue which goes to root of matter. In Hotel Blue Moon( supra), Hon'ble Supreme Court has now held that issuance of notice under Section 143(2) of Income Tax Act, 1961 is mandatory requirement and not some mere procedural irregularity and same can be said to be curable. In its decision Apex Court in clear terms has held that omission on part of Assessing Authority to issue notice under Section 143(2)cannot be regarded as procedural irregularity and same is not curable and such requirement cannot be dispensed with. Hon'ble Apex Court has held that even for purpose of Chapter XIV-B of Income Tax Act for determining of undisclosed income for block assessment in proceedings under Section 158BC, provisions of Section 142, 143(2) and 143(3) are applicable and no assessment can be made without issuing notice under Section 142 of said Act. 23. Accordingly, we decide additional substantial question of law in favour of Assessee and against Revenue. 24. Since, jurisdictional issue is decided in favour of Assessee and against Revenue, no useful purpose will be served in deciding substantial questions of law framed at time of admission of this Appeal on 27.08.2008. Even if we were to decide these questions 14 TXA/75/08 & MCA/179/16 dtd. 13.09.2019 of law in favour of Revenue, same, would be of no avail to Revenue because very initiation of assessment proceedings without issuance of notice under Section 143(2) of Income Tax Act has rendered such assessment proceedings incompetent. 25. In aforesaid circumstances, we see no ground to interefere with impugned Judgment and Order dated 10.12.2007. By answering additional substantial question of law in favour of Assessee and against Revenue, we dismiss this Appeal. There shall be no order as to costs. 26. In view of aforesaid, any decision on issue of condonation of delay in filing cross-objections is rendered merely academic and therefore, Miscellaneous Civil Application No. 179 of 2016 is also disposed of, accordingly. NUTAN D. SARDESSAI, J. M. S. SONAK, J. msr Commissioner of Income-tax, Panaji v. Fomento Finance and Investment Pvt. Ltd