Order of High Court dismissing Revenue's appeal in limine held unsustainable in law.

The appeal before the court arose from a decision by the High Court of Delhi, where the appellant's appeal was dismissed on the grounds that it did not involve any substantial question of law. The appellant, the Revenue (Commissioner of Income Tax), challenged the dismissal, claiming that the High Court was not justified in its decision.

The issue at hand concerned the legality and correctness of a notice issued by the Assessing Officer (AO) under Section 148 (of Income Tax Act, 1961), and the subsequent determination made by the AO in the assessment order. The respondent (assessee) had raised objections to the notice, arguing that it was based on a change of opinion and therefore invalid. The objections were upheld by the Income Tax Appellate Tribunal (ITAT), resulting in the appeal being allowed by the respondent and the Revenue's appeal being dismissed by the High Court.

The court concluded that the High Court was not justified in dismissing the appeal solely on the grounds that it did not involve any substantial question of law. Consequently, the impugned order was set aside, and the case was remanded to the High Court for a fresh decision on the appellant's appeal based on its merits and in accordance with the law.

The court also framed four substantial questions of law that should have been considered by the High Court during the appeal, including the validity of the notice issued under Section 148 (of Income Tax Act, 1961) and the legal sustainability of the ITAT's findings on the merits of the case. These questions are to be answered by the High Court during the fresh disposal of the appeal.

The court clarified that its decision to remand the case to the High Court was without expressing any opinion on the merits of the case and instructed the High Court to decide the appeal independently.

1. Leave granted.

2. This appeal is filed against the final judgment and order dated 21.04.2017 passed by the High Court of Delhi at New Delhi in ITA No.854 of 2016 whereby the Division Bench of the High Court dismissed the appeal filed by the appellant herein.

3. A few facts need mention here in below for the disposal of this appeal, which involves a short point.

4. By impugned order, the Division Bench of the High Court dismissed the Revenue's (appellant herein) appeal filed under Section 260 (of Income Tax Act, 1961)­A of the

Income Tax Act, 1961 (hereinafter referred to as “the Act”) on the ground that it did not involve any substantial question of law within the meaning of Section 260 (of Income Tax Act, 1961)­A of the Act.

5. In other words, the High Court was of the view that since the appeal did not involve any substantial question of law, it deserves dismissal in limine.

6. The appellant is the Revenue (Commissioner of Income Tax) and the respondent is an assessee. The issue arises out of an assessment year (1999-­2000).

7. The issue essentially relates to legality and correctness of the notice issued by the Assessing Officer (AO) to the respondent under Section 148 (of Income Tax Act, 1961) of

the Act and to the consequential determination made by the AO in the assessment order for which the impugned notice was issued to the respondent.

8. The objections raised by the respondent (assessee) to the notice contending inter alia that since the impugned notice was based on "change of

the opinion" and hence bad in law was upheld by the ITAT resulting in allowing the respondent's appeal and further by dismissing the Revenue's

appeal by the High Court. The Revenue has felt aggrieved by the order of the High Court dismissing their appeal in limine and has filed the present appeal by way of special leave in this Court.

9. The short question, which arises for consideration in this appeal, is whether the High Court was right in dismissing the Revenue's appeal

in limine holding that it did not involve any substantial question of law.

10. Having heard the learned counsel for the

parties and on perusal of the record of the case, we

are of the view that the High Court was not justified

in dismissing the appeal on the ground that the

appeal did not involve any substantial question of

law. We are, therefore, constrained to allow this

appeal, set aside the impugned order and remand

the case to the High Court for deciding the

appellant’s appeal afresh on merits in accordance

with law.

11. In our considered view, the following

substantial questions of law do arise in this appeal

filed by the Revenue (appellant herein) under

Section 260 (of Income Tax Act, 1961)­A of the Act in the High Court against

the order dated 03.06.2016 passed by the ITAT in

Appeal No. 1870/DEL/2010 and the same should

have been framed by the High Court for deciding the

appeal on merits in accordance with law:

1. Whether the ITAT was justified in

holding that the notice issued by the AO

under Section 148 (of Income Tax Act, 1961) was bad in law when

admittedly the impugned notice was issued

in the case where the assessment was made

under Section 143(1) (of Income Tax Act, 1961) but not under

Section 143(3) (of Income Tax Act, 1961).

2. Whether the ITAT was justified in

holding that the notice issued under Section

148 of the Act was bad because it was based

on mere change of opinion by overlooking the

fact that there was no foundation to form any

such opinion.

3 When admittedly the notice in

question satisfied the requirements of

Section 148 (of Income Tax Act, 1961) as it stood, namely,

that first, it contained the facts constituting

the "reasons to believe" and second, it

furnished the necessary details for assessing

the escaped income of the assessee, whether

the ITAT was still justified in declaring the

notice as being bad in law without taking into

consideration any of these admitted facts.

4 In case, if the notice is held proper

and legal, whether the finding recorded by

the ITAT on the merits of the case on each

item, which is subject matter of the notice, is

legally sustainable.

12. In our considered view, the aforementioned

four questions framed need to be answered by the

High Court on their respective merits while deciding

the appeal filed by the Revenue (appellant herein)

under Section 260 (of Income Tax Act, 1961)­A of the Act.

13. We are, therefore, of the view that such order

is not legally sustainable in law and hence deserves

to be set aside.

14. In view of the foregoing discussion, the appeal

succeeds and is accordingly allowed. The impugned

order is set aside. The case is remanded to the High

Court for answering the aforementioned questions

on merits in accordance with law.

15. Since we have formed an opinion to remand

the case to the High Court for its fresh disposal on

merits, we have not expressed any opinion on the

merits of the case while deciding this appeal. The

High Court will, therefore, decide the appeal

uninfluenced by any observation made by this

Court in this order.

[ABHAY MANOHAR SAPRE]

[DINESH MAHESHWARI]

New Delhi;

April 08, 2019