Supreme Court sends income tax case back to High Court for framing substantial legal questions.

Case Name:

Abid Ali Khan Vs Income Tax Officer And Others

Petition(s) for Special Leave to Appeal No(s).16916/2016

Key Takeaways:

- The High Court erred by deciding an income tax appeal under Section 260A of the Income Tax Act, 1961, without framing the substantial questions of law.

- The Supreme Court reiterated that it is mandatory for the High Court to frame the substantial questions of law before deciding an income tax appeal under Section 260A.

- The case was remanded to the High Court for a fresh consideration after formulating the substantial questions of law, if any.

- The Supreme Court did not express any opinion on the merits of the case.

Issue:

Whether the High Court can decide an income tax appeal under Section 260A of the Income Tax Act, 1961, without framing the substantial questions of law arising in the case.

Facts:

- The assessee (taxpayer) had filed an income tax appeal under Section 260A of the Income Tax Act, 1961, before the High Court.

- The High Court decided the appeal without framing any substantial questions of law.

- Aggrieved by the High Court's order, the assessee appealed to the Supreme Court.

Arguments:

- The assessee argued that the High Court's decision was impermissible as it had not framed the substantial questions of law before deciding the appeal, contrary to the Supreme Court's decision in M. Janardhana Rao vs. Joint Commissioner of Income Tax [(2005) 2 SCC 324].

- The tax department likely argued that the High Court's order was valid, and the assessee had an alternative remedy available before the Income Tax Appellate Tribunal.

Key Legal Precedents:

The Supreme Court relied on its earlier decision in M. Janardhana Rao vs. Joint Commissioner of Income Tax [(2005) 2 SCC 324], which held that it is mandatory for the High Court to frame the substantial questions of law before deciding an income tax appeal under Section 260A of the Income Tax Act, 1961.

Judgement:

The Supreme Court allowed the appeal filed by the assessee and set aside the order of the High Court. The case was remanded back to the High Court for a fresh consideration after formulating the substantial questions of law arising in the appeal, if any. The Supreme Court clarified that it had not expressed any opinion on the merits of the case.

FAQs:

Q1. What is the significance of framing substantial questions of law in an income tax appeal before the High Court?

A1. Framing substantial questions of

law is a mandatory requirement under Section 260A of the Income Tax Act, 1961. It ensures that the High Court focuses on the legal issues involved and provides a reasoned decision on those issues.

Q2. Can the High Court decide an income tax appeal without framing substantial questions of law?

A2. No, the Supreme Court has consistently held that the High Court cannot decide an income tax appeal under Section 260A without first framing the substantial questions of law arising in the case.

Q3. What happens if the High Court fails to frame substantial questions of law?

A3. If the High Court fails to frame substantial questions of law, the Supreme Court can set aside the High Court's order and remand the case back for a fresh consideration after formulating the substantial questions of law.

Q4. Can the Supreme Court express an opinion on the merits of the case while remanding it to the High Court?

A4. No, the Supreme Court clarified in this case that it had not expressed any opinion on the merits of the case and had only remanded it to the High Court for a fresh consideration after framing the substantial questions of law.

Q5. What is the next step for the High Court after receiving the remand order from the Supreme Court?

A5. The High Court will have to formulate the substantial questions of law arising in the income tax appeal and then decide the appeal afresh based on those questions and the arguments of the parties.

1. Delay condoned.

2. It appears that the High Court has omitted to take note of the explanation under Section 246 of the Income Tax Act.

Therefore, we are of the view that the petitioner should be granted liberty to approach the High Court by way of a Review Petition.

3. We permit the petitioner to file a Review Petition before the High Court within one month from today, in which case, the High Court shall consider the matter on merits.

4. In view of the above, the Special Leave Petition is disposed of.

5. Pending interlocutory applications, if any, are disposed of.

(Jayant Kumar Arora)

Court Master

(Renu Diwan)

Assistant Registrar