BRODWELD PVT. LTD. V. DEPUTY COMMISSIONER INCOME TAX

SCA/17621/2017

AI Insights

The case involves Brodweld Pvt. Ltd., the petitioner, challenging an order by the Income Tax Appellate Tribunal (ITAT) concerning block assessments for the years 1996-97 to 2001-02. The core issue arose from the alleged suppression of net profit for the assessment years 1998-99 and 2000-01, which was initially omitted due to an inadvertent error by the Revenue but later included and allowed by the ITAT. The petitioner contested that the additional ground was raised without proper procedure, including lack of notice and opportunity to contest. The High Court found that the Tribunal had not followed proper procedures in allowing the additional ground and remanded the matter for fresh consideration.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 762967 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 19-03-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: B S SOPARKAR
• Keywords: Additional ground; Block assessment; Income Tax; Miscellaneous Application; Suppression of Net Profit
• Section: 143(3)

Judgement Text

"C/SCA/17620/2017 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 17620 of 2017 With R/SPECIAL CIVIL APPLICATION NO. 17621 of 2017 BRODWELD PVT. LTD. Versus DEPUTY COMMISSIONER INCOME TAX Appearance: MR B S SOPARKAR(6851) for the PETITIONER(s) No. 1 MR.VARUN K.PATEL(3802) for the RESPONDENT(s) No. 1,2 CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 19/03/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These petitions arising in common back-ground have been heard together and are being finally disposed of by this common judgement. We may notice the facts as emerging from the record of Special Civil Application No. 17620 of 2017. 2. Assessee has filed these petitions challenging an order dated 27.03.2017 passed by the Income Tax Appellate Tribunal ['ITAT' for short] as well as the portion of an order dated 05.12.2008 passed by the said Tribunal which challenges arise in following background: 3. The petitioner was subjected to search operation which led to framing of block assessment for the assessment years 1996-97 Page 1 of 8 C/SCA/17620/2017 ORDER to 2001-02 by the Assessing Officer which gave rise to the orders of assessment. The assessee appealed against orders of assessment before the CIT(Appeals) who gave substantial relief to the assessee in his order dated 10.03.2003. The Revenue thereupon filed different tax appeals before the Tribunal. We are concerned with tax appeals for the assessment years 1998-99 and 2000-2001. In all these years, the issue before the Assessing Officer and also before the CIT(Appeals) was of alleged suppression of the net profit. The Assessing Officer had made certain additions purportedly on the basis of seized material. CIT (Appeals) had deleted the additions for all assessment years. In the appeals that the Revenue filed before the Tribunal, however, this ground was taken in all years except in the assessment years 1998-99 and 2000-01. According to the Revenue, this was a pure inadvertent error. 4. Group of appeals was fixed for hearing before the Tribunal at Baroda on 22.09.2008. Case of the Revenue is that during the course of the hearing, the Revenue's representative realized that due to inadvertent error, this ground has been omitted in the said two assessment years. Immediately steps were taken for making amends and additional ground was raised for both these years which was also entertained by the Tribunal. The case of the assessee, however, is that during the course of oral hearing, the Revenue sought permission of the Tribunal to raise this additional ground for both the assessment years Page 2 of 8 C/SCA/17620/2017 ORDER 1998-99 and 2000-01. The Tribunal orally refused such permission on the ground that at such a belated stage, no additional ground can be allowed to be raised. 5. Be that as it may, when the Tribunal disposed of all the appeals of the Revenue by common judgement dated 05.12.2008, this ground was taken into consideration for both the disputed assessment years and, in fact, allowed also. The assessee-petitioner thereupon immediately filed a Miscellaneous Application before the Tribunal on 27.10.2009 and hotly disputed the record suggesting that no new ground was permitted by the Tribunal. At any rate, copy of the application of the department was not served on the petitioner and no opportunity was given to the petitioner either to oppose raising of the additional ground or to oppose the restoration of the additions urged by the Revenue. 6. By the time this Miscellaneous Application came up for hearing before the Tribunal, the original composition of the Bench had completely changed. Both the members who presided in the hearing and disposal of the appeals of the Revenue were either transferred or retired. New members therefore, obviously did not have any personal information about this hotly disputed factual aspect. The members therefore offered to restore all tax appeals on this ground before the Tribunal for fresh hearing and disposal. Counsel for the assessee understandably refused such offer. The Tribunal Page 3 of 8 C/SCA/17620/2017 ORDER therefore rejected Miscellaneous Application giving rise to the present petition. 7. Learned counsel Mr. Soparkar vehemently contended that the Tribunal had not given permission to raise the additional ground. No additional ground could have been even otherwise raised within the short time available to the Revenue's representative. These appeals were listed at serial Nos. 1 to 18 before the Tribunal. Hearing would have been over in maximum one hour, a time which is too short to enable the Revenue to activate its entire machinery which would include the authorized representative to take permission from the Commissioner and raise written grounds before the Tribunal. In any case, the concern representative has shied away from making specific averments with respect to the actual events of the date. Application of the Revenue for raising the ground was not served on the assessee. No endorsement of the assessee is found on such application. At any rate thus, it is clear that such grounds were allowed to be taken in without opposition of the assessee. The assessee was therefore obviously not heard on the merits of the additions which the Tribunal restored. 8. On the other hand, learned counsel for the department opposed the petition contending that the official record cannot be doubted or disputed. The members of the Tribunal, who had disposed of the appeals, have recorded that such grounds were Page 4 of 8 C/SCA/17620/2017 ORDER allowed to be raised. In absence of any contrary material, this averment cannot be doubted. He further submitted that not raising these grounds in these two assessment years was a pure error. The Revenue had taken up this issue in all other assessment years. The assessee should not be allowed to get benefit on two technical reasons. 9. The Courts start with a strong presumption that the official records of the subordinate Courts and Tribunals are true and faithful to the actual facts and events. Disturbing such official recordings must necessarily be rare in exceptional circumstances and when clinching evidence suggests to the contrary. Having been taken through the documents and records contemporaneous with the evidence which unfolded later, it does appear that the additional ground for the said two assessment years was allowed to be raised by the Tribunal once the hearing was over. In fact, the Tribunal in its order dated 05.12.2008 while disposing of the Tax Appeals of the Revenue in the context of this additional ground for the assessment years 1998-99 and 2000-01 had observed as under: “As no new facts are to be investigated, therefore, the additional grounds taken by the Revenue, after hearing the rival submissions stand admitted.” 10.These observations of the Tribunal are significant and would suggest that the Revenue was allowed to raise this ground after the submissions were over. This appears to have been done by Page 5 of 8 C/SCA/17620/2017 ORDER the Tribunal on the premise that this ground was common for assessment years and there was a common factual thread running through all assessment years concerning this ground. This feeling of the Tribunal we respect. Nevertheless, there is always a method of achieving the ultimate just conclusion through proper procedure. The Tribunal seems to be carrying an overwhelming impression that the facts were common, the ground was common and probably the ultimate conclusion that the Tribunal may arrive at for all assessment years was not possible to be divested in separate assessment years. This may justify the Tribunal being linent in allowing an additional ground to be raised at the last moment. This however, by no means would permit allowing such a ground (i) without putting it to the notice of the assessee; (ii) without inviting and considering objection, if raised and; (iii) at any rate, even after entertaining such a ground, deciding the same on merits without hearing the assessee. No matter how futile it may appear to follow such a sequence, it must be done. The Tribunal's impression that no difference would be made even if the assessee were to be heard, must at best be the Tribunal's unilateral opinion and, in a given case, may even be proved to be erroneous, if the assessee is allowed full participation at every crucial stage. 11.The ultimate conclusion that we would therefore reach is that this is not a case where the Tribunal has decided a ground which was never raised by the Revenue, a suggestion which is Page 6 of 8 C/SCA/17620/2017 ORDER otherwise made by the petitioner but we are unable to accept. The fact that the Revenue moved with great speed need not be conclusive. How long that the arguments last, merely because it was the group of appeals which was listed at serial Nos. 1 to 18 arguments were heard ahead of other appeals, whether the Commissioner's decision was conveyed to the Revenue's representative who was present before the Tribunal telephonically allowing him to proceed to raise the ground without written communication are issues not possible perhaps not necessary for us to finally comment upon. We are unable to find conclusive evidence to hold that the Tribunal entertained a ground which was not raised. 12.The second important conclusion that we have reached is that the Tribunal did act somewhat informally in the process. We are convinced that the assessee was not given an opportunity to oppose this additional ground being raised by the Revenue in these two years and more importantly, oppose the ground on merits. 13.The inevitable result of these conclusions would be that the Revenue's appeals for the said two assessment years 1998-99 and 2000-01 would have to be placed back before the Tribunal on this limited issue. Ordinarily, we would have placed the matter back before the Tribunal at a stage where the Revenue would be allowed to press its application for adding this ground for the said two assessment years and the assessee Page 7 of 8 C/SCA/17620/2017 ORDER would be allowed to oppose even this request. However, learned counsel Mr Soparkar agreed that the matter be remanded to the Tribunal for considering afresh the Revenue's ground for the said two assessment years 1998-99 and 2000-01 allowing the assessee full opportunity to oppose the additions pressed by the Revenue on this ground. In other words, the assessee would not object the Revenue's request for raising this additional ground for the said two assessment years. 14.Under the circumstances, the petitions are allowed in part. The impugned judgement of the Tribunal dated 05.12.2008 is set aside to the limited extent where the Tribunal has allowed the Revenue's appeals for the assessment years 1998-99 and 2000- 01 on the additional ground of deletion of suppression of net profit by the CIT (Appeals) on the basis of diary called black diary seized during the search. For such purpose Tribunal's findings on this issue are set aside for fresh independent disposal in accordance with law. 15.Order dated 27.03.2017 passed by the Tribunal in the Miscellaneous Application does not survive. Petitions are disposed of accordingly. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 8 of 8 "