S.40 (a) (ia) r.w.s 194C - SHREE CHOUDHARY TRANSPORT COMPANY (SC) – COUNSELS MISSED TO POINT OUT THAT NO SUBSTANTIAL QUESTIONS OF LAW WERE FRAMED BY HIGH COURT and did not request for restoration of appeal to High Court- a fit case for review.

[DEV KUMAR KOTHARI]

Recent judgment of the honorable Supreme Court:

SHREE CHOUDHARY TRANSPORT COMPANY VERSUS INCOME TAX OFFICER 2020 (8) TMI 23 - SUPREME COURT in which appeal was against  the following judgment:

SHREE CHOUDHARY TRANSPORT COMPANY VERSUS INCOME TAX OFFICER  2009 (5) TMI 865 - RAJASTHAN HIGH COURT  INCOME TAX APPEAL No. 164 of 2008 Dated: - 15 May 2009

Appeal of assesse:

The appeal before the High Court was filed in the year 2009 against order of Tribunal   Dated:  29 August 2008

 Therefore,  the appeal was under S.260A of the Income-tax Act,1961.

Sections 260A and 260B falling under Chapter XX – part CC of the Income-tax Act, 1961 were inserted w.e.f. 01.10.1998.

Therefore, this appeal  was  u/s 260A  against order of Tribunal, and   not a case of reference for opinion of High Court under old provisions of section 256 for reference to High Court for question of law arising from the order of Tribunal.

The provisions of S.260A were required to be complied with by the High Court and non-compliance should have been a point of grievance of appellant/ assesse before the Supreme Court also.

With respect to counsels of assesse as well as the revenue, author feels that both sides failed, as officer of Court,  to assist the high Court to make compliance of the provisions of S.260A.

 In fact, with due respect, author feels that even their lordships of the Supreme Court  could have preferably restored the appeal to High Court , by  having a look  upon  provisions and judgments of Supreme Court on mandatory nature of requirements as per  provisions of S.260A read with the summary and short order of the High Court, in which there is no mention of SQL prosed by appellant and framed by the High Court.

This was a fit case for restoring the appeal / matter to the High Court, for formulation of SQL and deciding the same.

However, instead the Supreme Court preferred to decide  the issues (which involved facts and law both) ignoring the fact that  no SQL were formulated by the High Court. May be their lordships were conscious of old pending appeal of 2009 and with a view   to avoid further delay, a detailed order has been passed by the Supreme Court.

However, relevant issue is whether the summary order of the High Court , in this case, can be regarded as a judgment of the High Court , on an appeal made to the High Court, in respect of an order passed under S.254.

Another question is whether the Supreme Court can do so, or is justified in doing so, in absence of SQL framed and answered by the High Court?   

Let us have a look on provisions of S.260A and 261 which are reproduced below with highlights added by author:

Appeal to High Court.

260A. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal ²[***********], if the High Court is satisfied that the case involves a substantial question of law.

(2) ³[The ⁸[Principal Chief Commissioner or] Chief Commissioner or ⁸[Principal Commissioner or] Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be-]

(a) filed within one hundred and twenty days from the date on which the order appealed against is ⁴[received by the assesse or the ⁸[Principal Chief Commissioner or] Chief Commissioner or ⁸[Principal Commissioner or] Commissioner];

(b) ⁵[***]

(c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.

⁷[(2A) The High Court may admit an appeal after the expiry of the 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 the same within that period.]

(3) Where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question.

(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question :

Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question.

(5) The High Court shall decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded and may award such cost as it deems fit.

(6) The High Court may determine any issue which-

(a) has not been determined by the Appellate Tribunal; or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1).

⁶[(7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section.]

 Appeal to Supreme Court.

261. An appeal shall lie to the Supreme Court from any judgment of the High Court delivered ¹[********] on a reference made under section 256 ²[against an order made under section 254 before the 1st day of October, 1998 or an appeal made to High Court in respect of an order passed under section 254 on or after that date] in any case which the High Court certifies to be a fit one for appeal to the Supreme Court.

The High Court is required to formulate Substantial Questions of law (SQL):

As per clear provisions of S.260A and well settled legal position by several judgments of the Supreme Court,  the High Court is required to formulate SQL.

The High Court is required to answer such SQL as are framed by the High Court.

Summary order of Rajasthan High Court:

On reading of judgment/ order of High Court we find that, on filing of appeal by assesse/ appellant notices were issued and counsels of both sides were present. As per order of High Court, only counsel of Appellant/ assesse  was  heard. (it appears that in view of summary order, there was no need for the counsel of revenue/ respondent to speak, so he was not heard, though he was present).

 Therefore, the High Court was required to formulate SQL and then answer such SQL.

  The judgment /order   is reproduced below with highlights added:

Quote:

For the Appellant : Sanjeev Johari

For the Respondent : K.K. Bissa

“ORDER :

Heard learned counsel for the appellant and perused the impugned order.

In our view, on the language of section 194C(2), and the fact that the goods received were sent through truck owners by the appellant, and there was no privity of direct contract between the truck owners and the cement factory. According to the contract between the appellant and the cement factory, it was the appellant's responsibility to transport the cement, and for that the appellant hired the services of the truck owners, obviously as sub-contractors. In that view of the matter, we do not find any error in the impugned order of the Tribunal. The appeal is, therefore, dismissed summarily.”

Unquote:

On reading of the above order of the honorable High Court we find that the High Court has considered only provision of S. 194C. Whereas the disallowance was made under Section 40(a) (ia) though read with S.194C. S. 194C, may not be applicable in many situations similarly  S. 40 (a) (ia) may not be applicable in many situations.

Before the Tribunal several contentions were raised and for the same various judgments, were also relied on by assesse. Various issues were complex on factual and legal aspects both.

The honorable High Court has not dismissed appeal for reasons that no SQL arise or the appeal involves only question of fact and the Tribunal is final fact finding authority.

Rather the High Court had held that “  we do not find any error in the impugned order of the Tribunal. The appeal is, therefore, dismissed summarily.”

In fact, even the SQL, as incorporated in the memorandum of appeal before the High Court have not been mentioned in the summary order.

With due respect, author feels that the dismissal of appeal in such summary manner is not in accordance with the provisions of S.260A and also provisions of Civil Procedure Code.

Observations of the Supreme Court:

On reading of the judgment of the Supreme Court also it is clear that the Supreme Court has also found that the High Court passed a summary order. The Supreme Court has also not mentioned about SQL raised in appeal memo and SQL , as framed by the High Court.

 From the order / judgment of the Supreme Court:

Quote (with highlights added)
Preliminary

1. By way of this appeal, the assessee-appellant has called in question the order dated 15.05.2009 passed in Income Tax Appeal No. 164 of 2008 whereby, the High Court of Judicature for Rajasthan at Jodhpur has summarily dismissed the appeal against the order dated 29.08.2008 passed in ITA No. 117/JU/2008 by the Income Tax Appellate Tribunal, Jodhpur Bench at Jodhpur; and thereby, the High Court has upheld the computation of total income of the assessee-appellant for the assessment year 2005-2006 with disallowance of payments to the tune of ₹ 57,11,625/-, essentially in terms of Section 40(a)(ia) of the Income Tax Act, 1961, for failure of the assessee-appellant to deduct the requisite tax at source.

Unquote:

From above preliminary observations of the honorable Supreme court,  we find that the honorable Supreme Court has considered that the appeal is against an order of the High Court dated 15.05.2009, furthermore that the said order is a summary order whereby the appeal has been dismissed  summarily and that by such dismissal  the High Court has upheld the computation of total income of the assessee-appellant for the assessment year 2005-2006 with disallowance of payments to the tune of ₹ 57,11,625/-, essentially in terms of Section 40(a)(ia)

As noted earlier in the order of High Court there is no mention of S.40(a) (ia), there is no mention of SQL as per memo of appeal and no SQL has been framed. The High Court also did not held that the question involved is pure question of fact and no question of law is involved. The order of High Court, cannot, with due respect, be considered a judgment within meaning and purposes of S.260A and 261.

Therefore, when there was no SQL and no judgment, a question arises is whether the Supreme Court was justified  in passing an order and judgment itself instead of sending back the matter to the High Court for compliance with requirements of S.260A.

The Supreme Court has not regarded the order of the High Court as a judgment.

In fact the summary order merely dismissing appeal cannot be called a judgment on appeal filed by appellant in terms of provisions of S.260A.

Therefore. With due respect author express that there is noncompliance of requirements of S.260A by the High Court and accordingly there is no compliance of provisions of S.261 read with S.260A by the honorable Supreme Court  also.

The following judgments are  on the  issue of requirements u/s 260A . The same  have not been found mention in the judgment  in case of Shree Choudhary Transport (supra.) referred above. In fact in entire judgment author could not find any mention about Sections 260A and 261 and substantial question of law.

Following precedence on issue of S.260A  were not mentioned:

2019 (5) TMI 201 - SUPREME COURT RYATAR SAHAKARI SAKKARRE KARKHANE NIYAMIT VERSUS ASST. COMMISSIONER OF INCOME TAX-C-1 & ORS.

2019 (4) TMI 957 - SUPREME COURT  PR. COMMISSIONER OF INCOME TAX, CENTRAL 2 VERSUS M/S A.A. ESTATE PVT. LTD.

2020 (7) TMI 544 - SUPREME COURT  SHIV RAJ GUPTA VERSUS  COMMISSIONER OF INCOME-TAX, DELHI-IV 

In ultimate analysis, author feels that the order and judgment in case of Shree Choudhry Transport Co. is a fit case for recall , review and restoration to the high Court. Readers may also refer to other articles by the author on issue of Substantial Question of Law and appeal u.s. 260A.