Kansai Nerolac Paints Ltd vs. DCIT (Bombay High Court)

DATE: (Date of pronouncement)
DATE: June 5, 2014 (Date of publication)

Click here to download the judgement (kansai_nerolac_ITAT_remand_power.pdf)

S. 254: If a legal issue is raised (even for the first time) ITAT has the duty to deal with it and cannot remand it to lower authorities

Before the Tribunal, the assessee raised an additional ground claiming that the penalty order was not valid as it had been passed on an assessee which was not in existence pursuant to an order of amalgamation. The Tribunal admitted the additional ground of appeal and held that as it had been raised for the first time, the matter should be remanded to the AO for fresh consideration. The assessee filed an appeal in the high Court claiming that as the issue was a legal one, the Tribunal ought to have decided the issue and not remanded it. HELD by the High Court allowing the appeal:

The Tribunal should have answered the legal issue itself. The Tribunal was not prevented in any manner and in law from considering a purely legal issue for the first time, more so, if this legal issue goes to the root of the matter. The issue was an impact and legal effect of a order of amalgamation and winding up of the assessee thereto on the penalty proceedings have been initiated and were continuing. If they were initiated prior to the order of the winding up passed or the scheme of amalgamation being sanctioned, then, whether the subsequent act of a order sanctioning the scheme would permit continuation of the proceedings against an entity or company which is wound up and in terms of the provisions contained in the Act was, thus, a clear legal issue. It should have been answered by the Tribunal, particularly when it had admitted the question or ground and also the additional evidence filed by the assessee. The only two documents which required to be looked into were the scheme of amalgamation and the order passed in pursuance thereof by this Court. If that was the admitted factual position and based on which the legal issue was raised, then, the Tribunal was obliged to answer the legal question. Its omission to answer it, therefore, is vitiated in law. The Tribunal is a last fact finding Court and equally if it could have been approached by the assessee both on law and fact, then, in the given circumstances, the Tribunal should have answered this issue and its failure to do so can safely be termed as not performing its duty in law. The direction to remit and to remand it to the AO is not justified and in the peculiar facts and circumstances noted above

Note: A similar view has been taken in Coca-Cola 290 ITR 464 (Bom)
One comment on “Kansai Nerolac Paints Ltd vs. DCIT (Bombay High Court)
  1. True. Hon ugh Court of Bombay is right. if there is both facts and law issues are raised too Ld. ITAT should not remit to Ld. AO, as Ld. AO being a prosecutor and how you can ask a prosecutor to decide the issue and if allowed he would be partial to revenue and definitely principles of Natural Justice under Art 14 or even otherwise gets into arbitrary cycles is called justice. So justice perforce need to be seemed to have been done would get thrown to Winds of arbitrariness and coercion. Then it would become non governance by a democratic government.

    Besides even Monarchy believing in divine law and divine justice could not do that is why common law became vital to Britain and thus Britain was able to rule 3/4 of the world. That means even slaves cannot be subjected to arbitrariness is the factum!

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