Can Questions of law be raised for the first time before the High Court?
Section 275 of the Income Tax Act imposes a bar of limitation for imposing penalties. Section 275(1)(a) provides that no penalty can be imposed in a case where Appeal is preferred before the Commissioner of Income tax (Appeal) u/ s246 or 246A after the end of the Financial year in which the Proceedings, in the course of which action for imposition of Penalty has been initiated are completed, or six months from the end of the month in which the order of the Commissioner of Income tax (Appeal)is received by the Chief Commissioner which ever period expires later.
Where the relevant Assessment or other order is appealed against before the Appellate Tribunal u/s 250, after the expiry of the financial year in which the relevant Assessment or other Proceedings in the course of which action for imposition of Penalty has been initiated, are completed, or six months from the end of the month in which the order of the Appellate Tribunal is received by the Commissioner which ever period expires later.
Let us refer to the case of CIT v. Jhabua Power Ltd. (2013), where the issue under consideration was whether questions on limitation raised for the first time before the SC could be entertained by High Court without having been raised before the lower courts or not
Facts of the Case:
Assessment of the return submitted by the Assessee company was undertaken by the concerned ITO under sections 143(3) and 147 of the Income-tax Act and subsequently, penalty was levied by the ACIT under section 271D of the Act
Appeal to High Court
During the appellate procedure, it was only on appeal to the jurisdictional High Court that for the first time the revenue department raised two questions of law which were as follows:
- Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal failed to appreciate that the period of limitation in the instant case is governed by the provisions of Section 275as the penalty was initiated in the assessment order itself and the penalty order was issued within time in accordance with the provisions of Section 275(1)(a) of the Income Tax Act, 1961?
- Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in coming to the conclusion that the order of penalty was barred under provisions of Section 275(1)(c) and failed to consider that penalty was initiated in the assessment order itself and the same was issued within time and in accordance with Section 275(1)(a) of the Income-tax Act, 1961?
Appeal to the Supreme Court (SC)
On appeal to the Supreme Court of India, the question before the bench was whether the abovementioned questions of law could be raised before the High Court for the first time without any mention in the earlier stages of appeal.
Observations of the Supreme Court (SC)
Ordinarily, an appeal before the jurisdictional High Court can only be in respect of issues which were raised before first appellate authority and therefore any question of law not raised before the first appellate authority cannot be permitted to be raised before High Court for the first time.
The questions of law on Limitation raised for the first time before SC on the applicability of whether order of penalty was barred by limitation under the provisions of sections 275(1)(a) or 275(1)(c) of the Act.
The same should first be answered by the ITAT and then by the High Court, therefore, the matter was remanded to the ITAT and the judgements and order passed by the High Court and ITAT were set aside.