The English Premier League club went into voluntary administration last Friday but the Government's Revenue and Customs department (HRMC) challenged that move in court on Tuesday.
Frustrated that they come low down the pecking order of creditors at a club with almost 80 million pounds of debts, HRMC demanded more information and wanted confirmation the appointment of the administrators was valid.
"The question we ask, and supporters and members of the public ask, is how is it possible that this once-great club has become insolvent with liabilities exceeding assets by a figure of 65 million (pounds)?," Gregory Mitchell, representing HMRC, told High Court judge Mr Justice Norris.
He said HMRC wanted to know how a "succession of owners of the club have allowed such enormous debts to accrue".
"We say there are serious questions which arise and require a full investigation into the financial dealings between the various owners of the club, which at the moment are shrouded in mystery."
He said HMRC supported the administration but also wanted the questions answered and to be satisfied about "areas of concern".
"We understand that any funds will come from Mr Chainrai and our concern is that there should be a full and independent investigation of the position and the transactions between the club and Mr Chainrai."
Mr Mitchell said although HMRC welcomed the administration if properly funded, there were concerns about where funds to meet the debts will come from.
Adjourning the case until the week beginning March 14, Justice Norris said: "A shadow has been cast over the existing appointment of the administrators and that shadow should be removed as quickly and cheaply as possible".
Portsmouth, bottom of the Premier League, are almost certain to be deducted nine points for going into administration but league officials are waiting for the outcome of the court case before deciding on the matter.
