1968 (9) TMI 44 - HC - Income Tax

Assessee appealed to AAC against an order of assessment but not questioned the decision of IT on the point decided. AAC has not considered that point in his order - further appeal to Tribunal - assessee was not entitled to question the decision of the officer on the point in an appeal to the Tribunal against the order of the AAC - further tribunal was not entitled to allow the assessee to agitate this question under the guise of granting leave under r. 11 of the IT (Tribunal) Rules 1963 -

Summary

Issues Involved:
1. Jurisdiction of the Tribunal under the Income-tax Act, 1961.
2. Competence of the Tribunal to entertain an additional ground of appeal not raised before the Appellate Assistant Commissioner.
3. The principle of merger of the Income-tax Officer's order with the Appellate Assistant Commissioner's order.
4. Interpretation of relevant statutory provisions and rules, including Sections 246, 250, 251, 253, and 154(1A) of the Income-tax Act, 1961, and Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Tribunal under the Income-tax Act, 1961

The core issue was whether the Tribunal had jurisdiction to allow the assessee to raise an additional ground of appeal regarding the deduction of Rs. 25,920, which was not initially contested before the Appellate Assistant Commissioner. The Tribunal's jurisdiction is defined by the scope and ambit of the relevant statutory provisions, particularly Sections 246, 250, 251, and 253 of the Income-tax Act, 1961. The judgment clarified that the Tribunal's jurisdiction is contingent upon the matters considered and decided by the Appellate Assistant Commissioner.

2. Competence of the Tribunal to entertain an additional ground of appeal not raised before the Appellate Assistant Commissioner

The Tribunal allowed the assessee to raise an additional ground of appeal based on a Supreme Court decision in India Cements Ltd. v. Commissioner of Income-tax, which deemed such expenditure allowable under Section 37 of the Income-tax Act, 1961. However, the High Court held that since the disallowance of the third claim was neither raised nor decided by the Appellate Assistant Commissioner, the Tribunal lacked the competence to entertain this additional ground. The judgment emphasized that an appeal to the Tribunal must be based on decisions made by the Appellate Assistant Commissioner, and there was no such decision regarding the third claim.

3. The principle of merger of the Income-tax Officer's order with the Appellate Assistant Commissioner's order

The judgment examined whether the order of the Income-tax Officer merged with the order of the Appellate Assistant Commissioner. It was established that the order of the Income-tax Officer ceases to exist and merges into the order of the Appellate Assistant Commissioner, making the latter the operative order. However, this principle does not imply that every aspect of the Income-tax Officer's order is automatically considered and decided by the Appellate Assistant Commissioner. The High Court clarified that the Appellate Assistant Commissioner is not obligated to examine every decision of the Income-tax Officer unless it is specifically challenged or considered suo motu.

4. Interpretation of relevant statutory provisions and rules

The judgment delved into the interpretation of Sections 246, 250, 251, 253, and 154(1A) of the Income-tax Act, 1961, and Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. Section 246 provides the right of appeal to the assessee, while Section 250 outlines the hearing process. Section 251 grants the Appellate Assistant Commissioner broad powers to confirm, reduce, enhance, or annul the assessment. Section 253 allows both the assessee and the revenue to appeal to the Tribunal. Section 154(1A) addresses the rectification of orders. Rule 11 permits the Tribunal to allow grounds not set forth in the memorandum of appeal but does not extend to grounds that could not have been originally taken.

The High Court concluded that the Tribunal's discretion under Rule 11 does not extend to grounds that were not and could not have been raised before the Appellate Assistant Commissioner. The Tribunal's decision to allow the additional ground was therefore beyond its jurisdiction.

Conclusion

The High Court answered the referred question in the negative, stating that the Tribunal did not have jurisdiction to allow the assessee to raise the additional ground concerning the deduction of Rs. 25,920. The assessee was ordered to pay the costs of the reference to the Commissioner.