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TMI Blog2014 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). After filing the appeal, the assessee raised additional ground by letter dated 11.12.1992 stating that in the balance sheet printed in the Annual Report of the company, the assessee showed the expenditure of Rs. 19,36,427/- attributed to market development (advertisement) expenses and in the return of income filed, the assessee omitted to claim the said expenditure as deduction under Section 37(1) of the Income Tax Act. The additional statement of fact and ground are as follows: "Additional Statement of Facts: The Company M/s Madras Cements Ltd has incurred a sum of Rs. 19,36,427/- towards Market Development Expenditure during the year ending 31.12.86 relevant for the Assessment year 1987-88. This expenditure has not been charged in to Profit & Loss Account for the year ended 31.12.86, which has been treated as "Miscellaneous Expenditure to the extent not written off for adjusted" in the Balance Sheet. This expenditure has not been allowed in the Assessment year 1987-88. Hence, the assessee prefers this appeal as additional ground, since this point has not been included in the Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings and therefore, the Commissioner of Income Tax (Appeals) ought to have considered the additional ground raised in exercise of sub-section (5) to Section 250 of the Income Tax Act. He also pleaded that the reasoning of the Commissioner of Income Tax (Appeals) that the fact is raised belatedly and it is not a question of law, is not correct, as the issue canvassed by the assessee is in relation to the determination of total income and the tax liability thereon, based on the details furnished by the assessee in the balance sheet. However, in the return of income, the assessee failed to make this claim for deduction under Section 37(1) of the Income Tax Act. But for the purpose of determining the total income and tax liability thereon, as the details relevant for determination was available in the balance sheet, the omission to make such a claim in the return of income should not be held against the assessee and frustrate the claim, which is lawfully due and allowable expenditure. 6. To support this plea, learned counsel appearing for the assessee placed reliance on the decisions reported in (1998) 229 ITR 383 (National Thermal Power Co. Ltd. V. Commissioner of Income-Tax), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the omission was not willful or unreasonable. 10. Section 250 of the Income Tax Act deals with the procedure in appeal. Sub-section (5) of Section 250 provides that if the appellate authority is satisfied, the appellant may be allowed to raise additional grounds. Section 250 (5) of the Income Tax Act reads as follows: "250. Procedure in appeal.--(1) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the Assessing Officer against whose order the appeal is preferred. (2) ...... (3) ...... (4) ...... (5) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable." 11. A reading of the above provision makes it clear that the finding of the Commissioner of Income Tax (Appeals) appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Supreme Court relying upon the decision in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, held that the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. For better clarity, we extract the relevant portion, which is as follows: "In the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR688, this court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee omitted to claim deduction inadvertently and such a claim was made before the Commissioner of Income Tax (Appeals). The Bombay High Court relied upon the decision reported in (1998) 229 ITR 383 (National Thermal Power Co. Ltd. V. Commissioner of Income-Tax) and held as follows: "The orders of the Commissioner of Income-tax (Appeals) and the Tribunal clearly indicate that both the appellate authorities had exercised their juris-diction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC). This is clear from the fact that these judgments have been expressly referred to in detail by the Commissioner of Income-tax (Appeals) and by the Tribunal." 18. The Bombay High Court distinguished the decision reported in (2006) 284 ITR 323 (SC) (Goetze (India) Ltd. V. Commissioner of Income Tax and we do not find any reason why the said decision will in any way limit the claim of the appellant/assessee in the present case. 19. The powers of the Appellate Authority is prescribed in Section 250 of the Income Tax Act to allow the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is so, because the very object of the appeal is not to decide a point raised as a dispute, but any point which goes into the adjustment of the taxpayer's liability. In that sense,a view prevails, even in England, that the authorities sitting in appeal in a tax case, cannot be regarded as deciding a lis, but they are only engaged in an administrative act of adjusting the taxpayer's liability. Under our fiscal jurisprudence, we may regard the appellate authorities as exercising quasi-judicial functions in the same sense as a taxing officer does. But, even so, the proceedings before them lack the basic elements of adversary proceedings. It, therefore, follows that the discussion and the scope of the appellate jurisdiction of the Tribunal and other authorities under the tax code cannot be pursued by drawing a parallel to civil litigation with particular reference to appeals from decrees, and the like. The insistence on one party to the appeal being entitled to the fruits of finality, as it is called, and the appellate authority being confined to the subject-matter of the appeal are all ideas which might have relevance if the discussion centres on purely civil litigation and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isapprehension that an appeal under the Income Tax Act, 1918, is the same in substance as an appeal where two private persons are engaged in litigation. It is, of course, totally different." In IRC v. Sneath [1932] 17 TC 149, Greer L.J. gave a similar descrip-tion of the true position of a tax appeal in the following words, (p. 164) : " I think, the estimating authorities, even when an appeal is made to them, are not acting as judges deciding litigation between the subject and the Crown. They are merely in the position of valuers whose proceedings are regulated by statute to enable them to make an estimate of the income of the taxpayer for the particular year in question." Romer L.J., in the same case, held as under (p. 168) : " The appeal is merely another step taken by the Commissioners, at the instance of the taxpayer, in the course of the discharge by them of their administrative duty of collecting the sur-tax. " Special Commissioners of Income Tax [1935] 20 TC 381, went tothe Court of Appeal land there Lord Wright M. R. reiterated the positionin the following passage in his judgement (p.387) : " I may note here at once that in making the assessment and in dealing with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment is not strictly an arbitral tribunal deciding a contested issue bet-ween two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It enhance the assessment, taking advantage of the opportunity afforded by the taxpayer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself." 21. Taking note of the above principles, while we consider the facts of the present case, we noticed that the assessee in this case has bonafide shown all the expenditure in the balance sheet of the company as stated in the Annual printed report, but the claim was not made in the returns. Notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld record his satisfaction. "The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also." 24. It is to be noted herein that the Act does not contain any express provision preventing the assessee from raising additional grounds in appeal and there is also no provision in the Act restricting the Appellate Authority to entertain such additional ground in the appeal. In the absence of statutory bar, the Appellate Authority is vested with the power, which is co-terminus with that of the Original Authority, to allow the assessee to raise additional ground, if the same is bona fide and not willful or unreasonable. In the present case, we find that the plea of bonafide omission is acceptable. The additional grounds were raised before the first Appellate Authority with reasons. We find that such a reason is tenable. The Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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