TMI Blog2014 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... , but out of inadvertance it was not stated in the return of income - this claim of the assessee is not willful and the additional ground raised by the assessee cannot be termed as unreasonable. 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 - the plea of bonafide omission is acceptable - The additional grounds were raised before the first Appellate Authority with reasons – CIT(A) failed to exercise the discretion vested in him in accordance with law and reason – thus, the order of the Tribunal is set aside and the matter is remitted back to the CIT(A) - Decided in favour of assessee. - Tax Case (Appeal) No. 916 of 2004 - - - Dated:- 17-9-2014 - R. Sudhakar And G. M. Akbar Ali,JJ. For the Appellant : Mr. P. J. Rishikesh For the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich has been filed along with Return of Income. This Market Development expenditure is revenue expenditure incurred wholly and exclusively for the purpose of business and is allowable revenue expenditure. Since, it has been omitted to be claimed in the Memo of Total Income eventhough the details of expenditure shown in the Printed Annual Report filed along with the Return of Income, the learned Deputy Commissioner of Income-tax has not allowed this revenue expenditure for the assessment year 1987-88. Therefore, it is prayed that the Commissioner of Income-tax (Appeals) may direct the Deputy Commissioner of Income-tax to allow the above expenditure and justice rendered. 3. The Commissioner of Income Tax (Appeals) refused to entertain the additional grounds of appeal and proceeded to decide the appeal on merits on the other issues raised holding that the assessee has to explain that the omission to file the grounds originally was not willful and unreasonable. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the assessee pursued the matter by filing an appeal before the Income Tax Appellate Tribunal contending that the Commissioner of Income Tax (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 37(1) of the Income Tax Act was very much available and due to inadvertance it was not claimed, additional ground was raised before the first Appellate Authority contending that the appeal is a continuation of the original assessment proceedings and therefore, relief should have been granted by the Commissioner of Income Tax (Appeals). 7. Per contra, learned Standing Counsel appearing for the Revenue submits that it is the assessee's duty to claim deduction of expenditure under Section 37(1) at the time of filing of return of income, but he failed to do and that cannot be made good at the appellate stage. If a deduction is not claimed before the Assessing Authority and there was no consideration by the Assessing Officer on such deduction, the same cannot be urged before the Commissioner of Income Tax (Appeals) without filing a revised return. In support of his plea, he relied on the decision reported in (2006) 284 ITR 323 (SC) (Goetze (India) Ltd. V. Commissioner of Income Tax). 8. We have heard the rival submissions of the learned counsel appearing for the assessee and the learned Standing Counsel appearing for the Revenue and perused the materials placed before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that explanation with relevant material to state as to why it was not raised at the first instance, the Commissioner should go into the issue as to whether such a omission was willful or unreasonable. 12. The purport behind this provision can be culled out from the decisions of the Supreme Court and that of this Court as to how the Courts have viewed the assessment proceedings and the proceedings in appeal, vis-a-vis, the provisions of the Income Tax Act. 13. The Supreme Court had an occasion to consider the power of the Tribunal in the decision reported in (1998) 229 ITR 383 (National Thermal Power Co. Ltd. V. Commissioner of Income-Tax). The facts therein are the assessee had made short term deposits with banks. The interest received on such deposits during the previous year relevant to the assessment year 1978-79, amounted to ₹ 22,84,994/-, was offered by the assessee for tax assessment and the same was completed. Before the Commissioner of Income Tax (Appeals), several issues were raised by the assessee, but the said amount of ₹ 22,84,994/- was not challenged by the assessee nor considered by the Commissioner of Income Tax (Appeals). The assessee went before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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. 15. A reading of the above decision makes it clear that if there are bonafide and good reasons in not preferring the additional grounds, the first Appellate Authority should exercise discretion in permitting the assessee to raise additional grounds. We find that the proceedings before the Commissioner of Income Tax (Appeals) and before the Tribunal on the issue of raising additional grounds appears to be analogous. The Supreme Court has clearly viewed that the proceedings before the Tribunal should not be confined only to the issues arising out of the order by the Commissioner of Income Tax (Appeals), as it would amount to taking a narrow view as to the powers of the Tribunal. If there are facts, which are on record from the assessment proceedings, there is no bar in allowing the additional grounds to be raised for the purpose of correctly assessing the tax liability of the assessee. The Supreme Court in the above-stated decision answered the question of law in the following manner: The reframed question, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to omission of deduction were raised in the grounds of appeal before the Tribunal and the objection of the Department was overruled placing reliance on the decision reported in (1967) 66 ITR 710 (SC) (CIT V. Mahalakshmi Textile Mills Ltd.). While considering this issue, this Court, by relying upon several rulings of the English Courts, discussed about the purpose and intention of the taxing statute and the manner in which the Assessing Authority, Appellate Authority and the Tribunal should deal with the claim of the tax paying assessee. 20. For better clarity, we are inclined to extract the relevant portion as under, as we find that the Department is trying to take a hyper technical plea that since such a claim for deduction of expenditure was not made at the first instance before the Assessing Authority, the assessee is not entitled to claim before the Appellate Authority: The primary purpose of the statute is to levy and collect the income-tax. This is based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. The task of an appellate authority under the taxing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be in accord with the scheme of the Act to impose restrictions on the ambit and the power of the Tribunal by such like notions as finality, subject-matter of the appeal,and the like. The statutory provision in s. 33(4) of the 1922 Act ands. 254 of the 1961 Act which confers appellate jurisdiction on the Tribunal clearly lays down that the Tribunal, in disposing of an appeal, may pass such orders thereon as it thinks fit. Excepting that the expression subject-matter has taken the fancy of many learned and eminent judges, that is an expression which is not employed by the provision conferring the jurisdiction in the Tribunal. Indeed, in the Mahalakshmi Textile Mills' case[1967] 66 ITR 710 (SC) in one of the passages to which we have made reference, the Supreme Court has understood the Tribunal's appellate jurisdiction as a jurisdiction to pass such orders on the appeal as it thinks fit , without adding any gloss of their own to the expression. In the Nelliappan's case [1967] 66 ITR 722 (SC) as well as the Mahalakshmi Textile Mills' case, the Supreme Court had even used phrases which are reminiscent of the language which English judges have used while describing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes before them, and, as we shall see later, to obtain any material which they think is necessary and which they think they ought to have,and on that to make the assessment or the estimate which the law requires them to make. They are not deciding the case inter partes; they are assessing or estimating the amount which in the interests of the country at large the taxpayer ought to have to deal with as the basis on which he is to be taxed. In a recent Full Bench decision of this court dated November 2, 1982,in T.C.(R) Nos. 78 of 1980 and 195 of 1980 (State of Tamil Nadu v.Arulmurugan Co. [1982] 51 STC 381), it was held that the appellate authorities perform precisely the same functions as the assessing authority. The Full Bench expressed the view that a tax appeal, is a rehearing of the entire assessment and it cannot be equated to adversary proceedings in appeal in civil cases. The following passage (at page 392), from the judgment of the Full Bench would be relevant to the discussion in the present case. An appellate authority under the taxing enactments sits in appeal,only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) to state that the omission to raise additional ground was not willful or unreasonable. We find that Commissioner of Income Tax (Appeals) in this case has erroneously thrown the onus on the assessee to explain the omission as not willful or unreasonable. The assessee in this case has given certain reasons with records to show that it was a bona fide claim, but out of inadvertance it was not stated in the return of income. We find that this claim of the assessee is not willful and the additional ground raised by the assessee cannot be termed as unreasonable. 23. The Commissioner of Income Tax (Appeals) relied on the decision reported in [1991] 187 ITR 688 (Jute Corporation of India Ltd. v. CIT), in which the decision in the case of Rai Kumar Srimal v CIT [1976] 102 ITR 525, was referred to. The Commissioner of Income Tax (Appeals) followed the decision in the case of Rai Kumar Srimal v CIT, wherein, the Calcutta High Court held the Appellate Assistant Commissioner was entitled to admit new grounds or evidence either suo motu or at the invitation of the parties. If he is acting on being invited by the assessee, then there must be some ground for admitting new evidence in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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