TMI Blog2002 (12) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... simply on the ground that such grounds have not been raised either before the assessing authority or before the first appellate authority - - - - - Dated:- 5-12-2002 - Judge(s) : G. SIVARAJAN., P. R. RAMAN. JUDGMENT The judgment of the court was delivered by G. SIVARAJAN J.-The Income-tax Appellate Tribunal, Cochin Bench, Cochin, has referred the following two questions of law under section 256(2) of the Income-tax Act, 1961, at the instance of the assessee, as directed by this court in judgment dated November 18, 1998 in O.P. No. 13673 of 1998: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in not entertaining the additional grounds as referred to in the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment before the Commissioner of Income-tax (Appeals), the dispute was in regard to another matter, i.e., regarding the claim of interest payable to the partners of the firm and the said appeal was dismissed. In the second appeal filed before the Tribunal, the assessee had raised a contention by way of additional grounds which was not taken either before the assessing authority or before the first appellate authority. The said additional grounds reads as follows: (a) The learned Commissioner of Income-tax (Appeals) ought to have found that the Assessing Officer was not entitled to take the income received by United Investment Corporation of Rs. 2,40,617 as income of the company by treating the same as sham transaction. (b) The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or before the first appellate authority, such a contention was taken in view of the decision of this court in Padinjarekara Agencies (P.) Ltd. v. CIT [1988] 173 ITR 637 where according to the assessee this court had dealt with the principles regarding the interpretation of a document as sham. Counsel also relied on the decision of the Supreme Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, where the Supreme Court had considered the scope of section 254 of the Income-tax Act and the power of the Tribunal to allow additional grounds. Shri P.K.R. Menon, senior Central Government standing counsel appearing for the respondents, submitted that so far as the assessee is concerned, in respect of the very same partnership firm, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order in respect of other matters. The assessee thereafter filed a second appeal before the Tribunal on some other grounds. In other words, no contention was taken either before the assessing authority or before the first appellate authority regarding the assessability of the sum of Rs. 22,84,994. No such grounds were also raised by the assessee in the appeal memorandum filed before the Tribunal. However, during the pendency of the said appeal, the assessee by a forwarding letter raised three additional grounds which read as follows: "1. The sum of Rs. 22,84,994 deducted from 'Statement of expenditure during construction' cannot be included in the total income. 2. It is contended that on admission (erroneous), no income (the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power 6f the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier." The Supreme Court also referred to its earlier decision in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 and noted the observations in that case thus: "In the case of Jute Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) takes too narrow a view of the powers of the Appellate Tribunal. It was further observed that undoubtedly, the Tribunal will have the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings, the Supreme Court observed that the Tribunal was bound to allow such questions to be raised when it is necessary to consider the question in order to correctly assess the tax liability of an assessee. The Supreme Court had accordingly, remanded the matter to the Tribunal for consideration of the new grounds raised by the assessee in that case. From the aforesaid decision, it is clear that the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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