TMI Blog1992 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... s transferred to contingency reserve and tariff and dividend control reserve?" In respect of the second question, the pertinent facts are as follows: This question refers to the assessment years 1962-63 to 1971-72. The assessee-company which is governed by the Electric Supply Act of 1948 was required to transfer certain amounts to contingency reserve and dividend and tariff reserve. The assessee-company did not claim these amounts as deductions either before the Income-tax Officer or before the Appellate Assistant Commissioner in appeal in respect of these assessment years. Subsequently, our High Court held in the case of Amalgamated Electricity Co. Ltd. v. CIT [1974] 97 ITR 334, that such amounts represented allowable deductions on revenue account. At the time when this decision came, the assessee had already filed appeals before the Tribunal against the orders of the Appellate Assistant Commissioner for the assessment years 1962-63, 1963-64, 1966-67, 1967-68, 1968-69 and 1969-70. The Department had filed appeals before the Tribunal for the assessment years 1964-65, 1965-66, 1970-71 and 1971-72. For these assessment years, the assessee had filed cross-objections. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings, however, the assessee's stand for the earlier year was not accepted. The Tribunal decided the assessee's appeal for the assessment year 1962-63 some time in 1972 holding that the shed which was constructed was not a temporary shed and that it constituted a capital asset on which depreciation was to be allowed. For the next assessment year 1963-64, depreciation could not be allowed in view of section 34(2)(ii) as then in force, as the shed was destroyed by cyclone during the year. Thus, the question of claiming a deduction under section 32(1)(iii), admittedly, arose as result of the Tribunal's order in the assessee's case for the assessment year 1962-63. The assessee sought to raise an additional ground of appeal to the effect that Rs. 42,443 be allowed as revenue loss tinder section 32(1)(iii) of the Income-tax Act, 1961, incurred due to the destruction of the sugar godown because of a cyclone on June 10, 1961. The Tribunal did not permit the assessee to raise this additional ground as the same was not raised and did not arise out of the order of the Appellate Assistant Commissioner from which the appeal had been preferred to the Tribunal. The above question, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. An Explanation to sub section (2) states, " In disposing of an appeal, the Appellate Assistant Commissioner may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, not with standing that such matter was not raised before the Appellate Assistant Commissioner by the appellant ". Thus, the Appellate Assistant Commissioner has very wide powers while considering an appeal which may be filed by the assessee. He may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer, This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of an assessee in accordance with law. Hence an Appellate Assistant Commissioner also has the power to enhance the tax liability of the assessee although the Department does not have right of appeal before the Appellate Assistant Commissioner. The Explanation to sub-section (2), however, makes it clear that for the purpose of enhancement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Tribunal cannot permit raising of points not arising from the order of the Appellate Assistant Commissioner. We do not find anything in section 254 which would thus restrict the powers of the Appellate Tribunal while considering an appeal before it. As we have said earlier, the basic purpose of an appeal procedure in an income-tax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stages, either before the Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee. The appellate authorities, of course, cannot travel beyond the proceedings and examine new sources of income. For this purpose, other separate remedies are provided to the Department under the Income-tax Act. But, apart from this, there is nothing in section 254 or section 251 which would indicate that the appellate authorities are confined to considering only the objections raised before them or allowed to be raised before them either by the assessee or by the Department, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce. It is in this sense that the source is looked upon by the Patna High Court as a new source ... Therefore, if an income is the subject-matter of the consideration by the Income-tax Officer, and even though the Income-tax Officer may come to the conclusion that that income is not subject to tax, it would be open to the Appellate Assistant Commissioner to take different view and to bring that income to tax ". Therefore, even without the Explanation, the court had interpreted the provisions of section 31(3) as conferring on the Appellate Assistant Commissioner powers much wider than those of an ordinary court of appeal. Once an assessment comes before an Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee but ranges over the whole assessment and it is open to him to correct the Income-tax Officer's order not only with regard to a matter raised by the assessee in the appeal but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment. The Explanation to section 251, therefore, neither confers any additional powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional points to be raised before it so long as they arise from the subject-matter of the proceedings and not necessarily only from the subject-matter raised in the memorandum of appeal. This point, however, is not res integra. There are a large number of authorities on this question. In the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232, the Supreme Court was required to consider the powers of the Appellate Tribunal under section 33(4) of the Indian Income-tax Act, 1922, which is equivalent to the present section 254 of the Income-tax Act, 1961. In the case before the Supreme Court, the assessee-company, was incorporated in the then native State of Indore. It was assessed in British India, except for the assessment year 1948-49, as a non-resident on such income as fell within section 4(1)(a) or (c) read with section 42 of the Indian Income-tax Act, 1922. After the Constitution of India came into force, Indore became a Part B State and the Indian Income-tax Act, 1922, was brought into force in Part B States with effect from April 1, 1950. For the assessment year 1950-51, the assessee became assessable as a resident. The Tribunal, in that case, had permitted the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal is competent to pass such orders on appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the Departmental authorities. All questions, whether of law or of facts, which relate to the assessment of the assessee may be raised before the Tribunal. " In the case of CIT v. S. Nelliappan [1967] 66 ITR 722, the Supreme Court once again considered the scope of section 33(4) of the Indian Income-tax Act, 1922. The court reiterated that in hearing an appeal the Tribunal may give leave to the assessee to urge grounds not set forth in the memorandum of appeal and in deciding the appeal the Tribunal is not restricted to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. The Tribunal was, therefore, competent to allow the assessee to raise the contention relating to the cash credits which was not made the subject-matter of a ground in the memorandum of appeal. The court said that the Tribunal is not precluded from adjusting the tax liabilities of the assessee in the light of its findings merely because the findings were inconsistent with the case pleaded by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in an appeal which had not been taken either before the Appellate Assistant Commissioner or before the Income-tax Officer. In the case of CED v. Bipinchandra IV. Patel [1990] 186 ITR 29 (Bom), our court was required to consider whether, in an appeal to the Appellate Tribunal under the Estate Duty Act, 1953, the Tribunal had the power to admit an additional ground which was not raised either before the Assistant Controller or before the Appellate Controller. The court (to which one of us was party) held that it was permissible for the Tribunal to allow such an additional ground, especially as the ground pertained to a legal question. The court in that case considered various authorities of our High Court which have been referred to earlier and also referred to the decision of the Andhra Pradesh High Court in the case of CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778 (AP) as also Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC) while arriving at this conclusion. In the case of Addl. CIT v. Gurjargravures [1978] 111 ITR 1, the Supreme Court was concerned with a case where the Tribunal had allowed a point to be raised which had not been taken either before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, can be raised before the Tribunal. There is nothing in the Income-tax Act which restricts the Tribunal to the determination only of questions raised before the Departmental authorities. The Punjab and Haryana High Court also distinguished the Supreme Court decision in the case of Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 on the ground that that decision turned upon the peculiar facts and circumstances of that case, since that was case where material was not available in support of the plea which was raised before the Tribunal for the first time. (See also in this connection two other decisions of the Punjab and Haryana High Court to similar effect in the case of Oswal Cotton Spinning and Weaving Mills v. CIT [1981] 129 ITR 761 and in the case of Vijay Kumar Jain v. CIT [1975] 99 ITR 349). The Kerala High Court has taken a similar view in the case of CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624. The Kerala High Court has observed that the appeal provisions under the Income-tax Act are for the purpose of assessing the correct tax liability of the assessee and, for that purpose, the Tribunal can permit additional grounds to be ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of which the plea could have been raised before the Tribunal. The Gujarat High Court has also taken a different view. In the case of CIT v. Karamchand Premchand Private Ltd. [1969] 74 ITR 254, the Gujarat High Court has taken the view that the Tribunal can consider only the points which have been dealt with by the Appellate Assistant Commissioner. In that case, the Gujarat High Court held that where, in an appeal to the Appellate Assistant Commissioner by the assessee against an order of assessment, the assessee had not questioned the decision of the officer on a point decided and the Appellate Assistant Commissioner had not in his order considered that point, the assessee was not entitled to question the decision of the officer on the point in an appeal to the Appellate Tribunal against the order of the Appellate Assistant Commissioner. The High Court said that the Tribunal was not entitled to allow the assessee to agitate the question under the guise of granting leave under rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. The Gujarat High Court held that, while the powers of the Appellate Assistant Commissioner were very wide, under section 253 which deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee which is before the Tribunal for consideration ; and this will cover the proceedings before the Income-tax Officer, before the Appellate Assistant Commissioner as well as before the Tribunal - including the grounds raised before the Tribunal, any additional grounds which may be allowed to be raised before the Tribunal as also cross-objections, if any, before the Tribunal. Undoubtedly, the Tribunal has a discretion to decide whether any additional points can be allowed to be raised before it at the stage of appeal before it. And it may not permit such a new point to be raised for good reasons. But the extent of jurisdiction of the Tribunal is not confined only to points which were considered by the Appellate Assistant Commissioner and which may be challenged in appeal before the Tribunal. The Tribunal can permit other grounds also to be raised before it, provided, of course, that they arise out of the proceedings. We do not, therefore, agree with the view taken by the Gujarat High Court in the case of CIT v. Karamchand Premchand Private Ltd. [1969] 74 ITR 254. The view taken by the Gujarat High Court in the case of CIT v. Karamchand Premchand Private Ltd. [1969] 74 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority 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 The Supreme Court considered the observations in the case of Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC), and said that these do not rule out the case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at the stage when the return was filed or when the assessment order was made or if the ground became available on account of change of circumstances of law. There may be several factors justifying the raising of such a new plea in an appeal. Each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied, he would be acting within hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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