TMI Blog2022 (2) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders (P) Ltd.[ 2012 (7) TMI 158 - BOMBAY HIGH COURT ] had after taking cognizance of the judgment of the Hon‟ble Supreme Court in the case of Goetze (India) Ltd. (supra) observed, that an assessee in the course of proceedings before the appellate authorities is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. The assessee at the time of filing of his returns of income u/s. 139(1) and u/s 148 of the Act had remained under a bonfaide belief that as the agricultural land in question i.e at Village Dharampura was situated beyond the municipal limits, and thus not a capital asset‟, therefore, the gain on transfer of the same was not exigible to tax under the Act. Accordingly, backed by his aforesaid conviction, the assessee in our considered view had no occasion to have raised in his aforesaid returns of income filed u/s 139(1) and u/s 148 of the Act a claim for deduction u/s 54B w.r.t the investment that was made by him towards purchase of new agricultural lands. In fact, it was only after the aforesaid claim of the assessee for exemption of the gain on transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated, the assessee who is engaged in the business of trading and manufacturing of electric poles had filed his return of income for the assessment year 2007-08 on 31.03.2008, declaring an income of ₹ 1,83,410/- a/w agricultural income of ₹ 1,14,710/-. The return of income filed by the assessee was initially processed as such u/s. 143(1) of the Act. 3. Observing that though the assessee had sold his share in urban land situated at Village: Dharampura for a consideration of ₹ 10 lac but had failed to offer for tax the capital gain arising there from, the A.O reopened his case u/s.147 of the Act. Qua the Notice u/s 148, dated 12.03.2012 the assessee requested that his Original return of income filed u/s 139(1) of the Act be treated as a return filed in compliance thereto. 4. During the course of assessment proceedings, it was observed by the A.O that the assessee had both in his Original return of income filed u/s 139(1) of the Act; as well as that filed in compliance to Notice u/s 148 (i.e by requesting that his original return be treated as a return of income filed in compliance to Notice u/s 148) claimed that the income arising from the transfer of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction u/s 54B w.r.t the investment that was made by the assessee towards purchase of new agricultural lands. Backed by his aforesaid observation, the CIT(Appeals) was of the view that there was no justification on the part of the Assessing Officer to have declined the assessee‟s claim for deduction u/s. 54B of the Act. Accordingly, the CIT(Appeals) directed the A.O to allow the assessee‟s claim for deduction u/s 54B of ₹ 4,31,581/- i.e as regards the purchase of new agricultural lands by him. 6. Being aggrieved, the revenue has carried the matter in appeal before us. Controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the CIT(Appeals) is right in law and the facts of the case in allowing the assessee‟s claim for deduction u/s. 54B of the Act, despite the fact that the same was never raised by him in his return of income? 7. We have heard the Ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, as per the settled position of law it is not permissible for an assessee to raise a fresh claim for deduction otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. The Supreme Court held as under :- 5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se is another matter. The exercise of discretion is entirely different from the existence of jurisdiction. 12. At page 694, after referring to certain observations of the Supreme Court in Additional Commissioner of Income-tax v. Gurjargravures P. Ltd., (1978) 111 ITR 1, the Supreme Court observed at Page 694 as under :- The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngal Raw Jute Taxation Act, 1941 . Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee's entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Manufacturing Company Limited v. Commissioner of Income-tax, (1971) 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction. The words could not have been raised must, therefore, be construed liberally and not strictly. 15. It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several factors justifying the raising of a new plea in appeal and each case must be considered on its own facts. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has the power to enhance the tax liability of the assessee although the Department does not have a right of appeal before the Appellate Assistant Commissioner. The Explanation to subsection (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act. (C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income-tax (supra) set out above. It is important to note that even in this case, therefore, the ground existed when the return was filed. The mere fact that a decision of a court is rendered subsequently does not indicate that the ground did not exist when the law was enacted. Judgments are only a declaration of the law. The assessee could have raised the ground in its return itself. It did not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal has not examined the additional grounds raised by the assessee on merit, we do not propose to answer the questions relating to the merit of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows: Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same. Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible. 22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer. The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case. (emphasis supplied by us) Now, in the case before us, we find that the assessee at the time of filing of his returns of income u/s. 139(1) and u/s 148 of the Act had remained under a bonfaide belief that as the agricultural land in question i.e at Village Dharampura was situated beyond the municipal limits, and thus not a capital asset‟, therefore, the gain on transfer of the same was not exigible to tax under the Act. Accordingly, backed by his aforesaid conviction, the assessee in our considered view had no occasion to have raised in his aforesaid returns of income filed u/s 139(1) and u/s 148 of the Act a claim for deduction u/s 54B w.r.t the investment that was made by him towards purchase of new agricultural lands. In fact, it was only after the aforesaid claim of the assessee for exemption of the gain on transfer of the agricultural land in question was scuttled by the A.O for the reason that the agricultural land in question was situated within the municipal limits, and thus, was a capital as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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