TMI Blog1976 (8) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 and 1969-70. The assessee, Assam Co-operative Apex Bank Ltd., is a bank registered under the Assam Co-operative Societies Act, 1949, carrying on banking or allied business. During the assessment proceeding for the assessment year 1967-68, it was submitted on behalf of the assessee before the Income-tax Officer that the assessee's sole income including interest on securities was in the nature of business income and, therefore, it was totally exempt under section 80P(2)(a)(i) of the Act. The Income-tax Officer found from the records that the assessee was assessed only on interest on securities during the earlier years holding the opinion that the securities were not trading assets of the assessee, and, therefore, the income in question was not business income. Against the orders of the Income-tax Officer in the preceding years, the assessee filed revision petitions under section 264 of the Act before the Commissioner of Income-tax, who disposed of the petitions of the assessee on April 19, 1969, confirming the orders of the Income-tax Officer. The assessee thereafter moved the High Court in Civil Rules Nos. 799 to 809 of 1969 [Assam Co-operative Apex Bank Ltd. v. Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal by its consolidated order dated August 29, 1973, passed in the three appeals set aside the consolidated order dated March 31, 1970, passed by the Appellate Assistant Commissioner relating to the assessment years 1967-68, 1968-69 and 1969-70 and remanded the three appeals to the Appellate Assistant Commissioner for disposal in accordance with law and in the light of the directions given in the Tribunal's judgment after giving opportunity to both the parties of being heard. In its order the Tribunal has held that the investment in securities under section 24(2A) of the Banking Regulation Act, 1949, is an investment in securities for the purpose of banking business, that the investment in shares cannot be said to be easily realisable amounts and, therefore, they cannot be held to be stock-in-trade and that the amount of the reserve fund which is invested in securities may be said to be sterilised and blocked and it cannot be withdrawn at the will of the assessee-bank and, therefore, not easily realisable securities. The Tribunal has further observed that the circumstances that the borrowings from the State Bank of India have been increasing and thus the borrowings are inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :--- (a) in the case of a co-operative society engaged in--- (i) carrying on the business of banking or providing credit facilities to its members, or ...... the whole of the amount of profits and gains of business attributable to any one or more of such activities. " In the assessment order passed by the Income-tax Officer for the assessment year 1967-68 (vide annexure " A " at page 22 of the paper-book) it has been observed as follows : " In response to notice under section 143(3) Shri B. K. Sen, Addl. Secretary, appears and states that the bank's sole income including interest on securities is in the nature of business income and this is totally exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961. It is found from the records that the assessee has been assessed only on interest on securities in earlier years holding the opinion that the securities were not a trading asset of the bank and that income, therefore, was not business income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt except Rs. 3,61,503 which was the interest on securities and that amount was only taxed for that assessment year. Similarly, for the assessment year 1968-69, on the reasonings given in the assessment order for the assessment year 1967-68, the Income-tax Officer assessed to tax the interest on securities and the total taxable income for the assessment year 1968-69 was assessed at Rs. 4,38,427. Similarly, for the assessment year 1969-70, the Income-tax Officer, relying on the reasonings given in his assessment order for the assessment year 1967-68, brought the interest on securities to tax and the taxable income was assessed at Rs. 5,45,372 for the assessment year 1969-70. It is, therefore, very much clear that the assessed was affected by the assessment orders of the Income-tax Officer for the three relevant assessment years relating to the tax on interest on securities only. Thereafter, the assessee preferred three appeals before the Appellate Assistant Commissioner of Income-tax with respect to the three assessment orders and these appeals were numbered as Appeals Nos. 167-K J, l68-K J and 169-K J of 1969-70. By a consolidated order dated March 31, 1970, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any cross-objection. That being the position, the Tribunal's order must confine to the order of the Appellate Assistant Commissioner against which the assessee had come on appeal before it. The question of law referred for decision raises two points, namely, (i) whether the Tribunal was justified in setting aside the consolidated order of the Appellate Assistant Commissioner of Income-tax relating to the assessment years 1967-68, 1968-69 and 1969-70, and (ii) whether after setting aside the Appellate Assistant Commissioner's order the Tribunal was justified in remanding the appeals to the Appellate Assistant Commissioner to give a finding on the points as to what amount of the securities is the stock-in-trade or circulating capital of the assessee-bank and which amount is the capital investment of the assessee-bank. The Income-tax Officer brought the interest on securities to tax holding that it was not the business income of the assessee. In repelling the contentions of the assesee the Income-tax Officer relied on the decision of the Commissioner of Income-tax passed on the revision petitions for earlier years. Similarly, the Appellate Assistant Commissioner also relied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner as well as before this court has been that the securities are the trading assets of the bank and that they held the said securities as part of its banking business as provided and permitted under the aforesaid bye-law 4(h) ...... However, the Commissioner came to a clear finding that the interest on securities could be held to have been related to the society's banking business. Nevertheless, it found that since the petitioner was not dealing in securities and since the profit and loss was not disclosed in a statement as such dealer in securities, the petitioner was not entitled to the benefit under the aforesaid section of the Act. In our opinion, the Commissioner's finding that only a dealer in securities is entitled to the benefit under section 81 and that a co-operative society, which has invested its available funds in securities and has received some interest thereon, is not entitled to any exemption in regard to such interest under the section, is clearly wrong. We are also of the opinion that the Commissioner' s finding ' in no circumstances can the investment and securities be regarded as income from business ' is also clearly wrong in view of the decisions ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended as section 80P of the Act. In paragraph 3 of the Tribunal's order it has been observed as follows : " The Appellate Assistant Commissioner has pointed out that the assessee is a co-operative society carrying on business of banking. From the order of the Appellate Assistant Commissioner, it is also evident that the only point at issue before him was whether the income derived by the assessee from certain Government securities are assessable to tax or not. He has also clearly pointed out that such income amounted to Rs. 3,61,503 for the assessment year 1967-68, Rs. 4,38,427 for the assessment year 1968-69 and Rs. 5,45,382 for the assessment year 1969-70. " Thus, it is quite clear from the order of the Tribunal itself that the aforesaid three amounts of income related to income derived by the assessee from certain Government securities, or, in other words, interest on Government securities. These three amounts of income also were under consideration before the Income-tax Officer, as it is quite clear from the assessment orders for the relevant assessment years. To be more precise, it may be pointed out that in the assessment order for the assessment year 1967-68, the sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal it is found that the Tribunal has accepted the finding of fact of the Appellate Assistant Commissioner that the investments of Rs. 62,29,950 for the assessment year 1967-68, Rs. 81,96,200 for the assessment year 1968-69 and Rs. 1,01,51,200 for the assessment year 1969-70 were in Central and State Government securities and, as already observed above, the question before the Income-tax Officer and the Appellate Assistant Commissioner was regarding the tax on Government securities only. So, from the order of the Tribunal itself it is found that the assessee preferred the appeals before the Tribunal on the ground that the income from investment in Government securities was not taxable under section 80P of the Act. The Income-tax Officer and the Appellate Assistant Commissioner found' these items taxable on the basis of the order of the Commissioner of Income-tax, which has been found to be bad in law and has been set aside. The Tribunal has also observed that it could not be doubted that the investment in securities under section 24(2A) of the Banking Regulation Act, 1949, has to be held to be an investment in securities for the purpose of banking business. Thus, it is found that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction inasmuch as the Tribunal has no power of enhancement of tax as assessed by the Income-tax Officer and affirmed by the Appellate Assistant Commissioner. At this stage, therefore, we are required to consider the scope of the appellate power of the Tribunal. Section 254 of the Act reads as follows : " 254. Orders of Appellate Tribunal.---(1) 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. (2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Income-tax Officer : Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard. (3) The Appellate Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court. Section 33 of the Indian Income-tax Act, 1922, deals with appeals against the orders of the Appellate Assistant Commissioner. Section 33(4) of the 1922 Act reads as follows : " 33. (4) The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner. " It is found that sub-sections (1) and (3) of section 254 of the 1961 Act are almost in identical terms with sub-section (4) of section 33 of the 1922 Act. In Motor Union Insurance Co. Ltd. v. Commissioner of Income-tax [1945] 13 ITR 272 (Bom), the powers of the Appellate Tribunal were considered by the Bombay High Court under the 1922 Act and Kania J., as he then was, delivering the court's judgment, observed in that case as follows : " In order to appreciate the powers of the Tribunal, it is necessary to take into consideration sections 30, 31 and 33 of the Act. After the Income-tax Officer has made an order, if the assessee feels aggrieved, he can appeal to the Appellate Assistant Commissioner. The powers of the Appellate Assistant Commissioner in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms enacted that. In our opinion, that fact is against the contention that the words of section 33(4) are wide enough to include a power of enhancement, without an appeal by the Commissioner. The word 'thereon' used in section 33(4) only means ' on the appeal ', which must mean on the grounds raised in the appeal. Read in that way, the subsection only gives power to the Appellate Tribunal to give its decision and pass orders in respect of all grounds urged (which must be on behalf of the appellant) in respect of the decision appealed against. In deciding those grounds it can pass appropriate orders. But, in our opinion, it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant. " We have already quoted sub-sections (1) and (3) of section 254 which are almost in identical terms with sub-section (4) of section 33 of the 1922 Act. The reasonings given in Motor Union Insurance Co. Ltd. v. Commissioner of Income-tax [1945] 13 ITR 272 (Bom) on the point, therefore, are equally applicable to the instant case. In Puranmal Radhakishan and Company v. Commissioner of Income-tax [1957] 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qually settled principle that, where the whole or part of an order has not been appealed against, it would be final ; and the appellate authority, in case there is an appeal against a part of an order, would have no jurisdiction in the absence of statutory provision to interfere with the other part which does not form the subject of the appeal. Where a statute confers a right to appeal to an appellate authority, its powers and functions are limited by the terms of that statute. Section 30 gives a right of appeal only to the assessee against an order of assessment by an Income-tax Officer ; the department has no right to appeal against the order of the Income-tax Officer, even if it were prejudicial to the revenue. That presumably is for the reason that the Appellate Assistant Commissioner being an officer of the department would be vigilant in protecting the interests of the revenue, provided a power is given to him to enhance the tax in an appeal by the assessee. Section 33B enables the Commissioner to suo motu revise an order of assessment which is prejudicial to the revenue. Section 31(3), which enumerates the powers of the Appellate Assistant Commissioner, says : ' In dispo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith an appeal against the order of the assessing authority. As the appellate power is a power which is conferred by statute, both its existence as well as its extent has to be gathered from the relevant statutory provision. The fundamental idea is that an appellant seeks a relief from an appellate court, and not detriment to himself. Even under the general provisions of the law of procedure, the worst detriment which an appellate court may visit on an appellant is to dismiss the appeal with a direction in an appropriate case to pay costs to the opposite side. An order adverse to the interests of the appellant--- adverse in the sense that it takes away from him a benefit which he has already acquired under the order appealed from---is possible only by means of an order made either upon a cross-appeal filed by the other side or on the basis of a memorandum of cross-objections presented by him wherever the law permits him to do so." In Hukumchand Mills Ltd. v. Commissioner of Income-tax [1967] 63 ITR 232, 237, the Supreme Court has observed after quoting section 33(4) of the 1922 Act as follows : " The word ' thereon ', of course, restricts the jurisdiction of the Tribunal to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by way of enhancing the tax liability. In the instant case, the Tribunal has set aside the order of the Appellate Assistant Commissioner and thereafter the Tribunal has remanded the appeals to the Appellate Assistant Commissioner to determine which securities were stock-in-trade or circulating capital of the assessee and which securities were capital investment of the assessee-bank. As we have already observed, the point at issue before the Income-tax Officer and the Appellate Assistant Commissioner was regarding the tax liability of the interest on Government securities. In the appeals before the Tribunal also the point that was agitated by the assessee was whether the interest on Government securities was liable to be taxed. The Tribunal has found that the Appellate Assistant Commissioner was not correct in holding that the interest on Government securities was liable to tax in the instant case. We have also noticed that the basis of the orders of the Income-tax Officer and the Appellate Assistant Commissioner, that is, Commissioner's orders relating to the preceding year, was removed as illegal by the judgment of this court. That being so, the Tribunal itself hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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