2006 (3) TMI 136 - HC - Income Tax

Validity of the assessment order - Appeal To Appellate Tribunal - Admission of additional grounds - Jurisdiction - proceedings so initiated u/s 142(2A) - barred by limitation - HELD THAT - It cannot be disputed that the CIT(A) had jurisdiction to examine those four grounds had it been raised before him in appeal even in the first round. We thus cannot subscribe to the approach and the manner in which the Tribunal allowed the assessee to raise additional grounds in appeal for the first time and then deciding the appeal on those grounds by not only setting aside of the order of the CIT(A) but even proceeding to annul the order of the Assessing Officer also. Such approach is neither legal, nor proper. It only exhibits the anxiety of the Tribunal to decide the appeal on the merits even on those points which did not arise for decision out of the order of the CIT(A) . In other words, instead of concentrating on the issues already decided by the CIT(A), the Tribunal only concentrated on those grounds which had not been taken before the CIT(A) and then answered them in favour of the assessee by completely annulling the whole assessment. There would have been no prejudice caused to either party if the case had been remanded to the CIT(A) once the prayer to raise additional grounds was allowed by the Tribunal in favour of the assessee. When a litigant has a right to seek adjudication on a particular point from one more authority (as in this case CIT(A) and again acquire a right to reiterate the challenge before the higher appellate authority (such as Tribunal) in case if the challenge is decided against by the first appellate authority, then in such event, there is no justifiable reason as to why a litigant is deprived of such an opportunity. We, therefore, do not agree to such approach resorted to by the Tribunal and hence, we set aside the impugned order. Hence, we answer only additional question of law framed in favour of the Revenue and against the assessee (respondent). As a result, the appeal succeeds and is hereby allowed. The impugned orders of the Tribunal is set aside, so also that of the of CIT(A) which was the subject-matter of appeal before the Tribunal in an appeal filed by the assessee.

Summary

Issues:
- Appeal filed by the Revenue under section 260A against an order passed by the Income-tax Appellate Tribunal.
- Justification of the Tribunal's finding regarding the assessment based on the revised return filed by the assessee.
- Legality and sustainability of the Tribunal's decision annulling the assessment made by the Assessing Officer.
- Permission granted to the assessee to raise additional grounds in appeal before the Tribunal for the first time.
- Tribunal's decision to proceed with deciding the appeal instead of remanding the case to the Commissioner of Income-tax (Appeals) for deciding the additional grounds.

Analysis:

1. The judgment deals with an appeal filed by the Revenue under section 260A of the Income-tax Act against an order passed by the Income-tax Appellate Tribunal. The appeal involved substantial questions of law regarding the assessment based on the revised return filed by the assessee and the legality of annulling the assessment made by the Assessing Officer.

2. The Tribunal allowed the assessee to raise four additional grounds in appeal for the first time, which were not raised before the Commissioner of Income-tax (Appeals). The Tribunal decided to adjudicate these additional grounds first, challenging the legality of the assessment order.

3. The High Court observed that the Tribunal should have remanded the case to the Commissioner of Income-tax (Appeals) for deciding the appeal afresh on all issues, including the additional grounds raised by the assessee. The Court found fault with the Tribunal's decision to decide the appeal on those grounds without remanding it.

4. The Court emphasized that the Tribunal's approach of allowing the assessee to raise additional grounds and then deciding the appeal on those grounds was neither legal nor proper. The Tribunal's decision to annul the whole assessment without remanding the case to the Commissioner of Income-tax (Appeals) was deemed incorrect.

5. As a result, the High Court set aside the impugned order, allowing the appeal filed by the Revenue. The Commissioner of Income-tax (Appeals) was directed to decide the appeal filed by the assessee afresh on the merits, including the four additional grounds raised by the assessee.

6. The Court clarified that the Commissioner of Income-tax (Appeals) should decide the appeal strictly in accordance with the law, disregarding any findings or observations made by the Tribunal. The Commissioner of Income-tax (Appeals) was instructed to consider the four additional issues within six months from the date of appearance.

7. The judgment concluded by directing the parties to appear before the Commissioner of Income-tax (Appeals) on a specified date and specified that no costs were to be awarded in this matter.