2011 (3) TMI 1609 - HC - Income Tax

Summary

Issues Involved:
1. Registration of the reference.
2. Assessment of the assessee's income.
3. Tribunal's rejection of additional ground of appeal.
4. Tribunal's reliance on Supreme Court judgment.
5. Remand to the Tribunal for de-novo hearing.

Summary:

1. Registration of the Reference:
The court noted a "comedy of errors" in the registration of the reference, where both the assessee and the revenue sought a reference of various questions of law, but a single reference was registered. The reference was titled inconsistently in the paperbook and the Cause List.

2. Assessment of the Assessee's Income:
The assessee, a wholly-owned subsidiary of ONGC, was involved in a Joint Structure Agreement (JSA) for drilling and selling petroleum. Due to the 1978 Iranian revolution, the assessee's business was immobilized, leading to a Settlement Agreement dated 26.12.1993, where the assessee was to receive USD 6 million and delayed payment charges at LIBOR one year base. The Assessing Officer's order dated 20.03.1987 included several additions, which were partially allowed by the CIT(A) on 04.11.1987.

3. Tribunal's Rejection of Additional Ground of Appeal:
The Tribunal, in its judgment dated 31.10.1991, rejected the assessee's additional ground of appeal regarding the effective date of the Settlement Agreement, stating that the assessee did not provide good reasons for not raising the ground earlier and that further investigation of facts was required. The Tribunal's reasoning was found to be specious as it did not consider whether the assessee had actually exercised the choice of adopting different previous years for different sources of income.

4. Tribunal's Reliance on Supreme Court Judgment:
The Tribunal relied on the Supreme Court judgment in Jute Corporation of India Ltd. Vs. Commissioner of Income Tax (1991) 187 ITR 688, which allows raising additional grounds if there are sufficient reasons and bona fide on the part of the assessee. The court found that the Tribunal misconstrued the ratio of the judgment and did not consider the entire gamut of facts and circumstances. The Supreme Court's judgment in National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 further supports the view that the Tribunal has wide powers to entertain additional grounds if they arise from the facts on record.

5. Remand to the Tribunal for De-novo Hearing:
The court set aside the Tribunal's judgment dated 31.10.1991 and remanded the matter for a de-novo hearing, instructing the Tribunal to consider the additional ground without allowing the assessee to introduce new material. The court consciously refrained from expressing its view on the merits of the matters, disposing of both references in these terms.