2008 (11) TMI 682 - HC - Income Tax

Summary

Issues involved:
The issue involves the entitlement of the assessee to raise an additional ground before the first appellate authority for the first time, the consideration of the question of limitation in the original orders of assessment in an appeal filed against the order passed while redoing the original assessment, and the statutory provisions governing the appellate authority's powers in modifying assessment orders.

Entitlement to Raise Additional Ground:
The Tribunal narrated that the assessee, a business owner, filed the original return under section 139(4) of the IT Act for the assessment year 1987-88. Subsequently, after a search and seizure by the Revenue under section 132 of the Act, the assessee filed a revised return. The assessing authority completed the assessment, and the first appellate authority remitted the matter back for a fresh assessment. The assessee raised an additional ground before the first appellate authority, contending that the assessment order was barred by limitation due to the filing of the original return under section 139(4) instead of section 139(1). Citing legal precedents, the first appellate authority accepted this ground, leading to the Tribunal also upholding this decision against the Revenue's appeal.

Statutory Provisions and Appellate Authority's Powers:
The Revenue challenged the first appellate authority's decision, arguing that the additional ground was impermissibly raised and that the Tribunal erred in rejecting the appeal. The counsel for the assessee defended the decisions, relying on the Supreme Court's ruling in Jute Corporation of India Ltd. vs. CIT, emphasizing the plenary powers of the appellate authority to modify assessment orders on additional grounds. The apex court's declarations highlighted that the appellate authority's powers are coterminous with that of the assessing authority, allowing for the consideration of additional grounds even if not raised before the initial assessment. The Tribunal's discretion to allow new grounds was acknowledged, with the necessity to correctly assess the tax liability of the assessee being a key factor.

Conclusion:
The High Court, in line with the legal principles established by the apex court, upheld the first appellate authority's decision to consider the additional ground raised by the assessee. The Court emphasized that the appellate authority possesses plenary powers to modify assessment orders based on additional issues, even if not raised initially. Therefore, the question of law framed by the Revenue was answered against them and in favor of the assessee, leading to the order being upheld accordingly.