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2010 (3) TMI 1141 - AT - Income TaxAppeal filed u/s 253(2) - seek a correction of a mistake - HELD THAT - In view of the facts and circumstances of the case and the legal position , We find that the CIT(A) has rightly held that the additions in respect of unaccounted expenses claimed by the assessee could not be made u/s 69C. In an appeal filed u/s 253(2) the department could not travel beyond the order of the CIT (A) and say that AO had erroneously invoked section 69C and that he should have made the addition u/s 37(1). The scheme of section 253(2) does not permit such a stand on the part of the department. In the case of Indian Steel Wire Products Ltd. v. CIT 1993 (6) TMI 20 - CALCUTTA HIGH COURT , the Court held that a fresh plea which altogether changes the complexion of the case as originally brought before the CIT(A), cannot be raised at the stage of hearing before the Tribunal. The Tribunal is supposed to decide only the issues which were the subject-matter of the first appeal. In the result, all the three appeals filed by the department are dismissed. Per Vijay Pal Rao, Judicial Member - HELD THAT - Following the decisions case of the Tarajan Tea Co. (P.) Ltd. 1993 (7) TMI 67 - GAUHATI HIGH COURT , Thanthi Trust 1998 (2) TMI 62 - MADRAS HIGH COURT , Assam Tribune 2006 (4) TMI 85 - GAUHATI HIGH COURT . It is clear that the Tribunal has the jurisdiction and power to entertain a fresh plea on the subject-matter of the appeal before it and to pass necessary directions for ascertainment of relevant facts and deciding the issue by applying the correct provisions of law. In the case in hand the subject-matter is same for which the learned Departmental Representative has raised a plea that the claim of unaccounted expenditure is required to be decided u/s 37(1) and not u/s 69C as wrongly applied by the AO. Since the claim of the expenditure was disallowed by the AO, therefore in any case by entertaining this plea and remanded the matter to the AO for correcting the application of law shall not amount to enhancement of assessment. In view of the above discussion and decisions of the Hon ble Supreme Court and the Hon ble High Courts, the contentions raised by the learned Departmental Representative are accepted. The orders of the lower authorities are set aside and the matter is remanded to the record of the AO for reconsidering the claim of the assessee for unaccounted expenditure u/s 37(1). THIRD MEMBER ORDER Per Pradeep Parikh, Vice-President - Whether, on the facts and circumstances of the case, the Tribunal had jurisdiction to accept the fresh plea of the learned DR and direct the AO to examine the assessee s claim u/s 37(1) - HELD THAT - In the light of the discussion and cases, I agree with the view taken by the ld. J.M. to hold that the plea raised by the ld. D.R. is to be accepted and the matter is to be remanded to the AO for considering the claim of the assessee for claiming deduction of unaccounted expenditure u/s 37(1). The matter may now be placed before the Division Bench to give effect to the majority view. Per Abraham P. George, Accountant Member. - In all these three appeals there arose difference of opinion between Members of the Division Bench hearing the appeal. Therefore the matter was referred to the Third Member. Hon ble Vice-President acting as Third Member has agreed with the view of the Learned Judicial Member. Therefore in view of the majority decision the orders of the lower authorities are set aside and matter is remanded to the record of the AO for reconsidering the allowability or otherwise of the claim of unaccounted expenditure, u/s 37(1). In the result, the appeal filed by the revenue is allowed for statistical purposes.
Issues Involved:
1. Application of Section 69C of the Income-tax Act. 2. Allowability of unaccounted expenses under Section 37(1) of the Income-tax Act. 3. Jurisdiction of the Tribunal to entertain a fresh plea raised by the Department. Detailed Analysis: 1. Application of Section 69C of the Income-tax Act: The primary issue was whether the Assessing Officer (AO) correctly applied Section 69C to disallow unaccounted expenses claimed by the assessee. The AO added amounts of Rs. 10,00,000, Rs. 15,00,000, and Rs. 41,30,000 for the assessment years 2002-03, 2003-04, and 2004-05 respectively, under Section 69C, stating that the expenditure was unexplained. The CIT(A) deleted these additions, reasoning that the source of the expenditure was explained by the unaccounted commission receipts, thus Section 69C could not be invoked. 2. Allowability of Unaccounted Expenses under Section 37(1) of the Income-tax Act: The Department argued that the AO should have invoked Section 37(1) instead of Section 69C to examine the allowability of the unaccounted expenses. The Tribunal had to decide whether it had jurisdiction to entertain this fresh plea and direct the AO to reconsider the claim under Section 37(1). The argument was based on the premise that the subject matter of the appeal was the allowability of the expenses, regardless of the specific provision under which they were disallowed. 3. Jurisdiction of the Tribunal to Entertain a Fresh Plea Raised by the Department: The Tribunal's jurisdiction to accept a fresh plea from the Department and direct the AO to examine the assessee's claim under Section 37(1) was a contentious issue. The Accountant Member initially rejected the fresh plea, arguing that the Tribunal's jurisdiction is limited to the subject matter of the appeal, which in this case was the application of Section 69C, not Section 37(1). However, the Judicial Member held that the Tribunal has the jurisdiction to entertain a fresh plea if it pertains to the subject matter of the appeal, which is the allowability of the expenses. Tribunal's Decision: Majority View: The Third Member, agreeing with the Judicial Member, held that the Tribunal has the jurisdiction to entertain the fresh plea raised by the Department. The Tribunal can direct the AO to examine the allowability of the unaccounted expenses under Section 37(1). This decision was based on the interpretation that the subject matter of the appeal was the allowability of the expenses, not the specific provision under which they were disallowed. Legal Precedents: The decision relied on several legal precedents, including: - Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC): The Supreme Court held that the Tribunal has the authority to direct further enquiry and dispose of the case based on such enquiry. - Mahalakshmi Textile Mills Ltd. v. CIT [1967] 66 ITR 710 (SC): The Tribunal can admit a fresh plea if it pertains to the subject matter of the appeal. - N.P. Saraswathi Ammal v. CIT [1982] 138 ITR 19 (Mad.): The Tribunal has jurisdiction to entertain a new plea even if it requires further investigation into facts. Conclusion: The Tribunal, by majority decision, set aside the orders of the lower authorities and remanded the matter to the AO to reconsider the allowability of the unaccounted expenses under Section 37(1) of the Income-tax Act. The appeals filed by the Revenue were allowed for statistical purposes.
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