2014 (10) TMI 539 - HC - Income Tax

Admission of additional grounds - Inherent contradiction in the order of Tribunal Held that - The Court refrain itself from deciding the issues arising out of additional grounds on merits simply because there is inherent contradiction in the order of tribunal - If the tribunal was not inclined to admit additional grounds, then, refusal could have been based on some germane reason such as delay in raising these grounds or lack of complete material or failure of the Assessee to bring the same diligently or anything by which the assessee could be held responsible - If the additional grounds are indeed substantial and could have been raised in the opinion of the tribunal, then, it was incumbent upon the tribunal to have allowed the parties to rely on facts and material on the additional grounds and considered the contentions canvassed on that basis pass a reasoned and proper order. The approach of the Tribunal is not right, more particularly when the mistake was brought to the notice of the tribunal in the rectification proceedings, the tribunal clarifies that the observations shall not be treated as opinion on merits but shall be considered for not admitting the additional grounds - the tribunal seriously erred in refusing to admit the additional grounds - The additional grounds ought to have been considered in accordance with law - If there are materials on record and which are adequate to consider additional grounds then refusal to admit additional grounds cannot be sustained in such matters - The tribunal is the last fact finding authority and ought to be more careful - the tribunal is directed to admit the grounds or questions and permit the parties to produce material as is permissible in law Decided in favour of assessee.

Summary

Issues:
1. Disallowance of foreign tour expenses under section 37(3) of the Income Tax Act, 1961.
2. Admission of additional grounds for consideration related to investment allowance on actual cost of plants and machineries due to variations in foreign exchange rates.

Issue 1: Disallowance of Foreign Tour Expenses
The assessee sought deduction for foreign tour expenses under section 37(3) of the Income Tax Act, 1961. However, the Assessing Officer disallowed Rs. 10,000 for foreign tour expenses based on section 37(2A) of the Act. The tribunal was asked to opine on this disallowance. The Senior Counsel for the assessee decided not to press question no.1, as the amount involved was only Rs. 10,000. Consequently, the court did not render any opinion on this question.

Issue 2: Admission of Additional Grounds for Investment Allowance
The second issue revolved around the admission of additional grounds for consideration related to investment allowance on the actual cost of plants and machineries due to variations in foreign exchange rates. The assessee had taken a loan in foreign exchange for acquiring plants, resulting in an increased actual cost due to rupee devaluation. The tribunal had considered these additional grounds but did not admit them for further consideration. The Senior Counsel for the assessee argued that the tribunal erred in not admitting the additional grounds and in deciding on the merits of these grounds without proper consideration. The court found an inherent contradiction in the tribunal's order, noting that if the additional grounds were substantial, the tribunal should have allowed parties to present facts and material to support these grounds. The court criticized the tribunal's approach in disposing of the additional grounds without proper consideration and clarification.

Judgment
The court held that the tribunal had erred in refusing to admit the additional grounds for consideration. It directed the tribunal to admit these grounds, allow the parties to produce relevant material, and consider the contentions on additional grounds afresh in accordance with the law. The court emphasized the importance of avoiding further proceedings and multiplicity of litigation by ensuring that all relevant grounds are properly considered at the tribunal level.