2016 (11) TMI 1718 - HC - Income Tax

Rectification of mistake u/s 254 - excess addition on account of on money - whether the Tribunal is duty bound to grant relief to the assessee as claimed during the hearing on the basis of the case eventually found by it even if there is no specific ground of appeal raised before it in support of such relief.? - HELD THAT - When an appeal from an assessment is brought before the Tribunal under Section 254(1) of the Act all questions arising there-from including questions which are incidental or consequential to such assessment are open to be agitated before the Tribunal. The Tribunal is empowered to pass such orders thereon as it thinks fit . It is one thing to say that the Tribunal must confine itself to the subject matter of the appeal and not go beyond it but quite another to say that whilst deciding such subject matter it cannot consider questions which are incidental to or would follow as a consequence of its determination. If the Tribunal rejects the assessee s case on a particular ground and if such ground affords a certain relief to the assessee without his having to ever any new facts such relief cannot be denied on the footing that the assessee never claimed it. If the assessee did not claim it the Tribunal must grant it suo motu as a matter of law if the relief does follow as a legal incident. Our Court held that the alternative submission did not amount to raising of an additional ground of appeal but the submission was a different facet of the same controversy; it was merely consequential to the finding of the tribunal against the assessee. The submission would not arise in case the tribunal accepts the assessee s contention for deduction of the amount as revenue expenditure; but where the tribunal turns down the assessee s claim and holds it to be capital expenditure it is the duty of the Tribunal even without an alternative submission to pass necessary consequential orders suo motu to give further directions in the matter as the situation may warrant . We are of the view that the Tribunal was bound in law to consider the alternative plea raised by the assessee at the hearing of the appeals. The question now is what relief should be granted on the applications before us. The miscellaneous application taken out before the Tribunal by the assessee clearly brings out an error apparent on record insofar as the original order passed by the Tribunal is concerned. It is particularly so since both the decisions in CIBA India 1993 (1) TMI 35 - BOMBAY HIGH COURT and Mahalakshmi Textile Mills 1967 (5) TMI 4 - SUPREME COURT were already available when the Tribunal considered the matter. We are therefore of the view that it would be more appropriate to allow the miscellaneous application and direct the Tribunal to consider the alternative plea of the assessee in the light of what we have stated above. Since the final order of the Tribunal on the appeal can only be crystallized after the plea is so considered by the Tribunal the Reference may have to be returned unanswered. The writ petition is accordingly allowed and the impugned order passed by the Tribunal on the miscellaneous application to the extent it relates to assessment years 1987-88 and 1988-89 is set aside and the miscellaneous application is allowed by directing the Tribunal to consider the alternative plea raised by the assessee in the light of what we have observed above. The Tribunal shall now decide the appeal on merits.

Summary

Issues Involved:
1. Scope of an appeal before the Income Tax Appellate Tribunal (Tribunal) and the Tribunal’s powers to pass orders.
2. Assessment of 'on-money' income and the method of accounting for the same.
3. Whether the Tribunal is duty-bound to grant relief based on the case found by it even if no specific ground of appeal was raised.

Detailed Analysis:

Issue 1: Scope of an appeal before the Tribunal and the Tribunal’s powers to pass orders.
The judgment addresses the Tribunal’s powers under Section 254(1) of the Income Tax Act, emphasizing that the Tribunal can pass orders on all questions arising from an assessment, including incidental or consequential questions. The Tribunal must confine itself to the subject matter of the appeal but can consider questions incidental to its determination. The Tribunal’s refusal to consider the alternative plea raised by the assessee was deemed erroneous, as it should have granted relief if it followed as a legal incident.

Issue 2: Assessment of 'on-money' income and the method of accounting for the same.
The assessee, engaged in the construction and sale of buildings, disclosed ?66 Lakhs as 'on-money' for the assessment years 1987-88 and 1988-89, following the project completion method. The Assessing Officer rejected this method, assessing 'on-money' annually at 25% of the aggregate agreement value plus 'on-money,' resulting in a total 'on-money' of ?1,25,78,000 spread over eight years. The Tribunal upheld this method and quantum, rejecting the project completion method. However, the Tribunal failed to adjust the 'on-money' figures for the last two years (1987-88 and 1988-89) to the normative figures of ?8,16,000 and ?2,02,000, respectively, leading to an unintended total 'on-money' of ?1,81,60,000.

Issue 3: Whether the Tribunal is duty-bound to grant relief based on the case found by it even if no specific ground of appeal was raised.
The Tribunal denied relief to the assessee on the grounds that the assessee did not raise this specific ground in its appeal and did not object to its own returns. The court found these reasons non-germane, stating that the Tribunal should have granted relief suo motu if it followed as a legal incident. The Tribunal’s refusal to consider the alternative plea was incorrect, as the relief was a direct consequence of the Tribunal’s findings.

Conclusion:
The court allowed the writ petition, set aside the impugned order of the Tribunal, and directed the Tribunal to consider the alternative plea raised by the assessee. The Tribunal must now decide the appeal on merits, considering the normative 'on-money' figures for the assessment years 1987-88 and 1988-89. The reference was returned unanswered, and no order as to costs was made.