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2016 (9) TMI 820 - HC - Income TaxAdditional grounds of appeal - whether , the Income Tax Appellate Tribunal was correct in law in holding that the Grounds of Appeal raised before the ITAT could not be entertained as it was not raised as additional grounds of appeal without seeking leave of the court even though the same was part of grounds of appeal filed before the ITAT by the Appellant ? - Held that - Rule 11 confers wide powers on the Tribunal, although it requires a party to seek the leave of the Tribunal. It does not require the same to be in writing. It merely states that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal. In a fit case it is always open to the Tribunal to permit an appellant to raise an additional ground not set forth in the memorandum of appeal. The safeguard is in the proviso to Rule 11 itself. The proviso states that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. Thus even if it is a pure question of law, the Tribunal cannot consider an additional ground without affording the other side an opportunity of being heard. We venture to state that even in the absence of the proviso it would be incumbent upon the Tribunal to afford a party an opportunity of meeting an additional point raised before it. Moreover, even though Rule 11 requires an appellant to seek the leave of the Tribunal, it does not confine the Tribunal to a consideration of the grounds set forth in the memorandum of appeal or even the grounds taken by the leave of the Tribunal. In other words the Tribunal can decide the appeal on a ground neither taken in the memorandum of appeal nor by its leave. The only requirement is that the Tribunal cannot rest its decision on any other ground unless the party who may be affected has had sufficient opportunity of being heard on that ground. In the present case the Tribunal ought to have exercised its discretion especially in view of the fact that the assessee intends raising only a legal argument without reference to any disputed questions of fact. In view of the afore-referred statement made by learned senior counsel appearing on behalf of the appellant-assessee that for the decision on the new ground raised by the assessee, no additional evidence would be led and that such question arose from the facts which were already on the record of the assessment proceedings and further being convinced that a decision upon the new ground raised by the assessee would only help in determining the assessee s correct tax liability, after setting aside the impugned order, we remand the matter to the Tribunal for adjudicating upon the additional ground on merits. The Tribunal would be at liberty to remand the matter further, if it so deems fit.
Issues Involved:
1. Whether the ITAT was correct in law in holding that the Grounds of Appeal raised before it could not be entertained as they were not raised as additional grounds of appeal without seeking leave of the court. 2. Whether the ITAT's order is contrary to the ratio of the Apex Court in the case of National Thermal Vs. CIT 229 ITR 383. Issue-wise Detailed Analysis: 1. Grounds of Appeal and Leave of the Tribunal: The assessee challenged the ITAT's refusal to adjudicate on an additional ground regarding the calculation of Minimum Alternate Tax (MAT) to be carried forward, arguing that it was part of the grounds of appeal filed. The ITAT held that prior written leave was required to raise additional grounds, and an oral request was insufficient, as it would prejudice the Revenue by denying it the opportunity to counter the request. The ITAT relied on judgments from the Gujarat High Court, Allahabad High Court, and Punjab and Haryana High Court to support its decision. 2. Tribunal's Powers Under Section 254(1): Section 254(1) of the Income Tax Act provides the Tribunal with wide powers to pass orders as it thinks fit after hearing both parties. The Tribunal's powers are not limited to issues arising from the order appealed from, but also include determining the correct tax liability of the assessee. Rules 11 and 29 of the Income Tax (Appellate Tribunal) Rules, 1963, further support the Tribunal's discretion to allow new or additional questions of law arising from the record before it, provided that the other party is given a sufficient opportunity to be heard. 3. National Thermal Power Co. Ltd. vs. CIT: The Supreme Court in National Thermal Power Co. Ltd. vs. CIT held that the Tribunal has jurisdiction to examine a question of law arising from the facts on record, even if not raised earlier. The Tribunal's powers are expressed in the widest possible terms, allowing it to consider questions necessary to correctly assess the tax liability of an assessee. This includes questions of law arising from the assessment proceedings, which had not been raised earlier. 4. Application of National Thermal Power Case: The Apex Court's judgment in National Thermal Power Co. Ltd. was followed by this Court in Avery Cycle Industries Ltd. vs. CIT, which allowed additional grounds to be raised before the Tribunal if relevant facts are on record. Similarly, the Bombay High Court in Ahmedabad Electricity Co. Ltd. vs. CIT held that the Tribunal has jurisdiction to permit additional grounds even if they do not arise from the order of the Appellate Assistant Commissioner, as long as they pertain to the subject matter of the tax proceedings. 5. Tribunal's Reliance on Other Judgments: The Tribunal's reliance on the Gujarat High Court's judgment in Smt. Arundhati Balkrishna vs. G.M. Singhvi was found to be contrary to the Supreme Court's ruling in National Thermal Power Co. Ltd. The Full Bench of the Bombay High Court in Godavari Sugar Mills Ltd. also supported the assessee's position, emphasizing the Tribunal's wide powers under Rule 11 of the Appellate Tribunal Rules. 6. Tribunal's Discretion and Additional Grounds: The Tribunal should have exercised its discretion to allow the additional ground, especially since the assessee intended to raise only a legal argument without reference to disputed facts. The Tribunal's reliance on Sahara India's case was misplaced, as the facts of that case were not clear, and the judgment ultimately supported the assessee's position. Conclusion: The appeal was allowed, and the substantial questions of law were answered in favor of the assessee. The matter was remanded to the Tribunal for adjudication on the additional ground on merits, with the Tribunal having the liberty to remand the matter further if necessary. The Tribunal's decision was set aside, and it was directed to consider the new ground raised by the assessee, ensuring the correct tax liability is determined.
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