1976 (8) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the Tribunal in setting aside the consolidated order of the Appellate Assistant Commissioner.
2. Justification of the Tribunal in remanding the appeals with a direction to determine the nature of securities as stock-in-trade or capital investment.

Analysis of the Judgment:

1. Justification of the Tribunal in Setting Aside the Consolidated Order:
The Tribunal set aside the consolidated order dated March 31, 1970, of the Appellate Assistant Commissioner (AAC) relating to the assessment years 1967-68, 1968-69, and 1969-70. The Tribunal's decision was based on the argument that the investment in securities under section 24(2A) of the Banking Regulation Act, 1949, is for the purpose of banking business. The Tribunal held that the AAC had not adequately determined which securities were stock-in-trade or circulating capital and which were capital investments. The High Court found that the Tribunal was justified in setting aside the AAC's order because the basis of the AAC's decision, which relied on the Commissioner of Income-tax's (CIT) orders, had been invalidated by the High Court in earlier rulings ([1978] 112 ITR 87, 99).

2. Justification of the Tribunal in Remanding the Appeals:
The Tribunal remanded the appeals to the AAC with the direction to determine which securities were stock-in-trade or circulating capital and which were capital investments. The High Court found this remand order to be unjustified. The High Court emphasized that the Tribunal's jurisdiction under section 254 does not include the power to enhance the tax liability unless the Commissioner has filed an appeal or cross-objection. The Tribunal's direction to the AAC to determine the nature of the securities was seen as an enlargement of the scope of the appeal, which was not permissible. The High Court noted that the AAC's and the Income-tax Officer's (ITO) decisions were based on the now-invalidated orders of the CIT, and thus, the Tribunal should not have remanded the case with such directions.

Conclusion:
The High Court concluded that while the Tribunal was justified in setting aside the AAC's consolidated order, it was not justified in remanding the case with directions to determine the nature of the securities. The Tribunal's remand order was seen as an overreach of its appellate powers, as it effectively expanded the scope of the appeal beyond what was contested. The reference was answered in the negative and in favor of the assessee, with no order as to costs.