1990 (9) TMI 6 - SC - Income Tax

In appeal before AAC, assessee raised additional ground for deduction of purchase tax - AAC had jurisdiction to permit assessee to raise such additional ground

Issues Involved:
1. Jurisdiction of the Appellate Assistant Commissioner to entertain additional grounds in an appeal.
2. Correct interpretation of Section 251(1)(a) of the Income-tax Act, 1961.
3. Conflict between judicial precedents on the powers of the Appellate Assistant Commissioner.
4. Entitlement of the assessee to claim a deduction for purchase tax liability not initially claimed before the Income-tax Officer.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Appellate Assistant Commissioner to entertain additional grounds in an appeal:
The primary issue was whether the Appellate Assistant Commissioner (AAC) had the jurisdiction to entertain an additional ground of appeal that was not raised before the Income-tax Officer (ITO). The AAC allowed the assessee to raise an additional ground claiming a deduction of Rs. 11,54,995 for purchase tax liability. The Tribunal, however, held that the AAC had no jurisdiction to entertain such additional grounds, relying on the decision in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1.

2. Correct interpretation of Section 251(1)(a) of the Income-tax Act, 1961:
Section 251(1)(a) of the Income-tax Act confers wide powers on the AAC, including the power to confirm, reduce, enhance, or annul the assessment, and to set aside the assessment and remit the case for fresh assessment. The judgment emphasized that the AAC's powers are coterminous with those of the ITO, meaning the AAC can do what the ITO can do and also direct the ITO to do what he has failed to do. The court observed that there is no statutory provision in the Act that restricts the AAC from entertaining additional grounds in an appeal.

3. Conflict between judicial precedents on the powers of the Appellate Assistant Commissioner:
The court noted the conflicting views in judicial precedents. In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, a three-Judge Bench held that the AAC has plenary powers in disposing of an appeal, which are coterminous with those of the ITO. However, in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1, a two-Judge Bench held that the AAC had no power to entertain new grounds not raised before the ITO. The court clarified that the decision in Gurjargravures was based on the specific facts of that case and did not overrule the broader principle established in Kanpur Coal Syndicate.

4. Entitlement of the assessee to claim a deduction for purchase tax liability not initially claimed before the Income-tax Officer:
The court examined whether the assessee was entitled to claim a deduction for purchase tax liability, which was not initially claimed before the ITO. The assessee had not claimed the deduction initially as it believed it was not liable to pay the tax. However, upon being assessed for the purchase tax, the assessee raised the claim before the AAC. The court held that since the tax liability was admitted and supported by the decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, the AAC was justified in allowing the deduction.

Conclusion:
The Supreme Court held that the Appellate Assistant Commissioner has the jurisdiction to entertain additional grounds in an appeal, provided such grounds could not have been raised earlier or became available due to a change in circumstances or law. The court found that the Tribunal and the High Court erred in their interpretation of the AAC's powers and set aside their decisions. The matter was remitted to the Tribunal to consider the merits of the deduction permitted by the AAC, with the option to remand the case to the AAC for rehearing if necessary. The appeal was disposed of with no order as to costs.

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