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TMI Blog2005 (12) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... are the same. We are of the considered opinion that the Tribunal is not always prevented from passing orders which may result in enhancement of the assessee s tax liability beyond the tax liability determined by the Assessing Officer. In other words, it is not always necessary that as a result of the proceeding following assessee having been carried in appeal, the assessee cannot be worse off vis-a-vis the position in the event of his having simply accepted the order which is so carried in appeal. The rule preventing enhancement of assessee s tax liability, beyond the liability fixed by the Assessing Officer, is not universal and without exceptions to the said rule. The reason for revenue not taking up this plea earlier is the retrospective amendment in law. There can be any lack of bona fides in this reason; nobody can be expected to have the clairvoyance of knowing as to what the amendments in the statute will be in future. When the law so permitted, the Assessing Officer happily gave the relief prayed for. The legal position has changed now. The appellate proceedings are still on and there cannot be any excuse for any appellate authority to decide the issue in any manner except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed grounds of appeal which are as follows : On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to tax the foreign bank at a rate applicable to domestic companies, i.e., 45 per cent, and surcharge shall not be payable by it, without appreciating the fact that : ( i ) The CIT(A) ought to have held that the tax rate applicable to foreign bank would be as per the provisions of the Finance Act for the foreign companies. ( ii ) The Assessing Officer and the CIT(A) erroneously interpreted the provisions of law in respect of taxation of foreign companies, which has now been clarified by way of insertion of Explanation to section 90 of Income-tax Act, 2001, which is with retrospective effect from 1-4-1962. ( iii ) It is, therefore, prayed that the Hon ble ITAT decides the issue in the light of the said Explanation to section 90 of the Act. 2. The materials facts of the case, so far as the assessment year 1992-93 is concerned, are like this. The original assessment order under section 143(3) was framed on 25-1-1994 and, in the said order, the Assessing Officer had directed that charge income-tax @ 65 per cent, as rate app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the case law relied upon by the assessee as above. As such the contention of the assessee is acceptable. As such the assessee company shall be taxed in India at the same rate as applicable to the domestic companies i.e., 50 per cent. The assessed income will remain unchanged at Rs 8,98,91,268. 3. The Assessing Officer himself thus upheld the contention of the assessee and held that, in terms of non-discrimination clause enshrined in India-Japan DTAA, the assessee was required to be taxed at the same rate at which Indian companies are taxed in India. 4. The assessee was still not satisfied. The assessee s grievance this time, however, was slightly different. The grievance was on the question whether the assessee was required to be taxed at the same rate at which a closely held domestic company is required to be taxed or as a company in which public is substantially interested . This grievance was set out in the following ground of appeal taken by the assessee before the Commissioner (Appeals): The Assessing Officer has erred in taxing the appellant at the rate applicable to closely held domestic companies. The Appellant submits that considering the facts and circumstances of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended with retrospective effect. The scope of section 90 of the Act, which is the enabling provision under the Act to give relief in the cases where the Central Government has entered into an agreement with Government of any country outside India, has been curtailed by inserting an Explanation, by the Finance Act, 2001 but with retrospective effect from 1-4-1962, which provides as follows : Explanation - For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which domestic company is chargeable, shall not be regarded as less favourable charge or levy in respect of such foreign company. The net effect of insertion of this Explanation is that the non- discrimination clauses in the Double Taxation Avoidance Agreements (DTAAs, in short), so far as they relate to non-discrimination in tax rates between domestic companies vis-a-vis foreign companies in India, have been rendered ineffective. The very section which enabled the relief being given in respect of the cases covered by the DTAAs has been amended so as to disable the relief being given on the ground of such non-discrimination. The enforceability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to consider a question of law arising from the facts which are already on record, we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess tax liability of the assessee . [Emphasis supplied] Explaining the reasoning of coming to this conclusion, Their Lordships, earlier in the same order, observed as follows : Under section 254 of the Income-tax Act, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in widest possible terms. The purpose of assessing authorities is to assess correctly the tax liability of an assessee in accordance with the law . If, for example, as a result of judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction declined, we do not see any reasons why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as relevant facts are on record in respect of that item. We do not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in a position worse off, as a result of the matter being carried in appeal before the Tribunal by the revenue, than the position the assessee was in after the assessment order ? To put it differently, can there be situations in which the assessee ends up paying more, as a result of the matter having been carried in appeal before the Tribunal, than what it would have paid if the Assessing Officer s order was simply accepted by the assessee ? 17. Undoubtedly, the normal principle is that the Tribunal does not have any powers of enhancement, but this principle is not without any exceptions. There have been situations, as we will see now, where as a result of the matter having been carried before the Tribunal, there has been an enhancement of tax liability of the assessee vis-a-vis the tax liability which would have arisen if the assessee had simply accepted the order passed by the Assessing Officer. It is also to be noted that in the present case there is no enhancement of income but there is an enhancement in tax liability wholly because of retrospective insertion of Explanation in section 90 of the Act, with retrospective effect from 1-4-1961, which restricts the application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be worse off as a result of his having carried the matter in appeal before the Tribunal. It was materially the same issue before the Hon ble Allahabad High Court in the case of Pahulal Ved Prakash v. CIT [1990] 186 ITR 589 and Their Lordships came to the conclusion that it is settled that the Tribunal, while dealing with an appeal, in the absence of any cross appeal or cross objection, cannot give a finding adverse to the appellant which would make his position worse than it was under the orders appealed against . That is not even the situation before us. Revenue is in appeal and the real issue is whether as a result of revenue s appeal being allowed, assessee can be worse off vis-a-vis the position that he would have been in, in the event of his not challenging the assessment order in appeal at all - irrespective of whether or not the relevant legal provision has been subjected to the retrospective amendment. 18. In the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232, Hon ble Supreme Court did observe that the words pass such orders as the Tribunal thinks fit include all the powers (except possibly the powers of enhancement) which are conferred upon the AAC by section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these discussions, we are of the considered opinion that the Tribunal is not always prevented from passing orders which may result in enhancement of the assessee s tax liability beyond the tax liability determined by the Assessing Officer. In other words, it is not always necessary that as a result of the proceeding following assessee having been carried in appeal, the assessee cannot be worse off vis-a-vis the position in the event of his having simply accepted the order which is so carried in appeal. The rule preventing enhancement of assessee s tax liability, beyond the liability fixed by the Assessing Officer, is not universal and without exceptions to the said rule. 19. The reason for revenue not taking up this plea earlier is the retrospective amendment in law. There can be any lack of bona fides in this reason; nobody can be expected to have the clairvoyance of knowing as to what the amendments in the statute will be in future. When the law so permitted, the Assessing Officer happily gave the relief prayed for. The legal position has changed now. The appellate proceedings are still on and there cannot be any excuse for any appellate authority to decide the issue in any ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the assessee to present its case. However, when the addition was, even after giving yet another opportunity of hearing to the assessee, reiterated by the Assessing Officer, the assessee was again in appeal before the AAC. The addition was challenged on merits and an additional ground was taken on the issue of reopening of assessment under section 147 of the Act. The AAC admitted and allowed this additional ground and the assessment was thus cancelled. The Tribunal, however, reversed this action of the AAC by holding that in the second round of proceedings, it was not open to the AAC to consider the question of validity of reassessment proceedings when the assessee failed to question the same at the time of filing appeal against the original reassessment order. When the assessee s grievance against Tribunal s order, so reversing the relief given by the AAC, came up before the Hon ble Bombay High Court, Their Lordships upheld the action of the AAC and reversed the order of the Tribunal. Their Lordships also took note of the judgment of Hon ble Calcutta High Court in the case of CIT v. Shree Ganesh Jute Mills Ltd. [1977] 109 ITR 562 which lays down that any ground, not necessari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Trade Tax [1999] 115 STC 491 wherein Hon ble High Court has held that it is unimaginable that though the law does not allow the Commissioner to challenge the assessment order in first appeal, he can do so by preferring a second appeal before the Tribunal and that right of an appellant is restricted to challenge the order. . . and not to revert back to the assessment order that were not subject-matter of appeal... . Learned counsel has also invited our attention to paragraph 4.19 at page 89 of the Report of Direct Taxes Administration Enquiry Committee, 1958-59. This highlights the fact that the Tribunal does not have powers of enhancement of assessment. In our considered view, these contentions are also devoid of legally sustainable merits. As for learned counsel s reliance on G.D. Steels Gases (P.) Ltd. s case ( supra ), this case deals with revenue s challenge to the assessment order on a factual aspect regarding concealed turnover which was accepted by the Assessing Officer at the assessment stage but questioned again by the Assessing Officer at the time of second appeal to the Tribunal. Hon ble Allahabad High Court held that the Commissioner s appeal to the extent of ch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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