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TMI Blog2012 (5) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... etion to allow a new ground to be raised. If a pure question of law arises for which facts are on record of the authorities below, the question should be allowed to be raised if it is necessary to assess the correct tax liability. The submission that the ground could not be raised earlier as the assessee did not have the services of an advocate at its command is reasonable and bona-fide - Additional ground admitted. - IT Appeal Nos. 5018 to 5022 & 5059 (Mum.) of 2010 - - - Dated:- 21-5-2012 - G. E. Veerabhadrappa, D. K. Agarwal And K. G. Bansal, JJ. ORDER 1. These appeals involve common grounds in respect of the claim of the assessee u/s 80IA (4) of the Income Tax Act, 1961 ( the Act for short). The issue was discussed before us with reference to the facts of the case for assessment year 2004-05. The grounds taken by the assessee in this appeal are as under :- 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating that the order passed by the Assessing Officer is without jurisdiction and bad in law as the jurisdiction u/s 153A is vitiated. 2. The Commissioner (Appeals) erred in confirming the disallowance of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication S.O.744 (E) dated 1.9.1998 (copy placed at page 118 of the paper book), letter of Director, CBDT, to all Chief Commissioners of Income-tax dated 16.12.2005 (copy placed at page 120 of the paper book) etc., which may have some bearing on the issue. 5. Under such circumstances, we propose the following two questions : 1. Whether, on the facts and in law, the scope of assessment u/s 153A encompasses additions, not based on any incriminating material found during the course of search ? 2. Whether, on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was justified in upholding the disallowance of deduction u/s 80IA(4) of the Act, on merits ? 1.2 Consequently, the Hon'ble President, Income Tax Appellate Tribunal, constituted the special bench to decide following questions :- 1. Whether, on the facts and in law, the scope of assessment u/s 153A encompasses additions, not based on any incriminating material found during the course of search? 2. Whether, on the facts and in the circumstances of the case, the learned CIT(Appeals) was justified in upholding the disallowance of deduction u/s 80IA (4) of the Act, on merits? 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore Ld. CIT(A), his decision is not available in this matter. Consequently, it is argued that ground No. 1 does not arise out of the order of lower authorities. The questions referred to the special bench cannot be answered in isolation de hors the grounds taken by the assessee in appeal. Therefore, finding will have to be given whether ground No. 1 before the Tribunal is additional ground, which requires to be admitted with the leave of the Tribunal. On the other hand, the submission of the Ld. Counsel for the assessee has been that this ground has been taken in the memorandum of appeal and, therefore, it is not an additional ground. Further, he drew our attention towards ground No. 3 taken before the Ld. CIT(A) that Ld. DCIT erred in disallowing the claim of deduction u/s 80IA(4) already granted in order passed u/s 143(3) dated 30.12.2006 which is merely change of opinion. His argument is that though the language employed in this ground is different from the language employed in ground No. 1 taken before Tribunal, yet in essence they are similar in nature. In the alternative, it is submitted that even if ground No. 1 does not arise out of the order of the Ld. CIT(A), it is pure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on can be made on items in respect of which no incriminating material is found in search. The decisions in favour and against of the assessee have also been listed. That is why, two questions have been referred to special bench. The issue has also been considered by Hon'ble President, ITAT, who has constituted the special bench to consider the two questions. Although it is a trite to say that the decision has to be taken on the facts and circumstances of the case, yet it is clear that various issues have been considered by the division bench and the Hon'ble President and, therefore, question No. 1 can not be taken as additional ground. In any case the revenue has taken no objection at the time of hearing before the division bench and now it is too late to take any such objection. 3.1 Further, Ld. Counsel referred to the provision contained in section 253, which inter alia provides that the President, may for the disposal of any particular case, constitute a Special Bench consisting of three or more Members, one of whom shall necessarily be a judicial member and one an accountant member. On the basis of language contained in this provision, it is argued that the President ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and which has a bearing on the liability of the assessee, even if such question has not been raised before the lower authorities. Thus, it is argued that even if the questions involve an additional ground, it is too late for the revenue to object to it because the matter has been considered by the Division Bench and now these questions have to be decided by the Tribunal as per order made by Hon'ble President. In any case even if an additional ground is involved, the Bench has all the powers to admit it and adjudicate upon it if all the facts necessary for such decision are available on record of lower authorities. It is stated that all facts are there on record and no new fact is required to be brought on record, therefore, the ground may be admitted. 3.2 Ld. Counsel also referred to the decision of Hon'ble Bombay High Court in the case of J.B. Greaves v. CIT [1963] 49 ITR 107 , in which it has inter alia been mentioned that it is indeed true that the powers of the Tribunal u/s 33(4) ( of the old Act) are wide. The Tribunal after giving both the parties to the appeal, an opportunity of being heard, can pass such orders thereon as it thinks fit. The word thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed cross-objections in the appeal filed by his opponent, will not be entitled to challenge that part of the lower court's decree which is against him, and the appellate court will have no power or jurisdiction to permit him to do so. But, in so far as he only wants to maintain the decree of the lower court which is against the appellant and in his favoaur, he will be entitled to support it on fresh grounds also if he can do so, and the appellate court also will have jurisdiction to permit him to do so, provided, of course, that the fresh grounds which he wants to urge do not require a further investigation into facts which are not already on record and are not based on facts which were neither alleged nor admitted nor proved and which the other side was never called upon to meet in the lower court. 3.3 It thus follows that the subject matter of appeal would get confined to limits of the grounds specifically raised in the memorandum of appeal, the new grounds raised by the appellant with the previous permission of the Tribunal and the grounds urged by the respondent in support of decree passed in his favour. 3.4 Based upon these decisions, it is argued that the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narrow a view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on the record in the assessment proceedings, the court fails 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 the tax liability of an assessee. A narrow view to which the Hon'ble court referred to had been taken in the case of CIT v. Anand Prasad [1981] 128 ITR 388 (Delhi), CIT v. Karamchand Premchand Pvt. Ltd. [1969] 74 ITR 254 (Guj) and CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 (Guj) (Full Bench). The case of the Ld. Standing Counsel is that the facts are distinguishable ; and in any case the assessee has to furnish reasons as to why the ground was not taken before lower authorities and why it should now be admitted by the Tribunal. 4.1 In order to support his contention, he relied on the decision of the Mumbai Tribunal in the case of Jay Bharat Co-op. Housing Society Ltd. v. ITO [2011] 10 ITR (Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal to the Appellate Tribunal against such order (emphasis supplied by the Ld. Standing Counsel). It is argued that the question was never taken up before the lower authorities, therefore, it cannot be said that the assessee is aggrieved by the impugned order, therefore, the assessee could not have taken ground No. 1 as it exists in the memorandum of appeal. Thereafter, he referred to the provision contained in section 254 (1), which states that - the appellate Tribunal may pass after giving both the parties to the appeal an opportunity of being heard, such orders thereon as it thinks fit (emphasis supplied by the Ld. Standing Counsel). It is argued that the appellate Tribunal has to confine itself to the grounds taken in the memorandum of appeal, additional ground taken by the assessee which are permitted by the Tribunal and any other ground taken by the defendant with a view to support the impugned order. Thus, the Tribunal can deal with ground No. 1 only if it is taken as an additional ground and admitted by the Tribunal by granting leave. 4.2.2 It is submitted that the Tribunal may be pleased not to grant such a leave because no reason has been advanced for not raising th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Appellate Assistant Commissioner. The Hon'ble court considered a large number of decisions, some approved, some overruled, some dissented from, some concurred with, and some relied upon. This position has been summarized in the summery of the ruling furnished by the publisher. It will be fruitful to reproduce this summary :- CIT v. Krishna Mining Co. [1977] 107 ITR 702 (AP) approved; CIT v. Gangappa Cables Ltd. 1978 CTR (AP) 332 : [1979] 116 ITR 778 (AP) overruled; Ahmedabad Electricity Co. Ltd. v. CIT [1992] 106 CTR (Bom) (FB) 78: [1993] 199 ITR 351(Bom) (FB), State of Tamil Nadu v. Alumurugan Co. [1982] 51 STC 381 (Mad) (FB), CIT v. Indian Express (Madurai) (P) Ltd. [1983] 33 CTR (Mad) 314 : [1983] 140 ITR 705 (Mad.), CED v. Brahadeeswaran [1986] 57 CTR (Mad.) 162 : [1987] 163 ITR 680 (Mad.), CIT v. Kerala State Co-operative Marketing Federation Ltd. 100 CTR (Ker) 230 : [1992] 193 ITR 624 (Ker.) CIT v. Pratapsingh [1986] 57 CTR (Raj.) 291 : [1987] 164 ITR 431 (Raj.), ITAT v. B. Hill Co. (P) Ltd. [1982] 29 CTR (All) 301 : [1983] 142 ITR 185 (All.), Atlas Cycle Industries Ltd. v. CIT [1981] 21 CTR (P H) 109 : [1982] 133 ITR 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongly been pressed in the service of the assessee as the case dealt with the powers of the AAC and not the Tribunal. The court noted that the Apex Court pointed out in un-mistakable terms that the jurisdiction of the Tribunal must be confined to subject-matter of an appeal. The Tribunal has sufficient powers to remand the case to the ITO but the details do not support the assessee's contention, rather they go against her. In the case of Mahalaxmi Textile Mills Ltd, (1967) 66 ITR 710 ( supra ), the ITO disallowed the claim of the assessee for development rebate because according to him Casablanca conversion system did not involve installation of new machinery. This order was upheld by the AAC. Before the Tribunal, it was claimed for the first time that the claim was allowable either as development rebate or current repairs. The Tribunal accepted the alternative claim. It was observed by the Hon'ble Court that on investigation of true nature of alterations made by the introduction of Casablanca Conversion System, the Tribunal came to the conclusion that it did not amount to installation of new machinery, but it amounted to current repairs. Considering this decision, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as the Tribunal thinks fit could only mean the orders in respect of subject-matter which could be dealt with by the Tribunal and these words are not relevant to fire up the scope and subject-matter of appeal before the Tribunal. Therefore it is necessary to find out as to what could the real subject-matter of appeal before the Tribunal. In the view of the court, it could not be anything different from the subject-matter before the AAC and necessarily it should be something which arises out of the order of the AAC. But there is no taboo against raising a new ground or a new plea touching the same subject matter. This view finds support from the decision in the case of Steel Cast Corporation ; CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 (Guj.) (FB). 4.5 In the case of Additional Commissioner of Income Tax v. Gurjargravures P. Ltd. [1978] 111 ITR 1(SC), the revenue was aggrieved by the order of the Tribunal in which Tribunal entertained the question of relief u/s 84 and directed the AO to allow necessary relief. High Court upheld the order of the Tribunal. It was mentioned that neither any submission was made before the AO nor there was any materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct may not be allowed to be raised for the first time as it may lead to prejudice to the other side. The decision in the case of NTPC does not lay down that in every case, the question of fact can be mechanically allowed to be raised for the first time. In view of this decision, it is argued that the question now raised by the assessee cannot be allowed to be raised mechanically without going into the reasons as to why the assessee did not raise this issue before the AO or the Ld. CIT(A). In any case , further referring to the decision in the case of Maruti Udyog Ltd. v. ITAT and Ors [2000] 244 ITR 303 (Delhi), it is argued that the Tribunal has to record reasons and it is open to the parties to take such pleas as are available to them for taking up before the Tribunal on the question whether the additional ground should be permitted to be urged or not. 5. In the rejoinder reply, the Ld. Counsel reiterated that the Ld. Standing Counsel is arguing against the mandate of the President. Coming to the merits, it is submitted that the decision in the case of Late Begum Noor Banu Alladin was not considered in the decision in the case of NTPC even though the former decision was ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for the first time before the Tribunal in view of the decision in the case of NTPC. 5.2 Coming to the facts of the case, it is submitted that a sum of ₹ 26,85,820/- had already been disallowed by the AO in the proceedings of assessment year 2004-05. No incriminating material had been found in regard to the deduction u/s 80IA(4) in the course of search. The assessee had already taken ground No. 3 before the CIT(A) challenging the action of the AO in disallowing the deduction. The present ground is in furtherance of the same ground which the assessee can validly take in the light of the decision in the case of Shaik Ibrahim v. CIT , [1968] 69 ITR 117 (Andhra Pradesh) wherein it is mentioned that the mere fact with the assessee, not having appreciated his legal rights failed to raise the contention before the ITO or the AAC, where he was not represented by a lawyer but by his auditor who not being qualified in law, was not competent to appreciate the principles of law or its subtleties, cannot be denied the right to raise that question at the stage of the appeal before the Tribunal, which is also a forum both on question of fact as well as law. 5.3 Coming to the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Premchand Pvt. Ltd. It is mentioned that distinction has to be made between the jurisdiction of AAC and the Tribunal. The decision in this case, it is argued, should not be followed as the same is contrary to the decision of Supreme Court and Bombay High Court referred to earlier. 5.4 In the case of Pokhraj Hirachand, the question before the Tribunal was whether, a particular expenditure was of capital or revenue nature? However, the Tribunal also recorded a finding that actual payment was of lower amount than claimed by the assessee. The Hon'ble High Court noted that the statement of case does not mention anywhere that the departmental representative or ITO has raised any contention in respect of the quantum of the payment, therefore, it will be reasonable to assume that the Commissioner had incorporated all facts in the statement of the case. This being the position , the Tribunal could not have dealt with this question. The case of the Ld. Counsel is that the question is being raised by him and, therefore, the ratio of this case is not applicable. In the case of JB Greaves ( supra ). It was contended before the Tribunal that the AAC erred in holding that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und ; The case of the Ld. Counsel was that the application for additional ground may be allowed. In these circumstances, the Tribunal was directed to permit the petitioner to add the additional ground. In the case of V.K. Jain v. CIT [1975] 99 ITR 349 (P H), the facts are that the assessee filed his return on 28.3.1969, which was valid return u/s 139 (4). Oblivious of this provision ITO treated return as invalid and no order was passed thereon. Thereafter a notice u/s 148 was issued in response to which the assessee filed a return. This return showed loss of ₹ 4128/-, as shown in the first return. The assessment was completed on total income of ₹ 32431/-. The question before the Hon'ble High Court was - whether, the Tribunal was justified in refusing to consider the validity of notice u/s 148 even though the ground challenging the same had not been pressed before AAC? The court came to conclusion that the ITO did not dispose of the return voluntarily filed by the assessee but proceeded to take action u/s 34 (equivalent to section 147 of 1961 Act). The notice issued in pursuance of section 147 is invalid and, therefore, entire proceedings would become void. In s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions made before us. We have also considered various cases cited by both the parties. We find that four questions have to be answered for deciding the controversy at hand. The first question is - whether, question no. 1 raised before the Tribunal is the same or substantially the same as question No. 3 raised before the Ld. CIT(A) ? The submission of the Ld. Counsel is that the ground in appeal should be widely read and it should not be construed narrowly. The ground taken before the Ld. CIT(A) had been that the Ld. DCIT erred in disallowing the claim of deduction u/s 80IA(4) already granted in order passed u/s 143(3) on 30.12.2006 which is merely change of opinion. Thus the plea of change of opinion had indeed been taken up before the Ld. CIT(A). The ground before the Tribunal is that the Ld. CIT(A) erred in not appreciating that the order passed by the AO is without jurisdiction and bad in law as the jurisdiction u/s 153A is vitiated. It is argued that the substance of ground no. 3 before the Ld. CIT(A) is that in case of a completed assessment u/s 143(3), the assessment can not be altered to the disadvantage to the assessee merely on account of change of opinion, i.e. there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Ld. CIT(A) may be in regard to jurisdiction to disallow deduction already granted and in respect of which no material has been found in search. However question No. 1 before us is an upfront question which debars jurisdiction u/s 153A all together. The question is qualitatively different from the question raised before the Ld. CIT(A). Thus we are not able to sustain the submissions of the Ld. Counsel in this behalf. 7.1 Secondly, the ld. Standing Counsel has raised a plea that barring the jurisdiction would lead to a conclusion that proceedings u/s 153A are all together bad in law. This would mean that income voluntarily surrendered by the assessee in the return u/s 153A, on which tax has been paid, will have to be refunded to the assessee. This will amount to great prejudice to the revenue as even admitted tax will have to be refunded on the basis of interpretation sought to be placed by the ld. Counsel on the statutory provision. On the other hand, Ld. Counsel has drawn our attention to the provision contained in clause (b) of section 240 to the effect that if an order of assessment is annulled the refund shall become due only of the amount, if any, of the tax paid in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent to filing the appeal. By this time, the question regarding right of the assessee to take certain grounds, additional grounds etc. in respect of the appeal come to an end. Many other considerations may come into picture before and at the time of passing the order. Thus, we will defer the discussion on this issue and confine ourselves only to section 253(1) and the interpretation of the word aggrieved for the time being. We find that the decision in the case of Pokhraj Hirachand ( supra ), rendered by the jurisdictional High Court, throws sufficient light for coming to a decision in the matter. The facts are mentioned on page 295 of the report, which are reproduced below :- We are here concerned with the assessment year 1948-49. The assessee is a partnership firm consisting of six partners dealing in cloth and parachutes. One Milkhiram R. Goyal, who was carrying on business as the sole proprietor under the name and style of Milkhiram Brothers, was able to secure a contract for purchase of approximately 1,28,499 parachutes from Tata Aircraft Ltd. at the price of ₹ 93 lakhs on or about 1st November, 1946. On or about 13th November, 1946, Milkhiram assigned to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure and that the Tribunal had no jurisdiction to examine and determine the question of 'factum' of payment of ₹ 3 lakhs by the assessee, as the same, according to him, was not disputed by the income-tax authorities. The finding of the Hon'ble Court is that from the statement of the case submitted by the Tribunal, it is found that the assessee had raised objection that Tribunal had no jurisdiction to deal with the question about the amount paid by the assessee to Milkhiram. This question was not dealt with either by the AO or the Appellate Assistant Commissioner. The Tribunal, however, suo motu went into the question whether the whole of the amount of ₹ 3 lakhs has been paid to Milkhiram. It was found that only a sum of ₹ 1,87,000/- was paid to him and not ₹ 3 lakhs. The court held that the contention of the Ld. Counsel for the assessee is well founded as the factum of the payment was not disputed by the lower authorities. As mentioned earlier, the fact is that jurisdictional question as posed before the Tribunal had not been raised before the lower authorities. It has also been held that question No. 3 before the Ld. CIT(A) is qualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are identical with the powers enjoyed by an appellate court under the Code. Thus a respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the lower court in his favour may not have been based on such grounds. We have already held that a ground can be validly taken in the memorandum of appeal only if the appellant is aggrieved by the order of AAC/CIT(A). It has also been held that the ground No. 1 in the present appeal was never taken before any of the lower authorities and, therefore, this ground can not be validly taken up in memorandum of appeal. This brings us to the question whether this ground can be taken up as additional ground with the leave of the Tribunal. To our mind, the answer to the question is obvious in view of the decision in the case of NTPC, decided on 12.4.1996, after the decision was rendered in the case of Late Begum Noor Banu Alladin on 21.4.1993. The Hon'ble Supreme Court has held with the view that Tribunal is confined only to issues arising out of the appeal before the CIT(A) takes too narrow a view. This view was taken in the case of Anand Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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