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TMI Blog2010 (3) TMI 1141X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the first appeal. In the result, all the three appeals filed by the department are dismissed. Per Vijay Pal Rao, Judicial Member - HELD THAT:- Following the decisions case of the Tarajan Tea Co. (P.) Ltd. [ 1993 (7) TMI 67 - GAUHATI HIGH COURT] , Thanthi Trust [ 1998 (2) TMI 62 - MADRAS HIGH COURT] , Assam Tribune [ 2006 (4) TMI 85 - GAUHATI HIGH COURT] . It is clear that the Tribunal has the jurisdiction and power to entertain a fresh plea on the subject-matter of the appeal before it and to pass necessary directions for ascertainment of relevant facts and deciding the issue by applying the correct provisions of law. In the case in hand the subject-matter is same for which the learned Departmental Representative has raised a plea that the claim of unaccounted expenditure is required to be decided u/s 37(1) and not u/s 69C as wrongly applied by the AO. Since the claim of the expenditure was disallowed by the AO, therefore in any case by entertaining this plea and remanded the matter to the AO for correcting the application of law shall not amount to enhancement of assessment. In view of the above discussion and decisions of the Hon ble Supreme Court and the Hon ble High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed in earning the commission income when the same is not substantiated. 3. The assessee was engaged in the agency business of leather and leather products in the name of his proprietary concern M/s. Shoetek Agencies. He was receiving commission on export orders given to Good Leather group of concerns, headed by Shri K.R. Vijyan. 4. A search was conducted in the case of the assessee under section 132 of the Act on 22-1-2004. The papers found and seized during the search showed that the assessee had received unaccounted commission in cash. In the returns filed in response to the notice under section 153A the assessee showed unaccounted receipt of commission and unaccounted expenditure for the three years as under. S. No. AY Unaccounted Commission Rs. Unaccounted Expenses Rs. 1. 2002-03 11,35,819 10,00,000 2. 2003-04 44,01,158 15,00,000 3. 2004-05 90,00,000 41,30,000 5. In the assessment orders passed under section 153A of the Act on 31-3-2006, the Assessing Officer added ₹ 10,00,000, ₹ 15,00,000 and ₹ 41,30,000, respectively, under section 69C of the Act. The CIT(A) deleted these additions and his orders have been challenged by the department i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instances of claims of expenditure, for which there is no sufficient source. Otherwise, there would never arise even a single situation which can be anticipated for application of proviso to section 69C of IT Act, by applying the representative's explanation that the source, just by an explanation without actually offering the same, should come to get treated as source explained in his opinion. The fact that the assessee has admitted the unaccounted commission in the return of income filed pursuant to the search which is much more than the claim of expenditure does not prove any point when it comes to explaining the source as long the same gets netted by the claim of unexplained expenditure. In view of the above, I am of the opinion that the assessee has not offered any satisfactory explanation about the source of expenditure to the tune of ₹ 10,00,000 in the return filed by him and therefore, the same is not allowed to be claimed as allowable expenditure in terms of the proviso to section 69C of IT Act. The sum of ₹ 10,00,000 is therefore, brought to tax in terms of the proviso to section 69C of IT Act and is added back to the income returned." 9. The CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department to argue, saying that the Assessing Officer committed an error in invoking section 69C of the Act, that the Assessing Officer should have applied the provisions of section 37(1) of the Act, that the error needed to be corrected by the Tribunal, and he requested that the matter be restored to the file of the Assessing Officer with a direction to examine the case under section 37(1) of the Act. He placed reliance, and took us through the decisions in the following cases. (i) Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC), (ii) CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC), (iii) Steel Containers Ltd. v. CIT [1978] 112 ITR 995 (Cal.), (iv) D.M. Neterwalla v. CIT [1980] 122 ITR 880 (Bom.), (v) Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC), (vi) N.P. Saraswathi Ammal v. CIT [1982] 138 ITR 19 1 (Mad.), (vii) P.R. Mukherjee v. CIT [1979] 116 ITR 554 (Cal.), (viii) Godavari Sugar Mills Ltd. v. CIT [1994] 208 ITR 801 2 (Bom.), (ix) CIT v. Assam Travels Shipping Service [1993] 199 ITR 1 1 (SC), (x) Tarajan Tea Co. (P.) Ltd. v. CIT [1994] 205 ITR 45 (Gau.), (xi) Thanthi Trust v. Asstt. CIT [1999] 238 ITR 117 2 (Mad.), (xii) Assam Tribune v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-sections (1) and (2) of section 253 read as under : "253.(1) Any assessee aggrieved by any of the following orders may appeal to the Appellate Tribunal against such order- (a) an order passed by a [Deputy Commissioner (Appeals)] [before the 1st day of October, 1998] [or, as the case may be, a Commissioner (Appeals)] under [section 154], section 250, [section 271, section 271A or section 272A]; or (b) an order passed by an Assessing Officer under clause (c) of section 158BC, in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995, but before the 1st day of January, 1997; or (ba) an order passed by an Assessing Officer under sub-section (1) of section 115VZC; or (c) an order passed by a Commissioner under section 12AA or under clause (vi) of sub-section (5) of section 80G or under section 263 [or under section 271 or under section 272A or an order passed by him under section 154 amending his order under section 263] [or an order passed by a Chief Commissioner or a Director General or a Director under section 272A]. (2) The Commissioner may, if he objects to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 253, dealing with appeal by assessee, is 'aggrieved'. The different words used in sub-sections (1) and (2) of section 253 - 'aggrieved' and 'objects' respectively, bring out the subtle difference between the scope of the appeals, filed before the Tribunal, by the assessee and by the department. 21. The Courts have held that the word 'thereon' appearing in sub-section (1) of section 254 restricts the jurisdiction of the Tribunal to the 'subject matter' of the appeal. Therefore, in the case of an appeal by the department, the subject-matter of the appeal cannot extend beyond the realm of the order of the CIT(A). The word 'objects' appearing in sub-section (2) of section 253 makes this point unambiguously clear. And, this is precisely the reason why the decision of the Supreme Court in the case of Hukumchand Mills Ltd. (supra), was an authoritative ruling on the scope of the jurisdiction of the Tribunal to entertain a new plea put forward by the respondent to an appeal. Manifestly, this ruling does not apply to the present case where the department is the appellant. 22. Therefore, the argument of the learned DR that the department in its appeal filed under section 253(2) could s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the provisions of sections 253 and 254, two distinct concepts emerge: (i) the jurisdiction of the Tribunal, and (ii) the powers of the Tribunal. The jurisdiction of the Tribunal is restricted to the 'subject-matter' of the appeal as determined by sub-sections (1) and (2) of section 253. Once the four corners of the jurisdiction of the Tribunal has been determined in a particular case, the powers of the Tribunal which can be exercised within the said four corners are very wide. 27. In the case of Indian Steel & Wire Products Ltd. v. CIT [1994] 208 ITR 740 (Cal.), the Court held that a fresh plea which altogether changes the complexion of the case as originally brought before the CIT(A), cannot be raised at the stage of hearing before the Tribunal. The Tribunal is supposed to decide only the issues which were the subject-matter of the first appeal. 28. In the case of MCORP Global (P.) Ltd. (supra), the Supreme Court held that under section 254(1) of the Act, the Tribunal had no power to take back the benefit conferred by the Assessing Officer or enhance the assessment. 29. In view of the facts and circumstances of the case and the legal position discussed in the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99-2000 12,13,427 - 2000-2001 11,79,520 3,25,596 2001-2002 25,98,721 10,87,981 2002-2003 7,87,695 6,19,718 2003-2004 18,72,451 6,05,362.90 M/s. Venkat Shoes Private Limited 1999-2000 - - 2000-2001 - - 2001-2002 - - 2002-2003 7,87,695 5,01,050 2003-2004 18,72,451 5,72,367 Totals 2,24,41,315 1,56,20,120 From the above, it can be seen that the total commission payments received by cash by the assessee from the Good Leather Group of concerns during the financial year 1999-2000 upto the date of search was to the tune of ₹ 1,56,20,121 and that the total commission payments received in cheque was ₹ 2,24,41,315. During the course of search proceedings, it was seen that the assessee had not accounted for the commission payments received in cash and that only the commission payments received through cheque have been reflected by him in his books. The assessee when asked to explain as to why he had not accounted for the commission payments received in cash to the tune of ₹ 1,56,20,121 he had stated that he would be filing a return offering the same to tax." 33. In the block return, the assessee had offered a sum of ₹ 1,45,75,437 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the claim of the assessee towards unaccounted expenditure but at the same time a question arises: whether the claim of expenditure is allowable under the provisions of the Income-tax Act, 1961. Further, whether merely because the Assessing Officer has applied wrong provisions and acted against the basic legal and factual proposition shall allow the assessee to take benefit which amounts to de hors the basic object and scheme of the statute? The answer to these by any prudent mind inevitably would be 'NO'. When the assessee has already recorded and accounted all expenditures relating to the commission income earned from these four companies, then in all human probabilities the said expenditure includes the entire expenditure incurred by the assessee for earning accounted and non-accounted commission received by the assessee. When the assessee has not whispered anything during his statement at the time of search for such expenditure, then it is clear that the claim of the assessee prima facie is nothing but an after thought. From the facts and circumstances of the case, when it is clear that the claim of the assessee cannot be allowed on the factual situations, then the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of enhacement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act. Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. Rule 12 of the Appellate Tribunal Rules, 1946 made under section 5A(8) of the Income-tax Act provides as follows :........ The rules are merely procedural in character and do not in any way circumscribe or control the power of the Tribunal under section 33(4) of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the department in this case and to direct the Income-tax Officer to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into consideration for the purpose of computing the written down value." 36. In the case of Hukumchand Mills Ltd. (supra), the Hon'ble Apex Court has held that the Tribunal has the authority to direct the lower authorities to hold further enquiry and dispose of the case on the basis of such enquiry in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of the taxable income of the assessee." In the above case, the Hon'ble Jurisdictional High Court has held that the subject matter of the appeal was the right of the assessee to claim allowance whether the allowance was admissible under one head or other head of sub-section (2) of section 10, the subject-matter of the appeal remains the same. In the case in hand the subject-matter is the allowability of the claim of unexplained expenditure, whether the same comes under section 37(1) or 69C of the Income-tax Act, 1961, the subject-matter remains the same. 38. In the case of Steel Containers Ltd. (supra), the Hon'ble Calcutta High Court has held as under :- "There was nothing in the Income-tax Act which restricted the Tribunal to the determination of the questions raised before the departmental authority. All questions, whether of law or of fact, which related to the assessment of the assessee might be raised before the Tribunal. If for reasons recorded by the departmental authority in respect of a contention raised by the assessee, grant of relief to him on another ground was justified, it would be open to the departmental authority and the Tribunal and indee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no duty to issue any further direction. It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute. The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. In interpreting section 25A(1), we cannot also be oblivious to cases where there is a possibility of claims of partition being made almost at the end of the period within which it can be completed making it impossible for the ITO to hold an inquiry as required by section 25A(1) of the Act by following the procedure prescribed therefore. We, however, do not propose to express any opinion on the consequence that may ensue in case where the claim of partition is made at a very late stage where it may not be reasonably possible at all to complete the inquiry before the last date before which the assessment must be completed. In the instant case, however since it is not establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hierarchy of authorities and that it would be open to the Tribunal to consider any fresh plea in the exercise of its discretion. Even where consequences of the acceptance of the assessee's plea would involve granting a larger amount as deduction then was demanded at the stage of assessment the Tribunal would have jurisdiction to consider such a plea. The Tribunal has however, discretion not to admit any fresh plea being put forward when it would involve investigation of facts'. We do not regard the last observation as a fetter on the Tribunal's jurisdiction to admit a new plea. For the power to listen to a new contention and decide the appeal on that basis has been spelled out by the Supreme Court from the terms of the statute. The exercise of that power does not depend on the presence of any other factor, excepting that the new plea comes from a party to the appeal. Even in a case where fresh facts are called for to decide the new plea, the Tribunal would have jurisdiction to entertain that plea. How the Tribunal wishes to get at the relevant facts in order to decide the new point may be quite a different thing. The Tribunal may either remand the matter for the purpose or proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961. The subject-matter of the appeal was the assessability or includibility of the income from the Shyamasree Talkies in the income of the assessee. Viewed from that point of view whether that income was to be included as an income arising directly or indirectly from the asset transferred directly or indirectly by the assessee or whether that income was to be included because the asset belonged to the assessee as his own were really facets of two different aspects of the question of assessability or includibility of the income from the Shyamasree Talkies or the quantum thereof. In the context of these facts we are of the opinion that the subject-matter of the appeal was wide enough to include examination of the question of benami by the Tribunal if reasonable and proper opportunity as enjoined under the Rules and the principles of justice was given to the assessee to controvert such a contention to be considered by the Tribunal." In the said decision, the Hon'ble Calcutta High Court has concluded that the Tribunal was right in holding that the wife of the assessee is a benamidar of the assessee and the property in question really belongs to the assessee and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. If the Appellate Assistant Commissioner is satisfied, he would be acting within his jurisdiction in considering the question so raised in all its aspects. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Supreme Court said that it was not overruling the decision in Gurjargravures Private Limited [1978] 111 ITR 1 , since if could be distinguished on facts. The ratio of this judgment would apply to the jurisdiction of the Appellate Tribunal also. The observations of the Supreme Court, in fact cover all appellate authorities under the Income-tax Act. We do not find anything in section 254(1) of the Income-tax Act which limits the jurisdiction of the Appellate Tribunal in any manner. For reasons which we have set out earlier, the phrase "pass such order thereon" does not in any way restrict the jurisdiction of the Tribunal but on the contrary confers the widest possible jurisdiction on the Appellate Tribunal including jurisdiction to permit any additional ground of appeal if in its discretion and for good reason it thinks it necessary or permissible to do so. (CIT v. Western Rolling Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court is empowered to reframe a question of law arising out of the Tribunal's order in case of framing of the question is not proper, we have no doubt that the question of law even as framed was wide enough to include this aspect which arises out of the Tribunal's order leading to the reference made to the High Court. The real question of law arising out of the Tribunal's order was : Whether the Tribunal was justified in taking the view that it had not alternative except to uphold the order of the Appellate Assistant Commissioner cancelling the penalty imposed by the Income-tax Officer? In substance, the question of law referred meant whether the Tribunal was justified in taking the view that it had no power to remand the matter to the Appellate Assistant Commissioner for further enquiry and decision in accordance with law on the findings of fact recorded. The High Court was in error in taking the view that this aspect was not covered in the question of law referred to it. Consequently, the impugned judgment of the High Court is set aside. The High Court should have answered the question of law referred to it in the negative stating that the Tribunal was not justified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it be contended that the Income-tax Officer does not have jurisdiction to decide a legal or jurisdictional issue." 49. In the case of the Assam Tribune (supra), the Hon'ble Gauhati High Court has held as under : "The next ground of challenge to the order passed by the learned Tribunal is that it has exceeded its jurisdiction in interfering with the order passed by the Commissioner of the Income-tax (Appeals), insofar as it relates to the decision of the Commissioner of Income-tax (Appeals) in respect of allowing the appeal of the assessee filed before the said authority by setting aside the order of the assessing authority in disallowing the deduction of the said amount of ₹ 3,41,911 from the income of the assessee under section 43B of the Act and consequently treating the said amount as income in computing the income as in the memorandum of appeal before the learned Tribunal such ground was not taken by the revenue and therefore the learned Tribunal cannot decide such question in view of the provisions contained in section 254 of the Act. Section 254(1) of the Act provides that the Appellate Tribunal may after giving both the parties to the appeal an opportunit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee restricts the jurisdiction of the Tribunal within the subject-matter of the appeal. Therefore, the case relied upon by the learned Authorized Representative of the assessee would not help the assessee in raising the contention that the Tribunal has no jurisdiction to entertain the new plea of the revenue and the subject-matter before the Tribunal has only the impugned order of the Commissioner of Income-tax (Appeals). I am afraid to accept the contentions of the assessee that the jurisdiction of the Tribunal is restricted only to the impugned order of the Commissioner of Income-tax (Appeals) and cannot entertain a new plea on the same subject-matter. The power of the Commissioner of Income-tax (Appeals) is co-terminus with the Assessing Officer and the order of the Commissioner of Income-tax (Appeals) is merged with the order of the Assessing Officer. Therefore, if there is inherent and patent illegality in applying the provisions of law in the assessment order on the subject-matter which is under the appeal before this Tribunal, then the Tribunal is competent to entertain the only plea in respect of the said patent illegality committed by the Assessing Officer and to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case for the reason that the expenditure stands explained insofar as that the same was incurred from the unaccounted commission earned by the assessee. Both the Members who heard the matter have also concurred with the view of the CIT (A) that section 69C is not applicable. However, in the course of hearing before the Tribunal, the ld. D.R. raised a fresh plea to the effect that the Assessing Officer should have invoked the provisions of section 37(1) and requested the Bench to remit back the matter to the file of the Assessing Officer to consider the allowability or otherwise of the expenditure under section 37(1) of the Act. The ld. A.M. rejected the request of the ld. D.R. by observing that the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal and the fresh plea taken by the ld. D.R. being out of the subject-matter, it cannot be accepted. In arriving at the conclusion that it is out of the subject-matter of the appeal, the ld. A.M. tried to draw distinction between the words "aggrieved" and "objects" appearing in section 253(1) and section 253(2) respectively. On the other hand, the ld. J.M held that the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. In my view, the ld. A.M. has placed undue stress on these two words to arrive at the conclusion he arrived at. According to Law Lexicon by P. Ramanatha Aiyar (2nd Edition), the word "aggrieved" means one whose pecuniary interest is directly affected by the adjudication. An aggrieved person is a person who has suffered a legal grievance - a man against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something or wrongfully affected his title to something. Thus, the word "aggrieved" is used for a person who has personally suffered some loss on account of adjudication. Section 253(1) gives right to the assessee to file an appeal before the Tribunal. Section 253(2) gives right to the Commissioner to file an appeal before the Tribunal. The Commissioner is acting in a fiduciary capacity on behalf of the Income-tax Department, Government of India. Thus, it is the subject on one hand and the State on the other hand. In the light of the meaning of the word "aggrieved", the citizen or the subject can be personally aggrieved by an order, but the State or the Commissioner acting for the State canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appeal before the Tribunal was the question as to what should be the proper written down value of the assets for calculating the depreciation allowance under the Indian Income-tax Act. It was certainly open to the department, in the appeal filed by the assessee before the Tribunal, to support the finding of the AAC with regard to the written down value on any of the grounds decided against it. In the case before the Supreme Court, earlier enactment was to be referred to, whereas in the present case only a different provision of the same enactment has to be considered. Therefore, I see no reason as to why the plea of the ld. D.R. cannot be accepted. In the present case, of course, the department is the appellant unlike in the case of Hukumchand Mills Ltd. (supra). But, in my view, it makes no difference. The department is aggrieved by the deletion of disallowance of expenditure which disallowance was made under one particular provision. The subject-matter of the appeal was whether the expenditure claimed by the assessee was allowable or not. If it was not disallowable under one particular provision but is disallowable under any other provision, the subject-matter, viz., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the department before the Tribunal could not be considered without a further investigation into facts. Nevertheless, the Tribunal entertained the plea, and remitted the case to the ITO for the ascertainment of the relevant facts. The Supreme Court, in their decision upheld not only the Department's new plea, but also the Tribunal's order of remand based on the new plea." In the light of the above discussion, I agree with the view taken by the ld. J.M. to hold that the plea raised by the ld. D.R. is to be accepted and the matter is to be remanded to the Assessing Officer for considering the claim of the assessee for claiming deduction of unaccounted expenditure under section 37(1) of the Act. 7. The matter may now be placed before the Division Bench to give effect to the majority view. Per Abraham P. George, Accountant Member. - In all these three appeals there arose difference of opinion between Members of the Division Bench hearing the appeal. Therefore the matter was referred to the Third Member. Hon'ble Vice-President acting as Third Member has agreed with the view of the Learned Judicial Member. Therefore in view of the majority decision the orders of the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X
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