TMI Blog1993 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... rther enhanced by a sum of Rs. 1,02,797.07 and this court also directed payment of interest on the enhanced compensation from the date of taking possession of the said land, i.e., October 11, 1957, till the date of payment. The enhanced compensation of Rs. 1,02,797.07 and the interest which worked out to Rs. 72,026 was received by the assessee on July 30, 1969. The present controversy in this reference relates to these two items and the assessment year is 1970-71. The return of income for the assessment year 1970-71 was filed on December 31, 1970, by one Sri Dost Mohammed Alladin, one of the legal heirs of the assessee, Smt. Begum Noor Banu Alladin, who died on December 2, 1969. In the said return, the sum of Rs. 1,02,797.07 received by the assessee towards enhanced compensation on July 30, 1969, was declared as capital gain. The sum of Rs. 72,026 received by the assessee as interest on the enhanced compensation from October 11, 1957, to June 15, 1969, at six per cent. per annum was also offered for assessment. The Income-tax Officer assessed the entire interest of Rs. 72,026 as income liable to be taxed for the assessment year 1970-71. As regards the sum of Rs. 1,02,797.07 dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172. The Appellate Tribunal also observed that as per the said decision, interest accrued on the date when the judgment and decree was passed, i.e., April 23, 1968, and that, therefore, the right to receive the enhanced compensation and interest arose on that date which was outside the accounting year relevant to the assessment year 1970-71 and that as such the entire interest could not be taxed in the assessment year 1970-71. In that view, the Appellate Tribunal brought to tax only the interest relatable to the assessment year in question, i.e., for the period October 1, 1968, to June 15, 1969, i.e., Rs. 4,491.57. As regards the enhanced compensation of Rs. 1,02,797.07, the assessee filed an application before the Appellate Tribunal for raising an additional ground questioning the leviability of capital gains tax in respect of the said sum. Notice of this application was given to the Department and preliminary objection was raised by the Departmental representative as regards the admissibility of the additional ground because the levy of the said tax was not questioned either expressly or impliedly before the Appellate Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tribunal are limited to the subject-matter of the appeal. ... It would not be permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed in the lower Tribunals or which was not in dispute and which does not form the subject-matter of the appeal. It is thus clear that the Tribunal has no jurisdiction to find its decision on a question which was not the subject of dispute at any stage of the proceedings and is not the subject-matter of the appeal. It has no power to enlarge the scope of the proceedings or that of the appeal before it by permitting the parties or any one of them to ask for a relief which was never the subjectmatter in those proceedings or of the appeal. " In Shaik Ibrahim v. CIT [1968] 69 ITR 117, another Division Bench of this court held (at page 120): "Mr. Kondaiah for the Department also takes the stand that as the assessee while making the return stated that the income was from the business of New York Cotton futures, he cannot now say that it was not from business. We cannot accept this contention. The mere fact that the assessee has not raised this contention before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst it. " The Gujarat High Court also held in that case that though rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, allows the appellant to urge any ground not taken in the memorandum of appeal, that does not mean that, with the leave of the Tribunal, the appellant can take any ground of appeal even if he was not originally entitled to take it in the memorandum of appeal. This view was accepted by a Full Bench of this court in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57, while dealing with the powers of the Sales Tax Appellate Tribunal under the Andhra Pradesh General Sales Tax Act. The Full Bench also relied on the decision of the Supreme Court in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232, wherein the Supreme Court observed (at page 237) : "The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal." Karamchand Premchand Private Ltd.'s case.[1969] 74 ITR 254 (Guj) was followed by the Gujarat High Court in CIT v. Steel Cast Corporation [1977] 107 ITR 683, which was in turn approved by a Full Bench of the Gujarat High Court in CIT v. Cellulose Products of India Ltd. [198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala does not agree with the view of the Gujarat High Court and, in the latest edition of the Law and Practice of Income-tax (Eighth Edition of 1990), under the heading "Raising new questions Ground not taken before lower authority" he opines as follows (at page 1526): "The Punjab and Haryana High Court has held that the assessee is entitled to urge before the Tribunal a ground regarding the validity of the, assessment which he had given up before the Commissioner of Income tax (Appeals) or any other ground which he had not taken before the lower authorities. The latter view is also taken by the Madras High Court. The Bombay High Court has held that the assessee can argue before the Tribunal a point of jurisdiction not raised before the lower authorities. The Calcutta High Court has held the assessee entitled to claim for the first time before the Tribunal certain benefits which he had not claimed before. In CIT v. Karamchand Premchand P. Ltd. [1969] 74 ITR 254, the Gujarat High Court held that if a point arising in the assessment order is not taken in appeal by the assessee and is therefore, not dealt with by the Commissioner of Income-tax (Appeals), the assessee cannot raise tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this court and also by different High Courts, and as the various decisions of the Supreme Court also have to be analysed, the matter has to be considered by a Full Bench. There is also the decision of the Supreme Court in S. S. Gadgil v. Lal and Co. [1964] 53 ITR 231, wherein the Supreme Court delineated the characteristics of proceedings for assessment as follows (headnote) : "A proceeding for assessment is not a suit for adjudication of civil dispute. That an income-tax proceeding is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The income-tax authorities who have power to assess and recover tax are not acting as judges deciding a litigation between the citizen and the State : they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income and to assess a tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. " These aspects have also to be kept in view while considering the powers of the Appellate Tribunal in entertaining additional grounds and an authoritative pronouncement is needed. Therefore, questions Nos. 1 and 2 are referred to the Full Bench. As regards question No. 3, as it is covered by a decision of the Division Bench of this court in CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172 in favour of the assessee, we answer the question in the negative against the Revenue and in favour of the assessee. JUDGMENT OF FULL BENCH The judgment of the court was delivered by P. VENKATARAMA REDDI J.-We are called upon to answer in this referred case a highly debated question, viz., whether the Income-tax Appellate Tribunal has jurisdiction to grant relief on consideration of an additional ground raised before it by the assessee for the first time although such ground related to an item of assessment which was not disputed at any earlier stage. The sharp divergence of opinion amongst the various High Courts and in the decisions of this court adds to the dimension of the problem on hand. We shall start with a brief reference to the relevant facts : One Sri Dost Mohamma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant in respect of the donations made to a public charity. In fact, these were the subject-matter of dispute at the stage of assessment itself. Before the Appellate Assistant Commissioner, a supplemental ground was raised contending that the interest of Rs. 72,026 received on the enhanced compensation should be spread over from year to year commencing from the year of taking possession of the land and only a sum of Rs. 4,492 ought to have been assessed to tax for the assessment year 1970-71. The Appellate Assistant Commissioner substantially rejected the appeal and he gave relief only to the extent of Rs. 1,096 pertaining to dividend income. With regard to interest on enhanced compensation, the appellate authority observed that the assessee himself offered the same for assessment and that there was, therefore, no grievance. In the second appeal before the Tribunal, grounds were raised contesting the chargeability of income from gifted property, disallowance of relief under section 80G and interest on the enhanced compensation amount. During the pendency of the appeal, an additional ground was sought to be raised by the assessee in regard to the exigibility of capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 105 ITR 172, and referred questions Nos. 1 and 2 to the Full Bench for consideration. The learned judges observed that, in view of the importance of the matter and the conflicting views expressed by different High Courts and this court itself, the matter has to be placed before a Full Bench. That is how the referred case has come up before us. The pivotal question is whether the Appellate Tribunal could allow the assessee to raise a dispute in regard to the chargeability of income which remained undisputed before the Income-tax Officer and the Appellate Assistant Commissioner and which was in fact offered for assessment by the assessee himself. Learned standing counsel for the Income-tax Department, Mr. S. R. Ashok, contends, adopting mainly the reasoning of the Gujarat High Court in CIT v. Karamchand Premchand Pvt. Ltd. [1969] 74 ITR 254 and of this court in State of A. P. v. Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57 [FB] that the Tribunal has no jurisdiction to allow such ground to be raised for the first time before it and that the Tribunal misconstrued the reasoning of the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710. He stresses the need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he thinks fit or to direct the Income-tax Officer to make further enquiry and report the result of the same. Sub-section (5) lays down that the appellate authority may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if he is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. The powers of the Appellate Assistant Commissioner/Commissioner (Appeals) are set out in section 251. In an appeal against an order of assessment, the said appellate authority may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer to make a fresh assessment in accordance with the directions given by the appellate order. In an appeal against an order imposing a penalty, the appellate authority may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. In any other case, he may pass such order in the appeal as he thinks fit. It is enjoined by sub-section (2) that the appellate authority shall not enhance an assessment or penalty or reduce the amount of refund unless the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal tinder this rule : Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground". Rule 27 enables the respondent to the appeal to support the order appealed against on any of the grounds decided against him. Rule 28 specifically confers the power of remanding the case to the Income-tax Officer or to the appellate authority with such directions as the Tribunal may think fit. Rule 29 empowers the Appellate Tribunal to permit the parties to the appeal to produce additional evidence either oral or documentary under certain circumstances. What would then be the scope of appeal before the Appellate Tribunal and the scope of relief that could be granted by the Tribunal is the question that arises for our consideration. It is not in dispute and it cannot be disputed in view of rule 11 of the Appellate Tribunal Rules that the Tribunal can permit an additional ground to be raised at any stage of the appeal. The Tribunal, in deciding the appeal need not be confined to the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no other subsequent decision of the Supreme Court expounding the parameters of the Appellate Tribunal's power of granting relief on new ground. The first judgment which we would like to refer to is Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC). In that case, the question was as to what should be the proper written down value of the building and machinery belonging to the assessee for calculating the depreciation allowance under section 10(2)(vi) of the Indian Income-tax Act, 1922. The assessee relied upon section 10(5)(b) and contended that the original cost of the machinery and buildings should be taken into account for this purpose. The Income-tax Officer as well as the Appellate Assistant Commissioner rejected this contention of the assessee. However, the Tribunal accepted the contention of the assessee in this regard. At the same time, the Tribunal permitted the Revenue to raise a new ground which was not considered by the Income-tax Officer or the Appellate Assistant Commissioner. The contention was that, under paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, certain amounts of depreciation which were allowed under the Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment, in the appeal filed by the assessee before the Tribunal, to support the finding of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. It was argued on behalf of the appellant that the action of the Tribunal in remanding the case is not strictly justified by the language of rule 27 or rule 12. Even assuming that rules 12 and 27 are not strictly applicable, we are of the opinion that the Tribunal has got sufficient power under section 33(4) of the Act to entertain the argument of the Department with regard to the application of paragraph 2 of the Taxation Laws Order and remand the case to the Income-tax Officer in the manner it has done. It is necessary to state that rules 12 and 27 are not exhaustive of the powers of the Appellate Tribunal. 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellate order on a different ground. The next case which needs reference is the decision of the Supreme Court in Mahalakshmi Textile Mills' case [1967] 66 ITR 710. Shah J., spoke for the Bench, consisting of himself, S. M. Sikri and V. Ramaswami JJ. This case has been strongly relied upon by learned counsel for the assessee just as it was relied upon by the Bombay, Madras and other High Courts to which we shall refer later. In that case, the question before the Supreme Court was with regard to development rebate. The assessee was manufacturer of cotton yarn. He claimed that he spent a sum of Rs. 93,215 for the introduction of "Casablanca conversion system" in its spinning plant which involved replacement of certain machinery and other additions and alterations in the drafting mechanism. The Income-tax Officer disallowed the claim of the assessee for development rebate on the ground that the Casablanca conversion system did not involve installation of new machinery. The Appellate Assistant Commissioner agreed with the Income tax Officer and rejected the appeal. However, for the first time before the Appellate Tribunal, it was claimed by the assessee that the expenditure was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as the dispute pertained to the same item and the same quantum of income, it is immaterial whether the relief could be given by the Tribunal on a different or new ground. Even if the ground raised is inconsistent with the ground taken earlier before the Income-tax Officer or the Appellate Assistant Commissioner, nevertheless, that could be permitted to be raised by the Tribunal. The broad observations made to the effect that " all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal " shall be understood in the light of the ratio of the judgment and the observations following the above-quoted sentence. All that the Supreme Court laid down in this case was that relief can be granted by the Tribunal on the basis of a new plea raised by the assessee, whether it be an alternative or inconsistent plea, provided, of course, the scope and subject-matter of the appeal do not get extended. It is not proper to construe a judgment without reference to its true ratio and the context in which the observations were made. It is trite to say that the judgment must be read as a whole. At this stage, we would like to recall what the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have been raised at any earlier stage either before the Income-tax Officer or before the Appellate Assistant Commissioner, it can be raised for the first time at the stage of appeal before the Tribunal, but it must be in connection with the subject-matter of appeal. " The next and third case is the decision in CIT v. S. Nelliappan [1967] 66 ITR 722 (SC), which was decided by the same Bench of the Supreme Court on the same day. This case has again been pressed into service to contend that relief could be granted by the Tribunal even in respect of a matter unrelated to the subject-matter of the dispute before the Appellate Assistant Commissioner. It was contended that the ground permitted to be raised in this case relates not only to a new issue but a new item unrelated to the original subject-matter. We find it difficult to accept this contention. In that case, the Assessing Officer rejected the books of account maintained by the assessee and made certain additions to the profits disclosed by him and brought the same profits to tax. Certain cash credits were also treated is undisclosed profits. The matter went up to the High Court ultimately. It was urged before the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was not made the subjectmatter of a ground in the memorandum of appeal. It cannot be said that in accepting the contention of the assessee that the cash credits represented income from the business withheld from the books, the Tribunal made out a new case inconsistent with the assessee's own plea. In any event the Tribunal is not precluded from adjusting the tax liability of the assessee in the light of its findings merely because the findings are inconsistent with the case pleaded by the assessee." This is also not a case where the Tribunal gave any relief traversing beyond the true subject-matter of the appeal. It is a case of allowing new plea to be raised just as in the case of Mahalakshmi Textile Mills [1967] 66 ITR 710 (SC). The Supreme Court observed that, even if it amounts to an inconsistent plea, the Tribunal is not precluded from accepting the said plea and adjust the tax liability accordingly. Whether the unexplained cash credits should be telescoped into the undisclosed profits arrived at by the lower authorities is a question integrally connected with the dispute as to estimation of undisclosed profits and the assessee's plea that the unexplained cash credits w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellate Assistant Commissioner which are against him and by which he is aggrieved. It is, therefore, imperative that there must be a decision of the Appellate Assistant Commissioner by which the assessee or the Revenue is aggrieved before he can prefer an appeal against that part of the order of the Appellate Assistant Commissioner consisting of such decision. These observations may convey the impression that an assessee who did not raise a particular dispute before the Appellate Assistant Commissioner cannot be said to be aggrieved by the order of the Appellate Assistant Commissioner within the meaning of section 253 and, therefore, he cannot file an appeal to the Tribunal. However, we do not think that this is correct approach to the problem. If the assessee is aggrieved by any part of the order of the Appellate Assistant Commissioner, he is aggrieved in that sense and he can maintain an appeal. For instance, in the case decided by the Gujarat High Court and in the case with which we are concerned, the assessee can be said to be aggrieved against the order of the Appellate Assistant Commissioner because he did not grant relief in regard to the matters agitated before hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Steel Cast Corporation's case [1977] 107 ITR 683 and the Full Bench decision of the same High Court in CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499. In Steel Cast Corporation's case [1977] 107 ITR 683, Divan C. J., speaking for the Bench, concluded that (at page 701) : "once the subject-matter of the appeal is determined, the Tribunal has very wide powers to deal with all questions of fact and law pertaining to that subject matter of appeal and it can allow a new question of law to be raised in support of the same claim for relief ". In Cellulose Products' case [1985] 151 ITR 499 (Guj) [FB], P. S. Poti C. J., speaking for the Full Bench, observed (at page 513) : "In all these situations, in an appeal before the Tribunal, he is free to make a fresh approach, present his case from a different perspective and raise new grounds in support of the relief sought by him. The fact that he has failed to make that approach before the first appellate authority should not stand in the way of his making a new approach. But all this must be related to the same subject-matter as was in appeal before the first appellate authority. . . . It is evident, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mills' case [1967] 63 ITR 232 expressed the view that the entire tax proceedings of the assessee become the subject matter of the appeal before the Tribunal. This is what the Full Bench said (at page 367) : ". . . . if the word 'thereon' can be said to refer to the subject matter of the appeal, then, as stated by the Supreme Court in the case of Hukumchand Mills [1967] 63 ITR 232, the subject-matter of the appeal is the entire tax proceeding of the assessee which is before the Tribunal for consideration ; and this will cover the proceedings before the Income tax Officer, before the Appellate Assistant Commissioner as well as before the Tribunal-including the grounds raised before the Tribunal, any additional grounds which may be allowed to be raised before the tribunal as also cross-objections, if any, before the Tribunal" With due respect to the learned judges, we do not think that this assumption is correct. No such observation was made by the Supreme Court in Hukumchand Mills' case [1967] 63 ITR 232. In our view, the subject-matter of appeal before the Appellate Assistant Commissioner is the assessment order or such other orders as are mentioned in section 246. As elabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to revise the determination made by the Income-tax Officer under the said proviso and exercise the power which the Income-tax Officer could exercise. In CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891, the Supreme Court clarified that the power of the Appellate Assistant Commissioner to enhance the assessment did not comprehend within its fold the power to bring into the net of taxation new sources of income not mentioned in the return or not considered by the Income-tax Officer. V. Ramaswami J., speaking for the Supreme Court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443, had this to say on the extent of powers possessed by the first appellate authority (at page 449) : "It is necessary also to emphasise that the statute provides that, once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee ; his competence ranges over the whole assessment and it is open to him to correct the Incometax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Incometax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even where an appeal is filed by the Department, that appeal could only be in respect of matters considered and decided by the Appellate Assistant Commissioner. In the absence of such determination by the Appellate Assistant Commissioner, the Tribunal cannot enhance the tax liability under the original assessment itself, in an appeal filed by the Department against the Appellate Assistant Commissioner's order. II It is, therefore, futile to contend that there is no qualitative difference between the first appeal and the second appeal under the Income-tax Act, 1961, and that what could be said of the first appeal could also be said of the second appeal. The scheme of the Act pertaining to appeals and the contents of the relevant provisions dealing with appeals militate against any such interpretation. Above all, the need to impart finality to settled matters is another weighty consideration which dissuades us from accepting the interpretation placed on behalf of the assessee. While conferring the right of appeal and cross-objections to both parties at the second appellate stage, the Legislature evidently thought that the process of review or revision of assessment, if we may say so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner and it must be said that the Supreme Court dispelled the shadow cast on the powers of the first appellate authority by its earlier judgment in Addl. CIT v. Gurjargravures Pvt. Ltd. [1978] 111 ITR 1 (SC). The Supreme Court reiterated what was said by Subba Rao J., in Kanpur Coal Syndicate's case [1964] 53 ITR 225, that the power of the Appellate Assistant Commissioner was co-extensive with that of the Income-tax Officer. The opening and concluding sentences in the above passage refer only to the powers of the Appellate Assistant Commissioner. The general observations regarding the appellate authority's powers in the middle of the passage extracted above do not lead to the necessary inference that the Supreme Court intended to lay down the proposition that the Appellate Tribunal possesses the same powers as the Appellate Assistant Commissioner. It is not reasonable to infer so having regard to the fact that the limitation on the powers of the Tribunal is manifested by the relevant statutory provisions. In fact, their Lordships of the Supreme Court have guardedly qualified the general statement vis-a-vis the appellate authority's powers by using th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocedure in an incometax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stages, either before the Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee." We do not think that the conclusions reached on the application of certain general principles of tax jurisprudence rest on a sound basis. We must primarily have regard to the statutory provisions creating and defining the appellate remedies. Even speaking from the standpoint of general principles, it should not be forgotten that there is an equally salutary principle underlying a taxing statute that there should be finality to the proceedings so that an element of certainty could be ushered in as early as possible in the interests of both sides. The assessments need not be thrown to contest throughout the stages of appeal, revision and reference. There is a fallacy in thinking that, in reality, there is no lis between the parties before the Tribunal and that the Tribunal should set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal will hear the grievances and contentions put forward on both sides and decide the appeal as a judicial body. The nature of the appeal and the proceedings are akin to those in a civil appeal. Under these circumstances, it is difficult to say that there are no adversarial proceedings before the Tribunal and the Tribunal can, there fore, embark upon an enquiry into the correctness of the assessment as a whole and recompute the tax de novo just as an assessing authority could have done. If that be the true function of the Tribunal, how is it that the power of enhancement of assessment which was bestowed on the Appellate Assistant Commissioner is not confided to the Tribunal ? This question admits of no satisfactory answer, if the above view expressed by the Madras and other High Courts is to be endorsed. Further, if the above viewpoint is carried to its logical conclusion, the Tribunal can even disturb the original assessment to the detriment of the assessee in an appeal filed by the Department against the Appellate Assistant Commissioner's order. It was not suggested by any of the counsel that such a power could be assumed by the Tribunal. Here, we would like to refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1965] 57 ITR 643 (SC), in which the Supreme Court held that if a dealer who had returned certain sales and allowed them to be taxed found on a later decision of the court that the same were not taxable, he could file an appeal and ask for condonation of delay.... the Gujarat High Court itself rightly held in later cases that an assessee could raise before the Commissioner of Income-tax (Appeals) for the first time a point which he had not raised before the Assessing Officer and which was therefore not dealt with in the assessment order. It is submitted that the correct position in law is that both the Commissioner of Income-tax (Appeals) and the Tribunal have the jurisdiction in every case to entertain a ground which was not urged before the authority whose order is appealed against, but they, judicially exercising their discretion, may or may not entertain the new ground. " We find ourselves unable to endorse the view expressed by the learned authors. The assumption that the first appellate authority must be deemed to have sustained the assessment in toto (in a case where he dismisses the appeal) is not fully correct. It is only in respect of matters raised before him that the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter in appeal by originally including it in the memorandum of appeal or with leave of the Appellate Assistant Commissioner under section 250, sub-section (5), the Appellate Assistant Commissioner was entitled to consider and decide it since the entire assessment was open before him. But he was not bound to do so and if in fact he did not consider it, it is difficult to see how it can be laid that he decided it against the assessee. It is only if the Appellate Assistant Commissioner was under an obligation to examine the correctness of the entire assessment irrespective of the grounds of appeal taken by the assessee, that it could conceivably be urged that the Appellate Assistant Commissioner must be presumed to have examined the correctness of the decision of the Income-tax Officer as regards the disallowance of the third claim and since he did not reverse that decision, he must be held to have accepted it as correct. But it is apparent, and this indeed was not disputed on behalf of the assessee, that the Appellate Assistant Commissioner was under no obligation to examine the correctness of every decision recorded by the Income-tax Officer in the course of the assessment. The en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scope of the appeal or revision contemplated by the particular statute". The Supreme Court further observed that the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions concerning the appellate or revisional jurisdiction. In that case, the Supreme Court was concerned with the question whether the entire assessment order passed by the Deputy C. T. O. could be said to have merged in the revisional order passed by the Deputy Commissioner of Commercial Taxes. The Supreme Court answered that question in the negative because the subject-matter of revision (filed by the assessee) was only with reference to a particular item and in so far as the other items of assessment are concerned, there was no merger. The Supreme Court relied upon the judgment in CIT v. Amritlal Bhogilal and Co. [1958] 34 ITR 130 (SC). Applying the principles laid down in these cases, it is difficult to conclude that the entire assessment order becomes an integral part of the appellate order and that, therefore, any part thereof could be challenged, irrespective of the subject-matter of the dispute in the first appeal. Of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st appellate authority. We are, therefore, not inclined to accept the argument of Mr. Ratnakar. Referring to this rule and rule 29 which permits additional evidence to be let in, the Full Bench of the Bombay High Court in Ahmedabad Electricity Co.'s case [1993] 199 ITR 351, held (at page 360) : "These rules, therefore, indicate that the scope of enquiry before the Tribunal can be wider than the points which are raised before the Tribunal. The Tribunal, therefore, would ordinarily have the power to allow additional points to be raised before it so long as they arise from the subject-matter of the proceedings and not necessarily only from the subject-matter raised in the memorandum of appeal..." In the light of what we have said above regarding the true scope of rule 11, we are unable to agree with the view expressed in the last sentence of the above passage. It is further submitted by learned counsel for the assessee that wider interpretation of rule 11 is called for in order to avoid the situations in which the taxpayers would be left without any remedies to redress their genuine grievance. For instance, it is contended that, if an assessee bona fide claims certain deductions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage of hearing of the second appeal, the assessee sought for permission to raise a new ground touching an item admitted to be taxable earlier. The justification for not raising this ground earlier is not discernible from the records in the reference case. The Tribunal did not even address itself to the question whether there was sufficient justification for not raising the ground at the earlier stages or at an earlier point of time. The Tribunal having found that it had jurisdiction to entertain this additional ground, unhesitatingly allowed the assessee to raise the ground stating that it was a pure question of law. The Tribunal held that the income was not assessable to tax during the relevant assessment year. Of course this conclusion of the Tribunal is justified by the decision of this court in S. Appala Narasamma v. CIT [1987] 168 ITR 17. The net result is that the income in question cannot be assessed to tax either in the assessment year in which it was taxed or in any other previous year because, the time for reopening or revising the assessment of that previous year expired by now. The admitted income is thus going out of the net of taxation. Is it equitable and just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n held times without number that there is no estoppel on a question of law. Whether, in fact, the transactions of the assessee in respect of the New York Cotton futures, known as 'brackets' are exempt from tax under section 4(3)(vii) or it would amount to 'business' is question of law. The mere fact that the assessee, not having appreciated his legal rights, failed to raise the contention before the Income-tax Officer or the Appellate Assistant Commissioner, where he was not represented by a lawyer but by his auditor who not being qualified in law, is not competent to appreciate the principles of law or its subtleties, he 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 questions of fact as well as law. Having so held, the learned judges answered the question in favour of the assessee and held that the receipts in question were exempt from tax under section 4(3)(vii) of the 1922 Act. It is to be seen that the question considered in this case was whether the assessee having admitted that the income was derived from the bracket business could be allowed to turn round and contend for the first time that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s asked for by the assessee. Gopal Rao Ekbote C. J., speaking for the Bench, pointed out that the powers of the Tribunal are limited to the subject-matter of appeal. It was observed (at page 707) : "They (the appellants) are not, however, permitted to widen the scope of the proceedings determined by the Income-tax Officer or the first appellate authority. Within the outer limit of those proceedings, they are free to ask for the necessary relief thus limiting the subject-matter and ultimately the scope of the appeal. It is plain that once these limits are set, the Tribunal can deal only with that part of the order of the lower Tribunal which has been made the subject-matter of the appeal before the Tribunal. It would not be permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed in the lower Tribunals or which was not in dispute and which does not from the subject-matter of the appeal. . . . We are, therefore, of the clear opinion that these provisions do not permit the Tribunal to travel beyond the scope of the appeal in order to decide questions raised by the assessee subsequently. The gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Gurjargravures (P.) Ltd.'s case [1978] 111 ITR 1 (SC), it was not open to an assessee to claim any relief before the Appellate Assistant Commissioner or the Tribunal, if he had not claimed the same before the Incometax Officer. This contention was negatived by the Bench. Obul Reddi C. J., speaking for the Division Bench, expressed his opinion in the following terms (at page 781) : "We are of the opinion that when there is sufficient evidence on record to support a claim, neither the Appellate Assistant Commissioner nor the Tribunal is barred from entertaining a claim on the basis of the evidence on record which is sufficient to support the claim. The decision of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1, therefore, is no bar to the entertaining of the claim by the Appellate Assistant Commissioner or the Tribunal, in view of the fact that all the necessary material for allowing a claim under section 80J(1) was before the Income-tax Officer." On the facts stated in the judgment, it is not clear whether the claim under section 80J(1) was made for the first time before the Tribunal. Perhaps, that is the inference which has to be drawn from the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may, after giving both parties to the appeal, a reasonable opportunity of being heard (i) confirm, reduce, enhance or annul the assessment or the penalty or both ; or (ii) set aside the assessment or the penalty, or both, and direct the assessing authority to pass a fresh order after such further enquiry as may be directed ; or (iii) pass such other orders as it may think fit. (Proviso not relevant)." On a tax revision case filed by the State, a Full Bench of this court expressed the view that the Tribunal had no jurisdiction to permit the assessee to dispute for the first time the assessment on an item which was not disputed in the first appeal filed earlier and which had become final. The Full Bench consisting of Sambasiva Rao, Alladi Kuppuswami and Lakshmaiah JJ., held that, in an appeal against the revisional order of the Deputy Commissioner which was confined to the rate of tax applicable, the Tribunal had no jurisdiction to go into the question of legality of the entire assessment and set aside the assessment on the turnover itself. Under the Andhra Pradesh General Sales Tax Act, only an assessee had a right of appeal to the Tribunal but not the Department. Moreover, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing preferred an appeal against the order of assessment is, in our view, precluded from agitating fresh matters in an appeal before the Tribunal against the order of the Deputy Commissioner. " Referring to the provisions of Order 41, rule 33, Civil Procedure Code, as an instance of the wide power conferred on the court of appeal, the Full Bench pointed out that but for that specific provision, there would be no power in the appellate court to pass a decree in regard to matters which were not the subject-matter of the appeal. Then it was noted : "Moreover, it is to be remembered that we are concerned with a second appeal before the Appellate Tribunal and not a first appeal before the Appellate Assistant Commissioner. " Though the judgment of the Full Bench has no direct application to the case on hand, we have extracted some of the pertinent observations of the Full Bench to reinforce our conclusion. What remains for us is to refer in a nutshell to the various decisions of the other High Courts and to indicate our agreement or disagreement with them. We respectfully dissent from the view taken by the Full Bench of the Bombay High Court in Ahmedabad Electricity Co.'s case [1993] 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier decisions of the Bombay, Madras and Delhi High Courts in Ugar Sugar Works Ltd. v. CIT [1983] 141 ITR 326 (Bom), Panchura Estate Ltd. v. Govt. of Madras [1973] 87 ITR 698 (Mad) and CIT v. Anand Prasad [1981] 128 ITR 388 (Delhi). The leading judgment is that of the Gujarat High Court in Karamchand Premchand's case [1969] 74 ITR 254. The reasoning and observations made therein were followed in almost all these cases. We also express our agreement with this judgment subject to the clarification given at page 193. In the light of the foregoing discussion, our answer to the first question is in the negative and against the Assessee. On question No. 2, it is submitted by learned counsel for the assessee as well as learned counsel for the Income-tax Department that a Division Bench of this court in S. Appala Narasamma's case [1987] 168 ITR 17, held that the year during which the vesting of land involved in the land acquisition proceedings occurs is the relevant year for levy of capital gains. It is also stated that a similar view was taken by the Gujarat High Court in CIT v. Purshottambhai Maganbhai Hatheesingh (HUF) [1985] 156 ITR 150 and the Karnataka High Court in Buddaiah v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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