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TMI Blog1991 (4) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared income was Rs. 688. The assessment was, thereafter, reopened under section 147(a) by serving notice under section 148 on the assessee on March 17, 1967. Reassessment was completed under section 143(3) read with section 147(a) on March 18, 1970. Total income therein was determined at Rs. 1,16,184. The amount added in the reassessment was Rs. 1,16,184. This represented a number of cash credits. According to the income-tax Officer, the nature and source thereof was not satisfactorily explained and that amount, therefore, was added as income from undisclosed sources. In the appeal against the above order of reassessment, the pleading was that the assessee was in a position to prove the genuineness of the parties and that it could not do so at the time of hearing before the Income-tax Officer as the creditors were from far away places. The Incometax Officer was present at the time of hearing. It appears that, with the consent of the parties, the Appellate Assistant Commissioner set aside the reassessment so that opportunity could be given to the assessee to prove its case. The appellate order is dated November 28, 1970. In pursuance of the above order of the Appellate Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was not justified in entertaining the ground regarding the validity of initiation of the reassessment proceedings under section 147(a) as the assessee had not challenged the reassessment in the appeal filed for the first time against the order of reassessment. The only contention raised in that appeal was that the assessee was in a position to prove the genuineness of the parties but was not able to before the Income-tax Officer for certain reasons. That contention was accepted and the reassessment order was set aside for the purpose of giving the assessee full opportunity to prove its case. The scope of fresh reassessment made in pursuance of the appellate order as well as appeal against such a reassessment, according to the Tribunal, was limited. The Tribunal, accordingly, set aside the order of the Appellate Assistant Commissioner on this ground and restored the appeal to his file directing him to decide the appeal on merits as regards the addition of the cash credits. The facts are not in dispute. Shri Sathe, learned counsel for the assessee, has contended that the Tribunal ought to have appreciated that ground which goes to the root of the matter can be taken at any stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory provisions of section 148(2). So far as the Supreme Court decision in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 is concerned, it was stated that the observations made therein were general observations. It was submitted that the general observations made by the Supreme Court in the above case regarding the wide powers of the Appellate Assistant Commissioner could be applied to a situation only when the Appellate Assistant Commissioner was seized of the appeal for the first time and not to the proceedings against fresh reassessment made in pursuance of the order of remand passed by the Appellate Assistant Commissioner in the earlier appeal. In order to answer the question of law referred to us, it is first necessary to consider the nature of the new ground raised, i.e., whether it really questions the jurisdiction of the Income-tax Officer to make reassessment, in other words, whether it goes to the very root of the matter. We will then have to consider whether such a ground can be raised for the first time before the Appellate Assistant Commissioner, jurisdiction to make reassessment not having been challenged before the Income-tax Officer himself. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have jurisdiction to initiate proceedings under section 34(1)(a). The fulfilment of this condition is not a mere formality but it is mandatory. The failure to fulfil that condition would vitiate the entire proceedings . . . " we hold that the formation of belief by the Income-tax Officer to the effect that income of the assessee had escaped assessment is one of the conditions precedent for the assumption of jurisdiction to make a reassessment. Placing reliance on section 21 of the Code of Civil Procedure and the Supreme Court decision in the case of Director of Inspection of Income-tax (Investigation) v. Pooran Mall and Sons [1974] 96 ITR 390, it was suggested on behalf of the Revenue that all cases of challenge to jurisdiction did not result in making an order of reassessment a nullity. There was a marked distinction between want of basic or inherent jurisdiction and irregular exercise of jurisdiction and that, in the present case, the Incometax Officer had basic and/or inherent jurisdiction to make an order of reassessment on the assessee and the assessee was merely questioning the initiation of the reassessment proceedings. With respect, we do not see any merit in this submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner or the Commissioner of Income-tax (Appeals). The Supreme Court, it may be stated, in that case, referred to its earlier decision in Add. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 and explained and distinguished the same. The law in this regard is, thus, to be taken as settled. The powers of the first appellate authority, whether the Appellate Assistant Commissioner or the Commissioner of Income-tax (Appeals) are coterminous with those of the Income-tax Officer, subject to the limit that these authorities could do all that the Income-tax Officer could do or have done. It is a different thing whether, in a given case, these authorities might or might not entertain a ground not urged before the Income-tax Officer in the exercise of their judicial discretion. It cannot, however, be said that they have no jurisdiction to do so. Accordingly, we hold that the Appellate Assistant Commissioner had jurisdiction to entertain the impugned ground urged before him by the assessee even though the jurisdiction to make reassessment as such was not challenged before the Income-tax Officer. Coming now to the third and the last aspect of the question, pertinent facts may be stated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und challenging the jurisdiction to initiate reassessment proceedings. For this purpose, it is necessary to refer to our court's judgment in CWT v. N. A. Narielwalla [1980] 126 ITR 344. Referring, with approval, to the Punjab and Haryana High Court decision in the case of Vijay Kumar Jain v. CIT [1975] 99 ITR 349, our court held that ground by which the jurisdiction of the Income-tax Officer to make assessment is challenged can be allowed to be taken in an appeal before the Tribunal even though such a ground was not taken before the Income-tax Officer or the Appellate Assistant Commissioner. The facts in that case were that for the assessment year 1961-62, the Wealth-tax Officer, acting under section 19A, had assessed the wealth of the deceased in the hands of the executor. On appeal, the Appellate Assistant Commissioner confirmed the assessment order. On appeal to the Tribunal, a new ground was taken for the first time that section 19A was introduced in the Wealth-tax Act with effect from April 1, 1965, and the assessment was, therefore, without jurisdiction. The Tribunal entertained the ground and our court upheld the order of the Tribunal. In Ugar Sugar Works Ltd. v. CIT [1983] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust and proper to allow it to be raised. " Again, in the case of G. M. Contractor v. Gujarat Electricity Board, AIR 1972 SC 792 at p. 793 the Supreme Court held as under : "It is stated that this ground goes to the very root of the matter but was not raised before the High Court. The appellants objected to this fresh ground being allowed to be taken up, but we consider that as this ground goes to the very root of the matter, it should be allowed after the appellants are compensated by costs." The Gujarat High Court has, of course, taken the very view in its two decisions in CIT v. Nanalal Tribhovandas [1975] 100 ITR 734 and P. V. Doshi v. CIT [1978] 113 ITR 22. Indirectly, the Allahabad High Court in CIT v. Hari Raj Swarup and Sons [1982] 138 ITR 462, has also taken the same view. We, therefore, hold that a ground by which the jurisdiction to make assessment itself is challenged can be urged before any authority for the first time. This, however, does not solve the problem before us. All the cases referred to by us above are the cases dealing with same round of litigation. In the case before us, the new ground was raised for the first time not in appeals arising out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise, it may be open to the assessee to raise objections to the assessment or to the quantum which he had not raised originally before him or the Appellate Assistant Commissioner. The other view is that the Income-tax Officer is, while passing orders in pursuance of the orders of the appellate authority, required to consider only those matters about which there was a dispute before the appellate authority and directions had been given. Even where the appellate order does not contain such specific directions, under certain circumstances, it may have to be read as remitting the case only on the issues in appeal and, in that event also, the Income-tax Officer cannot re-examine other issues. Consequently, the assessee may not be able to raise contentions which were not raised by him in the original proceedings. However, in this case, it is not really necessary to go into this question. The impugned ground raised before the Appellate Assistant Commissioner admittedly goes to the very root of the Income-tax Officer's jurisdiction to make reassessment. In our view, the jurisdiction of the Income-tax Officer to initiate reassessment proceedings under section 34 of the Act depends solel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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