9911796707
TMI Blog1981 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... turn development rebate on various items such as machinery purchases, power house machinery, on workshop machinery, factory water supply machinery and motor-car and jeeps, etc. The ITO in his order of assessment dated 18th February, 1964, amongst other things, rejected the assessee's claim for development rebate in respect of all the items mentioned above, including the electric motors. For rejecting the assessee's claim for rebate on electric motors, the ITO had relied on the decision of this court in the case of Maneklal Vallabhdas Parekh v. CIT [1959] 37 ITR 142. Against the order of the ITO the assessee filed an appeal to the AAC. However, it is not disputed that in the said appeal the assessee did not challenge the ITO's finding about the rejection of its claim for development rebate on electric motors either by making it a ground in the memo of appeal and/or by raising contentions against it even in the course of the arguments. The said disallowance of rebate on electric motors was, therefore, not the subject-matter of the appeal before the AAC, although the other findings of the ITO rejecting other claims were specifically challenged both in the memo of appeal and in the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh it involved a point of law ?" The learned counsel for the assessee at whose instance the said reference is made has strongly contended that the ground sought to be raised before the Tribunal, being only a question of law not involving investigation of any new facts, the Tribunal had ample power to allow the assessee to raise the said new ground in appeal before it. On the other hand, the learned counsel for the Revenue contended that the Tribunal had no jurisdiction to entertain the said new ground as it was not in relation to the subject-matter of the appeal before it, the assessee not having agitated the same before the AAC and thereby having accepted the finding by the ITO thereon. He further contended that the Tribunal's powers, though vast they may be, were to be exercised by it within the four corners of its jurisdiction, that is, the subject matter of the appeal, which in this case the Tribunal did not have. To understand the rival contentions it would be first convenient to refer to certain provisions of the I.T. Act, 1961, dealing with the appeals before the AAC and the Tribunal. Section 250 of the I.T. Act, 1961, deals with the procedure to, be followed in appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment subject to an opportunity of being heard being given to the assessee before doing so, as is required under sub-s. (2). As against the said provisions regarding the jurisdiction and powers of the AAC, the corresponding provisions as to the jurisdiction and powers of the Tribunal may be considered. Section 253 of the I.T. Act, 1961, sets out different orders against which an assessee aggrieved by such orders can file an appeal. One of such orders, being an order made by the AAC under s. 250, sub-s. (2), gives a right to the Commissioner to direct the ITO to file an appeal against the order of the AAC under s. 250. Sub-section (4) provides for filing cross-objections by the other party who had not appealed against the order of the AAC or a part thereof. Section 254 deals with the orders that the Tribunal can pass on an appeal filed before it. Section 254(1), which is relevant for our purpose, provides : " 254. Orders of Appellate Tribunal.-(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. " Section 255 deals with the procedure to be followed in appeals before the Tribunal. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction and power of the Tribunal. The court held (headnote) : " The powers of the Appellate Tribunal in dealing with appeals are expressed in section 33(4) of the Income-tax Act in the widest possible terms. The word ' thereon ' in section 33(4) restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words 'Pass such order as the Tribunal thinks fit ' include all the powers (except Possibly the power of enhancement) which are conferred on the Appellate Assistant Commissioner by section 31. The Tribunal has authority under section 33 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." (Underlining supplied.) If, therefore, the use of the word " thereon " in s. 254(1) of the I.T. Act, 1961, restricts the jurisdiction of the Tribunal to the subject-matter of appeal, then, as the said decision shows, the powers of the Tribunal, vast as they may be, on the same lines as those of the AAC, were to be exercised by the Tribunal within the four corners of such jurisdiction. comparison of the aforesaid provisions concerning the jurisdiction and powers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the AAC in respect of the said matter so as to entitle him to file an appeal to the Tribunal against the order of the AAC on the said finding. The assessee once having accepted the said finding of the ITO by not having appealed against the same to the AAC, the assessee's grievance, if any, against the said finding of the ITO cannot form the subject-matter of an appeal before the Tribunal so as to give it jurisdiction in exercise of its powers to pass such order in appeal as it may deem fit. This view that we are taking finds direct support from certain decisions of the High Courts of Gujarat, Andhra Pradesh and Madhya Pradesh. The first of such decisions was of the Gujarat High Court in the case of CIT v. Karamchand Premchand P. Ltd. [1969] 74 ITR 254. In that case, the facts were similar to the facts of this case, and the question that arose before the court was the same as before us. There the ITO had disallowed two of the three items claimed by the assessee while partially allowing the third one. The assessee, in the appeal to the AAC, did not challenge the finding of the ITO as regards the disallowance of one of such items, while it had challenged the ITO's finding as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellate Assistant Commissioner and the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal. 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. On the facts found, if a Dew aspect of law can be applied, it can allow it to be urged even though that aspect of the law was not urged either before the Income-tax Officer or the Appellate Assistant Commissioner. The Tribunal is not restricted to the very grounds of appeal on which originally the decision of the Appellate Assistant Commissioner was sought to be challenged when the appeal was filed. It has wide powers to allow the party to add to or alter the grounds of appeal, subject, of course, to the opportunity being given to, the other side of being heard on this new ground of appeal. The jurisdiction of the Tribunal which is restricted to the subjectmatter of the appeal must not be confused with the powers of the Tribunal to deal with an appeal within the four corners of its jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal before the AAC but was not either passed, or, though taken in the grounds and argued, the order of the AAC might have remained silent about it indicating an implied where the finding of the ITO, though challenged before the AAC on one ground, was sought to be challenged before the Tribunal on a different ground. We, therefore, make it clear that we propose to determine the question of the Tribunal's jurisdiction with reference only to the facts and circumstances of the case, namely, where the finding of the ITO, without being challenged either expressly or impliedly before the AAC, was sought to be challenged before the Tribunal, and we do not wish to consider the said question as arising under other situations visualised above. Initially, the learned counsel for the assessee relied upon the decision of the Supreme Court in the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710, to show that by reason of the court's observations in this case, the observations of the Supreme Court in Hukumchand's case [1967] 63 ITR 232, cited above, namely, that the Tribunal's jurisdiction being restricted to the subject-matter of the appeal, would not hold good. The observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, nothing in the said decision of the Supreme Court to hold that the court's observations in Hukumchand's case [1967] 63 ITR 232 (SC), as to the Tribunal's jurisdiction did not hold good. The next decision relied upon by the learned counsel was the decision of this court in the case of J. S. Parkar v. V.B. Palekar [1974] 94 ITR 616. In that case certain goods in the possession of the assessee, held to be smuggled goods, were confiscated. The assessee was prosecuted and convicted by the Magistrate, the conviction being confirmed by the High Court as well as by the Supreme Court. The assessee wanted the price of the confiscated goods to be shown as trade losses, and claimed to set off the same against the income from undisclosed sources for which he was assessed. The said point was sought to be raised by the assessee for the first time before the Tribunal. However, the Tribunal declined to entertain the plea on the ground that it was raised for the first time. It was contended before this court in reference that the Tribunal was under statutory obligation to entertain the plea and decide the same, no matter at what stage it was. The court, inter alia, accepted the said co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal to the Tribunal. The Tribunal upheld the view of the AAC, but it set aside the order of the AAC and directed him to dispose of the appeal, after taking into consideration the question of apportionment, following the ratio of Ahmedbhai Umarbhai's case [1950] 18 ITR 472 (SC). In a reference to this court at the instance of the assessee, it was contended by the assessee that the only ground of appeal raised by the Commissioner before the Tribunal was whether the income was earned in the British India or the Indian State and that the question of apportionment was neither agitated either before the ITO Or the AAC nor in the grounds of appeal to the Tribunal, and, therefore, it was not open for the Tribunal under s. 33(4) of the Indian I.T. Act, 1922, to decide on a question which was not a question urged by the appellant before it. The question in that case was as to the competency of the Tribunal to decide the appeal on the ground not taken by the ITO in the grounds of appeal. The court, therefore, was concerned only with the powers of the Tribunal and not its jurisdiction. The court's observations at p. 856 of the report (31 ITR) clearly show that the court had kept in mind the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year a return has been submitted before assessment, the Income-tax Officer cannot ignore the return and the notice of reassessment and consequent assessment ignoring the return are invalid. If the notice issued is invalid for any reason, the entire proceedings taken by him would be void for want of jurisdiction. In this situation, the Tribunal was not justified in refusing to consider the validity of the notice under section 148 even though the ground challenging the same had not been pressed before the Appellate Assistant Commissioner." (Underlining supplied.) Along with this decision another decision of this court in the case of CWT v. N. A. Narielwalla [1980] 126 ITR 344, taking the same view may also be referred to. In that case the question of the jurisdiction of the Tribunal under s. 19A of the W.T. Act, 1957 (similar to s. 254 of the I.T. Act, 1961), came up for consideration. The facts in that case were that for the assessment year 1961-62 the WTO had, acting under s. 19A, assessed the wealth of the deceased in the hands of his executor. On appeal, the AAC confirmed the order of the WTO. On appeal to the Tribunal, the Tribunal, in spite of the objection of the Department, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC or the Tribunal, as such jurisdiction is always presumed to be existing in an authority before passing the order. The said two decisions, therefore, cannot take the matter any further so far as the question before us is concerned. The other decision relied upon was of the Andhra Pradesh High Court in the case of CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778. In that case the assessee, for the first time, raised a plea in second appeal before the Tribunal that the expenditure incurred by the assessee before it went into commercial production was an admissible deduction for the purpose of s. 80J(1) of the I.T. Act, 1961. The Revenue had resisted the claim on the ground that the said claim having not been put forward by the assessee before the ITO or the AAC, it could not be raised in second appeal. The Tribunal held that the directors' report accompanied by the balancesheet and the P/L a/c and other statements were filed by the assessee before the ITO and practically all the details for allowing a claim under s. 80J(1) were on record and hence it was open to the Tribunal to allow such a claim. The court held that the Tribunal was correct in allowing the claim of the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view, therefore, on the facts and in the circumstances of this case, the said contention of the learned counsel for the assessee based on the aforesaid decisions cannot be accepted. As we have pointed out above, the jurisdiction of the Tribunal in the matter of appeals is expressly restricted, by reason of s. 254 of the I.T. Act, 1961, to the subject-matter of the appeal. In this case the assessee not having appealed to the AAC against the finding of the ITO disallowing development rebate to the assessee on the price of electric motors, bad accepted the same, and the AAC had, therefore, no occasion to deal with the same. The assessee, therefore, cannot be considered to be aggrieved by any decision of the AAC on the said finding of the ITO so as to entitle it to file an appeal to the Tribunal under s. 253 of the said Act, with the result that the said finding of the ITO could never be the subject-matter of the appeal before the Tribunal, whether it was taken in the grounds of appeal initially or allowed to be raised subsequently with the leave of the Tribunal. In that case the Tribunal had no jurisdiction to deal with or pass orders in respect of the said finding of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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