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TMI Blog1982 (11) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... AAC. Many questions have cropped up during this period touching the scope of the Tribunal's appellate jurisdiction. The Tribunal itself has dealt with aspects of its own jurisdiction, on the principle that a Tribunal has undoubted jurisdiction to decide whether it has jurisdiction or not. Many of the determinations of this Tribunal on the question of its own jurisdiction have been the subject of consideration by the several High Courts in the country and also by the Supreme Court. The case with which jurisdictional questions have been brought before the High Court and the Supreme Court is not surprising, because against any order passed by the Tribunal in appeal, a reference is available to the aggrieved party before the High Court, and against the judgment of the High Court on such reference, the statute provides for an appeal to the Supreme Court if the case is a fit one for appeal. There is thus no dearth of case-law from the High Courts and the Supreme Court on the subject of the scope of the Tribunal's appellate jurisdiction. The scope of the Tribunal's appellate jurisdiction has been set out in the simplest terms both in the Indian I.T. Act, 1922, under which the Tribunal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eath and the like. To the extent money was paid out in payment of gratuity, the assessee showed it as a regular outgoing in its books of account. However, according to accepted accountancy practice, a provision for gratuity might well be made every year on the basis of actuarial calculations and such a provision can be regarded as a proper charge against the profits of the year, even though no money is paid out. The actual payment, if any, by way of gratuity made by the assessee to any workman retiring during the year is a different thing altogether from a mere provision. Although the assessee had followed the method of making an appropriate provision for gratuity in the balancesheet year after year, so far as its income-tax assessments were concerned, the assessee did not claim any deduction of the amount representing the provision for gratuity in each year. On the contrary, the claim of the assessee in its assessments was restricted to the payments, if any, actually made during the relevant account year to outgoing employees. During the account year ended April 30, 1968, relevant to the assessment year 1969-70, there was an agreement between the assessee on the one hand, and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to raise an additional ground of appeal. In the additional ground, the assessee raised a plea that the sum of Rs. 4,56,810.14 and Rs. 55,657.69 which were provisions made in the relevant year towards gratuity liability should be deducted in the computation of its assessable business profits of the year. On behalf of the Department, a preliminary objection was raised at the hearing to the effect that the Tribunal should not entertain this new plea by the assessee since it had not been raised at any time earlier at any stage of the proceedings, either before the ITO or before the AAC. The Tribunal, however, overruled this preliminary objection as to its jurisdiction. The Tribunal regarded the matter as one entirely within its discretion, either to entertain or not to entertain. The Tribunal proceeded to observe that in, the exercise of its discretion this was a fit case to allow the assessee to raise a new point in the appeal. The Tribunal, however, directed the case to be sent back to the ITO, for going into the factual and other considerations bearing on this new point. In this reference, brought at the instance of the Department, the question for our decision is : " Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the High Court observed that the matter required reconsideration by the Tribunal, and disposed of the case accordingly. At the time of reconsideration, it was for the first time put forward before the Tribunal on the assessee's behalf that the ITO could not make an estimate of income and also add further amounts towards unexplained cash credits. The assessee further contended that the addition of credits was redundant, in the circumstances, and must be deleted. The Tribunal accepted this new plea of the assessee, and allowed the appeal in part directing the deletion of the cash credits from the assessee's taxable income. The Commissioner thereupon demanded a reference from the Tribunal, raising the question whether the Tribunal was right in law in making out a new case for the assessee and interfering with the assessment. The Tribunal rejected the reference application. The Department moved the High Court for direction to the Tribunal asking it to state a case and refer the question of law for decision. This application was dismissed by the High Court. On appeal by special leave, the Supreme Court observed as under (p. 724): " In hearing an appeal, the Tribunal may give leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rits of this plea, the Tribunal directed the deletion of the entire amount of Rs. 93,215 as an admissible deduction of revenue expenditure. The Department challenged the propriety of the Tribunal entertaining this new plea. The Department brought a reference before the High Court, on this question, as a jurisdictional issue. But the High Court upheld the jurisdiction of the Tribunal to permit the assessee to raise a new contention, which had not been raised by the assessee before the departmental authorities. The Commissioner thereupon took the matter on special leave before the Supreme Court. It was urged for the Department that the Tribunal had no jurisdiction to allow a plea from the assessee which was inconsistent with the plea raised before the departmental authorities. This contention, however, was negatived by the Supreme Court. The court observed thus (p. 713): " Under sub-section (4) of section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal " as it thinks fit ". There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not been put forward at the earlier stages of the proceedings in assessment and in the first appeal. In the passages which we have earlier quoted from the Mahalakshmi Textile Mills' case [1967] 66 ITR 710 (SC)the Supreme Court did not lay down the Tribunal's jurisdiction as being limited to " the subject-matter " of the appeal. On the contrary they said that the Appellate Tribunal is competent to pass such orders on the appeal as it thinks fit. They proceeded to explain what they meant by saying that it would be the duty of the Tribunal to decide all questions of fact and law before it even though it was not raised before the departmental authorities. Mr. Rangaswami, however, submitted that the real ratio decidendi in the Mahalakshmi Textile Mills' case [1967] 66 ITR 710 (SC), is to be found not in the passage quoted by us but elsewhere in the judgment. He cited the following passage as containing the real reason of the decision in that case (p. 713): " The subject-matter of the appeal in the present case was the right of the assessee to claim allowance for Rs. 93,125. Whether the allowance was admissible under one head or the other of sub-section (2) of section 10, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal's jurisdiction. That enunciation, as we read the judgment, has to be found in the earlier passage which we have quoted. It is in that passage that the Supreme Court have clearly laid down that even though a plea is put forward for the first time before the Tribunal and is inconsistent with the pleas earlier made, the Tribunal has jurisdiction to try and determine important questions, whether on fact or on law, which relates to the assessment of the assessee and there was nothing in the Act which restricts the Tribunal to determining those questions which have been raised before the departmental authorities. It is in this particular passage that the Supreme Court have rendered comprehensive idea of the scope of the Tribunal's jurisdiction. It may be that the observations of the court were not strictly called for, but they must nevertheless be regarded as binding. That the Tribunal's appellate jurisdiction is as wide as has been enunciated by the Supreme Court in the Mahalakshmi Mills' case [1967] 66 ITR 710, must be accepted, considering that this was the view expressed even in the earlier decision in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC). The facts in that earli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionate to the income assessed in British India, for the limited purpose of ascertaining the written down value for the assessment years 1950-51 onwards. On this basis the ITO made the assessment. This assessment was confirmed by the AAC. The assessee contested this position before the Appellate Tribunal in further appeal. In that appeal, the Department as a respondent, before the Tribunal, put forward a new plea for the first time. That plea was based on the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950. It was contended by the Department that if this Order was applied, then whatever had been actually allowed to the assessee's mill under the Indore State Taxation Rules would have to come in for reducing the actual cost to a figure of written down value and that figure must be taken as the basis for working out the depreciation allowance for 1950-51 and subsequent periods. This new plea of the Department was opposed by the assessee, but the Tribunal overruled that objection and entertained it. Since, however, the relevant facts and figures relating to the depreciation actually granted under the Indore Taxation Rules were not readily available, the Tribunal rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spel this impression. For, here was a case where the Department was only respondent to a second appeal by the assessee before the Tribunal. All along, at the stage of the assessment as well as at, the first appellate stage before the AAC, the stand taken by the Department was something of compromise, which was not based on a strict adherence to the provisions of the Taxation Laws (Removal of Difficulties) Order. This new point was raised by the Department as a respondent when the appeal of the assessee was heard by the Tribunal. A respondent to an appeal is well within his rights if he seeks to support the order of the lower authority on any ground decided against him. But in this case, what the Department had done while raising a plea based on the Taxation Laws (Removal of Difficulties) Order, was not to support any adverse decision by the AAC on any point urged before that authority, but altogether a new point which had never been thought of or urged either before the AAC or before the ITO. It follows, therefore, that the Tribunal's appellate jurisdiction, as understood by the Supreme Court, even in the Hukumchand Mills' case [1967] 63 ITR 232, is wide enough to take in a plea by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court, the AAC was not under an obligation suo motu to go into the entire assessment in every case, but would be acting rightly if he had confined himself to the points raised by the assessee in the appeal. Adverting to the case before them, the Gujarat High Court observed that the assessee did not raise any question about the disallowance of Rs. 25,920 and, therefore, the AAC did not go into it. Neither did he suo motu go into that aspect of disallowance. Hence, according to the court, the assessee had no cause for complaint since the AAC was not under any obligation to suo motu go into the question of disallowance of the expenditure. The appeal before the Tribunal, according to the learned judges, was possible only if the assessee could contend that the AAC had erred in deciding a particular matter. If the AAC had not decided any matter, for the reason that it was not raised before him, there was nothing on which the assessee could feel aggrieved or could file a further appeal to the Appellate Tribunal. In this situation, the Gujarat High Court held that the assessee was not entitled to appeal against the disallowance, raising the question for the consideration of the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er High Court decisions. Mr. Rangaswami then submitted that there is till now no decision of the Supreme Court which had gone to the extent of saying that a point which has never been addressed at the assessment stage or at the first appellate stage can be gone into by the Tribunal, and, therefore, the present case cannot be regarded as falling within the rules laid down by any previous decision. We agree that, on facts, we cannot draw a parallel between the case on hand before us and any other reported cases, on the scope of the appellate jurisdiction. In Mahalakshmi Mills' case [1977] 66 ITR 710 (SC), in some measure or other, the assessee had made a claim in relation to the " Casablanca conversion system " both before the ITO and before the AAC. Again, in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC), the question of written down value figured, in one form or another, both before the ITO and before the AAC and some decision or other had been taken on the subject by the time the matter came before the Appellate Tribunal for consideration. It is true that the Gujarat decision alone deals with a case where a point had not been raised at all before any authority except at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the departmental authorities. Quite apart from precedents, it seems to us quite in the fitness of things to invest the Tribunal with the plenary jurisdiction in matters of assessment. As we earlier observed, the Tribunal was created in 1941 as an independent, non-departmental body, in whose hands the Legislature intended to entrust the task of reviewing assessments made under the Act. Under the scheme of the Act, which gives only the High Courts and the Supreme Court the power of interference on questions of law, the Tribunal is constituted the final authority on facts and the penultimate authority on law touching the assessment and other proceedings under the I.T. Act. The primary purpose of the statute is to levy and collect the incometax. This is based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. The task of an appellate authority under the taxing statute, especially a non-departmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1922 Act and s. 254 of the 1961 Act which confers appellate jurisdiction on the Tribunal clearly lays down that the Tribunal, in disposing of an appeal, may pass such orders thereon as it thinks fit. Excepting that the expression subject-matter " has taken the fancy of many learned and eminent judges, that is an expression which is not employed by the provision conferring the jurisdiction in the Tribunal. Indeed, in the Mahalakshmi Textile Mills' case [1967] 66 ITR 710 (SC) in one of the passages to which we have made reference, the Supreme Court has understood the Tribunal's appellate jurisdiction as a jurisdiction to pass " such orders on the appeal as it thinks fit ", without adding any gloss of their own to the expression. In the Nelliappan's case [1967] 66 ITR 722 (SC) as well as the Mahalakshmi Textile Mills' case, the Supreme Court had even used phrases which are reminiscent of the language which English judges have used while describing a tax appeal. The Supreme Court observed that the Tribunal is not precluded from " adjusting " the tax liabilities of the assessee in the light of its findings merely because the findings are inconsistent with the case pleaded by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding the case inter partes; they are assessing or estimating the amount which in the interests of the country at large the taxpayer ought to have to deal with as the basis on which he is to be taxed." In a recent Full Bench decision of this court dated November 2, 1982, in T.C.(R) Nos. 78 of 1980 and 195 of 1980 (State of Tamil Nadu v. Arulmurugan Co. [1982] 51 STC 381), it was held that the appellate authorities perform precisely the same functions as the assessing authority. The Full Bench expressed the view that a tax appeal, is a rehearing of the entire assessment and it cannot be equated to adversary proceedings in appeal in civil cases. The following passage (at page 392), from the judgment of the Full Bench would be relevant to the discussion in the present case. An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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