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TMI Blog2008 (7) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal. The other two references (ITR No. 300/1988 and ITR No. 301/1988) are at the instance of the revenue and arise out of the assessees appeal [ITA NO. 2907/1982(Delhi)] and revenues appeal [ITA NO. 3018/1982 (Delhi)] before the Tribunal. ITR No. 299/1988 2. In this reference, the question that has been referred to us is:- Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the disallowance of the expenditure amounting to Rs. 10,03,627/- being legal, court and other expenses in connection with the litigation against the National Bank of Pakistan 3. According to the learned counsel for assessee, this question has be to decided against the assessee and in favour of the revenue in view of the decision of this Court in its own case in respect of the assessment years 1967- 68 to 1972-73 in the case entitled Dalmia Dairy Industries Limited vs. CIT : 241 ITR 9. This Court, in that case, had noted that the litigation expenses incurred for recovering the sale proceeds from Pakistan were of a capital nature and were not allowable as an expenditure. Consequently, following this Courts decision in 241 ITR 9, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 215 (4) of the Act read with Rule 40 of the Income Tax Rules 1962 (hereinafter called the Rules). A perusal of the said Rule 40 would show that the discretion vested with the I.T.O. to reduce or waive the interest could be exercised only after the assessment has been made. In other words the exercise of that discretion does not form part of the assessment order and therefore, in my opinion, cannot be challenged in an appeal against the assessment order. The Commissioner of Income Tax (Appeals) also rejected the assessees plea for the following reason :- d) The assessee filed petitions under Section 215 (4) of the Act read with Rule 40 of the Rules before the I.T.O. The same were rejected by the I.T.O. No appeals have been filed against the said orders therefore cannot be challenged in the present appeals. 7. The tribunal after considering Rule 40 of the said Rules concluded that there is no mandate in the said rule that in order to exercise the discretion for waiving or reducing interest, the assessment must first have been completed and interest charged. The tribunal noted that as discretion has been given to waive interest, it must follow that it should be before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. In our view, the interpretation given by the Commissioner Income-tax (Appeals) is erroneous. There is nothing in the sub-rule 40 (1) which stipulates or requires the Income Tax Officer to exercise his discretion to reduce or waive interest payable under Section 215 or 217 only after an assessment is completed. The view expressed by the Tribunal in this regard is the correct view in law. 10. Consequently, the question (including its four parts) is answered in favour of the assessee and against the revenue. ITR No. 301/1988 11. In this reference, three questions have been referred to us for our decision:- 1. Whether the ITAT is correct in law in holding that sales-tax liability of Rs. 7,00,057/- is an allowable deduction during the year under consideration 2. Whether the ITAT is correct in law and on facts in holding that since litigation expenses have been disallowed, cost and litigation charges of Rs. 29,53,197/- are not taxable as revenue receipts 3. Whether, on the facts and in the circumstances, the ITAT is correct in law and on facts in declining the departments request in the form of additional ground of appeal 12. Question No. 1 need not detain us in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1978-79 and 1979-80, as the case may be. The learned counsel also submitted that the revenue itself was not clear as to in which year the said amount was to be regarded as being taxable. 15. While considering the question of permitting the revenue to raise this additional ground, the Tribunal came to the conclusion that the revenue cannot be so permitted. First of all, it took the view that it was an accepted position that the issue of taxability of the interest was not part of the subject matter of the assessment order or of the order of the first appellate authority for the assessment year under appeal and, that being the case, there can be no question of the setting of the process of assessment and action by the authorities below for the first time. Consequently the tribunal, following the Supreme Court decision in the case of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria : 66 ITR 443 came to the conclusion that that the Appellate Authority had no jurisdiction to assess the source of income which was not disclosed either in the return or processed in the assessment order. The tribunal obviously was of the view that if the additional ground was permitted to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal (vide, e.g., CIT vs. Anand Prasad [1981] 128 ITR 388 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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