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TMI Blog1979 (11) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the abovesaid interest was enhancement of Rs. 6,36,309 ? " The reference arises out of the assessment of M/s. Edward Keventer (Successors) Pvt. Ltd., Delhi, for the assessment year 1957-58. The assessee is a private limited company belonging to what may be described as Dalmia group of companies. For the assessment year 1957-58, it filed a return showing a loss of Rs. 4,12,222. This return by the company comprised, inter alia, of two constituent elements. One was a loss on the purchase and sale of certain shares which was computed at Rs. 1,38,078 (gross) and Rs. 1,24,116 (net). The other item which went by way of deduction into the computation of the figure of loss, earlier mentioned, was an interest claim of Rs. 3,22,696 which had been debited to the profit and loss account. The ITO found that the assessee claimed to have purchased and sold several shares of various companies belonging to the Dalmia group as a result of which it sustained the loss of Rs. 1,38,078. He referred in particular to the shares of a company known as Asia Udyog P. Ltd., and also to certain transactions in shares of Allen Berry & Co. (Cal) P. Ltd., Govan Bros. (P.) Ltd. and M/s. Indian National Airway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the AAC were to the following effect : (i) The assessee had alleged a purchase on September 30, 1955, of 2,84,000 ordinary shares of Asia Udyog P. Ltd. from Bharat Union Agencies Ltd. (B.U.A.), another company of the same group, at Rs. 12 per share. On the same day, it had purchased the same shares from another company, it had also sold all the shares at Rs. 10 per share of this company held by it (including those purchased on September 30, 195 5) at Rs. 11 on December 9, 1955 and Rs. 10 on February 28,1956, respectively. This showed that the Purchase price of the shares had been inflated by Rs. 2 per share or Rs. 5,68,000 in all. The liability to B.U.A. had been inflated by.Rs. 5,68,000 between September 30, 1955, and December 9, 1955. (ii) The assessee had sold, on September 2, 1955, 18,000 preference shares at Rs. 100 per share to B.U.A. Just 4 weeks thereafter, i.e., September 30, 1955, it purchased 23,000 preferences shares from the same company at Rs. 120 per share. These were again sold on December 9, 1955, to South Asia Industries at face value. It was, thus, apparent that the assessee had inflated the price of the 18,000 shares purchased on September 30, 1955, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though he referred to these transactions as collusive, he actually based his order on the footing that the transactions were real but that the purchase price had been inflated to show the loss. The assessee preferred further approved to the Tribunal The grounds of appeal were as follows : " (1) The learned AAC erred in enhancing the income of your appellant-company by the addition of Rs. 9,28,000 as being alleged profits from the transactions in the shares of Asia Udyog (P.) Ltd. purchased from M/s. Bharat Union Agencies (P.) Ltd. on September 30, 1955. In any event, the alleged finding of the learned AAC that your appellant-company had inflated the purchase price in the case of 2,34,000 ordinary shares of M/s. Asia Udyog (P.) Ltd., purchased on September 30, 1955, from M/s. Bharat Union Agencies (P.) Ltd. @ Rs 12 per share is arbitrary, without any material and is based merely on suspicion and surmises. Similarly, the alleged finding of the learned AAC that your appellant-company inflated the purchase price in the case of 23,000 pref. shares of M/s. Asia Udyog (P.) Ltd. purchased on September 30, 1955, from M/s. Bharat Union Agencies (P.) Ltd. @ Rs. 120 per share is arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee would not be entitled to the benefit of any deduction by way of interest on loans said to have been obtained for purchasing the shares. It was, therefore, urged that the department should be permitted to support the addition sustained by the AAC to the extent of Rs. 2,77,691. In support of this plea, the departmental representative relied on r. 27 of the Income-tax Appellate Tribunal Rules, 1946, which reads as under : The respondent, though he may not have appealed, may support the order of the Appellate Assistant Commissioner on any of-the grounds decided against him." In other words, the departmental representative made an attempt to persuade the Tribunal to delete from the assessment not the sum of Rs. 9,28,000 but only the said sum minus Rs. 2,77,691. The Tribunal, however, did not accede to the contention of the departmental representative. It pointed out that all that a respondent in an appeal could do was to support the decree on any of the grounds decided against him in the court below, but that the respondent could not make out a case for a decree for the same amount by attacking the decree in respect of a right decided against him. Referring to certain deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emorandum of appeal. Normally speaking such additional grounds can be urged only in relation to the subject-matter already appealed against and in regard to such grounds the Tribunal has discretion to grant or refuse permission and the grant of permission may also be express or implied. But, where an appellant seeks to bring in new items which had nothing to do with the subject-matter of the appeal as originally filed, it will be as if the appeal in this regard has been filed belatedly and the Tribunal can entertain them only after considering whether there are grounds to excuse the delay in filing the appeal (See Panchura Estate Ltd. v. Government of Madras [1973] 87 ITR 698 (Mad)). Where, however, permission is granted by the Tribunal, the scope of the original appeal will stand expanded or enlarged so as to cover the matters raised in the original grounds as well as those raised in the additional grounds. Thus, the subject-matter of the appeal is constituted by the original grounds of appeal and such additional grounds as may be raised by leave of the Tribunal. So much regarding the appellant. Now, adverting to the rights of the respondent in an appeal, we start with the basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the powers of the appellate authority, the Tribunal, are limited to the, subject-matter of the appeal. This is necessarily so because every point dealt with by the lower appellate court, the Appellate Assistant Commissioner, need not be the subject of attack before the Appellate Tribunal. The interests of the revenue are sufficiently protected by the extensive powers given to the first appellate authority, the Appellate Assistant Commissioner. At that stage, the only appellant would be the assessee, not the department although it is entitled to be represented by an officer of the department in support of the order of the original court. A mistake, if an committed by,the original authority, which is adverse to the interests of the assessee, will be canvassed by the assessee before the Appellate Assistant Commissioner. A mistake, if any, committed by the original assessing authority which is detrimental to the interests of the revenue is capable of being corrected by the Appellate Assistant Commissioner even without an appeal having been presented by the department. At the next stage of second appeal to the Appellate Tribunal, the liberty is given to both the sides to go up i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pealed or has not cross-objected, is satisfied with the decision of the trial court and he is before the court of appeal to support the judgment of the trial court. The appellant may challenge the decision of the trial court even on grounds not contained in the grounds of appeal if the court of appeal grants him leave to do so. Undoubtedly, in granting leave the court of appeal would consider various factors : whether the question raised would involve questions of fact which may necessitate a remand ; whether the conduct of the appellant is such as to disentitle him to raise the new ground ; and so on. But if leave is granted and it the other side has notice of the new ground which the appellant seeks to urge, there does not seem to be any reason why the court of appeal should not permit the appellant to challenge the decision of the trial court on a ground other than those taken in the grounds of appeal. The position with regard to the respondent is different; it is not open to him to urge before the court of appeal and get a relief which would adversely affect the appellant. If the respondent wanted to challenge the decision of the trial court, it was open to him to file a cross- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l that the assessee was not competent to raise this objection as to the non-applicability of s. 34 as it had not filed an independent appeal against the adverse finding of the AAC holding that the provision was applicable. It is in this context that the High Court had to go into the scope of the powers of the Tribunal while dealing with an appeal before it. After referring to the powers of the Tribunal to grant leave to the appellant, to raise additional grounds, the court turned to r. 27 and observed : " Turning to rule 27 which permits the respondent before the Tribunal to support the order of the Appellate Assistant Commissioner on any of the grounds decided against him, it seems to be clear that this is a right conferred upon him. The Tribunal has no discretion to deprive the respondent of the benefit of this rule. It is an enabling provision which the respondent can avail himself of in order to retain the benefit which has accrued to him from the order appealed against. The rule that a respondent before the court or Tribunal can justify and support the decision in his favour not merely on grounds favourably decided but also on other grounds held against him by an authority w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner. It cannot be said that it became debarred from raising the question over again before the Tribunal because of the fact that it did not choose to file an appeal against other portions of the order of the, Assistant Commissioner which was unfavourable to it. The scope of section 34 was a ground which was decided against the assessee before the Appellate Assistant Commissioner and we do not see how the assessee is precluded, from relying upon rule 27 and urging that ground before the Tribunal with a view to support only that portion of the Appellate Assistant Commissioner's order which was favourable to it. " Of course, as pointed out by the Bombay High Court in Bamasi v. CIT [1972] 83 ITR 223, earlier referred to, the assessee could use this argument only to sustain the order of the AAC but not to get further relief and have the reassessment itself annulled and thug adversely affect the appellant and place it in a worse position than if it had not appealed at all. This decision illustrates the principle that the subject-matter of the appeal should be understood not in a narrow and unrealistic manner but should be so comprehended as to encompass the entire controversy betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the finding of the AAC that there had been a profit on sale of shares was not correct, then on the same logic, the allowance of interest was not justified and so the assessee would be entitled to a reduction of only,Rs. 6,50,309 from the assessment and not Rs. 9,28,000. We agree in principle with the contention urged by the department. Though the ground raised by the assessee referred only to the figure of Rs. 9,28,000 the subject-matter of the appeal should be understood in the context of facts not as turning round this figure but as pertaining to the addition sustained by the AAC by reference to the transactions in dispute. It would be open to the department, as respondents, to point out that the addition upheld by the AAC was not Rs. 9,28,000 but much less and that the assessee would not be entitled to a relief of Rs. 9,28,000. We may give an example to clarify the position. Suppose there is only one item of income assessed in the case of a particular assessee, viz., the capital gains from a property. Suppose there is a dispute between the assessee and the department on this matter, the relevant figures being as follows : ----------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey have impact on the same subject-matter, the scope of the appeal should be broadly considered in the correct perspective, While the appellant should not be made to suffer and be deprived of the benefit given to him by the, lower authority where the other side has not appealed, equally the procedural rules should not be interpreted or applied so as to confer on an appellant a relief to which he cannot be entitled if the points decided in his favour on the same matter by the lower court are also considered as requested by the respondent. It seems to us that the position in the present case is somewhat similar. The ITO had treated certain transactions as sham and collusive, disallowed the losses claimed and consequently disallowed the interest admitted by the assessee to relate to these transactions. On appeal, the AAC treated the transactions as genuine but considered the prices to be, inflated. He, therefore, computed a profit and as a logical corollary, allowed the interest substantially (except to the extent of inflation found by him). When, on appeal, the Tribunal decides to restore the ITO's find-. ing that the transactions were bogus then the logical consequence will be a re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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