IN THE INCOME TAX APPELLATE TRIBUNAL
SPECIAL BENCH : MUMBAI
BEFORE HON'BLE PRESIDENT SHRI G.E. VEERABHADRAPPA,
SHRI D.K AGARWAL, JUDICIAL MEMBER AND
SHRI K.G. BANSAL, ACCOUNTANT MEMBER
I.T.A Nos. 5018 to 5022 & 5059/M/10,
Asstt. Years 2004-05 to 2009-10
M/s. All Cargo Global Logistics Vs. DCIT,
Ltd.
Central Csircle-44,
5th Floor, Diamond Square,
Aayakar Bhavan,
C.S.T. Road, Kalina,
M.K. Road,
Santacruz (E),
Mumbai 400 020.
Mumbai 400 098.
(Appellant) (Respondent)
Appellant by: S/Shri S.E. Dastur, Sr. Advocate, B.V. Jhaveri, Advocate
Respondent by: Shri Girish Dave, Standing Counsel
Date of hearing : 08-05-2012
Date of pronouncement : 21-05-2012
INTERIM ORDER
PER BENCH:
These appeals involve common grounds in respect of the claim of
the assessee u/s 80IA (4) of the Income Tax Act, 1961 ("the Act" for
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ITA Nos. 5018 to 5022 & 5059/M/2010
short). The issue was discussed before us with reference to the facts of
the case for assessment year 2004-05. The grounds taken by the
assessee in this appeal are as under :-
1. "On the facts and in the circumstances of the case and in law,
the CIT(A) erred in not appreciating that the order passed by
the Assessing Officer is without jurisdiction and bad in law as
the jurisdiction u/s 153A is vitiated.
2. The Commissioner (Appeals) erred in confirming the
disallowance of deduction of ` 1,25,77,637/- u/s 80IA(4) of the
Act.
3. The CIT(A) erred in relying on the decision of the Appellate
Triubnal in the case of Container Corporation of India Ltd. vs.
ACIT [30 SOT 284 (Del.)], without appreciating that the facts in
the present case are different from that of the aforesaid case.
4. The Commissioner (Appeals) failed to appreciate that the
appellant is covered by the definition of the term
"infrastructure facility" given in Explanation to section
80IA(4)(i) of the Act as "Ports".
5. The Commissioner (Appeals) erred in not following circular No.
793 dated 23rd June, 2000 and clarification dated 16th
December, 2005 issued by the CBDT which is binding on the
Income Tax Authorities.
6. The Commissioner (Appeals) failed to appreciate that sub-
clause (aa) of section 7 of the Customs Act, 1962 clarifies that
the Customs Ports are the places which are identified and
demarcated for the unloading of imported cargo and the
loading of exported cargo and, therefore, the Container
Freight Stations would be Customs Ports with reference to the
Customs Law and, therefore, it would be qualified for the
benefit of section 80-IA(4)(i) of the Act.
7. In the alternative and without prejudice, the Commissioner
(Appeals) failed to appreciate that the Container Freight
Station is an Inland Port and therefore, it is an infrastructure
facility within the meaning of section 80-IA(4) of the Act.
8. The order of the Commissioner (Appeals) is bad in law and
without jurisdiction."
1.1. Appeals were heard by the Division Bench. It came to the conclusion
that two questions, mentioned in reference u/s 255 (3) dated 19.1.2011,
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ITA Nos. 5018 to 5022 & 5059/M/2010
should be considered by the special bench. The findings in this respect are
contained in paragraph nos. 4.1 and 5, which are reproduced below :-
4.1 "Having heard both the sides and perused the relevant
material on record, it is noticed that the assessment years
under consideration are 2004-05 to 2009-10. The Delhi Bench
of the Tribunal in Container Corporation of India Ltd. (supra)
also considered assessment years 2003-04 to 2005-06. Some
of the arguments raised by the Ld. Sr. A.R., in the proceedings
before us, were also raised, considered and rejected by the
Tribunal. At the same time, it is also true that there is no
reference to certain relevant material in the Delhi Bench
order, such as Notification S.O.744(E) dated 1.9.1998 (copy
placed at page 118 of the paper book), letter of Director,
CBDT, to all Chief Commissioners of Income-tax dated
16.12.2005 (copy placed at page 120 of the paper book) etc.,
which may have some bearing on the issue.
5. Under such circumstances, we propose the following two
questions :
1. "Whether, on the facts and in law, the scope of assessment
u/s 153A encompasses additions, not based on any
incriminating material found during the course of search"?
2. "Whether, on the facts and in the circumstances of the
case, the Ld. CIT (Appeals) was justified in upholding the
disallowance of deduction u/s 80IA(4) of the Act, on
merits"?"
1.2 Consequently, the Hon'ble President, Income Tax Appellate Tribunal,
constituted the special bench to decide following questions :-
1. "Whether, on the facts and in law, the scope of assessment
u/s 153A encompasses additions, not based on any
incriminating material found during the course of search?"
2. "Whether, on the facts and in the circumstances of the case,
the learned CIT(Appeals) was justified in upholding the
disallowance of deduction u/s 80IA (4) of the Act, on merits?"
2. In the course of hearing before us, Ld. Standing Counsel for the
revenue submitted at the outset that ground No. 1 was not taken up by
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ITA Nos. 5018 to 5022 & 5059/M/2010
the assessee either before the AO or the Ld. CIT(A). In this connection, he
furnished the grounds taken before us and the grounds taken before the
Ld. CIT(A) in a tabular form, which is reproduced below to the extent it is
relevant to us :
Form No. 36 Form No.35
Grounds of Appeal Grounds of Appeal
1 Disallowance on Deduction u/s
80IA (4) of ` 1,25,77,537/-
On the facts and in the The Learned DCIT erred in
circumstances of the case disallowing the claim of
and in law, the CIT(A) erred deduction u/s 80IA 4) of `
in not appreciating that the 1,25,77,637 on the reasoning
order passed by the that Container Freight Station
Assessing Officer is without (CFS) are not Inland Ports
jurisdiction and bad in law as
the jurisdiction u/s 153A is
vitiated
The Commissioner (Appeals) 2. The Learned DCIT erred in
erred in confirming the disallowing the claim of
disallowance of deduction of deduction u/s 80IA(4) relying
` 1,25,77,637/- u/s 80IA(4) of on a Delhi ITAT order in the
the Act case of Container Corporation
of India case reported in 30
SOT 284 (Delhi)
The CIT(A) erred in relying on 3. The Learned DCIT erred in
the decision of the Appellate disallowing the claim of
Tribunal in the case of deduction u/s 80IA(4) already
Container Corporation on granted in the order passed
India Ltd. vs. ACIT [30 SOT u/s 143(3) dated 30.12.2006
284 (Delhi), without which is merely change of
appreciating that the facts in opinion.
the present case are
different from that of the
aforesaid case.
2.1 It is submitted that the grounds taken before the Ld. CIT(A) did not
deal in any manner with the jurisdiction or absence thereof u/s 153A of
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ITA Nos. 5018 to 5022 & 5059/M/2010
the Act. However, ground No. 1 taken before the Tribunal is to the effect
that the Ld. CIT(A) erred in not appreciating that the order passed by the
AO is without jurisdiction and bad in law as the jurisdiction u/s 153A is
vitiated. Since such ground was not taken before Ld. CIT(A), his decision
is not available in this matter. Consequently, it is argued that ground No.
1 does not arise out of the order of lower authorities. The questions
referred to the special bench cannot be answered in isolation de hors the
grounds taken by the assessee in appeal. Therefore, finding will have to
be given whether ground No. 1 before the Tribunal is additional ground,
which requires to be admitted with the leave of the Tribunal. On the other
hand, the submission of the Ld. Counsel for the assessee has been that
this ground has been taken in the memorandum of appeal and, therefore,
it is not an additional ground. Further, he drew our attention towards
ground No. 3 taken before the Ld. CIT(A) that Ld. DCIT erred in disallowing
the claim of deduction u/s 80IA(4) already granted in order passed u/s
143(3) dated 30.12.2006 which is merely change of opinion. His argument
is that though the language employed in this ground is different from the
language employed in ground No. 1 taken before Tribunal, yet in essence
they are similar in nature. In the alternative, it is submitted that even if
ground No. 1 does not arise out of the order of the Ld. CIT(A), it is purely
a legal ground in respect of which all facts are available on assessment
record. Therefore, this ground may be admitted, although it is reiterated
that ground is not an additional ground as it has been taken up in the
memorandum of appeal. The rival parties vehemently argued that this
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ITA Nos. 5018 to 5022 & 5059/M/2010
issue ought to be disposed off by passing an interim order so that
respective parties may take legal remedy as available, if found necessary.
In view of this insistence of both the parties, we proceed to determine this
issue on the basis of detailed arguments made before us.
3. Ld. Counsel submits that an order of assessment for this year was
made earlier by the AO u/s 143 (3) prior to the conduct of search u/s
132(1) on or about 26.4.2007. This is evident from the submissions of the
assessee made before the Ld. CIT(A) recorded in paragraph No. 3.4 where
it is submitted that in the original assessment order passed u/s 143(3),
deduction u/s 80IA(4) was allowed by the AO in various years. The facts
and circumstances in so far as deduction u/s 80IA(4) is concerned remain
the same, therefore, the AO was not justified in changing the stand taken
by his predecessor on the basis of the decision of the Tribunal in the case
of Container corporation of India Limited vs. ACIT (2009) 30 SOT 284(Del).
The division bench considered this matter which is evident from the fact
that in the reference made to Hon'ble President, ITAT, it is inter alia
mentioned in paragraph 4 that the decision in the case of Container
Corporation of India Ltd., according to the assessee, is not applicable to
the facts of his case because the Tribunal considered the admissibility of
the deduction in the case of Inland Container Depot ("ICD" for short) and
not in the case of a Container Freight Station ("CFS" for short). On the
other hand, the case of the revenue is that the decision of Hon'ble
Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd.
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ITA Nos. 5018 to 5022 & 5059/M/2010
(2010) 189 Taxman 54, relied upon by the assessee, is not applicable to
the facts of this case as the assessee has claimed the income to be
derived from operation of cranes and not from infrastructure facilities
such as ICD or CFS. The division bench also mentioned in paragraph Nos.
3.1 & 3.2 that there is a cleavage of opinion amongst different benches of
the Tribunal in respect of scope of assessment framed u/s 153A, i.e.
whether addition can be made on items in respect of which no
incriminating material is found in search. The decisions in favour and
against of the assessee have also been listed. That is why, two questions
have been referred to special bench. The issue has also been considered
by Hon'ble President, ITAT, who has constituted the special bench to
consider the two questions. Although it is a trite to say that the decision
has to be taken on the facts and circumstances of the case, yet it is clear
that various issues have been considered by the division bench and the
Hon'ble President and, therefore, question No. 1 can not be taken as
additional ground. In any case the revenue has taken no objection at the
time of hearing before the division bench and now it is too late to take any
such objection.
3.1 Further, Ld. Counsel referred to the provision contained in section
253, which inter alia provides that the President, may for the disposal of
any particular case, constitute a Special Bench consisting of three or more
Members, one of whom shall necessarily be a judicial member and one an
accountant member. On the basis of language contained in this provision,
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ITA Nos. 5018 to 5022 & 5059/M/2010
it is argued that the President has constituted a Special Bench consisting
of three members to dispose off the questions referred to it. Therefore,
these questions are required to be disposed off by this Bench. In this
connection, reliance is placed on the decision of `H' Bench (Special Bench)
of Mumbai Tribunal in the case of Mahindra & Mahindra Ltd. vs. DCIT
(2009) 30 SOT 374 (Mumbai). The assessee sought to raise an additional
ground to the effect that the order passed by the Ld. AO u/s 185 of the Act
is void ab initio being barred by limitation. Ld. DR objected to raising the
ground and submitted that the assessee had no right to raise the question
of limitation by way of additional ground as such ground could have been
initially taken before the AO. He relied upon decision in the case of
Hindustan Times Ltd. s. Union of India AIR 1998 (SC) 688. On hearing both
the parties and considering relevant material on record, the Hon'ble
Tribunal observed that during the course of original hearing before the
Division Bench, the assessee had raised the question of limitation by way
of additional ground. The revenue approached Hon'ble President for the
constitution of Special Bench for deciding the controversy as there were
conflicting views in the matter. Therefore, the special bench was
constituted to decide the question. It has been held that it is too late in
the day for the revenue to object to the legality of admission of additional
ground at this stage, because the special bench has been constituted for
disposing off this very controversy and that too at the instance of the
revenue. It has been further held that the question of limitation goes up
the very root of the matter. If the proceedings are initiated or completed
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ITA Nos. 5018 to 5022 & 5059/M/2010
beyond the prescribed time, then such proceedings deserve to be
quashed. The legal position is that there is no embargo on any party to
raise a legal ground before the Tribunal provided that the requisite
material already exists on record and no further investigation of fact is
required. Further, reliance is placed in the case of National Thermal Power
Corporation Ltd. vs. CIT (1998) 229 ITR 383 (SC) ("NTPC" for short). It has
been held that the powers of the Tribunal in dealing with the appeals are
expressed in the widest possible terms and it has jurisdiction to examine
the question of law which arises from the facts available before lower
authorities and which has a bearing on the liability of the assessee, even if
such question has not been raised before the lower authorities. Thus, it is
argued that even if the questions involve an additional ground, it is too
late for the revenue to object to it because the matter has been
considered by the Division Bench and now these questions have to be
decided by the Tribunal as per order made by Hon'ble President. In any
case even if an additional ground is involved, the Bench has all the powers
to admit it and adjudicate upon it if all the facts necessary for such
decision are available on record of lower authorities. It is stated that all
facts are there on record and no new fact is required to be brought on
record, therefore, the ground may be admitted.
3.2. Ld. Counsel also referred to the decision of Hon'ble Bombay High
Court in the case of J.B. Greaves vs. CIT (1963) 49 ITR 107 , in which it has
inter alia been mentioned that it is indeed true that the powers of the
Tribunal u/s 33(4) ( of the old Act) are wide. The Tribunal after giving both
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ITA Nos. 5018 to 5022 & 5059/M/2010
the parties to the appeal, an opportunity of being heard, can pass such
orders thereon as it thinks fit. The word "thereon" occurring in section
33(4) has been construed in various decisions as meaning "the subject
matter of appeal before the Tribunal". Now the subject-matter of appeal
before the Tribunal would naturally be the grounds raised by the appellant
before it. Rule 12 provides that the appellant shall not, except by the
leave of the Tribunal, is to be heard in support of any ground not set forth
in the memorandum of appeal ; but the Tribunal in deciding the appeal
shall not be confined to the grounds set forth in the memorandum of
appeal and taken by leave of the Tribunal under this rule. Rule 27 further
provides that the respondent, though he may not have filed appeal, may
support the order of the Appellate Assistant Commissioner on any of the
grounds decided against him. These are the relevant provisions relating to
the question that arises for consideration. Having regard to these
provisions, it can be mentioned that the subject matter of appeal would be
the grounds specifically raised in the memorandum of appeal, grounds
which Tribunal allows the appellant to raise, and contentions raised by the
Respondent in support of the order made by the appellate Assistant
Commissioner challenging the adverse findings against him. The scope
and ambit of these rules have been considered by the court in ITR No. 50
of 1959 (Commissioner of Income Tax vs, M/s Hazarimal Nagji & Co.
(1962) 46 ITR 1168, decided on 6th October, 1961, wherein it has been
observed :-
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`Now, reading the provisions of section 33(4) and the relevnt rules
to which our attention has been drawn by Mr. Joshi, it seems to us
that the powers of the Appellate Tribunal are similar to the powers
of the appellate court under the Civil Procedure Code. That also is
the view which this court has taken in New India Life Assurance Co.
Ltd. v. Commissioner of Income Tax {1957) 31 ITR 844 where it is
observed that the position of the Appellate Tribunal' is the same as
a court of appeal under the Civil Procedure Code and its powers are
`identical' with the powers enjoyed by an appellate court under the
"Code". Now, a respondent in an appeal is undoubtedly entitled to
support the decree which is in his favour on any grounds which are
available to him, even though the decision of the lower court in his
favour may not have been based on those grounds. A respondent,
unless he has filed an appeal himself or filed cross-objections in the
appeal filed by his opponent, will not be entitled to challenge that
part of the lower court's decree which is against him, and the
appellate court will have no power or jurisdiction to permit him to do
so. But, in so far as he only wants to maintain the decree of the
lower court which is against the appellant and in his favoaur, he will
be entitled to support it on fresh grounds also if he can do so, and
the appellate court also will have jurisdiction to permit him to do so,
provided, of course, that the fresh grounds which he wants to urge
do not require a further investigation into facts which are not
already on record and are not based on facts which were neither
alleged nor admitted nor proved and which the other side was never
called upon to meet in the lower court."
3.3. It thus follows that the subject matter of appeal would get confined
to limits of the grounds specifically raised in the memorandum of appeal,
the new grounds raised by the appellant with the previous permission of
the Tribunal and the grounds urged by the respondent in support of
decree passed in his favour,
3.4 Based upon these decisions, it is argued that the question of
requirement of leave of the Tribunal is merely a formality in this case and
if it is necessary to grant such a leave, it may be granted.
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3.5. He also referred to ground No. 3 taken before the Ld. CIT(A) that the
Ld. DCIT erred in disallowing the claim of deduction u/s 80IA(4) granted in
the order passed in section 143(3) on 30.12.2006 which is merely
change of opinion (emphasis stated by the Ld. Counsel). It is urged that
the highlighted words are large enough to take into account ground No. 1
taken before the Tribunal regarding lack of jurisdiction u/s 153A, as the
grounds are to be read widely and not narrowly.
3.6 Ld. Counsel also dealt with the written submissions dated 3.5.2012
and 7.5.2012 filed by the revenue.
4. In reply, the Ld. Standing Counsel submits that the decision in the
case of NTPC has to be read in the context of the facts of that case. The
facts are that the assessee had deposited surplus funds with banks as
short term deposits. The interest received in the relevant year on such
deposits, amounting to ` 22,84,994/-, was offered for tax and the
assessment was completed accordingly. Before the Ld. CIT(A), a number
of grounds were taken by the assessee but the inclusion of aforesaid
amount in the total income was neither challenged by the assessee nor
considered by the Ld. CIT(A). The assessee filed appeal before the
Tribunal against the order of the Ld. CIT(A), in which the inclusion of the
amount of ` 22,84,994/- was not objected to in the memorandum of
appeal. However, in letter dated 16.7.1983, the assessee took three
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additional grounds to effect that the aforesaid amount ought to be
deducted from the expenditure incurred during construction and it cannot
be included in the total income. It was explained that the grounds have
been taken on account of two orders passed by Special Bench of the
Tribunal in the case Arasan Alluminium Industries Pvt. Ltd. and Nagarjuna
Steels Ltd, where upon the assessee learnt that the interest earned in this
manner before setting up of the business is not a part of taxable income
as it goes to reduce capital cost of the plant. The Hon'ble court took into
account the decision in the case of Jute Corporation in India vs. CIT (1991)
187 ITR 688) (SC) and held that the view that the Tribunal is confined only
to issues arising out of the appeal before the Ld. CIT(A) takes too narrow a
view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal
will have the discretion to allow or not to allow a new ground to be raised.
But where the Tribunal is only required to consider a question of law
arising from the facts which are on the record in the assessment
proceedings, the court fails to see why such a question should not be
allowed to be raised when it is necessary to consider that question in
order to correctly assess the tax liability of an assessee. A narrow view to
which the Hon'ble court referred to had been taken in the case of CIT vs.
Anand Prasad (1981) 128 ITR 388(Delhi), CIT vs. Karamchand Premchand
Pvt. Ltd. (1969) 74 ITR 254 (Guj) and CIT Vs. Cellulose Products of India
Ltd. (1985) 151 ITR 499 (Guj) (Full Bench). The case of the Ld. Standing
Counsel is that the facts are distinguishable ; and in any case the
assessee has to furnish reasons as to why the ground was not taken
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before lower authorities and why it should now be admitted by the
Tribunal.
4.1 In order to support his contention, he relied on the decision of the
Mumbai Tribunal in the case of Jay Bharat Co-op. Housing Society Ltd. vs.
ITO (2011) 10 ITR (Trib.) 717, in which it has been inter alia held that the
judgment in the case of NTPC was rendered on the facts of the case, i.e.
during the course of appellate proceedings, the legal position on the issue
changed on account of judgments of the Appellate Tribunal. In these
circumstances, the assessee was allowed to raise a new ground before the
Tribunal and it was held that the Tribunal can admit a new ground if all
facts relating to the issue are available before Tribunal and no
investigation or verification of the fact is required. It is argued that there
is no change in position of law and Ld. Counsel has not referred to the
facts and completeness thereof, which do not require any further
investigation or verification.
4.2 Further, he relied on the decision of Hon'ble Bombay High Court in
the case of Pokhraj Hirachand (1963) 49 ITR 293. Briefly speaking, the
facts are that the question raised before the Tribunal was whether,
payment made by the assessee to Milkhi Ram R Goyal was capital or
revenue in nature? The Tribunal held that the payment is revenue in
nature. Further the Tribunal held that the entire amount has not been paid
to Milkhi Ram but only a part thereof has been paid, therefore, the
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deduction was allowed only for that part of the payment which had been
actually made. The Hon'ble court held that in the statement of the case,
the Tribunal had not stated that the departmental representative or the
Income Tax Officer had raised any contention in respect of quantum of
payment before it. If it is the correct position that the Income Tax Officer
or the departmental representative had raised any such contention before
the Tribunal, it will be a reasonable to assume that the Commissioner
would have seen that this fact is incorporated in the statement of the
case. This being the position on record, the Tribunal was in error in
dealing with the question about the quantum of payment made to Milkhi
Ram. The submission of the Ld. Standing Counsel, on the basis of this
judgment, seems to be that there is no mention about consideration of
jurisdictional aspect in the order of the Ld. CIT(A) and, therefore, the
question does not arise from the order of the lower authorities.
4.2.1 In this context, he referred to the provision contained in section 253
(1), which starts with the words " any assessee aggrieved by any of the
following orders may appeal to the Appellate Tribunal against such order "
(emphasis supplied by the Ld. Standing Counsel). It is argued that the
question was never taken up before the lower authorities, therefore, it
cannot be said that the assessee is aggrieved by the impugned order,
therefore, the assessee could not have taken ground No. 1 as it exists in
the memorandum of appeal. Thereafter, he referred to the provision
contained in section 254 (1), which states that "the appellate Tribunal
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may pass after giving both the parties to the appeal an opportunity of
being heard, such orders thereon as it thinks fit (emphasis supplied by
the Ld. Standing Counsel). It is argued that the appellate Tribunal has to
confine itself to the grounds taken in the memorandum of appeal,
additional ground taken by the assessee which are permitted by the
Tribunal and any other ground taken by the defendant with a view to
support the impugned order. Thus, the Tribunal can deal with ground No.
1 only if it is taken as an additional ground and admitted by the Tribunal
by granting leave.
4.2.2 It is submitted that the Tribunal may be pleased not to grant such a
leave because no reason has been advanced for not raising the ground
before any of the lower authorities.
4.3 Ld. Standing Counsel also submits that if the ground is allowed to be
proceeded with as the ground taken in memorandum of appeal or the
additional ground and decided in favour of the assessee, it will lead to
grave peril to the revenue. In this connection, our attention has been
drawn to paragraph No. 5 of the assessment order, in which it is
mentioned that in the return filed u/s 153A consequent upon the search,
the assessee has declared additional incomes of ` 26,85,850/- and `.
3,50,000/-, being part of general offer u/s 132 (4) of undisclosed income
made to cover any error / omission / discrepancy not noticed at the time
of conducting the search. The sum of ` 26,85,820/- consists of `
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23,05,528/- disallowed by the AO on account of conveyance and other
expenses in the original assessment made u/s 143(3) on 30.12.2006, and
the balance of ` 3,80,292/- is on account of reduction in the claim made
u/s 80IA. The revenue does not have objection to the decision regarding
deduction u/s 80IA(4) on merits. However, if the order u/s 153A is held to
be beyond jurisdiction, the incomes offered by the assessee suo moto in
the return will also get deleted as status quo ante shall prevail. Such a
position cannot be allowed to be obtained in view of the decision of
Hon'ble Andhra Pradesh High Court in the case of CIT vs. Late Begum
Noor Banu Alladin (1993) 204 ITR 166 (AP) (Full Bench). He referred to the
head notes where it is mentioned that the jurisdiction of the Tribunal is
necessarily restricted to subject matter of the dispute before the first
Appellate Authority and the Tribunal cannot allow the assessee or the
department to dispute new items or entertain claims of deduction for the
first time. If the assessee is precluded from taking a new ground unrelated
to subject matter before the Appellate Assistant Commissioner, he
cannot avail of Rule 11 of the ITAT Rules and obtain the leave of the
Tribunal to raise a new ground for the first time. Occasional injustice is no
ground to mould the interpretation in favour of the assessee and the
arguments based on equity and justice are something like double-edged
weapon which cut both ways. Consequently it has been held that it is not
competent to allow additional plea of the assessee if it was not subject
matter of the dispute before the Appellate Assistant Commissioner. The
Hon'ble court considered a large number of decisions, some approved,
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some overruled, some dissented from, some concurred with, and some
relied upon. This position has been summarized in the summery of the
ruling furnished by the publisher. It will be fruitful to reproduce this
summary :-
CIT vs. Krishna Mining Co. (1977) 107 ITR 702 (AP) approved ; CIT vs.
Gangappa Cables Ltd. 1978 CTR (AP) 332 : (1979) 116 ITR 778 (AP)
overruled; Ahmedabad Electricity Co. Ltd. vs. CIT (1992) 106 CTR (Bom)
(FB) 78: (1993) 199 ITR 351(Bom) (FB), State of Tamil Nadu vs.
Alumurugan & Co. (1982) 51 STC 381 (Mad) (FB), CIT vs. Indian Express
(Madurai) (P) Ltd. (1983) 33 CTR (Mad) 314 : (1983) 140 ITR 705 (Mad.),
CED vs. Brahadeeswaran (1986) 57 CTR (Mad.) 162 : (1987) 163 ITR 680
(Mad.) , CIT vs. Kerala State Co-operative Marketing Federation LTd.
(1991) 100 CTR (Ker) 230 : (1992) 193 ITR 624 (Ker.) CIT vs. Pratapsingh
(1986) 57 CTR (Raj.) 291 : (1987) 164 ITR 431 (Raj.), ITAT vs. B. Hill & Co.
(P) Ltd. (1982) 29 CTR (All) 301 : (1983) 142 ITR 185 (All.), Atlas Cycle
Industries Ltd. vs. CIT (1981) 21 CTR (P &H) 109 : (1982) 133 ITR 231 (P &
H) Taylor Instruemtns Co. (India) Ltd. vs. CIT (1992) 105 CTR (Del) 5 :
(1992) 198 ITR 1 (Del) and Hindustan Malleables & Forgings Ltd. vs. CIT
(1991) 191 ITR 110 (Pat) dissented from ; CIT vs. Steel Cast Corporation
(1977) 107 ITR 683 (Guj.), CIT vs. Karamchand Premchand PVt. Ltd. (1969)
74 ITR 254 (guj.) CIT vs. Cellulose Products of India Ltd. (1985) 44 CTR
(Guj) (FB) 278 : (1985) 151 ITR 499 (Guj), (FB), Hukum Chand and
Mannalal Co. vs. CIT (1980) 126 ITR 251 (MP) and Ugar Sugar Works Ltd.
vs. CIT (1982) 27 CTR (Bom) 174 : (1983) 141 ITR 326 (Bom.) CIT vs.
Anand Prasad (1981) 128 ITR 388 (Del) and Panchura Estate Ltd. vs. Govt.
of Madras (1973) 87 ITR 698 (Mad.) concurred with ; State of A.P. vs. Sri
Venkata Rama Lingeshwara Rice Mill (1977) 39 STC 57 (AP) (FB) relied on;
Shaik Ibrahim vs. CIT (1968) 69 ITR 117 (AP) explained
4.4. It has been mentioned that the finding of the Tribunal is that the
income in question cannot be assessed to tax in the assessment year in
which it was taxed or in any other previous year because the time for
reopening or reducing the assessment of that previous year has expired
by now. Consequently the admitted income is going out of the net of the
taxation, which is not equitable in law unless the assessee is entitled to
19
ITA Nos. 5018 to 5022 & 5059/M/2010
relief by virtue of a clear legal provision, which is not so. It has further
been mentioned that if such position is accepted, a number of assesses
may be put to the peril of being exposed to the appeal by the revenue
even though the ITO may not have applied to the AAC to enhance the tax.
The arguments based on equity and justice is a double-edged weapon
which cuts both ways. The Hon'ble Court referred to the decision in the
case of Karmchand Premchand Pvt. Ltd. and Shri Venkata Rama
Lingeshwara Rice Mill (supra) to the effect that the Tribunal has no
jurisdiction to allow such grounds to be raised for the first time before it
and that the Tribunal has misconstrued the reasoning in the case of
Mahalaxmi Textile Mills Ltd. It has also been mentioned that so long as the
item in dispute and the amount on which relief claimed remain the same,
it is open to the assessee to raise an additional or alternative ground. But
this power does not extend to decide a totally new item of dispute, thus,
the decision in the case of Jute Corporation of India Ltd. (supra) has
wrongly been pressed in the service of the assessee as the case dealt with
the powers of the AAC and not the Tribunal. The court noted that the Apex
Court pointed out in un-mistakable terms that the jurisdiction of the
Tribunal must be confined to subject-matter of an appeal. The Tribunal
has sufficient powers to remand the case to the ITO but the details do not
support the assessee's contention, rather they go against her. In the case
of Mahalaxmi Textile Mills Ltd,.(1967) 66 ITR 710 (supra), the ITO
disallowed the claim of the assessee for development rebate because
according to him Casablanca conversion system did not involve
20
ITA Nos. 5018 to 5022 & 5059/M/2010
installation of new machinery. This order was upheld by the AAC. Before
the Tribunal, it was claimed for the first time that the claim was allowable
either as development rebate or current repairs. The Tribunal accepted
the alternative claim. It was observed by the Hon'ble Court that on
investigation of true nature of alterations made by the introduction of
Casablanca Conversion System, the Tribunal came to the conclusion that
it did not amount to installation of new machinery, but it amounted to
current repairs. Considering this decision, the Hon'ble Andhra Pradesh
High Court mentioned that in this case subject-matter of appeal was the
same. The item was the same and the quantum of income was the same.
However, the facts of the case of the assessee are different. In the case
of CIT vs. S. Nelliappan(1967) 66 ITR 722 (SC), it was contended that the
ground permitted to be raised relates not only to a new issue but a new
item unrelated to original subject matter. However, such is not the case.
The AO had rejected the books of account and additions had been made
to the book profits. Cash credits were also added. It was urged before the
High Court that once additions have been made to the book profits on
account of suppression of income, the additions for unexplained cash
credit were not called for. In this case also the Tribunal had not given any
relief travelling beyond the true subject matter of appeal. In the case of
Karamchand Premchand Pvt. Ltd. it was held that there must be a
decision of the AAC by which the assessee or revenue is aggrieved before
an appeal can be preferred. These observations may convey the
impression that an assessee who did not raise a particular dispute before
21
ITA Nos. 5018 to 5022 & 5059/M/2010
the AAC cannot be said to be aggrieved by this order therefore, he cannot
file appeal. This may not be a correct approach to the problem. If the
assessee is aggrieved by any part of the order of the AAC, he is aggrieved
in that sense and he can maintain an appeal. In the case decided by
Gujarat High Court and in this case, the assessee can be said to be
aggrieved against the order of the AAC because he did not get relief in
respect of matter agitated before him. Therefore, there is no bar for filing
an appeal to the Tribunal. Of course, if the appeal is allowed by the AAC,
it will not be open to the assessee to file the appeal because he cannot be
said to be aggrieved by that order. Once the assessee or the ITO files an
appeal, the points which could be raised or allowed to be raised is of
course a different matter, whose answer depends upon the scope and
subject matter of appeal and the extent of relief that could be granted by
the Tribunal. Referring to the case of Hukumchand and Mannalal Co. v. CIT
(1980) 126 ITR 251 (MP), it is mentioned that jurisdiction of the Tribunal is
restricted to subject matter of the appeal and this principle has not been
digressed from in any later case. The words " pass such order as the
Tribunal thinks fit" could only mean the orders in respect of subject-
matter which could be dealt with by the Tribunal and these words are not
relevant to fire up the scope and subject-matter of appeal before the
Tribunal. Therefore it is necessary to find out as to what could the real
subject-matter of appeal before the Tribunal. In the view of the court, it
could not be anything different from the subject-matter before the AAC
and necessarily it should be something which arises out of the order of the
22
ITA Nos. 5018 to 5022 & 5059/M/2010
AAC. But there is no taboo against raising a new ground or a new plea
touching the same subject matter. This view finds support from the
decision in the case of Steel Cast Corporation ; & CIT vs. Cellulose
Products of India Ltd. (1985) 151 ITR 499 (Guj.) (FB) .
4.5 In the case of Additional Commissioner of Income Tax vs.
Gurjargravures P. Ltd. (1978) 111 ITR 1(SC), the revenue was aggrieved
by the order of the Tribunal in which Tribunal entertained the question of
relief u/s 84 and directed the AO to allow necessary relief. High Court
upheld the order of the Tribunal. It was mentioned that neither any
submission was made before the AO nor there was any material on record
in support of such claim, therefore, the High Court should have answer the
question in the negative i.e. against the assessee and in favour of
revenue.
4.6 In the case of Commissioner of Income-tax vs. V.K. Sood Engineers
and Contractors (P.) Ltd. [2003] 264 ITR 313 (P&H), it has been held that
the Tribunal was not right in observing that the grounds of appeal filed in
September, 1998, were not acceptable because the same had not been
approved by the Commissioner of Income Tax. Rule 9 (1) contains the
requirement of filing of specified documents alongwith memorandum of
appeal , but sub rule (3) thereof gives ample discretion to the Tribunal to
accept the memorandum of appeal even if it may not be accompanied by
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ITA Nos. 5018 to 5022 & 5059/M/2010
all or any of the specified documents. These rules are procedural in character.
Therefore, the failure of the Department to file grounds of appeal on May 6, 1994, should
not have been made a ground for dismissing the appeal in limine, more so because in
response to the show cause notice issued by the Tribunal, the grounds of appeal duly signed
by the Assistant Commissioner of Income-tax (Investigation Circle-II), Chandigarh, had been
filed. Ld. Sr. Standing Counsel submits that the instant case does not
involve procedural law but substantive law and for taking any such
ground, the assessee has to show that it is aggrieved by the order of the
Ld. CIT(A) as understood u/s 253(1). In the case of Aravali Engineers Pvt.
Ltd., vs. CIT(2011), 335 ITR 508 (P & H) the assessee was prosecuting
appeal before the Tribunal in respect of setting off of some losses against
income from house property. According to the AO ,the losses occurred in
speculative business and, therefore, such set off could not be granted.
The assessee also took up an additional plea that notice u/s 143(2) was
not served upon it within the statutorily prescribed time limit. The Tribunal
held that the assessee did not raise this plea earlier inspite of
opportunities granted to it. Therefore, such a plea could not be raised for
the first time before the Tribunal. The court dismissed the appeal of the
assessee by mentioning that no doubt an appellate authority can allow a
question to be raised for the first time even if such question was not
raised at lower forum, but such discretion has to be exercised in the
interest of justice and not mechanically. The question of fact may not be
allowed to be raised for the first time as it may lead to prejudice to the
other side. The decision in the case of NTPC does not lay down that in
24
ITA Nos. 5018 to 5022 & 5059/M/2010
every case, the question of fact can be mechanically allowed to be raised
for the first time. In view of this decision, it is argued that the question
now raised by the assessee cannot be allowed to be raised mechanically
without going into the reasons as to why the assessee did not raise this
issue before the AO or the Ld. CIT(A). In any case , further referring to the
decision in the case of Maruti Udyog Ltd. Vs. ITAT and Ors (2000) 244 ITR
303 (Delhi), it is argued that the Tribunal has to record reasons and it is
open to the parties to take such pleas as are available to them for taking
up before the Tribunal on the question whether the additional ground
should be permitted to be urged or not.
5. In the rejoinder reply, the Ld. Counsel reiterated that the Ld.
Standing Counsel is arguing against the mandate of the President. Coming
to the merits, it is submitted that the decision in the case of Late Begum
Noor Banu Alladin was not considered in the decision in the case of NTPC
even though the former decision was rendered on an earlier date.
However, that does not make any difference to the situation for the
reason that the latter decision has been rendered by the Apex Court. The
decision unequivocally lays down that where the Tribunal is only required
to consider the question of law arising from the facts which are on record
in the assessment proceedings, the court fails to see why such a question
should not be allowed to be raised, when it is necessary to consider that
question in order to correctly assess the tax liability of the assessee. This
decision takes care of the word "aggrieved", used in section 253 (1).
25
ITA Nos. 5018 to 5022 & 5059/M/2010
There could be many reasons to raise additional ground. In this case, the
ground is raised for the first time before the Tribunal as the assessee was
not property advised when the case was being represented before the AO
and the Ld. CIT(A).The assessee did not have services of an advocate at
that time.
5.1 Coming to the decisions relied upon by the Ld. Standing Counsel, it
is submitted that the decision in the case of Padma Sundara Rao (Dead)
and Others vs. State of TN and Others (2002) 3 SC 533 is not relevant in
the context of the facts of this case. In paragraph No. 9 it is mentioned
that courts should not place reliance on decision without discussing as to
how the factual situation fits in with the fact situation of the decision on
which reliance is placed. There is always peril in treating the words of a
speech or judgment as though they are words in a legislative enactment
and it is to be remembered that judicial utterances are made in the
setting of the facts of a particular case. Therefore, the effect is that the
Tribunal has to examine the facts of this case and thereafter decide
whether ground No. 1 is an additional ground and if yes whether it should
be admitted or not. Further, the facts in the case of Jay Bharat Co-
operative Society Ltd. are completely different as the issue required
verification of facts as the relevant facts were not available on the record.
If the question had been admitted, the matter had to go back to the AO
for verification. The decision however fails to take into account the
observations of Hon'ble Supreme Court in the case of Goetze (India) Ltd.
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ITA Nos. 5018 to 5022 & 5059/M/2010
vs. CIT (2006) 284 ITR 323 (SC). This decision specifically mentions that it
does not in any way relate to the power of the Tribunal as any question of
law can be raised for the first time before the Tribunal in view of the
decision in the case of NTPC.
5.2 Coming to the facts of the case, it is submitted that a sum of `
26,85,820/- had already been disallowed by the AO in the proceedings of
assessment year 2004-05. No incriminating material had been found in
regard to the deduction u/s 80IA(4) in the course of search. The assessee
had already taken ground No. 3 before the CIT(A) challenging the action of
the AO in disallowing the deduction. The present ground is in furtherance
of the same ground which the assessee can validly take in the light of the
decision in the case of Shaik Ibrahim vs. CIT, (1968) 69 ITR 117 (Andhra
Pradesh) wherein it is mentioned that the mere fact with the assessee, not
having appreciated his legal rights failed to raise the contention before
the ITO or the AAC, where he was not represented by a lawyer but by his
auditor who not being qualified in law, was not competent to appreciate
the principles of law or its subtleties, cannot be denied the right to raise
that question at the stage of the appeal before the Tribunal, which is also
a forum both on question of fact as well as law.
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ITA Nos. 5018 to 5022 & 5059/M/2010
5.3 Coming to the decision in the case of Late Begum Noor Banu
Alladin, it is argued that the decision is primarily based on the decision in
the case of Karamchand Premchand PVt. Ltd.. This decision and the
decision in the case of Anand Prakash and Cellulose Products of India Ltd.
have not been approved by the Apex Court in the case of NTPC. In this
very connection, he also referred to the commentary by Kanga, Palkhivala
& Vyas, volume II, page Nos. 2318 and 2319, dealing with raising new
questions . Under the heading "Grounds not taken before lower
authorities", it is mentioned that the Tribunal has jurisdiction to allow any
new question to be raised for the first time in appeal before it and it
should allow such question to be raised if it can be decided on the basis of
facts already on the record. In the footnote it is mentioned that the
decision in the case of Late Begum Noor Banu Alladin is not good in view
of the decision in the case of NTPC. The decision in the case of
Gurjargravures P. Ltd. (supra) is distinguished by referring to the facts
that there was neither any claim made before the ITO nor there was any
material on record to support the claim. Therefore, the facts necessary for
deciding the issue were not on record. This decision is also in conflict with
the decision of Hon'ble Supreme Court in the case of CIT vs Kanpur Coal
Syndicate 53 ITR 225 (SC), in which it has been held that the powers of
the ITO and the First Appellate Authority are coterminous. In any case this
decision deals with the powers of the AAC analogues to the powers of
CIT(A). The powers of the Tribunal have been expressed in widest terms
as held in the case of NTPC. The decision in the case of CIT vs. Godavari
28
ITA Nos. 5018 to 5022 & 5059/M/2010
Sugar Mills Ltd, vs. CIT, ITR 45 of 1977 (1993) 199 ITR, 351 (Bombay)
(Full Bench) makes a reference to the decision in the case of
Gurjargravures P. Ltd. and it has been explained that the Hon'ble
Supreme Court in that case was not called upon to consider a case where
the assessee had failed to make a claim although there was evidence on
record to support it ; nor it was called upon to consider a case where a
claim was made but there was no evidence or insufficient evidence
adduced in support of the claim, This judgment also deals with the
decision in the case of Ugar Sugar Works Ltd. vs. CIT (1983) 141 ITR 326,
which had followed the decision in the case of Karamchand Premchand
Pvt. Ltd. It is mentioned that distinction has to be made between the
jurisdiction of AAC and the Tribunal. The decision in this case, it is argued,
should not be followed as the same is contrary to the decision of
Supreme Court and Bombay High Court referred to earlier.
5.4 In the case of Pokhraj Hirachand, the question before the Tribunal
was whether, a particular expenditure was of capital or revenue nature?
However, the Tribunal also recorded a finding that actual payment was of
lower amount than claimed by the assessee. The Hon'ble High Court
noted that the statement of case does not mention anywhere that the
departmental representative or ITO has raised any contention in respect
of the quantum of the payment, therefore, it will be reasonable to assume
that the Commissioner had incorporated all facts in the statement of the
case. This being the position , the Tribunal could not have dealt with this
29
ITA Nos. 5018 to 5022 & 5059/M/2010
question. The case of the Ld. Counsel is that the question is being raised
by him and, therefore, the ratio of this case is not applicable. In the case
of JB Greaves (supra). It was contended before the Tribunal that the AAC
erred in holding that assessee had earned capital gain as a result of
transfer of managing agency, the reason being that the transaction was
neither of sale nor transfer. The AAC had found that the transaction
resulted in loss. The Tribunal observed that the finding of the AAC in this
respect was not correct having regard to various aspects of the case
including that the value of share of the Company as on 1.1.1939 could not
be more than 60% of what it was at the time of sale. The Hon'ble Court
mentioned that the material fact to be seen is the actual contract between
the parties. The agreement was one of sale of managing agency. This
object was achieved by resignation of the assessee from the appointment
of managing agency. Therefore on perusal of documents, it would
transpire that the transaction was one of sale of shares as well as
managing agency. This agreement had been performed by the assessee
as it resigned from the Managing Agency Office. In this situation, the
authorities were justified in holding that the provisions of section 12B of
1922 Act were attracted. Consequently, the subject matter of appeal
would get confined to limits of the grounds specifically raised in the
memorandum of appeal, new grounds raised by the appellant with the
previous permission of the Tribunal and the grounds urged by the
respondent in support of the decree passed in his favour. The case of the
Ld. Counsel is that the ground has been specifically raised by the
30
ITA Nos. 5018 to 5022 & 5059/M/2010
assessee in the memorandum of appeal, therefore, it has to be decided as
such.
5.5 The alternative submission of the Ld. Counsel is that in case the
Tribunal holds that this is an additional ground, it may be admitted in the
light of decision in the case of NTPC as no further facts are required to be
found.
5.6 Ld. Counsel also relied on some additional cases, which were not
cited in the course of his main presentation. In the case of Mohan Dairy vs
Union of India (2007) 163 Taxman 274(All), the assessee sought to raise
additional ground that the assessment proceedings and consequential
assessment order are without jurisdiction and barred by limitation, in view
of non-service of notice u/s 143(2) within the period allowed as per
provision to section 143(2). It was argued that non-service of notice within
the prescribe time may be correct, but this aspect of the matter has to be
adjudicated by the Tribunal after entertaining the ground ; The case of the
Ld. Counsel was that the application for additional ground may be
allowed. In these circumstances, the Tribunal was directed to permit the
petitioner to add the additional ground. In the case of V.K. Jain vs. CIT
(1975) 99 ITR 349 (P &H), the facts are that the assessee filed his return
on 28.3.1969, which was valid return u/s 139 (4). Oblivious of this
provision ITO treated return as invalid and no order was passed thereon.
31
ITA Nos. 5018 to 5022 & 5059/M/2010
Thereafter a notice u/s 148 was issued in response to which the assessee
filed a return. This return showed loss of ` 4128/-,as shown in the first
return. The assessment was completed on total income of ` 32431/-. The
question before the Hon'ble High Court was whether, the Tribunal was
justified in refusing to consider the validity of notice u/s 148 even though
the ground challenging the same had not been pressed before AAC? The
court came to conclusion that the ITO did not dispose of the return
voluntarily filed by the assessee but proceeded to take action u/s 34
(equivalent to section 147 of 1961 Act). The notice issued in pursuance of
section 147 is invalid and, therefore, entire proceedings would become
void. In such a situation, the Tribunal was bound to hear the assessee in
this matter. In the case of West Bengal State Electricity Board vs. DCIT
and another (2005) 278 ITR 218 (Calcutta), two points were raised by the
assessee i.e. the interest charged u/s 201 (IA) was discretionary. in nature,
and ii) The officer who passed the order had no jurisdiction thereby
rendering the order as null & void. The question regarding jurisdiction was
taken up for the first time before the Tribunal. The court came to the
conclusion that no fact needs to be gone in to for deciding this issue and it
is purely a question of law, which goes to the root of the matter. Such a
question can be admitted by the Tribunal for the first time in the light of
the decision in the case of NTPC. In the case of Orissa Cement Ltd. (2011)
250 ITR 856 (Del), the assessee raised additional grounds before the
Tribunal in respect of the claim of deduction u/s. 80E. These were rejected
by the Tribunal on the ground that they did not arise out of the order to
32
ITA Nos. 5018 to 5022 & 5059/M/2010
the AAC. The Hon'bvle Court held that the Tribunal had discretion to allow
or not allow to include the grounds. But where it is required to decide a
question of law for which all facts are on record in the assessment
proceedings, there is no reason as to why such a ground should not be
allowed to be raised. In other words, the decision in the case of NTPC has
been followed.
6. Ld. Counsel was permitted to state additional cases in the course
of rejoinder reply. Therefore, the Ld. Standing Counsel was permitted to
deal with these cases. It is submitted that the question in the case of V.K.
Jain was whether assessment had to be completed on a belated return
and pending that notice u/s 148 could not be issued, thus, the facts are
distinguishable. In the case of Mohan Dairy the facts regarding non
service of notice were on record. In the case of Orissa Cement Ltd., all the
facts in regard to the deduction u/s 80E were on record. Similarly in the
case of West Bengal Electricity Board all facts were on record. However, in
the instant case, all facts are not on record. What is available on the
record of lower authorities is the fact in respect of deduction u/s 80IA. The
facts regarding jurisdiction u/s 153A are not on record. Therefore, it is
argued that the ground may not be allowed to be raised.
7. We have considered the facts of the case and submissions made
before us. We have also considered various cases cited by both the
33
ITA Nos. 5018 to 5022 & 5059/M/2010
parties. We find that four questions have to be answered for deciding the
controversy at hand. The first question is whether, question no. 1 raised
before the Tribunal is the same or substantially the same as question No.
3 raised before the Ld. CIT(A) ? The submission of the Ld. Counsel is that
the ground in appeal should be widely read and it should not be
construed narrowly. The ground taken before the Ld. CIT(A) had been that
the Ld. DCIT erred in disallowing the claim of deduction u/s 80IA(4)
already granted in order passed u/s 143(3) on 30.12.2006 which is merely
change of opinion. Thus the plea of change of opinion had indeed been
taken up before the Ld. CIT(A). The ground before the Tribunal is that the
Ld. CIT(A) erred in not appreciating that the order passed by the AO is
without jurisdiction and bad in law as the jurisdiction u/s 153A is vitiated.
It is argued that the substance of ground no. 3 before the Ld. CIT(A) is that
in case of a completed assessment u/s 143(3), the assessment can not be
altered to the disadvantage to the assessee merely on account of change
of opinion, i.e. there should be tangible material on record on the basis of
which disadvantage may be caused to the assessee. The search, on the
basis of which the assessment is made u/s 153A, has not revealed any
incriminating material in so far as claim of the assessee u/s 80IA (4) is
concerned. Therefore, the addition made is merely on change of opinion.
In other words the AO did not have jurisdiction to make assessment ( or it
should be read adverse assessment) against the assessee. On the other
hand, the case of Ld. Standing Counsel is that question of admissibility of
deduction u/s 80IA(4) is completely different from the question of
34
ITA Nos. 5018 to 5022 & 5059/M/2010
jurisdiction u/s 153A. as the former question deals with the merits of the
case u/s 80IA(4) in the assessment / reassessment proceedings ,while the
latter question bars the jurisdiction even to make assessment, i.e. lack of
jurisdiction u/s 153A renders the notice under this provision vitiated. We
find that the two questions do not deal with the same subject. The
question before the Ld. CIT(A) had been that income quantified in order
passed u/s 153A by disallowing deduction u/s 80IA(4) is against the law as
it is based on change of opinion. On the other hand, the question before
us is whether the whole of order passed u/s 153A is bad in law because
the AO did not have jurisdiction u/s 153A. On bare perusal of section
153A, we find that the provision starts with non obstante clause in respect
of sections 139, 147, 148, 149, 151 and 153 ; and it provides that where
search has been initiated u/s 132 or books of account, other documents or
any assets or cash etc. have been requisitioned u/s 132A after 31.5.2003,
the AO shall proceed in the manner provided in clause (a) and clause (b)
of this sub-section. Clause (a) is regarding issue of notice to such a person
to require him to furnish the return of income. Since the provision
overrides section 147 and section 148, we shall refrain from taking
analogy from these provisions for the purpose of assessment or
reassessment u/s 153A. However, the provision clearly empowers the AO
to issue notice in a case where search is initiated after 31.5.2003. This
condition is satisfied in the instant case. Therefore, we are not in a
position to pursuade ourselves to agree with the Ld. Counsel that the two
questions or more or less the same, even when question No. 3 before the
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ITA Nos. 5018 to 5022 & 5059/M/2010
Ld. CIT(A) is read widely. The question before the Ld. CIT(A) may be in
regard to jurisdiction to disallow deduction already granted and in respect
of which no material has been found in search. However question No. 1
before us is an upfront question which debars jurisdiction u/s 153A all
together. The question is qualitatively different from the question raised
before the Ld. CIT(A). Thus we are not able to sustain the submissions of
the Ld. Counsel in this behalf.
7.1 Secondly, the ld.Standing Counsel has raised a plea that barring the
jurisdiction would lead to a conclusion that proceedings u/s 153A are all
together bad in law. This would mean that income voluntarily surrendered
by the assessee in the return u/s 153A, on which tax has been paid, will
have to be refunded to the assessee. This will amount to great prejudice
to the revenue as even admitted tax will have to be refunded on the basis
of interpretation sought to be placed by the ld. Counsel on the statutory
provision. On the other hand, Ld. Counsel has drawn our attention to the
provision contained in clause (b) of section 240 to the effect that if an
order of assessment is annulled the refund shall become due only of the
amount, if any, of the tax paid in excess of the tax chargeable on the total
income returned by the assessee. It is submitted that the assessee had
himself disallowed certain amounts including a sum of ` 3,50,000/- in
respect of claim u/s 80IA. Tax has been paid by way of self assessment on
filing the return u/s 153A. In view of the aforesaid provision, the assessee
is not entitled to the refund of the tax paid even if the assessment is
36
ITA Nos. 5018 to 5022 & 5059/M/2010
annulled or held to be in excess of power granted to the AO u/s 153A. We
have considered this matter also. The provision is clear that on account of
appeal if the order of assessment is annulled, the amount paid by the
assessee at the time of filing the return is not be refunded to the
assessee. In the context of the section, the assessment will include
reassessment also. Therefore, the prejudice to the revenue, if the ground
is admitted, will only be a legal grievance not leading to loss of revenue in
so far as returned income is concerned. Accordingly this plea of the Ld.
Standing Counsel is rejected.
7.2 The third question is whether, the ground taken by the assessee is
an additional ground ? The facts in this connection are that the ground
was not taken before Ld. CIT(A) or AO. Thus, no order is available from the
lower authorities on this issue. The case of the Ld. Counsel is rather
simple that the ground has been taken in the memorandum of appeal,
therefore, it is not an additional ground for which leave is required from
the Tribunal. On the other hand, the case of the Ld. Standing Counsel is
that the ground does not arise out of the order of lower authorities as this
question was never taken up before any one of them. We have considered
this matter also. Section 253(1) uses the words "aggrieved". A person as
appellant can be aggrieved only if the ground had been raised and it is
decided against him. It may also include a case where the ground is raised
but has not been decided by the Ld. CIT(A). Therefore, section 253(1) bars
a ground which was not raised and therefore not decided by the Ld.
37
ITA Nos. 5018 to 5022 & 5059/M/2010
CIT(A). There cannot be any grievance in respect of a matter where it is
not raised at all. Further, provision u/s 254(1) under which the Appellate
Tribunal is authorised to pass order on the appeal after granting
opportunity to both the parties of being heard uses the words "pass such
orders thereon as it thinks fit". According to us this is a stage subsequent
to filing the appeal. By this time, the question regarding right of the
assessee to take certain grounds, additional grounds etc. in respect of the
appeal come to an end. Many other considerations may come into picture
before and at the time of passing the order. Thus, we will defer the
discussion on this issue and confine ourselves only to section 253(1) and
the interpretation of the word "aggrieved" for the time being. We find that
the decision in the case of Pokhraj Hirachand (supra), rendered by the
jurisdictional High Court, throws sufficient light for coming to a decision in
the matter. The facts are mentioned on page 295 of the report, which are
reproduced below :-
"We are here concerned with the assessment year 1948-49. The
assessee is a partnership firm consisting of six partners dealing in
cloth and parachutes. One Milkhiram R. Goyal, who was carrying on
business as the sole proprietor under the name and style of
Milkhiram Brothers, was able to secure a contract for purchase of
approximately 1,28,499 parachutes from Tata Aircraft Ltd. at the
st th
price of ` 93 lakhs on or about 1 November, 1946. On or about 13
November, 1946, Milkhiram assigned to the assessee the benefits of
the said contract of purchase of the parachutes. The terms of the
agreement of the aforesaid transfer between the assessee and
Milkhiram are contained in a letter addressed to the assessee by
Milkhiram, and it is annexed as annexure "A". Now, Milkhiram
assigned to the assessee the benefits of the said contract of
purchase of parachutes for a consideration of ` 3 lakhs. The
assessee paid Milkhiram passed receipt in favour of the assessee for
the said amount of ` 3 lakhs. According to assessee, though he had
issued two cheques in favour of Milkhiram towards the payment of
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ITA Nos. 5018 to 5022 & 5059/M/2010
the said sum of ` 3 lakhs, at the request of Milkhiram, the said
amount was not paid by cheques, but was paid in cash, and this fact
also is admitted by Milkhiram in his own handwriting in the form of
an endorsement on the reverse of the said two cheques. Copies of
the cheques along with the endorsements in the handwriting of
Milkhiram forming part of the case are annexed as annexure "B"."
The finding to which the Ld. Counsel for the assessee took objection and the
objections are mentioned at page No. 297 of the report, which are reproduced below
:-
The Tribunal, however, went into the question as to whether the
entire amount of ` 3 lakhs has been paid by the assessee to
Milkhiram Goayl or not. The Tribunal held that the evidence on
record does not justify a finding that the assessee had proved that
the sum of ` 3 lakhs was paid to Milkhiram Goyal. It is held that the
assessee only paid ` 1,87,000/- and not ` 3 lakhs to Milkhiram
Goyal. The Tribunal therefore directed that the sum of ` 1,87,000/-
be allowed as allowable dedusction in computing the assessable
income of the assessee. It appears that when the appeal was heard
th
on 27 November, 1957, Mr. Palkhivala counsel for the assessee,
objected to the Tribunal's going into the question as regards the
quantum of payment, as according to Mr. Palkhivala that question
was neither the subject matter of the appeal, nor a question raised
by the respondent before the Tribunal. The objection raised by Mr.
Palkhivala is stated in the following terms by the Tribunal in the
statement of the case in paragraph 7 thereof :
"At the time of further hearing on 27th November, Mr.
Palkhivala, the learned counsel for the assessee, contended
that ` 3 lakhs was a revenue expenditure and that the
Tribunal had no jurisdiction to examine and determine the
question of ` factum' of payment of ` 3 lakhs by the assessee,
as the same, according to him, was not disputed by the
income-tax authorities."
The finding of the Hon'ble Court is that from the statement of the
case submitted by the Tribunal, it is found that the assessee had raised
objection that Tribunal had no jurisdiction to deal with the question about
the amount paid by the assessee to Milkhiram. This question was not dealt
with either by the AO or the Appellate Assistant Commissioner. The
39
ITA Nos. 5018 to 5022 & 5059/M/2010
Tribunal, however, suo motu went into the question whether the whole of
the amount of ` 3 lakhs has been paid to Milkhiram. It was found that only
a sum of ` 1,87,000/- was paid to him and not ` 3 lakhs. The court held
that the contention of the Ld. Counsel for the assessee is well founded as
the factum of the payment was not disputed by the lower authorities. As
mentioned earlier, the fact is that jurisdictional question as posed before
the Tribunal had not been raised before the lower authorities. It has also
been held that question No. 3 before the Ld. CIT(A) is qualitatively
different from question No. 1 before us. Therefore, the question does not
arise out of the orders of the lower authorities. The decision in the case of
Pokhraj Hirachand becomes important in the light of the fact that the word
used in section 263 (1) is "aggrieved", and grievance can arise only if the
matter has been taken up before any of the lower authorities on which
decision has been rendered or not. However, the question which has not
been raised before any of the lower authorities and obviously not decided
by any one of them, cannot lead to a grievance in respect of which a
ground can be validly taken in the memorandum of appeal. Therefore, we
tend to agree with the Ld. Standing Counsel that ground No. 1 in the
memorandum of appeal cannot be a ground validly taken as a grievance
from the order of lower authorities. The question whether it can be
admitted as an additional ground is all together a different matter. Thus it
is held that the ground as it stands could not have been taken in the
memorandum of appeal.
40
ITA Nos. 5018 to 5022 & 5059/M/2010
7.3 The final question is - whether, such a ground can be raised for the
first time before the Triubunal ?
7.4 In the case of JB Greaves (supra), which is the decision of the
jurisdictional High Court, it has been held that the subject matter of
appeal before the Tribunal would be the grounds raised by the appellant
before it. Rule 11 provides that the appellant shall not except by the leave
of Tribunal, be heard in support of any ground not set forth in the
memorandum of appeal. But the Tribunal in deciding the appeal shall not
be confined to the grounds set forth in the memorandum of appeal and
grounds taken by leave of the Tribunal. Rule 27 provides that even
though, the respondent may not have filed appeal, he may support the
order of Appellate Assistant Commissioner on any of the grounds decided
against him. Thus the subject matter of appeal consist of three elements :-
I) grounds taken in memorandum of appeal, 2) grounds for which leave is
allowed by the Tribunal, and 3) grounds taken by the respondent for
supporting the order of AAC/CIT(A). This position has also been explained
in the case of Hazarimal Nagaji & Co. decided by Hon'ble Bombay High
Court, in which it has inter alia been mentioned that the position of
Appellate Tribunal is same as that of a court of appeal under the Civil
Procedure Code and its powers are identical with the powers enjoyed by
an appellate court under the Code. Thus a respondent in an appeal is
undoubtedly entitled to support the decree which is in his favour on any
grounds which are available to him, even though the decision of the lower
41
ITA Nos. 5018 to 5022 & 5059/M/2010
court in his favour may not have been based on such grounds. We have
already held that a ground can be validly taken in the memorandum of
appeal only if the appellant is aggrieved by the order of AAC / CIT(A). It
has also been held that the ground No. 1 in the present appeal was never
taken before any of the lower authorities and , therefore, this ground can
not be validly taken up in memorandum of appeal. This brings us to the
question whether this ground can be taken up as additional ground with
the leave of the Tribunal. To our mind, the answer to the question is
obvious in view of the decision in the case of NTPC, decided on 12.4.1996,
after the decision was rendered in the case of Late Begum Noor Banu
Alladin on 21.4.1993. The Hon'ble Supreme Court has held with the view
that Tribunal is confined only to issues arising out of the appeal before the
CIT(A) takes too narrow a view. This view was taken in the case of Anand
Prasad , Karamchand Premchand Pvt. Ltd. and Cellulose Products of India
Ltd. This means that the ratio of these cases has not found favour with the
apex court. The decision in the case of Late Begum Noor Banu Alladin
heavily relies on the decision in the case of Karamchand Premchand and
Cellulose Products of India Ltd. If these cases have not been approved by
the Apex Court , it follows that the decision based on these cases may not
be followed by us. Further the Hon'ble Apex Court in very clear terms has
held that the Tribunal will have discretion to allow or not to allow a new
ground to be raised, but where the Tribunal is only required to consider a
question of law arising from the facts which are on record in the
assessment proceedings, it fails to see why such a question should not be
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ITA Nos. 5018 to 5022 & 5059/M/2010
allowed to be raised when it is necessary to consider that question in
order to correctly assessee the tax liability of an assessee. The position of
the assessee in the case at hand is similar to the position of NTPC, as both
of them are appellants. Therefore, on the basis of the decision, it
abundantly clear that if the pure question of law arises for which facts are
on record of the authorities below, such a question should be allowed to
be raised, if it is necessary to do so to assess the correct tax liability.
7.4.1 The Ld. Counsel has submitted that this ground could not be raised
earlier as the assessee was not properly advised in the proceedings
before the lower authorities, and it did not have the services of an
advocate at his command. On perusal of record, this submission is found
to be correct. The question is one of law and not one of fact. Therefore, it
could be that a proper ground could not be raised in absence of services
of an advocate although the denial of the deduction had been disputed.
This constitutes a reasonable cause in the light of the decision in the case
of Shaik Ibrahim (supra). Thus, we find that there are reasons to hold that
the assessee could not take up this ground before lower authorities for
bona-fide reasons.
7.4.2 In view of the stated position, stated by the Ld. Counsel, that all
facts are on record, we admit ground No. 1 in the memorandum of appeal
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ITA Nos. 5018 to 5022 & 5059/M/2010
for decision as an additional ground. It also follows from the decision that
no fresh fact will be entertained or examined while deciding the ground.
7.4.3. Before parting, we may add that a large number of cases have been
quoted by the rival parties , but we do not think it necessary to deal these
cases in detail here because we find that there is support available from
the decision of the Apex Court in this matter. It may however be added
that these cases have been summarised by us earlier for the sake of
completeness.
8. The effect of the discussion is that ground No. 1 is admitted as an
additional ground.
Sd/- Sd/- Sd/-
[D.K. AGARWAL] [G.E.VEERABHADRAPPA] [ K.G. BANSAL]
JUDICIAL MEMBER HON'BLE PRESIDENT ACCOUNTANT MEMBER
Dated: 21-05-2012
Veena
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order,
Deputy Registrar, ITAT
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