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Divine Infracon Pvt Ltd Vs. Commissioner Of Income Tax, Central Ii
September, 07th 2015
$~
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
6
+                             ITA 771/2014
       COMMISSIONER OF INCOME TAX CENTRAL-II ..... Appellant
                              Through : Suruchi Aggarwal, Senior Standing
                              Counsel with Ms Lakshmi Gurung, Junior
                              Standing Counsel.

                              versus

       DIVINE INFRACON PVT. LTD.                  ..... Respondent
                    Through Mr Salil Aggarwal and Mr Ravi Pratap
                    Mall, Advocates.

                              AND
7.

+                             ITA 185/2015
       DIVINE INFRACON PVT LTD                               ..... Appellant
                              Through Mr Salil Aggarwal and Mr Ravi Pratap
                              Mall, Advocates.

                              versus

       COMMISSIONER OF INCOME TAX,
       CENTRAL II                                 ..... Respondent
                   Through Suruchi Aggarwal, Senior Standing
                   Counsel with Ms Lakshmi Gurung, Junior
                   Standing Counsel.



       CORAM:
       HON'BLE DR. JUSTICE S.MURALIDHAR




ITA 771/2014 & ITA 185/2015                                    Page 1 of 12
       HON'BLE MR. JUSTICE VIBHU BAKHRU
                    ORDER
       %            13.08.2015

Vibhu Bakhru, J.

1. These appeals have been preferred against an order dated 12th June, 2014

passed by the Income Tax Appellate Tribunal (`ITAT') (hereafter referred to

as `Tribunal') in ITA No.2393/Del/2014, being the Assessee's appeal

against the decision of the Commissioner Income Tax (Appeals) [hereafter

`CIT(A)' ] sustaining the addition of a sum of Rs. 20,25,00,000/- on account

of unexplained credit under Section 68 of the Act, on merits. The Revenue

has filed the present appeal ( ITA 771/2014) being aggrieved by the decision

of the Tribunal insofar as it has upheld the CIT(A)'s view that the aforesaid

addition made by the Assessing Officer (hereafter `AO') was beyond the

scope of assessment under Section 153A of the Act. The Assessee states that

it has filed the present appeal (ITA 185/2015) only for the reason that the

Revenue has preferred an appeal against the order of the Tribunal.



2. The principal controversy involved in the present appeals relates to the

issue whether the Revenue could assail the finding returned by the CIT(A)

in favour of the Assessee in an appeal preferred by the Assessee before the




ITA 771/2014 & ITA 185/2015                                   Page 2 of 12
Tribunal, limited to the issue decided by the CIT(A) against the Assessee.

Admittedly, the Revenue did not appeal against the decision of CIT(A)

holding that the addition made was beyond the scope of the assessment

under Section 153A of the Act. Yet, the Counsel for the Revenue sought to

assail the said finding in the appeal preferred by the Assessee. The Tribunal

permitted the Counsel for the Revenue to agitate the issue but finally

decided the same against the Revenue. It is contended by the Assessee that it

was not permissible for the Tribunal to permit the Revenue to challenge the

decision of the CIT(A) in an Appeal preferred by the Assessee.






3. The aforesaid controversy arises in the backdrop of the following facts:



3.1 The Assessee filed a return for the Assessment year 2008-09 declaring a

total income of Rs.3,84,027/- on 30th September, 2009. Thereafter, on 14th

September, 2010 search and seizure operations were conducted at the

registered office of the Assessee Company. Subsequent thereto, a notice

under Section 153A of the Act was issued against the Assessee on 26 th

September, 2012. Pursuant to the notice issued under Section 153A, the AO

passed an order dated 28th March, 2013 assessing the total income of the




ITA 771/2014 & ITA 185/2015                                    Page 3 of 12
Assessee for the Assessment Year 2008-09 at Rs.20,28,84,027/-. The AO

made an addition of Rs.20,25,00,000/- under Section 68 of the Act as the

AO was of the view that the share application money received by the

Assessee Company was unexplained.



3.2 The Assessee preferred an appeal against the Assessment Order before

the CIT(A), being Appeal No. 320/2013-14, inter alia challenging the

addition on merits as well as on the ground that the addition was beyond the

scope of Section 153A of the Act. According to the Assessee, the share

application money was duly disclosed in its return and the addition was

unrelated to any incriminating material found during the search and, thus,

was beyond the scope of assessment under Section 153A of the Act.



3.3 The CIT(A) disposed of the Appeal by an order dated 24th January 2014.

The CIT(A) found merit in the Assessee's contention that the addition made

was beyond the scope of Section 153A of the Act as the addition was not

based on any incriminating material found during the search. However, the

CIT(A) upheld the conclusion of the AO that the share application money

reflected in the books of the Assessee was unexplained.




ITA 771/2014 & ITA 185/2015                                  Page 4 of 12
3.4 The Revenue accepted the aforesaid order passed by the CIT(A) and did

not prefer any appeal before the Tribunal. The Assessee, on the other hand,

impugned the order of CIT(A), inter alia, on the following ground :-

          "That the learned CIT (Appeals) has grossly erred in law
          and on facts in sustaining the addition made by assessing
          officer under section 68 of the Act amounting to
          Rs.20,25,00,000/- particularly having regard to the fact
          that very assumption of jurisdiction to bring to tax the
          aforesaid sum was beyond the scope of provisions of
          section 153A of the Act, as was held by learned
          Commissioner of Income Tax (Appeals) in the impugned
          order."


3.5    During the course of the proceedings before the Tribunal, the

representative of the Revenue sought to assail the finding of the CIT(A) that

the additions made were outside the scope of Section 153A of the Act. The

Tribunal entertained the aforesaid plea and permitted the representative of

the Revenue to raise contentions in that regard, but finally the conclusions of

the CIT(A) were sustained.



3.6. The Revenue has now preferred an appeal impugning the decision of the




ITA 771/2014 & ITA 185/2015                                    Page 5 of 12
ITAT insofar as the Tribunal sustained the finding of the CIT(A) that the

addition made in respect of the share application money was beyond the

scope of Section 153A of the Act.



4. The learned counsel for the Assessee submitted that the Tribunal erred in

permitting the Revenue to challenge the finding of the CIT(A) with regard to

the scope of Section 153A of the Act. He submitted that since the Revenue

had not appealed against the decision of the CIT(A), it could not raise the

issue before the Tribunal. He referred to the decision of this Court in CIT vs.

Edward Keventer (Successors) Pvt. Ltd.: (1980) 123 ITR 200(Del), in

support of his contention that it would not be open for the respondent to

travel outside the scope of the subject matter of the Appeal.



5. He submitted that the scope of the subject matter of the Appeal was

limited to the finding of the CIT(A) with regard to the merits of the addition

made; the issue whether the same was beyond the scope of Section 153A of

the Act was not the subject matter before the Tribunal and, thus, the

Tribunal could not have entertained any plea in that regard.




ITA 771/2014 & ITA 185/2015                                     Page 6 of 12
6. The learned counsel for the Assessee also referred to the decision of the

Supreme Court in Hindustan Coca Cola Beverages P.Ltd v. Joint

Commissioner of Income Tax: (2007) 293 ITR 226. In that case, the

Tribunal had decided to reopen an appeal decided earlier and permitted the

Assessee to urge a ground, which had not been considered by the Tribunal

while deciding the appeal. The decision of the Tribunal to reopen the matter

was not appealed against by the Revenue but, the Revenue successfully

assailed the final order passed by the Tribunal before the High Court, inter

alia, on the ground that the matter could not be reopened by the Tribunal. In

this context, the Supreme Court held that, "We have already noticed that the

order passed by the Tribunal to reopen the matter for further hearing as

regards ground No. 7 has attained its finality. In the circumstances, the High

Court could not have interfered with the final order passed by the Income-

tax Appellate Tribunal."



7. We find considerable merit in the contention advanced on behalf of the

Assessee. Concededly, the issue whether the additions made by the AO were

beyond the scope of Section 153A had been decided by the CIT(A) in favour

of the Assessee and the decision on the said issue had attained finality as the




ITA 771/2014 & ITA 185/2015                                    Page 7 of 12
Revenue had not preferred any appeal with regard to the CIT(A)'s order.



8.     It is also relevant to note that by virtue of Section 253(2) of the Act,

the Principal Commissioner or Commissioner may, if he objects to an order

passed by the CIT(A) under Section 250 of the Act, direct the AO to prefer

an appeal to the Tribunal. It is not disputed that no such directions to file an

appeal against the CIT(A)'s order dated 21st January, 2014 were issued by

the concerned Income Tax Authority.



9. In the circumstances, there could be no dispute that the CIT(A)'s order in

so far as it relates to the issue regarding the assessment being beyond the

scope of Section 153A of the Act had attained finality, and thus, could not

have been disturbed by the Tribunal.



10. It is also relevant to refer to the decision of the Mysore High Court in

Pathikonda Balasubba Setty v. CIT: (1967) 65 ITR 252 wherein the court

observed as under:


       "The effect of these provisions is that the Appellate Tribunal's
       powers are limited to passing such orders as they may think fit
       on the appeal. The expression 'on the appeal', clearly and
       indubitably points to the conclusion that the powers of the



ITA 771/2014 & ITA 185/2015                                     Page 8 of 12
       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 in appeal to the
       Appellate Tribunal and when the Appellate Tribunal comes to
       deal with the matter, the law regards it sufficient to leave it to
       the parties going up as appellants before the Tribunal to limit
       their attack on the order of the first appellate authority and to
       seek the intervention of the Tribunal only to the extent
       necessary to correct the errors in the order of the Appellate
       Assistant Commissioner according to the case of the appellant.
       It should be noted that in comparison to the sections describing
       the power of the Appellate Assistant Commissioner, the
       sections which describe the appellate powers of the Tribunal do
       not make any reference to a power to enhance the assessment or
       to enhance the tax in the same way as the Appellate Assistant
       Commissioner is empowered to do while dealing with an appeal
       against the order of the assessing authority.

       As the appellate power is a power which is conferred by statute,
       both its existence as well as its extent has to be gathered from






ITA 771/2014 & ITA 185/2015                                     Page 9 of 12
       the relevant statutory provision. The fundamental idea is that an
       appellant seeks a relief from an appellate court, and not
       determinate to himself. Even under the general provisions of the
       law of procedure, the worst determinate which an appellate
       court may visit on an appellant is to dismiss the appeal with a
       direction in an appropriate case to pay costs to the opposite side.
       An order adverse to the interests of the appellant-adverse in the
       sense that it takes away from him a benefit which he has already
       acquired under the order appealed from-is possible only by
       means of an order made either upon a cross-appeal filed by the
       other side or on the basis of a memorandum of cross-objections
       presented by him wherever the law permits him to do so."


11.    The aforesaid passages were referred to by a Division bench of this

Court in CIT vs. Edward Keventer (Successors) Pvt. Ltd (supra) and the

Court further reiterated the principle that a party who has not appealed

cannot be permitted to raise a ground, which will work adversely to the

appellant.



12.    Indisputably, the Revenue could also not take recourse to Rule 27 of

the Income Tax (Appellate Tribunal) Rules, 1963. By virtue of the said

Rule, a respondent before the Tribunal can support the decision appealed

against not only on the grounds decided in favour of the respondent but also

on grounds decided against it. However, Rule 27 of the said Rules would not

extend to permitting the respondent to expand the scope of an appeal and




ITA 771/2014 & ITA 185/2015                                      Page 10 of 12
assail the decision on issues, which are not subject matter of the appeal. In

CIT vs. Edward Keventer (Successors) Pvt. Ltd (supra), this court had

reiterated that "it would not be open to a respondent to travel outside the

scope of the subject matter of the appeal under the guise of invoking r 27"



13.    The learned counsel for the Revenue has referred to the decision of

the Supreme Court in National Thermal Power Corporation Ltd. vs.

Commissioner of Income Tax: 229 ITR 383 (SC) in support of the

contention that it is open for the Tribunal to consider all questions of law

where no investigation into facts are necessary. We find that the aforesaid

decision is wholly inapplicable to the facts of the present case. It is trite law

that the Tribunal may, under Section 254(1) of the Act, pass such orders as it

thinks fit; nonetheless, the decision must be in respect of the subject matter

of the dispute. Indisputably, the Tribunal can examine all questions which

relate to the subject matter of an appeal but, once an issue has attained

finality and is not a subject matter of the dispute before the Tribunal, it

would not be open for the Tribunal to reopen the issue on the pretext of

examining a question of law.




ITA 771/2014 & ITA 185/2015                                      Page 11 of 12
14. In view of the aforesaid, the Appeal preferred by the Revenue (being

ITA No. 771/2014) is rejected. As indicated above, the Appeal preferred by

the Assessee (ITA No. 185/2015) is only consequential to the Appeal filed

by the Revenue and is, accordingly, also disposed of.



15. It is clarified that the question whether an assessment could be framed

under Section 153A of the Act, even where no incriminating documents

have been found during the search is left open.




                                                   VIBHU BAKHRU, J




                                                   S.MURALIDHAR, J
AUGUST 13, 2015
pkv




ITA 771/2014 & ITA 185/2015                                 Page 12 of 12

 
 
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