Jute
Corporation of India Ltd. Vs. Commissioner of Income Tax & Anr [1990] INSC
266 (4 September 1990)
Singh,
K.N. (J) Singh, K.N. (J) Thommen, T.K. (J) Kuldip Singh (J)
CITATION:
1991 AIR 241 1990 SCR Supl. (1) 340 1991 SCC Supl. (2) 744 JT 1990 346
ACT:
Income
Tax Act, 1961: Section 251-- Appeal before Appel- late Assistant
Commissioner--Additional grounds raised by assessee which were not raised
before the Income Tax Offi- cer--Whether could be entertained.
HEAD NOTE:
In
respect of the assessment for the assessment year 1974-75, the appellant-assessee
preferred an appeal before the Appellate Assistant Commissioner. During the
hearing of the appeal, the assessee raised an additional ground as regards its
liability to Purchase Tax and claimed a deduc- tion of Rs.11,54,995. After
giving an opportunity of hearing to the Income Tax Officer, the Appellate
Assistant Commis- sioner allowed the said claim.
The
Revenue preferred an appeal before the Income Tax Appellate Tribunal. The
Tribunal held that the Appellate Assistant Commissioner had no jurisdiction to
entertain any additional ground not raised before the Income Tax Officer and
set aside the order of the Appellate Assistant Commis- sioner.
The assessee's
application for making reference to the High Court was refused by the Tribunal.
The High Court also rejected the assessee's application for calling the state- ment
of the case and reference from the Tribunal. Hence, this appeal by special
leave.
Disposing
of the appeal, the Court,
HELD:
1.1 The declaration of law is clear that the power of the Appellate Assistant
Commissioner is co-terminus with that of the Income Tax Officer. If that be so,
there appears to be no reason as to why the appellate authority cannot modify
the assessment order on an additional ground even if not raised before the
Income Tax Officer. No exception could be taken to this view as the Act does
not place any restric- tion or limitation on the exercise of appellate power.
Even otherwise an Appellate Authority while hearing appeal against the order of
a subordinate authority has all the powers which the original 341 authority may
have in deciding the question before it sub- ject to the restrictions or
limitation if any prescribed by the statutory provisions. In the absence of any
statutory provisions to the contrary the Appellate Authority is vested with all
the plenary powers which the subordinate authority may have in the matter. [155G-H;
156A-B]
1.2 If
the Appellate Assistant Commissioner is satisfied he would be acting within his
jurisdiction in considering the question so raised in all its aspects. Of
course, while permitting the assessee to raise an additional ground, the
Appellate Assistant Commissioner should exercise his discre- tion in accordance
with law and reason. He must be satisfied that the ground raised was bona fide
and that the same could not have been raised earlier for good reasons. The satisfac-
tion of the Appellate Assistant Commissioner depends upon the facts and
circumstances of each case and no rigid prin- ciples or any hard and fast rules
can be laid down for this purpose. [157D-F] Commissioner of Income Tax v. Mc Millan
& Co., [1958] 33 I.T.R. 182; Commissioner of Income Tax, U.P. v. Kanpur Coal Syndicate,, [1964] 53 I.T.R.
225; Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta, [1971] 82 I.T.R. 363; relied on.
Commissioner
of Income Tax, Bombay v. Shapporji Patton Ji Mistry,
[1962] 44 I.T.R. 891; Addl. Commissioner of Income Tax Gujarat v. Gurjargravures ?. Ltd., [1978]
111 I.T.R. 1; distinguished.
Rai
Kumar Srimal v. Commissioner of Income Tax, West Bengal 111, [1976] 102 I.T.R. 525, approved.
Narrondas
Manordass v. Commissioner of Income Tax, [1957] 31 1. T.R. 909 referred to.
2. In
the instant case, the assessee was assessed to Purchase Tax. The appellant
disputed the demand and filed an appeal before the Appellate Authority and
obtained stay order. The assessee thereafter claimed deduction for the amount
of Rs.11,54,995 towards his liability to pay Purchase Tax as deduction for the
assessment year 1974-75. The asses- see had not actually paid the Purchase Tax
as it had ob- tained stay from the Appellate Authority; nonetheless its
liability to pay tax existed, and it was entitled to deduc- tion of Rs.
11,54,995. [158B-C]
3.
Since the view taken by the Income Tax Appellate Tribunal is 342 not
sustainable in law, the order of the Tribunal is set aside and the matter is
remitted to the Tribunal to consider the merit of the deduction permitted by
the Appellate As- sistant Commissioner. If the Tribunal thinks it necessary, it
may remand the matter to the Appellate Assistant Commissioner (Deputy
Commissioner of Appeals) for hearing [158F-H]
CIVIL
APPELLATE JURISDICTION: Civil Appeal No. 1935 of 1981.
From
the Judgment and Order dated 8.4. 1980 of the Calcutta High Court in Matter No. 143 of 1980.
Sukumar
Bhattacharya and G.S. Chaterjee for the Appellant.
J.
Ramamurthy. g. Rajappa and Ms. A. Subhashini for the Respondents.
The
Judgment of the Court was delivered by K.N. SINGH, J. The appellant is a
Government Corporation engaged in jute industry. It was assessed to income tax
for the assessment year 1974-75 by the Income Tax Officer. The assessee
preferred appeal before the Appellate Assistant Commissioner. During the
hearing of the appeal, the assessee raised an additional ground claiming
deduction of Rs. 11,54,995 on the ground of liability of Purchase Tax. The assessee
claimed that in view of the decision of this Court in Kedarnath Jute Company
Limited v. Commissioner of Income Tax, [19771 82 I.T.R. 363 the aforesaid
amount being tax liability should be deducted from its income for purposes of
charging tax. The Appellate Assistant Commissioner permitted the assessee to
raise the additional ground and after hear- ing the Income Tax Officer, he
accepted the assessee's claim and allowed deduction of Rs. 11,54,995 in
computing the total income of the assessee for the assessment year 1974- 75.
The Revenue preferred appeal before the Income Tax Appellate Tribunal. The
Tribunal held that the Appellate Assistant Commissioner had no jurisdiction to
entertain an additional ground or to grant relief to the assessee on a ground
which had not been raised before the Income Tax Officer. The Tribunal set aside
the order of the Appellate Assistant Commissioner placing reliance on the
decision of this Court in Addl. Commissioner of Income Tax, Gujarat v. Gurjargravures P. Ltd.. [1978]
111 I.T.R.I. The assessee made application before the Tribunal under Section
256(1) of the Income Tax Act, 1961 for making reference to the High Court. The
Tribunal refused to refer the question on 343 the findings that the question
stood covered by this Court's decision in Gurjargravures (supra). The assessee
thereupon approached the High Court under Section 256(2) of the Act for calling
the statement of case and reference from the Appellate Tribunal. A Division
Bench of the Calcutta High Court held that the Tribunal was right in rejecting
the assessee's application, therefore it refused to call state- ment of case.
The assessee thereupon approached this Court under Article 136 of the
Constitution. and obtained leave.
Hence
this Appeal.
The
question of law which the assessee sought to be referred to the High Court
under Section 256(1) of the Act was:
"Whether
on the facts and in the circumstances of the case.
the
Income Tax Appellate Tribunal was justified in holding that the Appellate
Assistant Commissioner of Income Tax had exceeded his powers in entertaining
the additional ground of appeal taken before him in respect of the claim for deduc-
tion of a sum of Rs. 11,54,995 representing liability for raw jute Purchase
Tax." Section 251 of the Income Tax Act (hereinafter referred to as the
'Act') prescribes power of the Appellate Authority hearing appeal against the
order of..Income Tax Officer.
Clause
(a) of Section 25 1(1) confers power on the Appellate Authority namely the
Appellate Assistant Commissioner [now after the Amendment of 1987 the Deputy
Commissioner (Ap- peals)] according to which Appellate AUthority while hearing
appeal against an order of assessment. has power to confirm.
reduce,
enhance or annual the assessment; he is further empowered to set aside the
assessment and remit the case back to the Assessing Officer for making a fresh
assessment in accordance with its directions. after making such further inquiry
as may be necessary. If a direction is issued by the Appellate Authority, the
Assessing Officer is required to proceed to make such fresh assessment and
determine the amount of tax, if any. payable on the basis of fresh assess- ment.
The Appellate Assistant Commissioner is thus invested with wide powers under s.
251(1)(a) of the Act while hearing an appeal against the order of assessment
made by the Income Tax Officer. The amplitude of the power includes power to
set aside the assessment order or modify the same. The question is whether the
Appellate Assistant Commissioner while hearing an appeal under s. 251(1)(a) has
jurisdiction to allow the assessee to raise an additional ground in assailing
the order of the assessment before it. The Act does not contain any express
provision debarring an assessee from raising an addi- 344 tional ground in
appeal and there is no provision in the Act placing restriction on the power of
the Appellate Authority in entertaining an additional ground in appeal. In the
absence of any statutory provision. general principle relat- ing to the
amplitude of appellate authority's power being co-terminus with that of the
initial authority should nor- mally be applicable. But this question for the
purposes of the Income Tax Act has been an intricate and vexed one.
There
is no uniformity in the judicial opinion on this question.
Section
31 of the Income Tax Act, 1922 also conferred power on the Appellate Assistant
Commissioner to hear appeal against the assessment order made by the Income Tax
Officer.
The Chagla,
CJ of the Bombay High Court considered the question in detail in Narrondas Manordass
v. Commissioner of Income Tax, [1957] 31 I.T.R. 909 and held that the Appellate
Assistant Commissioner was empowered to correct the Income Tax Officer not only
with regard to a matter which had been raised by the assessee but also with
regard to a matter which may have been considered by the Income Tax Officer and
determined in the course of the assessment. The High Court observed that since
the Appellate Assistant Commissioner had revising authority against the
decisions of the Income Tax Officer; a revising authority not in the narrow
sense of revising those matters, which the assessee makes a grievance but the
subject matter of the appeal not only he had the same powers which could be
exercised by the Income Tax Officer. These observations were approved by this
Court in Commissioner of Income Tax v. McMillan & Co., [1958] 33 I.T.R. 182
the Appellate Assistant Commissioner on an appeal preferred by the assessee had
jurisdiction to invoke, for the first time provisions of Rule 33 of the Income
Tax Rules, 1922, for the purpose of computing the income of a nonresident even
if the Income Tax Officer had not done so in the assessment proceedings. But in
Commissioner of Income Tax, Bombay v. Shapporji Pallon Ji Mistry, [1962] 44
I.T.R. 891 this Court while considering the extent of the power of the
Appellate Assistant Commissioner referred to a number of cases decided by
various High Courts including Bombay High Court judgment in Narrondas case and
also the decision of this Court in McMillan & Co. case and held that in an
appeal filed by the assessee, the Appellate Assistant Commissioner has no power
to enhance the assessment by discovering new sources of income, not considered
by the Income Tax Officer in the order appealed against. It was urged on behalf
of the Revenue that the words "enhance the assessment" occurring in
s. 31 were not confined to the assessment reached through particular process
but the amount which ought to have been computed if the true total income had
been 345 found." The Court observed that there was no doubt that this view
was also possible, but having regard to the provisions of Sections 34 and 33B,
which made provisions for assessment of escaped income from new sources, the
interpretation suggested on behalf of the Revenue would be against the view
which had held the field for nearly 37 years. In this view the Court held that
the Appellate Assistant Commissioner had no power to enhance the assessment by
discovering new sources of income. This decision does not directly deal with
the question which we are concerned. Power to enhance Tax on discovery of new
source of income is quite different than granting deduction on the admitted
facts fully supported by the decision of this Court. If the tax liability of
the assessee is admitted and if the Income Tax Officer is af- forded
opportunity of hearing by the Appellate Authority is allowing the assessee's
claim for deduction on the settled view of law, these appears to be no good
reason to curtail the powers of the appellate authority under Section 25 1(1)(a)
of the Act.
In
Commissioner of Income Tax, U.P.v. Kanpur Coal Syndi- cate, [1964] 53 I.T.R.
225 a three Judge Bench of this Court discussed the scope of Section 31(3)(a)
of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a).
The
Court held as under:
"If
an appeal, lies, Section 31 of the Act describes the powers of the Appellate
Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing
of such an appeal the Appellate Assistant Commissioner may, in the case of an
order of assessment, confirm, reduce, enhance or annul the assessment; under
clause (b) thereof he may set aside the assessment and direct the Income Tax
Officer to make a fresh assessment. The Appellate Assistant Commissioner has,
therefore, plenary powers in disposing of an appeal. The scope of his power is
conterminous with that of the Income Tax Officer. He can do what the Income Tax
Officer can do and also direct him to do what he has failed tO do. " (emphasis
supplied) The above observations are squarely applicable to the interpretation
of s. 25 1(1)(a) of the Act. The declaration of law is clear that the power of
the Appellate Assistant Commissioner is co-terminus with that of the Income Tax
Officer, if that he so, there appears to be no reason as to why the appellate
authority cannot modify the assessment order on an additional ground even if
not raised before the Income Tax Officer. No 346 exception could be taken to
this view as the Act does not place any restriction or limitation on the
exercise of appellate power. Even otherwise an Appellate Authority while
hearing appeal against the order of a subordinate authority has all the powers
which the original authority may have in deciding the question before it
subject to the restrictions or limitations if any prescribed by the statutory provi-
sions. In the absence of any statutory provision the Appel- late Authority is
vested with all the plenary powers which the subordinate authority may have in
the matter. There appears to be no good reason and none was placed before us to
justify curtailment of the power of the Appellate Assist- ant Commissioner in
entertaining an additional ground raised by the assessee in seeking
modification of the order of assessment passed by the Income Tax Officer.
In
Additional Commissioner of Income Tax, Gujarat v. Gurjargravures P. Ltd.
(supra) this Court has taken a dif- ferent view, holding that in the absence of
any claim made by the assessee before the Income Tax Officer regarding relief,
he is not entitled to raise the question of exemp- tion under Section 84 before
the Appellate Assistant Commis- sioner hearing appeal against the order of
Income Tax Offi- cer. In that case the assessee had made no claim before the
Income Tax Officer for exemption under Section 84 of the Act, no such claim was
made in the return nor any material was placed on record supporting such a
claim before the Income Tax Officer at the time of assessment. The assessee for
the first time made claim for exemption under Section 84 before the Appellate
Assistant Commissioner who rejected the claim but on further appeal the Appellate
Tribunal held that since the entire assessment was open before the Appellate
Assistant Commissioner there was no reason for his not entertaining the claim,
or directing the Income Tax Officer to allow appropriate relief. On a reference
the High Court upheld the view taken by the Tribunal. On appeal this Court set
aside the order of the High Court as it was of the view that the Appellate
Assistant Commissioner had no power to interfere with the order of assessment
made by Income Tax Officer on a new ground not raised before the Income Tax
Officer, and therefore the Tribunal committed error in directing the Appellate
Assistant Commissioner to allow the claim of the assessee under Section 84 of
the Act. Apparent- ly this view taken by two Judge Bench of this Court appears
to be in conflict with the view taken by the three Judge Bench of the Court in Kanpur
Coal Syndicate's case (supra).
It
appears from the report of the decision in Gujarat case the three Judge Bench
decision in Kanpur Coal Syndicate (supra) case was not brought to the notice of
the Bench in the Gurjargravures P. Ltd. (supra). In the 347 circumstances the
view of the larger Bench in the Kanpur Coal Syndicate, (supra) holds the field.
However we do not consider it necessary to over-rule the view taken in Gurjar-
gravures P. Ltd. (supra) case as in our opinion that deci- sion is rounded on
the special facts of the case, as would appear from the following observations
made by the Court;
"As
we have pointed out earlier, the statement of case drawn up by the Tribunal
does not mention that there was any material on record to sustain the claim for
exemption which was made for the first time before the Appellate Assistant
Commissioner. We are not here called upon to consider a case where the assessee
failed to make a claim though there was no evidence on record to support it, or
a case where a claim was made but no evidence or insufficient evidence was ad- duced
in support. In the present case neither any claim was made before the Income
Tax Officer, nor was there any mate- rial on record supporting such a
claim." The above observa- tions do not rule out a case for raising an
additional ground before the Appellate Assistant Commissioner if the ground so
raised could not have been raised at that particu- lar stage when the return
was filed or when the assessment order was made, or that the ground became
available on account of change of circumstances or law. There may be several
factors justifying raising of such new plea in appeal, and each case has to be
considered on its own facts.
If the
Appellate Assistant Commissioner is satisfied he would be acting within his
jurisdiction in considering the question so raised in all its aspects. Of
course, while permitting the assessee to raise an additional ground, the
Appellate Assistant Commissioner should exercise his discre- tion in accordance
with law and reason. He must be satisfied that the ground raised was bona fide
and that the same could not have been raised earlier for good reasons. The satisfac-
tion of the Appellate Assistant Commissioner depends upon the facts and
circumstances of each case and no rigid prin- ciples or any hard and fast rule
can be laid down for this purpose.
In Rai
Kumar Srimal v. Commissioner of Income Tax, West Bengal 111, [1976] 102 I.T.R.
525 a Division Bench of Cal- cutta High Court presided over by Sabyasachi Mukharji,
J., as he then was held that the Appellate Assistant Commission- er was
entitled to admit new ground or evidence either suo motu or at the invitation
of the parties. If he is acting on being invited by the assessee, then there
must be some ground for admitting new evidence in the sense that there must be
some explanation to show that the failure to adduce earlier the evidence sought
to be adduced before the Appel- late Assistant Commissioner was not wilful and
not unreason- able. This view is reasonable and it finds favour with us.
348 In
the instant case the assessee was carrying on manu- facture and sale of jute.
In the assessment year of 1974-75 he did not claim any deduction on its
liability to pay Purchase Tax under the provisions of the Bengal Raw Jute
Taxation Act, 1941, as the appellant entertained a belief that it was not
liable to pay Purchase Tax under the afore- said Act. But later on it was assessed
to Purchase Tax and the order of assessment was received by it on 23.11. 1973.
The
appellant disputed the demand and filed an appeal before the Appellate
Authority and obtained stay order. The asses- see thereafter claimed deduction
for the amount of Rs.11,54,995 towards his liability to pay Purchase Tax as
deduction for the assessment year 1974-75. The assessee had not actually paid
the Purchase Tax as he had obtained stay from the Appellate Authority
nonetheless its liability to pay tax existed, and it was entitled to deduction
of Rs. 11,54,995 as was held by this Court in Kedarnath Jute Mfg. Co. Ltd. v.
Commissioner of Income Tax (Central), Calcutta, [1971] 82 I.T.R. 363. There was no dispute about these facts. In these
circumstances the Appellate Assistant Com- missioner allowed the assessee to
raise this question and after hearing the Income Tax Officer, he granted the deduc-
tion from the assessee's income. The Tribunal took a con- trary view placing
reliance on the decision of this Court in Gujargravures P. Ltd. (supra). As
already discussed the facts in the instant case are quite clear, unlike the
facts involved in Gurjargravures case. We are, therefore, of the view that the
view taken by the Appellate Tribunal and the High Court is not sustainable in
law. In our opinion, the High Court and Tribunal both committed error in
refusing to state the case, or making a reference.
The
next question which arises for consideration is to know what order should be
passed in the present circum- stances. In view of the findings recorded by us
ordinarily we should direct the High Court to call for the statement of case
from the Tribunal and thereupon decide the matter afresh, but this procedure
would be time consuming. Since we have already discussed the correct position
of law we do not consider it necessary to follow the usual procedure. Since the
view taken by the Income Tax Appellate Tribunal is not sustainable in law we
grant leave against the order of the Appellate Income Tax Tribunal under
Article 136 and set aside the same and remit the matter to the Appellate Income
Tax Tribunal to consider the merit of the deduction permit- ted by the
Appellate Assistant Commissioner. If the Tribunal thinks it necessary it may
remand the matter to the Appel- late Assistant Commissioner (now Deputy
Commissioner of Appeals) for reheating. The appeal is accordingly disposed of.
There will be no order as to costs.
G.N.
Appeal disposed of.
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