Commissioner Of Income-Tax vs Late Begum Noor Banu Alladin And Anr. on 21 April, 1993

[Cites 74, Cited by 39]

Andhra HC (Pre-Telangana)

Commissioner Of Income-Tax vs Late Begum Noor Banu Alladin And Anr. on 21 April, 1993

Equivalent citations: 1993(3)ALT105, [1993]204ITR166(AP)

Bench: P. Venkatarama Reddi

JUDGMENT

Syed Shah Mohammed Quadri and S. Parvattha Rao, JJ.

1. This is a reference at the instance of the Commissioner of Income-tax as required by this court under section 256(2) of the Income-tax Act, 1961, in its decision dated October 11, 1979, in Income-tax Case No. 31 of 1979.

2. The relevant facts as stated in the statement of case are as follows :

The assessee's lands admeasuring about 49 acres were acquired by the Government under the Land Acquisition Act and possession of the same was taken on October 11, 1957. After the land Acquisition Officer passed the award, the assessee took the matter on reference to the City Civil Court in Original Petition No. 207 of 1959. The City Civil Court by its decree dated July 24, 1961, enhanced the compensation. On further appeal to the High Court in C. C.A. No. 26 of 1963, the compensation was further enhanced by a sum of Rs. 1,02,797.07 and the interest which worked out to Rs. 72,026 was received by the assessee on July 30, 1969. The present controversy in this reference relate to these two items and the assessment year is 1970-71.

3. The return of income for the assessment year 1970-71 was filed on December 31, 1970, by one Sri Mohammed Alladin, one of the legal heirs of the assessee, Smt. Begum Noor Banu Alladin, who died on December 2, 1969. In the said return, the sum of Rs. 1,02,797.07 received by the assessee towards enhanced compensation on July 30, 1969, was declared as capital gain. The sum of Rs. 72,026 received by the assessee as interest on the enhanced compensation from October 11, 1957, to June 15, 1969, at six per cent per annum was also offered for assessment.

4. The Income-tax Officer assessed the entire interest of Rs. 72,026 as income liable to be taxed for the assessment year 1970-71. As regards the sum of Rs. 1,02,797.07 disclosed by the assessee herself as capital gain, the Income-tax Officer assessed the same observing as follows :

"In my view, this enhanced compensation has strictly to be assessed to tax in the year in which the land was acquired by the Government. However, as the assessee has declared the gain in this year, I shall include the same in the total income without prejudice to my right to take appropriate action for the year in which it is correctly assessable."

5. It may also be noted that the Income-tax Officer observed in his assessment order dated March 27, 1973, that, in the course of the proceedings before him, it was pointed out that Shri Dost Mohammed Alladin also passed away and that his brother, Shri Noor Mohammad Alladin, and his sister, Smt. Putlibai Rahamatullah, were brought on record as surviving legal heirs and that the assessment was made on them.

6. In the appeal preferred before the Appellate Assistant Commissioner of Income-tax against the said assessment order, no contention as regards the assessment of capital gains was raised either in the grounds of appeal or in the course of hearing of the appeal before the Appellate Assistant Commissioner. However, as regards interest of Rs. 72,026 a supplemental ground was raised before the Appellate Assistant Commissioner that the Income-tax Officer erred in subjecting to tax the total interest of Rs. 72,026 being the interest paid to the assessee for the period from October 11, 1957, to June 15, 1969, for the year under appeal. However, the Appellate Assistant Commissioner rejected the said contention holding that the appellant cannot be aggrieved because the said amount was offered for assessment in the assessment year 1970-71 and the Income-tax Officer merely accepted it and assessed it.

7. Before the Income-tax Appellate Tribunal, it was contended on behalf of the assessee that the interest was payable right from the date when possession was taken on October 11, 1957, and that, therefore, it should be spread over yearly from October 11, 1957, up to June 15, 1969, and that, on being so spread over a sum of Rs. 4,491.57 alone would be relatable to the assessment year 1970-71. The Income-tax Appellate Tribunal held that the assessee's contention that the interest had to be spread over right from the date the property vested in the Government could not be accepted in view of the decision of this court in CIT v. Smt. Sankari Manickyamma . The Appellate Tribunal also observed that as per the said decision, interest accrued on the date when the judgment and decree was passed, i.e. April 23, 1968, and that, therefore, the right to receive the enhanced compensation and interest arose on that date which was outside the accounting year relevant to the assessment year 1970-71 and that as such the entire interest could not be taxed in the assessment year 1970-71. In that view, the Appellate Tribunal brought to tax only the interest relatable to the assessment year in question, i.e., for the period October 1, 1968, to June 15, 1969, i.e., Rs. 4,491.57.

8. As regards the enhanced compensation of Rs. 1,02,797.07, the assessee filed an application before the Appellate Tribunal for raising an additional ground questioning the leviability of capital gains tax in respect of the said sum. Notice of this application was given to the Department and a preliminary objection was raised by the Department representative as regards the admissibility of the additional ground because the levy of the said tax was not questioned either expressly or impliedly before the Appellate Assistant Commissioner and, therefore, the assessee could not be said to be aggrieved by the order of the appeal before the Appellate Tribunal could not be extended or expanded beyond the memorandum of appeal filed before it. The Department representative relied on the decision of the Gujarat High Court in the case of CIT v. Steel Cast Corporation and the decision of this court in CIT v. Krishna Mining Co. . The assessee relied on the decision of this court in Shaik Ibrahim v. CIT [1968] 69 ITR 117. The Appellate Tribunal rejected the preliminary objection raised by the Department and held that it had the power to admit the additional ground. On the merits, the Appellate Tribunal held that the assessment of capital gains is taxable for the assessment year 1968-69 and not for the assessment year 1970-71 and deleted the entire sum of Rs. 1,02,797.07 from assessment.

9. The following three questions were referred for the opinion of this court :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in permitting the assessee to raise the additional ground in respect of levy of capital gains on the sum of Rs. 1,02,797 ?

(2) Whether, on the facts and in the circumstances of the case, the levy of capital gains on the amount of Rs. 1,02,797 for the assessment year 1970-71 is legal and valid ?

(3) Weather, on the facts and circumstances of the case, the entirety of interest of Rs. 72,026 received on the enhanced compensation is assessable for the assessment year 1970-71 ?"

10. As regards the admissibility of the additional ground, we are of the clear view that there is a conflict between the different decisions of this court and also between the decisions of the various High Courts. In CIT v. Krishna Mining Co. , a Division Bench of this court held on the language of section 33(4) of the 1922 Act, which is similar to section 254(1) of the 1961 Act, as follows (at page 707) :

"Although the powers of the Tribunal are thus expressed in very wide language, the word 'thereon' restricts the use of such wide powers of the Tribunal to the subject-matter of the appeal. What plainly follows is that the Tribunal powers are limited to passing such orders as it thinks fit 'on the appeal'. In other words, the powers of the Tribunal are limited to the subject-matter of the appeal.

... It would not be permissible for the Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed in the lower Tribunals or which was not in dispute and which does not form the subject-matter of the appeal. It is thus clear that the Tribunal has no jurisdiction to final its decision on a question which was not the subject of dispute at any stage of the proceedings and is not the subject-matter of the appeal. It has no power to enlarge the scope of the proceedings or that of the appeal before it by permitting the parties or any one of them to ask for a relief which was never the subject-matter in those proceedings or of the appeal."

11. In Shaik Ibrahim v. CIT [1968] 69 ITR 117, another Division Bench of this court held (at page 120) :

"Mr. Kondaiah for the Department also takes the stand that as the assessee while making the return stated that the income was from the business of New Year Cotton futures, he cannot now say that it was not from business. We cannot accept this contention. The mere fact that the assessee has not raised this contention before the Income-tax Officer or the Appellate Assistant Commissioner would not, in our opinion, bar him from raising the same before the Tribunal. It has been held times without number that there is no estoppel on a question of law. Whether, in fact, the transactions of the assessee in respect of the New York cotton futures, known as 'brackets' are exempt from tax under section 4(3) (vii) or it would amount to 'business' is a question of law. The mere fact that the assessee, not having appreciated his legal rights, failed to raise the contention before the Income-tax Officer or the Appellate Assistant Commissioner, where he was not represented by a lawyer but by his audit who not being qualified in law, is not competent to appreciate the principles of law or its subtleties, he 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. The assessee cannot, therefore, be denied an opportunity to raise such questions as would be open to him under the Act, before the Tribunal."

12. In CIT v. Karamchand Premchand Pvt. Ltd. , a Division Bench of the Gujarat High Court held as follows (at page 265) :

"Moreover, it is difficult to imagine how an assessee can be heard to say that, though he did not claim any particular relief in the appeal preferred before the Appellate Assistant Commissioner, and the Appellate Assistant Commissioner had therefore no occasion to decide whether such relied should be granted or not, he is still aggrieved by the decision of the Appellate Assistant Commissioner in not granting such relief to him. How can an assessee complain that an order does not grant him a particular relief, when such relief is not claimed by him in the appeal ? How can it be said by an assessee that the Appellate Assistant Commissioner erred in deciding a particular matter against him when no opportunity was given by him to the Appellate Assistant Commissioner even to make such error ? When the assessee seeks to contend in the appeal to the Tribunal that the Appellate Assistant Commissioner erred in deciding a particular matter against him, the question would be : where is the decision of the Appellate Assistant Commissioner deciding the matter against him by which he is aggrieved ? And if there is no such decision, obviously the assessee cannot appeal against it."

13. The Gujarat High Court also held in that case that though rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 allows the appellant to urge any ground not taken in the memorandum of appeal, that does not mean that, with the leave of the Tribunal, the appellant can take any ground of appeal even if he was not originally entitled to take it in the memorandum of appeal. This view was accepted by a Full Bench of this court in State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57, while dealing with the powers of the Sales Tax Appellate tribunal under the Andhra Pradesh General Sales Tax Act. The Full Bench also relied on the decision of the Supreme Court in Hukumchand Mills Ltd. v. CIT , wherein the Supreme Court observed (at page 237) :

"The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal."

14. Karamchand Premchand Private Ltd.'s case was followed by the Gujarat High Court in CIT v. Steel Cast Corporation , which was in turn approved by a Full Bench of the Gujarat High Court in CIT v. Cellulose Products of India Ltd. . In the said Full Bench case, the Gujarat High Court also discussed the decisions of the Supreme Court in Hukumchand Mills Ltd. v. CIT , CIT v. Mahalakshmi Textile Mills Ltd. , Addl. CIT v. Gurjargravures P. Ltd. and CIT v. S. Nelliappan . The Full Bench of the Gujarat High Court dissented from the view of this court in CIT v. Gangappa Cables Ltd. . In Gangappa Cables Ltd.'s case , this court, after discussing the decisions of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. , CIT v. Mahalakshmi Textile Mills Ltd. and Hukumchand Mills Ltd. v. CIT , held that (at page 781 of 116 ITR) :

"When there is sufficient evidence on record to support a claim, neither the Appellate Assistant Commissioner nor the Tribunal is barred from entertaining a claim on the basis of the evidence on record which is sufficient to support the claim."

15. In the recent decision of the Supreme Court in Jute Corporation of India Ltd. v. CIT , the Supreme Court once again reviewed the law on this question and referring in particular to the decision in Addl. CIT v. Gurjargravures P. Ltd. , held that the observations in that decision "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 the stage when the return was filed or when the assessment order was made or if the ground became available on account of change of circumstances or law" and that "there may be several factors justifying the raising of such a new plea in an appeal, and each case has to be considered on its facts". There does not seem to be any clear pronouncement of the Supreme Court on the question whether, wen the assessee submits an income for assessment and does not question the same in the appeal preferred by him before the Appellate Assistant Commissioner, he can question the assessment of the said income for the first time in the second appeal before the Income-tax Appellate Tribunal and whether he is barred from questioning the same on the ground that the said assessment had become final by virtue of his not questioning the same before the first appellate authority. The learned author, N. A. Palkhivala does not agree with the view of the Gujarat High Court and, in the latest edition of the Law and Practice of Income-tax (Eighth Edition of 1990), under the heading "Raising new questions - Ground not taken before lower authority" he opines as follows (at page 1526) :

"The Punjab and Haryana High Court had held that the assessee is entitled to urge before the Tribunal a ground regarding the validity of the assessment which he had given up before the Commissioner of Income-tax (Appeals) or any other ground which he had not taken by the Madras High Court. The Bombay High Court has held the assessee entitled to claim for the first time before the Tribunal certain benefits which he had not claimed before. In CIT v. Karamchand Premchand P. Ltd. , the Gujarat High Court held that if a point arising in the assessment order is not taken in appeal by the assessee and is therefore, not dealt wit by the Commissioner of Income-tax (Appeals), the assessee cannot raise that point before the Tribunal even if, on a judicial pronouncement subsequent to the Commissioner of Income-tax (Appeals) on a point which was not agitated before him, while the right to appeal to the Tribunal is granted by section 253 to an assessee so aggrieved. It is submitted that this decision is erroneous and was wrongly approved in CIT v. Cellulose Products of India Ltd. [FB] and wrongly followed in the undermentioned cases. Authorities under the Act have to administer the law correctly, and if, for instance, as a result of a subsequent judicial decision it is found that a non-taxable item is taxed or a permissible deduction is denied, the assessee can reasonably be said to be aggrieved by the Commissioner of Income-tax (Appeals)'s order in its totality, as it finally sustains the assessment. The Gujarat High Court's attention does not seem to have been drawn to Kamala Mills Ltd. v. State of Bombay in which the Supreme Court held that if a dealer who had returned certain sales and allowed them to be taxed found on a later decision of the court that the same were not taxable, he could file an appeal and ask for condonation of delay. Further, the right to appeal to the Commissioner of Income-tax (Appeals) is conferred by section 246 in identical terms on 'any assessee aggrieved' by the Assessing Officer's order, and yet the Gujarat High Court itself rightly held in later cases that an assessee could raise before the Commissioner of Income-tax (Appeals) for the first time a point which he had not raised before the Assessing Officer and which was therefore not dealt with in the assessment order. It is submitted that the correct position in laws that both the Commissioner of Income-tax (Appeals) and the Tribunal have the jurisdiction in every case to entertain a ground which was not urged before the authority whose order is appealed against, but they, judicially exercising their discretion, may or may not entertain the new ground."

16. We are of the view that, as the question is one of importance and there are conflicting views expressed by different Division Benches including one Full bench of this Court and also by different High Courts, and as the various decisions of the Supreme Court also have to be analysed, the matter has to be considered by a Full Bench. There is also the decision of the Supreme Court in S. S. Gadgil v. Lal ad Co. , wherein the Supreme Court delineated the characteristics of proceedings for assessment as follows (headnote) :

"A proceeding for assessment is not a suit for adjudication of a civil dispute. That an income-tax proceeding is in the nature of a judicial proceeding between contesting parties is in the nature of a judicial proceeding between contesting parties, is a matter which is not capable of even a plausible argument. The income-tax authorities who have power to assess ad recover tax are not acting as judged deciding a litigation between the citizen and the State : they are administrative authorities whose proceedings are regulated by statute, but whose function is to estimate the income of the taxpayer and to assess him to tax on the basis of that estimate. Tax legislation necessitates the setting up of machinery to ascertain the taxable income and to assess a tax on the income, but that does not impress the proceeding with the character of an action between the citizen and the State."

17. A full Bench of the Madras High Court in State of Tamil Nadu v. Arulmurugan and Co. [1982] 51 STC 381, referring to the decisions of the Supreme Court in CIT v. Mcmillan and Co. , CIT v. Kanpur Coal Syndicate and CIT v. Mahalakshmi Textile Mills Ltd. explained how a tax appeal differs from an appeal in civil cases in the following manner (at page 392 of 51 STC) :

"An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the Legislature. An appeal is a continuation of the adjustment of the tax liability to accord with the taxable event in the particular taxpayer's case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer's 'opponent', in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority's order assessment is not strictly an arbitral Tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority can itself enter the arena of assessment, either by pursing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself."

18. These aspects have also to be kept in view while considering the powers of the Appellate Tribunal in entertaining additional grounds and an authoritative pronouncement is needed.

19. Therefore, questions Nos. 1 and 2 are referred to the Full Bench.

20. As regards question No. 3, as it is covered by a decision of the Division Bench of This Court in CIT v. Smt. Sankari Manickyamma in favour of the assessee, we answer the question in the negative against the Revenue and in favour of the assessee.

JUDGMENT OF FULL BENCH The judgment of the court was delivered by P. Venkatarama Reddi J.

21. We are called upon to answer in this referred case a highly debated question, viz., whether the Income-tax Appellate Tribunal has jurisdiction to grant relief on consideration of an additional ground raised before it by the assessee for the first time although such ground related to an item of assessment which was not disputed at any earlier stage. The sharp divergence of opinion amongst the various High Courts and in the decisions of this court adds to the dimension of the problem on hand.

22. We shall start with a brief reference to the relevant facts : One Sri Dost Mohammad Alladin filed a return for the assessment year 1970-71 as a legal heir of the assessable person, Smt. Begum Noor Banu Alladin, who died on December 2, 1969. In the course of the assessment proceedings under section 143(3) of the Income-tax Act, 1961, it was noticed that Dost Mohammad Alladin also died and, therefore, the Income tax Officer brought on record the surviving legal heirs, namely, Noor Mohammad Alladin and Smt. Putlibai Rahamatullah. The assessee offered to tax an amount of Rs. 1,02,797 representing capital gains arising from the acquisition of lad of an extent of ac. 49 by the Government. Possession of the land was taken over on October 11, 1957, percent to an award passed earlier. On a reference under section 18 of the Land Acquisition Act, the civil court, by its decree dated July 24, 1961. enhanced the compensation. On an appeal to the High Court in C. C. C.A. No. 26 of 1963, the compensation was further enhanced to Rs. 1,02,797. The High Court also directed payment of interest in the enhanced compensation amount from the date of taking possession of the land till the date of payment. The interest worked out to Rs. 72,026. The compensation amount with interest was received on July 30, 1969.

23. The assessee did not raise any contest before the Income-tax Officer regarding the exigibility of the capital gain including the interest on the enhanced compensation; on the other hand, the assessee himself offered the same for assessment. The Income-tax Officer observed in the assessment order as follows :

"In my view, this enhanced compensation has strictly to be assessed to tax in the year in which the land was acquired by the Government.

However, as the assessee has declared the gain in this year, I shall include the same in the total income without prejudice to my right to take appropriate action for the year in which it is correctly assessable."

24. The income from house property, dividends, capital gain and interest on enhanced compensation were subjected to tax by the Income-tax Officer. In the first appeal filed by the assessee, originally four grounds were raised. It was contended that the income from the properties already gifted away to others and made over to a trust could not have been assessed to tax, that the dividend of Rs. 8,000 would qualify for exemption and lastly that the benefit under section 80G should have been allowed to the appellant in respect of the donations made to a public charity. In fact, these were the subject-matter of dispute at the stage of assessment itself. Before the Appellate Assistant Commissioner, a supplemental ground was raised contending that the interest of Rs. 72,026 received on the enhanced compensation should be spread over from year to year commencing from the year of taking possession of the land and only a sum of Rs. 4,492 ought to have been assessed to tax for the assessment year 1970-71. The Appellate Assistant Commissioner substantially rejected the appeal and he gave relief only to the extent of Rs. 1,096 pertaining to dividend income. With regard to interest on enhanced compensation, the appellate authority observed that the assessee himself offered the same for assessment and that there was, therefore, no grievance. In the second appeal before the Tribunal, grounds were raised contesting the chargeability of income from gifted property, disallowance of relief under section 80G and interest on the enhanced compensation amount. During the pendency of the appeal, an additional ground was sought to be raised by the assessee in regard to the exigibility of capital gains to tax. The contention was that no capital gains could be said to have accrued or arisen during the assessment year in question, inasmuch as, according to the appellant, the date of receipt of the enhanced compensation amount is not the relevant date. The Departmental representative raised a preliminary objection on the question of admissibility of the additional ground taken for the first time before the Tribunal. This preliminary objection was overruled, mainly relying upon the judgment of this court in Shaik Ibrahim v. CIT [1968] 69 ITR 117 in preference to a later judgment of this court in CIT v. Krishna Mining Co. . The Tribunal also declined to follow the decision of the Gujarat High Court in CIT v. Steel Cast Corporation . The Tribunal, therefore, considered the additional ground on merits and held that the capital gains were not assessable to tax for the year 1970-71. Regarding the interest on compensation, the Tribunal held that the entirety of interest was not assessable for the year 1970-71 and only a sum of Rs. 4,491 was liable to be assessed. With respect to other items also, relief was granted by the Tribunal.

25. On an application made by the Commissioner of Income-tax, Andhra Pradesh-III, this court, by its order dated October 11, 1979, in Income-tax Case No. 31 of 1979, directed the Tribunal to state the case and refer the following questions of law for opinion of the court :

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in permitting the assessee to raise the additional ground in respect of levy of capital gains on a sum of Rs. 1,02,797 ?

(2) Whether, on the facts and in the circumstances of the case, the levy of capital gains on the amount of Rs. 1,02,797 for the assessment year 1970-71 is legal and valid ?

(3) Whether, on the facts and in the circumstances of the case, the entirety of interest of Rs. 72,026 received on the enhanced compensation is assessable for the assessment year 1970-71 ?"

26. Accordingly, the Tribunal referred the case to this court.

27. The referred case came up for hearing before a Division Bench of this court consisting of Syed Shah Mohammad Quadri and Parvatha Rao JJ. The learned judges answered question No. 3 in favour of the assessee, following the Division Bench judgment of this court in CIT v. Sankari Manickyamma , and referred questions Nos. 1 and 2 to the Full Bench for consideration. The learned judges observed that, in view of the importance of the matter and the conflicting views expressed by different High Courts and this court itself, the matter has to be placed before a Full Bench. That is how the referred case has come up before us.

28. The pivotal question is whether the Appellate Tribunal could allow the assessee to raise a dispute in regard to the chargeability of income which remained undisputed before the Income-tax Officer and the Appellate Assistant Commissioner and which was in fact offered for assessment by the assessee himself. Learned standing counsel for the Income-tax Department, Mr. S. R. Ashok, contends, adopting mainly the reasoning of the Gujarat High Court in CIT v. Karamchand Premchand Pvt. Ltd. and of this court in State of A. P. V. Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57 [FB] that the Tribunal has no jurisdiction to allow such ground to be raised for the first time before it and that the Tribunal misconstrued the reasoning of the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd. . He stresses the need to impart finality to the issues arising out of assessment and submits that the powers of the Tribunal shall not be unduly extended. Learned standing counsel submits that the latest judgment of the Supreme Court in Jute Corporation of India Ltd. v. CIT is distinguishable inasmuch as the Supreme Court dealt with the powers of the first appellate authority.

29. Mr. Y. Ratnakar, learned counsel for the assessee, commends for the acceptance the view taken by the Bombay, Madras and other High Courts. He submits that the powers of the Appellate Tribunal are very wide. There is no warrant to restrict the amplitude of powers voted in the Tribunal. He strongly relies on the judgments of the Supreme Court in Jute Corporation's case and submits that the reasoning applied equally to the second appeal before the Tribunal. He relies upon rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, and contends that it must receive wide interpretation. He has also highlighted the fact that the assessee may be left without remedies in certain situations, if the power of the Appellate Tribunal to allow an additional ground, may be, in respect of a new item of dispute, is restricted. He argues that an equitable approach should be adopted and the facts of the case do call for such approach.

30. Before we proceed to deal with the rival contentions, we shall briefly refer to the relevant provisions for the Income-tax Act, 1961 (hereinafter referred to as "the Act"). Section 246 as it stood at the relevant point of time provided that any assessee aggrieved by the various orders specified therein can appeal to the Appellate Assistant Commissioner (hereinafter called "the AAC"). One such order is "an order against the assessee where the assessee denies his liability to be assessed under this Act or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the state under which he is assessed". In respect of certain orders, sub-section (2) provided for appeal to the Commissioner (Appeals). Section 250 deals with the procedure in appeals. Sub-section (4) of section 250 empowers the Appellate Assistant Commissioner or as the case may be, the Commissioner (Appeals) to make such further enquiry as he thinks fit or to direct the Income-tax Officer to make further enquiry and report the result of the same, Sub-section (5) lays down that the appellate authority ma, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if he is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. The powers of the Appellate Assistant Commissioner/Commissioner (Appeals) are set out in section 251. In an appeal against an order of assessment, the said appellate authority may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer to make a fresh assessment in accordance with the directions given by the appellate order. In an appeal against an order imposing a penalty, the appellate order. In an appeal against an order imposing a penalty, the appellate authority may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty. In any other case, he may pass such order in the appeal as he thinks fit. It is enjoined by sub-section (2) that the appellate authority shall not enhance an assessment or penalty or educe the amount or refund unless the appellate has had a reasonable opportunity of showing cause against such enhancement or reduction. The Explanation to section 251 which was introduced in the 1961 Act reads as follows :

"In disposing of an appeal, the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals) by the appellant."

31. Appeals to the Appellate Tribunal are provided for by section 253. An assessee aggrieved by the order passed by the Appellate Assistant Commissioner or, as the case may be, the Commissioner (Appeals), may prefer an appeal to the Appellate Tribunal. Sub-section (2) of section 253 lays down that the Commissioner may, if he objects to any order passed by an Appellate Assistant Commissioner or the Commissioner (Appeals) under Section 250 or 154, direct the Income-tax Officer to appeal to the Appellate Tribunal against the order. Such appeal either by the assessee or by the Income-tax Officer shall be filed within sixty days of the date on which the order sought to be appealed against is communicated. Sub-section (4) enables the assessee or the Income-tax Officer to file a memorandum of cross-objections within thirty days of the receipt of notice intimating the preferment of an appeal under sub-section (1) or sub-section (2) by the other party. Such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal. Section 254 says that the "Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit". The forms of appeal to the appellate authority and the Appellate Tribunal are prescribed by rules 45 and 47, respectively. Inter alia, the relief claimed in appeal and the grounds of appeal have to be specified therein. Rule 46A provides for adducing additional evidence before the first appellate authority. Rule 11 of the Appellate Tribunal Rules, 1963, deals with the grounds which may be taken in the appeal. It says, "the appellant shall not, except by leave of the Tribunal, urge or 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 or taken by leave of the Tribunal under this rule : Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground". Rule 27 enables the respondent to the appeal to support the order appealed against on any of the grounds decided against him. Rule 28 specifically confers the power of remanding the case to the Income-tax Officer or to the appellate authority with such directions as the Tribunal may think fit. Rule 29 empowers the Appellate Tribunal to permit the parties to the appeal to produce additional evidence either oral or documentary under certain circumstances.

32. What would then be the scope of appeal before the Appellate Tribunal and the scope of relief that could be granted by the Tribunal is the question that arises for out consideration. It is not in dispute and it cannot be disputed in view of rule 11 of the Appellate Tribunal Rules that the Tribunal can permit an additional ground to be raised at any stage of the appeal. The Tribunal, in deciding the appeal need not be confined to the grounds set fort in the memorandum of appeal or the grounds permitted to be raised. But the controversy is on the question whether such grounds could relate to new items of income, deductions and the like which were not disputed before the appellate authority. In other words, the real controversy is whether the assessee can, for the first time, claim before the Appellate Tribunal that certain income which has already been assessed by the Income-tax Officer and never disputed before the first appellate authority, should be excluded from taxation. It is the contention of learned standing counsel that so long as the item in dispute and the amount on which the relief is claimed is the same, it is open to the assessee to raise an additional or alternative ground to support his claim for relief. On the other hand, learned counsel for the assessee submits that no such restrictive interpretation can be placed on the power of the Tribunal and the Tribunal could do what the Appellate Assistant Commissioner could have done, the ultimate object being to arrive at the correct assessable income. In the decided cases cited before us, varying approaches to the problem were made. In the cases cited on behalf of the Revenue, stress was laid on the wording in section 253 and section 254, viz., "aggrieved by an order passed by the Appellate Assistant Commissioner or, as the case may be, Commissioner (Appeals)" (occurring in section 253) and "pass such orders thereon" occurring in section 254 of the Act. On the other hand, in the cases which go in favour of the assessee, stress was laid on the expression "pass such orders.... as it thinks fit" used in section 254 and the general concept of the appellate power in taxation matters. The more recent cases which fall in the later category and the Supreme Court's decision in Jute Corporation's case , dealing with the competence of the first appellate authority to decide upon a new item of dispute had been pressed into service. Before we refer to those cases and proceed to examine the reasoning adopted in those cases, we would like to refer to the judgments of the Supreme Court which turn on the powers of the Appellate Tribunal to grant relief on the basis of an additional or new ground taken by the assessee. By coincidence, all these cases were decided in the year 1967 and to our knowledge, there is no other subsequent decision of the Supreme Court expounding the parameters of the Appellate Tribunal's power of granting relief on a new ground.

33. The first judgment which we should like to refer to is Hukumchand Mills Ltd. v. CIT . In that case, the question was as to what should be the proper written down value of the building and machinery belonging to the assessee for calculating the depreciation allowance under section 10(2) (vi) of the Indian Income-tax Act, 1922. The assessee relied upon section 10(5)(b) and contended that the original cost of the machinery and buildings should be taken into account for this purpose. The Income-tax Officer as well as the Appellate Assistant Commissioner rejected this contention of the assessee. However, the Tribunal accepted the contention of the assessee in this regard. At the same time, the Tribunal permitted the Revenue to raise a new ground which was not considered by the Income-tax Officer or the Appellate Assistant Commissioner. The contention was that, under paragraph 2 of the Taxation Laws (Part B States) Removal of Difficulties) Order, 1950 certain amounts of depreciation which were allowed under the Industrial Tax Rules were to be deducted in arriving at the written down value of the assets held by the assessee. The Tribunal remitted the matter back to the Income-tax Officer for ascertaining whether any depreciation was allowed under the Industrial Tax Rules and for considering the question whether the said rules related to income-tax or super-tax or tax on profits of business, as contemplated by paragraph 2 of the said Order and if those questions were found in favour of the Department, to take into account the depreciation allowed under the said rules for the purpose of computing the written down value. A question arose before the Supreme Court whether the Tribunal was competent to go into the question with regard to the applicability of paragraph 2 of the Taxation Laws Order and whether the Department should have been allowed to raise the contention for the first time before the Tribunal. V. Ramaswami J. speaking for the three-Judge Bench. Consisting of himself, shah and Bhargava. JJ. while rejecting the contention of the assessee, made the following crucial observations (at page 236) :

"... we are of the opinion that the Tribunal had jurisdiction to permit the question to be raised for the first time in appeal. The powers of the Tribunal in dealing with the appeals are expressed in section 33(4) of the Act in the widest possible terms....

The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words 'pass such orders as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry".

34. After referring to rule 12 (corresponding to present rule 11 of the Appellate Tribunal Rules) and rule 28 (relating to power to remand), the Supreme Court observed (at page 237) :

"In the present case, the subject-matter of the appeal before the Tribunal was the question as to what should be the proper written down value of the buildings, machinery, etc. of the should be the proper written down value of the buildings, machinery, etc. of the assessee for calculating the depreciation allowance under section 10(2) (vi) of the Act. It was certainly open to the Department, in the appeal filed by the assessee before the Tribunal, to support the finding of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. It was argued on behalf of the appellant that the action of the Tribunal in remanding the case is not strictly justified by the language of rule 27 or rule 12. Even assuming that rules 12 and 27 are not strictly applicable, we are of the opinion that the Tribunal has got sufficient power under section 33(4) of the Act to entertain the argument of the Department with regard to the application of paragraph 2 of the Taxation Laws Order and remand the case to the Income-tax Officer in the manner it has done. It is necessary to state that rules 12 and 27 are not exhaustive of the powers of the Appellate Tribunal. The rules are merely procedural in character and do not., in any way, circumscribe or control the power of the Tribunal under section 33(4) of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the Department in this case and to direct the Income-tax Officer to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into consideration for the purpose of computing the written down value."

35. It is to be noted that, in the above case, the subject-matter of appeal before the first appellate authority as well as the Appellate Tribunal was the same. It was about the quantum of written down value of the building and machinery for the purpose of calculating the depreciation allowance. The new ground raised by the Department which was permitted to be raised by the Tribunal concerned the same subject-matter an it related to the same item of dispute which was throughout being agitated. The Supreme Court. Therefore, upheld the jurisdiction of the Tribunal to permit that question to be raised for the first time in the second appeal. The Supreme Court, in unmistakable, terms, pointed out that the jurisdiction of the Tribunal must be confined to the subject-matter of the appeal. Adverting then to the powers of the Appellate Tribunal under section 33(4), the Supreme Court pointed out that the powers are very wide - as indicated by the expression "pass such orders thereon as it thinks fit". The Supreme Court, therefore, held that the Tribunal had sufficient power under section 33(4) to remand the case to the Income-tax Officer for the purpose of considering the applicability of paragraph 2 of the Taxation Laws, Order even assuming that the action of the Tribunal in remanding the case was not strictly justified by the language of rule 27 or rule 12. This judgment, far from supporting the assessee's contention, goes against the assessee. In the case with which we are concerned, the subject-matter of appeal before the first appellate authority did not relate to the exigibility to capital gains tax. Till the stage of second appeal. That income was voluntarily offered for assessment. After filing the second appeal. An additional ground was taken disputing the disputing the liability to pay tax on the capital gains on the ground that the income did not accrue during the relevant assessment year. Thus, the ground sought to be raised before the Tribunal was unrelated to the subject-matter of appeal. For the first time, the assessee wants to question the assessment on an item of income representing capital gain. In the case decided by the Supreme Court, the subject-matter did not change at any time. It was only a case of seeking to support the appellate order on a different ground.

36. The next case which needs reference is the decision of the Supreme Court in Mahalakshmi Textile Mills' case . Shah J., spoke for the Bench, consisting of himself, S. M. Sikri and V. Ramaswami JJ. This case has been strongly relied upon by learned counsel for the assessee just as it was relied upon by the Bombay, Madras and other High Courts to which we shall refer later. In that case, the question before the Supreme Court was with regard to development rebate. The assessee was a manufacturer of cotton yarn. He claimed that he spent a sum of Rs. 93,215 for the introduction of "Casablanca conversion system" in its spinning plant which involved replacement of certain machinery and other additions and alterations in the drafting mechanism. The Income-tax Officer disallowed the claim of the assessee for development rebate on the ground that the Casablanca conversion system did not involve installation of new machinery. The Appellate Assistant Commissioner agreed with the Income-tax Officer and rejected the appeal. However, for the first time before the Appellate Tribunal, it was claimed by the assessee that the expenditure was allowable either as development rebate or as current repairs to the existing machinery within the meaning of section 10(2) (v) of the Indian Income-tax Act, 1922. The Tribunal, while holding that the expenditure was not admissible as development rebate, accepted the alternative contention of the assessee and held that the deduction had to be allowed under section 10(2) (v) of the Act. Dealing with the jurisdiction of the Tribunal to allow such a plea, the Supreme Court said (at page 713) :

"Under sub-section (4) of section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act, 1961, which restricts the Tribunal to the determination of questions raised before the Departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal :

If for reasons recorded by the Departmental authorities in rejecting a contention raised by the assessee, grant of the relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him."

37. The Supreme Court then observed (at page 713) :

"The Tribunal, on investigation of the true nature of the alterations made by the introduction of the Casablanca conversion system, came to the conclusion that it did not amount to installation of new machinery or plant, but it amounted in substance to current repairs to the existing machinery.

The subject-matter of the appeal in the present case was the right of the assessee to claim allowance for Rs. 93,215. Whether the allowance was admissible under one head or the other of sub-section (2) of section 10, the subject-matter for the appeal remained the same, and the Tribunal having held that the expenditure incurred fell within the terms of section 10(2) (v), though not under section 10(2) (vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee."

38. We do not understand this decision as laying down any different principle. On the other hand, there is reiteration of the principle that the subject-matter of appeal should remain the same. So long as the dispute pertained to the same item and the same quantum of income, it is immaterial whether the relief could be given by the Tribunal on a different or new ground. Even if the ground raised is inconsistent with the ground taken earlier before the Income-tax Officer or the Appellate Assistant Commissioner, nevertheless, that could be permitted to be raised by the Tribunal. The broad observations made to the effect that "all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal" shall be understood in the light of the ratio of the judgment and the observations following the above-quoted sentence. All that the Supreme Court laid down in this case was that relief can be granted by the Tribunal on the basis of a new plea raised by the assessee, whether it be an alternative or inconsistent plea, provided, of course, the scope and subject-matter of the appeal do not get extended. It is not proper to construe a judgment without reference to its true ratio and the context in which the observations were made. It is trite to say that the judgment must be read as a whole. At this stage, we would like to recall what the Supreme Court said in a very recent judgment as to the manner of reading and construing a binding judgment. In CIT v. Sun Engineering Works Pvt. Ltd. , Dr. Anand J. speaking for the Bench, made the following observations (at page 320) :

"It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court. A decision of this court takes its colour from the questions involved in the case in which it is rendered, and, while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this court, to support their reasoning."

39. The following passage from the judgment in Madhav Rao Jivaji Rao Scindia Bahadur (H. H. Maharajadhiraja) v. Union of India, , was quoted with approval (headnote and at page 578) :

"It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment."

40. Applying this principle, we have no doubt in our mind that the Supreme Court in Mahalakshmi Textile Mills' case , cannot be said to have laid down a proposition that any question, whether it relates to the same subject-matter or not, can be raised at any time before the Tribunal and that the Tribunal can grant relief on an item of income which was never disputed earlier. As rightly pointed out by Diva C.J., speaking for the Division Bench in Steel Cast Corporation's case :

"All that Shah J., is emphasising in the first part of the passage quoted above is that within the four corners of the jurisdiction which is restricted to the subject-matter of the appeal, the Tribunal has very wide powers and even though a particular ground of relief relating to the same subject-matter might not have been raised at any earlier stage either before the Income-tax Officer or before the Appellate Assistant Commissioner, it can be raised for the first time at the stage of appeal before the Tribunal, but it must be in connection with the subject-matter of appeal."

41. The next and third case is the decision in CIT v. S. Nelliappan , which was decided by the same bench of the Supreme Court on the same day. This case has again been pressed into service to contend that relied could be granted by the Tribunal even in respect of a matter unrelated to the subject-matter of the dispute before the Appellate Assistant Commissioner. It was contended that the ground permitted to be raised in this case relates not only to a new issue but a new item unrelated to the original subject-matter. We find it difficult to accept this contention. In that case, the Assessing Officer rejected the books of account maintained by the assessee and made certain additions to the profits disclosed by him and brought the same profits to tax. Certain cash credits were also treated as undisclosed profits. The matter went up to the High Court ultimately. It was urged before the High Court that wen specific additions were made to the total profits on the ground of suppression of income and inflated expenditure, the addition under the head "Unexplained cash credits" was not called for. The High Court, having noticed that the method of arriving at the gross amount of estimated income was not correct, held that the appeal will have to be disposed of afresh by the Tribunal. At the hearing before the Tribunal, the contention regarding the computation of profits under the head of operating expenses and additions for low collections was given up. However, it was urged that cash credits of Rs. 19,796 for the year 1946-47 and Rs. 32,700 for the year 1947-48 should be deleted. The Tribunal held that the explanation furnished by the assessee was unsatisfactory and that the cash credits should be treated as the income of the assessee. At the same time, the Tribunal observed that, since in each of the two years under appeal, additions to the book profits were accepted in excess of the cash credits, the additions in respect of cash credits became redundant and should, therefore, be deleted. The Commissioner of Income-tax applied to the Tribunal for reference of the following two questions, viz., (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition to the extent of Rs. 19,796 in the assessment ? (2) Whether the Tribunal was right in law in making out a new case for the assessee inconsistent with the assessee's own plea of interfering with the assessment ? The Tribunal rejected the reference application. The High Court also declined to call for statement of the case. On appeal to the Supreme Court, it was held that the first question was one of fact and the inference of the Tribunal that there was a connection between the profits withheld from the books and the cash credit entries was not without basis. As far as the second question is concerned, Shah J., speaking for the Supreme Court, observed (at page 724) :

"In hearing an appeal the Tribunal may give leave to the assessee to urge ground not set forth in the memorandum of appeal, and in deciding the appeal the Tribunal is not restricted to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. The Tribunal was, therefore, competent to allow the assessee to raise the contention relating to the cash credits which was not made the subject-matter of a ground in the memorandum of appeal. It cannot be said that in accepting the contention of the assessee that the cash credits represented income from the business withheld from the books, the Tribunal made out a new case inconsistent with the assessee's own plea. In any event the Tribunal is not precluded from adjusting the tax liability of the assessee in the light of its findings merely because the findings are inconsistent with the case pleaded by the assessee."

42. This is also not a case where the Tribunal gave any relief traversing beyond the true subject-matter of the appeal. It is a case of allowing a new plea to be raised just as in the case of Mahalakshmi Textile Mills . The Supreme Court observed that, even if it amounts to an inconsistent plea, the Tribunal is not precluded from accepting the said plea and adjust the tax liability accordingly. Whether the unexplained cash credits should be telescoped into the undisclosed profits arrived at by the lower authorities is a question integrally connected with the dispute as to estimation of undisclosed profits and the assessee's plea that the unexplained cash credits were already reflected in the profits added to the returned income is not a new item of dispute but only a projection of the claim for relief on a different plea. The judgment does not, therefore, help the assessee in the present reference. At best, that decision would only support the proposition that the Tribunal is not powerless to grant relief even though the findings might be inconsistent with the case pleaded by the assessee. Of course, the Supreme Court made it clear that, on the facts of the case, the Tribunal did not make out a new case inconsistent with the assessee's plea.

43. The common thread running through the three decisions of the Supreme Court above cited is that a new ground in espousing an existing grievance - a grievance which was put forward before the first appellate authority could be raised or allowed to be raised before the Tribunal though such ground may be different from or even inconsistent with the plea raised before the first appellate authority. In other words, so long as the subject-matter of the appeal remains the same and the ultimate relief sought for does not vary, it is open to the Tribunal to grant relief to the assessee on the basis of the new ground put forward put forward by the assessee. In all the three decisions, it was a case of projection of the assessee's claim for relief in a different form before the Tribunal and from the standpoint of a different approach to the subject-matter of the dispute already in existence.

44. With the background furnished by these cases, let us make a further study of the problem involved. The first point to be clarified is whether, by allowing to assessee to raise an issue before the Tribunal unrelated to an item of dispute before the first appellate authority, the basic requirement of the assessee being aggrieved by the order of the Appellate Assistant Commissioner is satisfied or not. If the assessee is not aggrieved within the meaning of section 253, the appeal itself will not be maintainable and it is liable to be rejected at the very threshold. In this connection, it is but appropriate to refer to the following observations of Bhagwati C.J., speaking for the Bench in Karamchand Premchand's case :

"The appeal by the assessee or by the Revenue against any part of the order of the Appellate Assistant Commissioner is therefore really an appeal against the decisions of the Appellate Assistant Commissioner which are against him and by which he is aggrieved. It is, therefore, imperative that there must be a decision of the Appellate Assistant Commissioner by which the assessee or the Revenue is aggrieved before he can prefer an appeal against that part of the order of the Appellate Assistant Commissioner consisting of such decision."

45. These observation may convey the impression that an assessee who did not raise a particular dispute before the Appellate Assistant Commissioner cannot be said to be aggrieved by the order oft he Appellate Assistant Commissioner within the meaning of section 253 and, therefore, he cannot file an appeal to the Tribunal. However, we do not think that this is a correct approach to the problem. If the assessee is aggrieved by any part of the order of the Appellate Assistant Commissioner, he is aggrieved in that sense and he can maintain an appeal. For instance, in the case decided by the Gujarat High Court and in the case with which we are concerned the assessee can be said to be aggrieved against the order oft he Appellate Assistant Commissioner because he did not grant relief in regard tot he matters agitated before him. There is, therefore, no bar against filing a second appeal to the Tribunal. Of course, if the assessee's appeal is allowed in toto by the Appellate Assistant Commissioner, it is not open to the assessee to file an appeal against that order because he cannot be said to be aggrieved against that order. (vide CIT v. Princess Sarla Kumari . Indeed, it was not suggested at the Bar that such a right of appeal is permissible to an assessee who totally succeeded in the appeal. But, as we had already observed, if the assessee does not succeed in the appeal in full, the assessee is naturally aggrieved by the order of the Appellate Assistant Commissioner and he gets the right to file an appeal to the Tribunal against that order. So also, the Income-tax Officer can file an appeal under section 253(2) if the Appellate Assistant Commissioner grants relied to the assessee wholly or partially. Once the assessee or the Income-tax Officer files an appeal, what questions and what points could be raised or allowed to be raised is, of course, a different question. The answer to that question depends upon what could be the scope and subject-matter of appeal and the extent of relief that could be granted by the Tribunal.

46. That the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal has been laid down by the Supreme Court in unequivocal terms in Hukumchand Mills' case , and as already noticed, the said principle was not departed from in any of the later cases. The power to pass such order as the Tribunal thinks fit could only be in relation to the subject-matter that could be dealt with by the Tribunal. Those words are not relevant to fix up the true scope and subject-matter of the appeal before the Tribunal. The next step of enquiry would be what is and what could be the real subject-matter of appeal before the Tribunal. The subject-matter of appeal before the Tribunal, in our view, could not be anything different from the subject-matter before the Appellate Assistant Commissioner and necessarily it should be something which arises out of the determination made by the Appellate Assistant Commissioner. Of course, as we have already clarified, there is no taboo against raising a new, ground or a new plea touching the same subject-matter. In this respect, we respectfully agree with the views expressed by the Gujarat High Court in Steel Cast Corporation's case and the Full Bench decision of the same High Court in CIT v. Cellulose Products of India Ltd. . In Steel Cast Corporation's case , Divan C.J., Speaking for the appeal is determined, the Tribunal has very wide powers to deal with all questions of fact and law pertaining to that subject-matter of appeal and it can allow a new question of law to be raised in support of the same claim for relief."

47. In Cellulose Products' case [FB], P. S. Poti C.J., speaking for the Full Bench, observed (at page 513) :

"In all these situations, in appeal before the Tribunal, he is free to make a fresh approach, present his case from a different perspective and raise new grounds in support of the relief sought by him. The fact that he has failed to make that approach before the first appellate authority should not stand in the way of his making a new approach. But all this must be related to the same subject-matter as was in appeal before the first appellate authority....

It is evident, therefore, that the attempt of the Tribunal in every case, where it is called upon to consider the question whether the new approach should be permitted should be to determine whether the subject-matter would remain the same, even if the new ground is permitted to be raised....

Speaking of subject-matter, it may happen that substantially a claim is urged by an assessee assuming that he is entitled to that claim under a certain provision of law indicated by him. It may be that he is entitled to relief in respect of such claim or part of it not because of that provision, but of some other provision of law. For the mere reason that he does not refer to or advert to the provision appropriately applicable will be no reason to deny him the right to urge his case, since, in such a case also, the subject-matter will not change by reason of allowing the question to be raised."

48. We are of the view that the above statement of law in the two cases cited supra represents the correct legal position. Any other construction would, in our view, lead to an anomalous and unintended result. An assessee as in the present case who returned the income from capital gains voluntarily and who never objected to the inclusion of that part of the income before the Appellate Assistant Commissioner, could straight-away dispute the assessment of tax on capital gains before the Tribunal. The assessee will be thereby inviting the Tribunal to sit in judgment over that part of the original assessment which was not made the subject-matter of appeal at all before the Appellate Assistant Commissioner. The appeal, in that sense, would be against the assessment order rather than the order of the Appellate Assistant Commissioner. This aspect was highlighted by Bhagwati C.J. in Karamchand Premchand's case . We quote the following crucial observations in the judgment which are fully supported by the language employed in the opening part of section 253 (see also at page 517 of 151 ITR) (at page 262) :

"If a particular matter is not considered and decided by the Appellate Assistant Commissioner and the decision on it does not form part of the order of the Appellate Assistant Commissioner, there can be no appeal against it."

49. The Full Bench of the Bombay High Court in Ahmedabad Electricity Co. Ltd. v. CIT proceeded on the assumption that the Supreme Court in Hukumchand Mills' case expressed the view that the entire tax proceedings of the assessee become the subject-matter of the appeal before the Tribunal. This is what the Full Bench said (at page 367) :

"..... if the word 'thereon' can be said to refer to the subject-matter of the appeal. Then, as stated by the Supreme Court in the case of Hukumchand Mills , the subject-matter of the appeal is the entire tax proceeding of the assessee which is before the Tribunal for consideration; and this will cover the proceedings before the Income-tax Officer, before the Appellate Assistant Commissioner as well as before the Tribunal - including the grounds raised before the Tribunal, any additional grounds which may be allowed to be raised before the Tribunal as also cross-objections, if any, before the Tribunal."

50. With due respect to the learned judges, we do not think that this assumption is correct. No such observation was made by the Supreme Court in Hukumchand Mills' case .

51. In our view, the subject-matter of appeal before the Appellate Assistant Commissioner is the assessment order or such other orders as are mentioned in section 246. As elaborated hereinafter, the entire assessment proceedings could be subjected to scrutiny by the first appellate authority and he can either grant relief to the assessee or even pass an order to his prejudice, by enhancing the tax. When we come to the second appellate stage, the subject-matter therein is the appellate order. To put it slightly differently, it is the assessment as modified or confirmed by the Appellate Assistant Commissioner but not the whole assessment. The reason for this distinction is to be found in the very provisions relating to the first and second appeals. The Explanation to section 251, which is extracted supra, makes it explicit that the first appellate authority can consider and decide any matter arising out of the assessment proceedings notwithstanding the fact that such matter was not raised by the appellant. By this Explanation, Parliament gave statutory recognition to the pre-existing legal position laid down by the courts. The first appellate authority can, therefore, probe into the correctness of the entire assessment. Whether or not a specific issue is raised before him. Such power flows from the power of enhancement of assessment conferred by section 251(a) read with the Explanation.

52. The scope of the power vested in the Appellate Assistant Commissioner under section 31(3) of the old Act (1922 Act) which is substantially in pari materia with section 251 was considered by the Supreme Court in quite a number of cases. In CIT v. McMillan and Co. , the Supreme Court, after citing approval the observations of Chagla C. J. in Narrondas Manordass v. CIT , pointed out (at page 193) that the language of section 31 was wide enough to enable the Appellate Assistant Commissioner "to correct the Income-tax Officer not only with regard to a matter which has been raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of assessment". In that case, the Supreme Court was considering the question whether the proviso to section 13 which conferred the power on the Income-tax Officer to reject the method of account adopted by the assessee and to compute the income and profits in such manner as he may determine. The Supreme Court held that it is open to the Appellate Assistant Commissioner in exercise of his appellate power to revise the determination made by the Income-tax Officer under the said proviso and exercise the power which the Income-tax Officer could exercise.

53. In CIT v. Shapoorji Pallonji Mistry , the Supreme Court clarified that the power of the Appellate Assistant Commissioner to enhance the assessment did not comprehend within its fold the power to bring into the net of taxation new sources of income not mentioned in the return or not considered by the Income-tax Officer. V. Ramaswami J., speaking for the Supreme Court in CIT v. Rai Bahadur Hardutroy Motilal Chamaria , had this to say on the extent of powers possessed by the first appellate authority (at page 449) :

"It is necessary also to emphasise that the statute provides that, once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment."

54. In CIT v. Kanpur Coal Syndicate , Subba Rao J., made the following observations regarding the powers of the Appellate Assistant Commissioner (at page 229) :

"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 coterminous 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. If the Income-tax Officer has the option to assess one or other of the entities in the alternative, the Appellate Assistant Commissioner can direct him to do what he should have done in the circumstances of the case."

55. The observations of Subba Rao J. were quoted with approval by the Supreme Court in a recent case Jute Corporation of India Ltd. v. CIT . We shall refer to that case in more detail a little later.

56. Thus, it is well established that the powers of the first appellate authority are very wide and the entire assessment is at large before him. The only limitation on the exercise of his power is that he cannot travel beyond the assessment proceeding and assess a new source of income. Such vast powers are conceded to the first appellate authority for the reason that the Department has no right of appeal against the assessment order and in the course of scrutiny of an appeal filed by the assessee, the appellate authority can see if in the interests of the Revenue, the tax has to be enhanced, Equally, it is open to him to go into the correctness of the computation of income made by the Income-tax Officer and grant necessary relief to the assessee, although the ground of relief was not raised by the assessee either before the Income-tax Officer or in the appeal. Such extensive power is however not confided to the Appellate Tribunal. The Tribunal is empowered to pass such order on the appeal as it thinks fit which obviously does not include an order enhancing the tax liability of the assessee in the absence of an appeal by the Department. Even where an appeal is filed by the Department, that appeal could only be in respect of matters considered and decided by the Appellate Assistant Commissioner. In the absence of such determination by the Appellate Assistant Commissioner,. the Tribunal cannot enhance the tax liability under the original assessment itself, in an appeal filed by the Department against the Appellate Assistant Commissioner's order.

57. It is, therefore, futile to contend that there is no qualitative difference between the first appeal and the second appeal under the Income-tax Act, 1961, and that what could be said the first appeal could also be said of the second appeal. The scheme of the Act pertaining to appeals and the contents of the relevant provisions dealing with appeals militate against any such interpretation. Above all, the need to impart finality to settled matters is another weighty consideration which dissuades us from accepting the interpretation placed on behalf of the assessee. While conferring the right of appeal and cross-objections to both parties at the second appellate stage, the Legislature evidently though that the process of review or revision of assessment, if we may say so, need not be undertaken by the Tribunal in the same manner as the Appellate Assistant Commissioner could have done.

58. Strong reliance is placed by learned counsel for the assessee on the judgment in Jute Corporation of India Ltd.'s case , and it is contended that the general concept of appellate powers enunciated by the Supreme Court should be kept in mind and applied to the case on hand. Let us quote what the Supreme Court has said after referring to Kanpur Coal Syndicate's case [ :

"The declaration of law is clear that the power of the Appellate Assistant Commissioner is conterminous with that of the Income-tax Officer, and if that is 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 restriction or limitation on the exercise of appellate power. Even otherwise, an appellate authority while hearing the appeal against the order of a subordinate authority. Has all the powers which the original authority may have in deciding the questions before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate 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 Assistant Commissioner in entertaining an additional ground raised by the assessee seeking modification of the order of assessment passed by the Income-tax Officer."

59. The Bombay High Court, after referring to this judgment, said in Ahmedabad Electricity Co. v. CIT [FB] :

"The ratio of this judgment would apply to the jurisdiction of the Appellate Tribunal also. The observations of the Supreme Court, in fact, cover all appellate authorities under the Income-tax Act, 1961. We do not find anything in section 254(1) of the Income-tax Act, 1961, which limits the jurisdiction of the Appellate Tribunal in any manner."

60. With great respect to the learned judges, we are not in a position to agree with these remarks. The Supreme Court was only concerned with the powers of the Appellate Assistant Commissioner and it must be said that the Supreme Court dispelled the shadow cast on the powers of the first appellate authority by its earlier judgment in Addl. CIT v. Gurjargravures Pvt Ltd. . The Supreme Court reiterated what was said by Subba Rao J. in Kanpur Coal Syndicate's case , that the power of the Appellate Assistant Commissioner was co-extensive with that of the Income-tax Officer. The opening and concluding sentences in the above passage refer only to the powers of the Appellate Assistant Commissioner. The general observations regarding the appellate authority's powers in the middle of the passage extracted above do not lead to the necessary inference that the Appellate Tribunal possesses the same powers as the Appellate Assistant Commissioner. It is not reasonable to infer so having regard to the fact that the limitation on the powers of the Tribunal is manifested by the relevant statutory provisions. In fact, their Lordships of the Supreme Court have guardedly qualified the general statement vis-a-vis the appellate authority's powers by using the expressions "subject to the restrictions or limitations, if any, prescribed by the statutory provisions" and "in the absence of any statutory provisions", etc. It is also to be noted that in Kanpur Coal Syndicate's case , the Supreme Court was only highlighting the plenary powers of the Appellate Assistant Commissioner but not those of the Appellate Tribunal. Having regard to all these factors, we do not think that either going by the ratio of the judgment or the observations made therein, the Supreme Court intended to define and clarify the Appellate Tribunal's power as well. In this context, we would once again recall the observations of the Supreme Court in Sun Engineering Works' case , that a decision of the Supreme Court takes its colour from the question involved in the case and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of the Supreme Court. It is not proper to pick out words or sentences from the judgment divorced from the context, as pointed out by the Supreme Court.

61. Then, the power to allow altogether a new ground unconnected with the subject-matter of the dispute before the Appellate Assistant Commissioner is sought to be conceded to the Tribunal on the theory that a tax appeal is peculiar in nature, that it is not like an adversary proceeding in a civil litigation and that the appellate authority's function is to determine the correct tax payable, not a pie less or more, In order to achieve this objective, the Tribunal, just like the Appellate Assistant Commissioner, has to go into the whole range of assessment and subject the assessment proceeding to a process of thorough review. This is the view expressed by the Madras High Court in State of Tamil Nadu v. Arulmurugan and Co. [1982] 51 STC 381 [FB] and reiterated in CIT v. Indian Express (Madurai) P. Ltd. and CED v. Brahadeeswaran ; by the Bombay High Court in Ahmedabad Electricity Co.'s case [FB], and by the Kerala High Court in CIT v, Kerala State Co-op. Marketing Federation Ltd. [1992] 193 ITR 624. Suffice it to refer to the observations of the Bombay High Court in Ahmedabad Electricity Co.'s case [FB] on this aspect (at page 358) :

".... The basic purpose of an appeal procedure in an income-tax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stage, either before the Appellate Assistant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee."

62. We do not think that the conclusions reached on the application of certain general principles of tax jurisprudence rest on a sound basis. We must primarily have regard to the statutory provisions creating and defining the appellate remedies. Even speaking from the standpoint of general principles, it should not be forgotten that there is an equally salutary principle underlying a taxing statute that there should be finality to the proceeding so that an element of certainty could be ushered in as early as possible in the interests of both sides. The assessments need not be thrown to contest throughout the stage of appeal, revision and reference. There is a fallacy in thinking that, in reality, there is no lis between the parties before the Tribunal and that the Tribunal should set upon itself the task of recomputing the tax liability irrespective of whether the ground was raised before the Appellate Assistant Commissioner or even before it. Here again, we must say with utmost respect to the learned judges, that the distinction between the first appeal and the second appeal as discernible from the scheme and provisions of the Act, has not been kept in view. At this juncture, we may revert to the decision of the Supreme Court in Rai Bahadur Motilal Chamaria . After quoting the observations of Chagla C. J. in Narrondas Manordass that the Appellate Assistant Commissioner has been constituted as a revising authority to revise every process which led to the ultimate computation of assessment, the Supreme Court made the following pertinent observations (at page 449) :

"It is necessary to bear in mind, in this connection, that it is only the assessee who has a right conferred under section 31 to prefer an appeal against the order of assessment made by the Income-tax Officer. If the assessee does not choose to appeal. The order of assessment becomes final subject to any power of revision that the Commissioner may have under section 33B of the Act. Therefore, it would be wholly, erroneous to compare the powers of the Appellate Assistant Commissioner with the powers possessed by a court of appeal. Under the Civil Procedure Code. The Appellate Assistant Commissioner is not an ordinary court of appeal. It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party. And in view of this peculiar position the statute has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee...."

63. These observations provides a clue to test the correctness of the view expressed by the learned judges of the Madras, Bombay and Kerala High Courts in the aforementioned decisions. Unlike in the case of the first appeal, under the scheme of the Income-tax Act, 1961, a second appeal to the Tribunal can be preferred by an assessee or by the Income-tax Officer. The right to file cross-objections is also conceded to the other party (respondent in the appeal). As already stated, no power of enhancement of tax de hors the subject-matter of first appellate order is conferred on the Tribunal. The Tribunal will hear the grievances and contentions put forward on both sides and decide the appeal as a judicial body. The nature of the appeal and the proceedings are akin to those in a civil appeal. Under these circumstances, it is difficult to say that there are no adversarial proceeding before the Tribunal and the Tribunal can, therefore, embark upon an enquiry into the correctness of the assessment as a whole and recompute the tax de novo just as an assessing authority could have done. If that be the true function of the Tribunal, how is it that the power of enhancement of assessment which was bestowed on the Appellate Assistant Commissioner is not confided to the Tribunal ? This question admits of no satisfactory answer. If the above view expressed by the Madras and other High Courts is to be endorse. Further, if the above viewpoint is carried to its logical conclusion, the Tribunal can even disturb the original assessment to the determined of the assessee in an appeal filed by the Department against the Appellate Assistant Commissioner's order. It was not suggested by any of the counsel that such a power could be assessment by the Tribunal. Here, we would like to refer to the decision of the Rajasthan High Court in CIT v. Pratapsingh . In that case, the learned judges went to the extent of saying that the Appellate Tribunal can pass any order which it thinks fit which includes the power of enhancement of tax. The learned judges pointed out that the wording or the phraseology used in section 254 (1) knows no limitation and the Tribunal may proceed to pass an order not he basis of a new point or contention. Referring to Hukumchand Mills' case , the learned judges explained away the words used by the Supreme Court - "except possibly the power of enhancement" - stating that it was merely a passing observation and that no law has been laid down to that effect. We cannot agree with the view taken by the Rajasthan High Court firstly because even the obiter dicta of the Supreme Court are binding on the High Court. Secondly, if such a drastic power as the power of enhancement of tax liability was intended to be conferred on the Tribunal. If should have been conferred in express terms just as it has been conferred on the first appellate authority under section 251 of the Income-tax Act, 1961.

64. The above discussion would lead us to the conclusion that the jurisdiction of the Tribunal is necessarily restricted to the 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 new claims for deduction for the first time.

65. Learned counsel for the assessee, Mr. Ratnakar, then relied upon a passage in the well-known commentary - Law and Practice of Income Tax (Eight edition) by Messrs, Kanga and Palkhivals, wherein the learned authors have criticised the judgments of the Gujarat High Court in Karamchand Premchand's case and Cellulose Products' case [FB] in the following terms (at page 1526) :

"The authorities under the Act have to administer the law correctly, and if, for instance, as a result of a subsequent judicial decision it is found that a non-taxable item is taxed or a permissible deduction is denied, the assessee can reasonably be said to be aggrieved by the Commissioner of Income-tax (Appeals)'s order in its totality, as it finally sustains the assessment. The Gujarat High Court's attention does not seem to have been drawn to Kamala Mills Ltd. v. State of Bombay , in which the Supreme Court held that if a dealer who had returned certain sales and allowed them to be taxed found on a later decision of the court that the same were not taxable, be could file an appeal and ask for condonation of delay.... the Gujarat High Court itself rightly held in later cases that an assessee could raise before the Commissioner of Income-tax (Appeals) for the first time a point which he had not raised before the Assessing Officer and which was therefore not dealt with in the assessment order. It is submitted that the correct position in law is that both the Commissioner of Income-tax (Appeals) and the Tribunal have the jurisdiction in every case to entertain a ground which was not urged before the authority whose order is appealed against, but they, judicially exercising their discretion, may or may not entertain the new ground."

66. We find ourselves unable to endorse the view expressed by the learned authors. The assumption that the first appellate authority must be deemed to have sustained the assessment in toto (in a case where he dismisses the appeal) is not fully correct. It is only in respect of matters raised before him that the first appellate authority puts his seal of approval on the assessment order. Merely because the appellate authority had the power to go through the entire range of assessment and decide all the aspects relating to computation of income even though they were not raised or disputed before the Income-tax Officer, it does not follow that, by implication, the first appellate authority must be deemed to have sustained the order on each and every aspect of assessment. It is to be noted that the powers of the first appellate authority, though extensive and plenary a held by the Supreme Court, the Act does not cast an obligation on him to investigate into and decide all questions of law and fact whether raised before him or not, and whether the infirmity in the assessment order is patent or latent. An enabling provision cannot be equated to a mandate to review the assessment as as a whole irrespective of the dispute raised or arising therein. It is difficult to predicate that, in respect of an item assessed and which was not taken up for consideration by the appellate authority, the appellate authority must still be regarded as having applied his mind to that particular item, and thereafter confirmed the assessment. As rightly pointed out in Steel Cast Corporation's case , if there is no express or implied decision of the Appellate Assistant Commissioner, there can be no appeal to the Tribunal. It was pointed out that, by implied decision, it is meant that the appellate authority had failed to decide a point though he was invited to do so. Thus, it cannot be said that the first appellate order, whatever, may be its scope and ambit, would carry with it the implication of confirmation of the assessment in its entirety. In this connection, the following observations in Karamchand Premchand's case are apposite (at page 264) :

"We will, therefore, proceed on the hypothesis that the principle of merger applied and the order of assessment passed by the Income-tax Officer was merged in the order of the Appellate Assistant Commissioner.

But even so, we fail to see how it can be said that there was any decision of the Appellate Assistant Commissioner in regard to the disallowance of the third claim when that was admittedly not a matter considered and decided by him. It is no doubt true that even if the assessee did not carry this matter in appellate by originally including it in the memorandum of appeal or with leave of the Appellate Assistant Commissioner under section 250, sub-section (5), the Appellate Assistant Commissioner was entitled to consider and decide it sine the entire assessment was open before him. But he was not bound to do so an if in fact he did not consider it, it is difficult to see how it can be said that he decided it against the assessee, It is difficult to see how it can be said that he decided it against the assessee. It is only if the Appellate Assistant Commissioner was under an obligation to examine the correctness of the entire assessment irrespective of the grounds of appeal taken by the assessee, that it could conceivably be urged that the Appellate Assistant Commissioner must be presumed to have examined the correctness of the decision of the Income-tax Officer as regards the disallowance of the third claim and since he did not reverse that decision. He must be held to have accepted it as correct. But it is apparent, and this indeed was not disputed on behalf of the assessee, that the Appellate Assistant Commissioner was under no obligation to examine the correctness of every decision recorded by the Income-tax Officer in the course of the assessment. The entire assessment was of course before him and he had the power, if he so chose, to examine any particular decision of the Income-tax Officer and to correct it if he found it wrong but there being no obligation on him to do so, no inference can be drawn from his omission to reverse the decision of the Income-tax Officer on any particular matter. The fact remains that the Appellate Assistant Commissioner did not consider and decide whether the disallowance of the third claim was proper or not...."

67. Again at page 265, it was observed :

"The assessment made by the Income-tax Officer was confirmed by the Appellate Assistant Commissioner save in respect of the second claim which was partly allowed but the confirming of the assessment in respect of the disallowance of the third was not because the disallowance was proper but because the disallowance was not challenged by the assessee before the Appellate Assistant Commissioner and no relief was claimed in respect of it and the Appellate Assistant Commissioner also did not suo motu examine of its correctness. There was therefore no decision of the Appellate Assistant Commissioner on the question of disallowance of the third claim."

68. The reasoning given by Bhagwati C. J. speaking for the Division Bench, appeals to us and we respectfully adopt the same. Regarding the decision in Kamala Mills Ltd.'s case , we cannot understand the general observations made therein with regard to filing of a belated appeal on the basis of a subsequent decision with a petition to condone the delay, as reflecting a viewpoint on the jurisdiction and powers of the Appellate Tribunal. We are, therefore of the view that the criticism of the Gujarat High Court's decision by the learned authors is not sound.

69. We are also of the view that the theory of merger cannot be pressed into service for purpose of advancing the plea of the assessee. As observed by the Supreme Court in state of Madras v. Madurai Mills Co. Ltd. (headnote) : "the doctrine of merger is not a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior authority and the other by the superior authority, passed in an appeal or revision, there is a fusion or merger of the two orders irrespective of the subject-matter of the appellate or revision order and the scope of the appeal or revision contemplated by the particular stature." The Supreme Court further observed that the application of the doctrine depends on the nature of the appellant or revisional order in each case and the scope of the statutory provisions concerning the appellate or revisional jurisdiction. In that case, the Supreme Court was concerned with the question whether the entire assessment order passed by the Deputy C.T.O. could be said to have merged in the revisional order passed by the Deputy Commissioner of Commercial Taxes. The Supreme Court answered that question in the negative because the subject-matter of revision (filled by the assessee) was only with reference to a particular item and in so no merger. The Supreme Court relied upon the judgment in CIT v. Amritlal Bhogilal and Co. . Applying the principles laid down in these cases, it is difficult to conclude that the entire assessment order becomes an integral part of the appellate order and that, therefore, any part there of any part thereof could be challenged, irrespective of the subject-matter of the dispute in the first appeal. Of course, as notice earlier, the Division Bench of the Gujarat High Court in Karamchand Premchand's case , reached the conclusion it did even on the assumption that the doctrine of merger would apply. We would only like to add that in view of the legal position clarified by the Supreme Court in Madurai Mills case, , the application of the principle of merger cannot be readily assumed. In fact, it was not seriously contended by any of the counsel that the answer to the issue on hand is to be found in the theory of merger. We need not therefore dilate on this aspect further.

70. Learned counsel for the assessee, Mr. Ratnakar sought to support his argument with reference to rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. The rule lays down that the appellant shall not, except by leave of the Tribunal, urge or 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, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule. Learned counsel submits that a broad and liberal; interpretation must be placed on this rule so that it would be possible for an assessee to raise an altogether new ground touching a new item of dispute even at the second appellate stage, As rightly pointed out by Bhagwati C. J. in Karamchand Premchand's case : "this rule does no more than recognise the power of the Tribunal which even otherwise, it possesses, to allow the appellant to urge any ground of appeal even if he was not originally entitled to take it in the memorandum of appeal". If the assessee is precluded form taking a new ground unrelated to the subject matter before the Appellate Assistant Commissioner, he cannot avail of rule 11 and obtain the leave of the Tribunal to raise such ground for the first time. This rule must be read as subservient to the provision in the Act providing for the right of appeal. So read, it is clear that the additional ground that could be permitted to be raised under rule 11 is the one is linked to the subject matter of the order passed by the first appellate authority. We are, therefore not inclined to accept the argument of Mr. Ratnakar. Referring to this rule and rule 29 which permits additional evidence to be let in the Full Bench of the Bombay High Court in Ahmedabad Electricity Co.'s case , held (at page 360) :

"These rules, therefore, indicate that the scope of enquiry before the Tribunal can be wider than the points which are raised before the Tribunal. The therefore, would ordinarily have the power to allow additional points to be raised before it so long as they arise from the subject-matter of the proceeding and not necessarily only from the subject-matter raised in the memorandum of appeal........"

71. In the light of what we have said above regarding the true scope of rule, 11 we are unable to agree with the view expressed in the last sentence of the above passage.

72. It is further submitted by learned for the assessee that a wider interpretation of rule 11 is called for in order to avoid the situations in which the taxpayers would be left without any remedies to redress their genuine grievance. For instance it is contended that, if an assessee bona fide claims certain deductions in a particular assessment year and later on it is found by the Tribunal or the Court that the deduction is allowable during a different year and the appeal for the said year is pending, it would be an injustice to the assessee, if the new ground is not allowed, to be raised in that appeal merely on the ground that the same was not the subject-matter of dispute in the first appeal. In illustration, learned counsel cited the decisions in ITAT v. B. Hill and Co. (P.) Ltd., and Atlas Cycle Industries Ltd. v. CIT . If we take into account the conduct of a diligent assessee who would prefer to claim the same deductions in more than one year by way of abundant caution, this argument is perhaps out of place. Even otherwise, the possibility of occasional injustice ensuing to assesses in certain rare cases is no ground to mould the interpretation in favour of the assessee, eschewing all other relevant factors. We may point out that the possibility of prejudice to the interests of the Revenue also cannot be ruled out, it the so-called broader interpretation is placed on section 254 and rule 11. Probably, case on hand illustrates this point. If the objection as to the assessability is raised for the time at the stage of second appeal, it is quite likely that the Department will be handicapped from exercising the power of revision in respect of a different year on account of lapse of limitation, pendency of appeals or otherwise. We cannot therefore come to any firm conclusion based on the plea of injustice. From a slightly different angle,. learned counsel contended that this court should be adopt an equitable approach shorn of technicalities. Apart from the question whether, in tax matters, such approach could be adopted in the teeth of the statutory provisions. We are not sure which way equity lies in the present case. Here is a case where the assessee voluntarily submitted returns disclosing income from capital gains. The appeals to the Appellate Assistant Commissioner was directed against certain items Appellate Assistant Commissioner was directed against certain items including the interest received on the enhanced compensation amount. Chargeability of capital gains to tax during the relevant assessment year was not at all dispute before the Appellate Assistant Commissioner. After a long lapse of time at the stage of hearing of the second appeal, the assessee sought for permission to raise a new ground touching an item admitted to be table earlier. The justification for not raising this ground earlier is not discernible form grounds at earlier stages or at an earlier point of time. The Tribunal having found that it had jurisdiction to entertain this additional ground, unhesitatingly allowed the assessee to raise the ground stating that it was a pure question of law. The Tribunal held that the income was not assessable to tax during the relevant assessment year. Of course this conclusion the Tribunal is justified by the decision of this court in S. Appala Narasamma v. CIT . The net result is that the income in questions cannot be assessed to tax either in the assessment year in which it was taxed or in any other previous year because, the time for reopening or revising the assessment of that previous year expired by now. The admitted in come is thus going out of the net of taxation. Is it equitable and just to allow this situation to happen unless of course the assessee is entitled to the relief by virtue of a clear legal provision or settled legal; position ? Surely not. That apart, if the contention of the respondent is to be accepted, many an assessee may be put to the peril of being exposed to second appeals by the Revenue even though the Income-tax Officer might not have applied to the Appellate Assistant Commissioner to enhance the tax. Thus, the very argument based on equity and justice is something like a double-edged weapon which cuts both ways. We are, therefore, not persuaded to formulate an answer to the question referred to us based upon the approach suggested by learned counsel for the assessee and as already stated, the facts of this case, at any rate, do not give rise to any equities in favour of the assessee.

73. Before closing the discussion, we would like to briefly refer tot the decisions of this court bearing on the point under consideration. The first one is the decision in Shaik Ibrahim v. CIT [1968] 69 ITR 117 (AP). This is the decision relied upon by the Tribunal. In that case, the assessee filed returns for three years showing the admitted income from property and business. He also showed in section D of the return certain amounts representing profits from "bracket business" (betting on New York cotton raise) and claimed them to be not taxable. In the absence of accounts, the Income-tax Officer estimated the income from the "bracket business" and charged the same to tax. The Appellate Assistant Commissioner confirmed the Income-tax Officer's estimate for two years and enhanced the income for one year. Against this appellate order. The assessee filed an appeal to the Tribunal. At the time of hearing of the appeal. The assessee filed an appeal to the Tribunal. At the time of hearing of the appeal. An additional ground was raised claiming exemption of the income from bracket business on the ground that the said income did not arise from business, profession, or vocation but that the receipts were causal and non-recurring in nature. The Tribunal did not allow this additional ground to be raised. On a reference to this court, Jaganmohan Reddy C. J. speaking for the Division Bench, observed (at page 120) :

"The mere fact that the assessee has not raised this contention before the Income-tax Officer or the Appellate Assistant Commissioner would not. In our opinion, bar him from raising the same before the Tribunal. It has been held times without number that there is no estoppel on a question of law. Whether in fact, the transactions of the assessee in respect of the New York Cotton futures, known as 'brackets' are exempt from tax under section 4(3) (vii) or it would amount to 'business is a question of law. The mere fact that the assessee, not having appreciated his legal rights, failed to raise the contention before the Income-tax Officer or the Appellate Assistant Commissioner, where he was not represented by a lawyer but by his auditor who not being qualified in law, is not competent to appreciate the principles of law or its subtleties, he 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 questions of fact as well as law."

74. Having so held, the learned judges answered the question in favour of the assessee and held that the receipts in question were exempt from tax under section 4 (3) (vii) of the 1922 Act. It is to be seen that the question considered in this case was whether the assessee having admitted that the income was derived from the bracket business could be allowed to turn round and contend for the first time that the receipt was not from business. The learned judges pointed out that there was no estoppel on a question of law and that there was no estoppel on a question of law and that, therefore, the assessee shall not be denied an opportunity to raise this point before the Tribunal. It is to be seen that the dispute with regard to the receipt form betting on the New York Cotton rates was looming large both at the preliminary stage as well as the appellate was looming large both at the preliminary stage as well as the appellate stage. It is not as if the dispute cropped up for the first time. It is a case in which the assessee claimed the relief on a different or inconsistent plea which, as we have already held, could be raised before the Tribunal according to the judgment of the Supreme Court. Moreover the Division Bench did not consider the broader question whether the Tribunal had jurisdiction and power to allow a new dispute to be raised.

75. The next one is the judgment of Gopal Rao Ekbote C. J. and Chennakesava Reddy J. in Krishna Mining Co.'s case . The question there was about the valuation of closing stock. The Tribunal, while rejecting the computation made by the Income-tax Officer as well as the assessee, reached the conclusion that, instead of an addition of Rs. 99,984, a sum of Rs. 10,644 alone had to be added. On an application filed by the assessee, the Tribunal rectified the arithmetical mistakes and revalued the closing and opening stock which resulted in reduction of profit to the tune of Rs. 83,169 instead of an addition. The assessee contended that the aforementioned amount should be deducted from the total amount of profit. The Tribunal did not agree with the assessee's contention in this regard as "it thought that the matter on appeal before it related only to the addition of Rs. 99,984 and that it was not competent to go further into the matter and give a greater relief tot he assessee than it had asked for". The Tribunal, therefore deleted the entire addition of Rs. 99,984 which arose because of the mistake in calculation and gave relief to this extent. This court upheld the view of the Tribunal holding that the matter before the Tribunal related only to the addition of a sum of Rs. 99,984 made by the Income-tax Officer which was completely deducted on revaluation of the stock and it was not competent to go further into the matter and give greater relief than was asked for by the assessee. Gopal Rao Ekbote C. J. speaking for the Bench, pointed out that the of the Tribunal are limited to the subject matter of appeal. It was observed (at page 707) :

"They (the appellants) are not, however permitted to widen the scope of he proceedings determined by the Income-tax Officer or the first appellate authority. Within the outer limit of those proceedings, they are free to ask the necessary relief thus limiting the subject-matter and ultimately the scope of the appeal. It is plain that once these limits are set, the Tribunal can deal only with that party of the order of the lower Tribunal which has been made the subject-matter of the appeal before the Tribunal. It would be permissible for he Tribunal to adjudicate or give a finding on a question which was not agitated or in regard to which no relief was claimed in the lower Tribunals or which was not in dispute and which does not from the subject-matter of the appeal......

We are, therefore, of the clear opinion that these provisions do not permit the Tribunal to travel beyond the scope of the appeal in order to decide questions raised by the assessee subsequently.

The grant of any such relief cannot be justified on the ground that section 33(4) of the Act enables the Tribunal to make any order that it thinks fit. We are not inclined to take any such view of that sub-section. Plainly, some limit, part from the limit which the word 'thereon' puts upon it, must be placed upon the generality of the words used."

76. This judgment was not followed by the Tribunal on the ground that the earlier judgment, viz, Shaik Ibrahim v. CIT [1968] 69 ITR 117 (AP) was not noticed by the learned judges and the decisions of the Supreme Court were also not referred to. In the light of the forgoing discussion. Our viewpoint broadly falls in line with the view expressed by the Division Bench in this case. On a consideration of the various judgments of the Supreme Court, we are unable to say that different view as to the scope of appeal before the Tribunal is called for.

77. The next case which needs reference is the judgment in CIT v. Gangappa Cables Ltd. , which was decided by a Division Bench consisting of Obul Reddi C. J. and Amareswari J. The facts stated in the judgment are these : The assessee filed an appeal before the Tribunal as it was aggrieved by the orders of the Income-tax Officer and the Appellate Assistant Commissioner regarding the disallowance of Rs. 1,81,694 incurred by it towards expenditure prior to the date of commencement of commercial of commercial production under the provisions of section 80J (1) of the Income-tax Act, 1961. It was the case of the Revenue before the Tribunal that it was not open to the assessee to claim relief under section 80J (1) as no such relief was claimed by it before the Income-tax Officer. The Tribunal negatived that contention holding that it had discretion to admit a new ground depending upon the facts of each case and that, on the facts case the omission to take this ground before the lower authorise was a bona fide mistake and, therefore it should be permitted to be raised before it. The Tribunal recorded a finding that all the necessary details for allowing a claim under section 80J (1) were practically there before the Income-tax Officer. The tribunal therefore expressed the view that the assessee was entitled to make a claim under section 80J (1) and accordingly, allowed the claim. Before the Division Bench, it was contended on behalf of the Revenue that, in view of the judgment in Gurjargravures (P.) Ltd.'s case , it was not open to an assessee to claim any relief before the Appellate Assistant Commissioner or the Tribunal, if he dad not claimed the same before the Income-tax Officer. This contention was negatived by the Bench. Obul Reddi C. J. speaking for the Division Bench, expressed his opinion in the following terms (at page 781) :

"We are of the opinion that when there is sufficient evidence on record to support a claim, neither the Appellate Assistant Commissioner nor the Tribunal is bared from entertaining a claim on the basis of the evidence on record which is sufficient to support the claim. The decision of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. , therefore is no bar to the entertaining of the claim by the Appellate Assistant Commissioner or the Tribunal, in view of the fact that all the necessary material for allowing a claim under section 80J(1) was before the Income-tax Officer."

78. On the facts stated in the judgment, it is not clear whether the claim under section 80J(1) was made for the first time before the Tribunal Perhaps, that is the inference which has to be drawn from the question framed. IT is also not clear as to what exactly was the scope of appeal before the Appellate Assistant Commissioner. Be that as it may, the only contention raised and answered by the Division Bench was whether the ratio of the Judgment in Gurjargravures P. Ltd.'s case , would apply. It was held that there was sufficient basis and evidence on record to allow the claim under section 80J (1) and, therefore, the aforementioned decision of the Supreme Court has no application. The learned judges have not decided the larger question that arises before us. In so far as this judgment is construed as laying down a principle that an additional relief could for the first time before the Tribunal irrespective of the fact whether it was claimed earlier or not. With great respect, we overrule, the said judgment to that the extent.

79. The last decision of this court which need reference is the Full Bench decision in Sri Venkata Rama Lingeshwara Rice Mills' case [1977] 39 STC 57. In the case, the question was with regard to the power of the Sales Tax Appellate Tribunal to allow the assessee the to dispute the additional turnover. The assessee preferred an appeal against the assessment disputing the turnover of Rs. 1,06,410. The Appellate Assistant Commissioner partly allowed the appeal. Long thereafter, the Deputy Commissioner of Commercial Taxes at a higher rate than what was assessed. The assessee then preferred an appeal to the Sale Tax Appellate Tribunal against the revisional order of the Deputy Commissioner. In that appeal, he not only questioned the order of the Deputy Commissioner subjecting the turnover to higher tax but he also raised an additional ground questioning the assessment on the turnover admitted earlier. This new ground was raised based a upon a subsequent decision of this court. The Tribunal allowed the petitioner to raise the additional ground and granted relief by remanding the case to the assessing authority for fresh disposal. The Tribunal held that it had jurisdiction under section 21(4) (ii) of the Andhra Pradesh General Sales Tax Act to take into consideration the entire law and facts at the time of hearing of the appeal. Section 21 provides for an appeal to the Appellate Tribunal and sub-section (4) thereof reads as follows :

"(4) The Appellate Tribunal may, after giving both parties to the appeal. A reasonable opportunity of being heard -

(i) Confirm reduce, enhance or annul the assessment of the penalty or both; or

(ii) set aside the assessment or the penalty, or both, and direct the assessing authority to pass a fresh order after such further enquiry as may be directed; or

(iii) Pass such other orders as it may think fit.

(Proviso not relevant)."

80. On a tax revision case filed by the State, a Full Bench of this court expressed the view that the Tribunal had no jurisdiction to permit the assessee to dispute for the first time the assessment on an item which was not disputed in the first appeal filed earlier and which had become final. The full Bench consisting of Sambasiva Rao, Alladin Kuppuswami and Lakshmaiah JJ. held that in an appeal against the revisional order of the Deputy Commissioner which was confined to the rate of tax applicable, the Tribunal had no jurisdiction to go into the question of legality of the entire assessment and set aside the assessment on the turnover itself. Under the Andhra Pradesh General Sales Tax Act, only a assessee had a right of appeal to the Tribunal but not the Department. Moreover, the Tribunal had the power to enhance the assessment in a appeal preferred by the assessee. The expression "thereon" was also not found in section 21(4) (iii) of the Andhra Pradesh General sales Tax Act Notwithstanding these distinguishing factors between the Andhra Pradesh General Sales Tax Act and the Income-tax Act, the full Bench cited with approval the observations of the Gujarat High Court in Karamchand Premchand's case . The full Bench also referred to the observations of the Supreme Court in Hukumchand Mills' case . The following observations of the Full Bench are relevant (at page 69) :

"...... we do not agree that either the principle that a court of appeal is a court of rehearing, or the provision enabling the Tribunal to pass such orders thereon as it thinks fit, would enable the Tribunal to pass orders on appeal regarding that part of the turnover which was not even objected to before the Assistant Commissioner. The court of appeal is no doubt entitled to rehear the case, but its power to rehear is confined only to the subject-matter of the appeal, unless express powers are conferred on the Tribunal to deal with the matters which are not the subject-matter of the appeal. Similarly, the power to pass orders as it thinks fit, thought wide in its, terms should be confined only to passing orders with reference to the subject-matter of the appeal......."

81. The Full Bench also observed (at page 67) :

"There is nothing in section 19 of section 21 which enables the dealer to reagitate before the Appellate Tribunal matters which have become final before, by reason of his not having appealed against the order of assessment. If the argument of the assessee is carried to its logical conclusion, even if no appeal is preferred to the Appellate Assistant Commissioner, the dealer would be entitled to prefer an appeal direct to the Appellate Tribunal and thus by pass the provisions of appeal to the Assistant Commissioner under section 19.

The position is the same when an assessee does not prefer an appeal against the order of assessment to the Appellate Assistant Commissioner, but the Deputy Commissioner chooses to exercise his powers of revision under section 20 and the assessee prefers an appeal against the order of the Deputy Commissioner, enhancing the assessment in revision. Even in such a case, the assessee, not having preferred an appeal against the order of assessment is, in our view, precluded form agitating fresh matters in an appeal before the Tribunal against the order of the Deputy Commissioner."

82. Referring to the provisions of Order 41, rule 33, Civil procedure Code, as an instance of the wide power conferred on the Court of appeal, the Full Bench pointed out that but for that specific provision, there would be no power in the appellate court to pass a decree in regard to matters which were not the subject-matter of the appeal. Then it was a noted : "Moreover, it is to be remembered that we are concerned with a second appeal before the Appellate Tribunal and not a first appeal before the Appellate Assistant Commissioner." Though the Judgment of the full Bench has no direct application to the case on hand, we have extracted some of the pertinent observations of the Full Bench to reinforce our conclusion.

83. What remains for us is to refer in a nutshell to the various decisions of the other High Courts and to indicate our agreement or disagreement with them. We respectfully dissent form the view taken by the Full Bench of the Bombay High Court in Ahmedabad Electricity Co.'s case ; by the Madras High Court in Indian Express (Madurai) Pvt. Ltd.'s case ; which was followed and applied in Brahadeeswaran's case a case arising under the Estate Duty Act; by the Kerala High Court in Kerala State Co-operative Marketing Federation's case [1992] 193 ITR 624; by the Delhi High Court in Taylor Instrument Co. (India) Ltd. v. CIT [1992] 198 ITR 1; by the Patna High Court in Hindusthan Malleables and Forgings Ltd. v. CIT ; by the Punjab and Harayana High Court in Atlas Cycle Industries' case ; by the Allahabad High Court in B. Hill and Co. (P.) Ltd.'s case . In these cases except the last two, the conclusions of the learned judges rest upon one or all of the following aspects :

(1) The observations of the Supreme Court in Hukumchand Mills' case and Mahalakshmi Textile Mills' case ;

(2) The subject-matter of the appeal before the Appellate Tribunal being not only the appellate order but also the assessment order;

(3) (a) The appellate authority's powers being plenary and co-extensive with those of the assessing authority;

(b) The observations of the Supreme Court in Jute Corporation's case regarding the amplitude of the powers of the appellate authority;

(4) Special features of a tax appeal which implicitly cast an obligation on the appellate authority to determine the correct tax liability.

84. We have already dealt with these aspects and recorded our views. In the last two, cases the jurisdiction or power of the Tribunal to allow an additional ground covering a new item was not discussed, but as in Gangappa Cables' case , the only issue considered was whether the judgment of the Supreme Court in Gurjargravures (P.) Ltd.'s case was distinguishable on facts.

85. The judgments which support the view taken by us are the decisions of this Court in Krishna Mining Co.'s case ; Sri Venkata Rama Lingeshwara Rice Mill's case [1977] 39 STC 57 [FB]; the decisions of the Gujarat High Court in Karamchand Premchand ; Steel Cast Corporation ; Cellulose products [FB]; the decision of the Madhya Pradesh High court in Hukumchand and Madanlal Co. v. CIT and the earlier decisions of the Bombay, Madras and Delhi High Courts in Ugar Sugar Works Ltd. V. CIT , Panchura Estate Ltd., v. Govt., of Madras and CIT v. Anand Prasad . The leading judgment is that of the Gujarat High Court in Karamchand Premchand's case . The reasoning and observations made therein were followed in almost all these cases. We also express our agreement with this judgment subject to the clarification given (supra) at page 193.

86. In the light of the foregoing discussion, our answer to the first question is in the negative and against the assessee.

87. On question No. 2 it is submitted by learned counsel for the assessee as well as learned counsel for the Income-tax Department that a Division Bench of this court in S. Appala Narasamma's case , held that the year during which the vesting of land involved in the land acquisition proceedings occurs is the relevant year for levy of capital gains. It is also stated that a similar view was taken by the Gujarat High Court in CIT v. Purshottambhai Maganbhai Hatheesingh (HUF) and the Karnataka High Court in Buddaiah v. CIT . The Tribunal has taken the same view. Perhaps, we would have answered the question in favour of the assessee but for the view we have taken on the first question in favour of the assessee but for the view we have taken on the first question. Having regard to our answer to the first questions, the second question does not really arise for consideration. If the Tribunal was not competent to allow the assessee to raise a new ground as to the legality of levy of tax on capital gains, the Tribunal could not have one into that question and granted relief to the assessee. The logical corollary of answering the first question against the assessee is that the second question cannot be gone into by the Tribunal or by this court. We therefore decline to answer the second question.

88. The third question is about the taxability of interest received on the enhanced compensation during the assessment year 1970-71. The Division Bench while referring the matter to the Full Bench on the other two questions. Has already answered this question in favour of the assessee following the judgment in Sankari Manickyamma . The Correctness of this conclusion is not questioned before us. We therefore, reaffirm the opinion of the Division Bench on this question.

89. The reference case is a accordingly disposed of. In the circumstances, there will be no order as to costs.

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