Income Tax Appellate Tribunal - Gauhati
Deputy Commissioner Of Income-Tax vs Assam Frontier Tea Ltd. on 20 April, 1993
Equivalent citations: [1993]47ITD179(GAU)
ORDER
R.V. Easwar, Judicial Member
1. to 8. [These paras are not reproduced here as they involve minor issues.]
9. At the time of hearing of the appeal and the cross objection, the Id. representative for the assessee, Mr. Ballav, filed an additional ground in the assessee's cross objection which is as under :
That the Assessing Officer should be directed to allow the surtax liability for the year while computing the total income of the appellant.
The additional ground is signed by a Director of the assessee-company and is dated 10-4-1993. It is also submitted in the additional ground, that the additional ground is a pure question of law involving no investigation of fresh facts and the same should therefore be admitted and adjudicated upon. The Id. representative for the assessee also drew our attention to the judgment of the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 in support of the admissibility of the additional ground. On the merits of the claim that the surtax liability is deductible under Section 37 of the Act, the Id. representative for the assessee drew our attention to the following decisions of the Hon'ble Gauhati High Court :-
(i) In the case of Makum Tea Co. (India) Ltd. v. CIT [1989] 178 ITR 453 : 44 Taxman 49,
(ii) In the case of Doom Dooma Tea Co. Ltd. v. CIT [1989] 180 ITR 126 : 47 Taxman 38.
10. The Id. Departmental Representative on the other hand, vehemently objected to the admission of the additional ground at the stage of the Tribunal. She drew our attention to the decision of the Hon'ble Supreme Court in the case of Addl CIT v. Gwjargravures (P.) Ltd. [1978] 111 ITR 1. She also pointed out that the income-tax and surtax proceedings are separate proceedings, that the records are also maintained separately, and, therefore, the additional ground involves investigation of fresh facts and therefore should not be admitted.
11. The Id. representative for the assessee filed copies of the surtax return for the assessment year under appeal and the relevant statements in support of his claim that no fresh investigation into fact is necessary for adjudicating upon the additional ground. These papers were also put to the Id. Departmental Representative and her views were obtained. She has reiterated her contention that both income-tax and surtax proceedings are separate proceedings and the records are also separate and therefore the additional ground thus involves investigation into facts.
12. We have given careful consideration of the question of admitting the additional ground. Though at one stage of the matter, we had felt inclined to take the view that the additional ground cannot be admitted at this stage, on a deeper consideration of the various aspects of the case and the judicial pronouncements on the point, we are of the opinion that we are bound to admit the additional ground. In the case of Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232, the Hon'ble Supreme Court permitted the Revenue who was the respondent in the appeal before the Tribunal, to raise a new ground for the first time before the Tribunal. The Supreme Court held that the rules framed by the Tribunal for regulating their own procedure including the procedure relating to additional grounds were merely self-regulating in character and did not circumscribe or control the power of the Tribunal as an appellate body. In the case of CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 again the Supreme Court held that there was nothing in the Income-tax Act restricting the Tribunal to the determination of questions raised before the departmental authorities. All questions of fact and law which relate to the assessment of the assessee may be raised before the Tribunal. After a reference to these decisions, the Madras High Court in the case of CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 : 13 Taxman 441 while upholding the order of the Tribunal permitting the assessee to raise an additional ground for deduction in respect of the provision for gratuity, which was not raised either before the Income-tax Officer or the Appellate Assistant Commissioner or even the Tribunal in the original instance, held as under :-
Quite apart from precedents, it seems to us quite in the fitness of things to invest the Tribunal with the plenary jurisdiction in matters of assessment. As we earlier observed, the Tribunal was created in 1941 as an independent non-departmental body, in whose hands the Legislature intended to entrust the task of reviewing assessments made under the Act. Under the scheme of the Act, which gives only the High Courts and the Supreme Court the power of interference on questions of law, the Tribunal is constituted the final authority on facts and the penultimate authority on law touching the assessment and other proceedings under the Income-tax Act. The primary purpose of the statute is to levy and collect the income-tax. This is based on the cardinal principle, which has been incorporated as a veritable constitutional provisions, that no tax can be levied or collected save under authority of law. The task of an appellate authority under the taxing statute, especially a non-departmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since the be-all and end-all of the statutory provisions, especially those relating to the administration and management of income-tax is to ascertain the taxpayer's liability correctly, to the last pie, if it were possible, the various provisions relating to appeal second appeal, reference and the like can hardly be equated to a lis or dispute as arises between the two parties in a civil litigation. Although the income-tax statute makes the Department or its officers figure as parties in appeal proceedings, they are not in the strict sense what are called by American writers as parties to adversary proceedings. This is so, because the very object of the appeal is not to decide a point raised as a dispute, but any point which goes into the adjustment of the taxpayer's liability. In that sense a view prevails, even in England, that the authorities sitting in appeal in a tax case, cannot be regarded as deciding a lis, but they are only engaged in an administrative act of adjusting the taxpayer's liability. Under our fiscaljurisprudence, we may regard the appellate authorities as exercising quasi-judicial functions in the same sense as a taxing officer does. But, even so, the proceedings before them lack the basic elements of adversary proceedings. It, therefore, follows that the discussion and the scope of the appellate jurisdiction of the Tribunal and other authorities under the tax code cannot be pursued by drawing a parallel to civil litigation with particular reference to appeals from decrees and the like. The insistence on one party to the appeal being entitled to the fruits of finality, as it is called and the appellate authority being confined to the subject-matter of the appeal are all ideas which might have relevance if the discussion centres on purely civil litigation and such like adversary proceedings as in an industrial dispute. But in case where the Revenue is all the while a party, in a manner of speaking and is also at the same time an authority vested with the responsibilities of drawing up the assessment and laying down the correct liability, it would not be in accord with the scheme of the Act to impose restrictions on the ambit and the power of the Tribunal by such like notions as finality, subject-matter of the appeal and the like. The statutory provision in Section 33(4) of the 1922 Act and Section 254 of the 1961 Act which confers appellate jurisdiction on the Tribunal clearly lays down that the Tribunal, in disposing of an appeal, may pass such orders thereon as it thinks fit. Excepting that the expression 'subject-matter' has taken the fancy of many learned and eminent judges, that is, an expression which is not employed by the provision conferring the jurisdiction in the Tribunal. Indeed, in the Mahalakshmi Textile Mills' case [1967] 66 ITR 710 (SC) in one of the passages to which we have made reference, the Supreme Court has understood the Tribunal's appeals jurisdiction as jurisdiction to pass 'such orders on the appeal as it thinks fit', without adding any gloss of their own to the expression. In the Nelliappan's case [1967] 66 ITR 722 (SC) as well as (he Mahalakshmi Textile Mills' case, the Supreme Court had even used phrases which are reminiscent of the language which Englishjudges have used while describing a tax appeal. The Supreme Court observed that the Tribunal is not precluded from 'adjusting' the tax liabilities of the assessce in the light of its findings merely because the findings are inconsistent with the case pleaded by the assessee. English judges have regarded a tax appeal, not as a lis, but as a process of further adjustment of taxpayer liability - vide Lord Hewart in Rexv. Special Commissioner of Income-tax [1935] 20 TC 381 (CA); Greer L.J. in IRC v. Sneath [1932] 17 TC 149(CA); Romer lLJ. in the same case, IRC v. Sneath and Lord Wright M.R. in Rex v. Special Commissioner of Income-tax.(pp. 721-725)
13. The above view was reiterated by the same learned judge. His Lordship Justice Balasubrahmanyan, in the case of CED v. R. Brahadeeswaran [1987] 163 ITR 680 : 11986] 28 Taxman 181 (Mad.). It was held that if an additional ground is raised before the Tribunal for the first time in appeal though it had not been raised in any form at the earlier stage, the Tribunal was duty bound to entertain that ground and render a determination either themselves or by remanding the matter if further investigation into the facts was warranted. It was also clarified that the appellate power under the taxing enactment is in no way different in substance from the assessment power exercisable by the assessing authority in the first instance.
14. A Special Bench of the Income-tax Appellate Tribunal in IndoJava& Co. v. IAC [1989] 30 ITD 161 (Delhi) after referring to the entire case law on the subject, have taken the view that it was open to the appellant before the Tribunal to take an additional ground, with the leave or permission of the Tribunal and the Tribunal was bound to admit the same and adjudicate upon the merits of the ground. The only condition for the exercise of this power was held to be that sufficient opportunity of being heard should be given to the party likely to be affected by the admission of the additional ground.
15. In the case of CIT v. Soorajmull Nagarmull [1990] 185 ITR 421 : [1989] 44 Taxman 71, the Calcutta High Court has taken a similar view on the power of the Tribunal to entertain an additional ground raised before it for the first time. His Lordship Justice A.K. Sengupta, after referring to the judgment to the Supreme Court in Mahalakshmi Textile Mills Ltd. 's case (supra), took the view that the Tribunal was competent to decide the ground which was not specifically raised either before the first appellate authority or before the Tribunal in the grounds of appeal.
16. In the case of Hindusthan Malleables & Forgings Ltd. v. CIT [1991] 191 ITR 110, the Patna High Court had occasion to deal with the same issue. The High Court applied the decision of the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case (supra) and held that the Tribunal was competent to entertain the additional ground raised before it for the first time. In coming to this conclusion, the High Court noticed that though the decision of the Supreme Court cited above was rendered in the context of Section 33(4) of the Income-tax Act, 1922, since the same is pari materia with Section 254 of the present Act, the dictum of the Supreme Court was applicable.
17. We may now briefly refer to the decision of the Supreme Court in the case of Jute Corporation of India Ltd. (supra) relied upon by the Id. representative for the assessee. This decision assumes importance since in that decision, the Supreme Court had occasion to consider its earlier decision in the case of Gurjargravures (P.) Ltd. (supra) which was relied on by the Id. D.R. before us. In that case, the assessee did not claim deduction in respect of purchase tax liability in the return for the assessment year 1974-75. The assessee did not claim the liability since it took the view that it was not liable. Subsequently, the assessee was assessed to purchase tax, but the assessment was disputed by the assessee. In the meantime, an appeal had been filed against the income-tax assessment, to the Appellate Assistant Commissioner. Since, the assessee had not made a claim for deduction of the purchase tax liability in the return, it raised an additional ground before the Appellate Assistant Commissioner claiming the deduction on the basis of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). The Appellate Assistant Commissioner allowed the assessee to raise the additional ground and after hearing the Income-tax Officer allowed the deduction. On appeal to the Tribunal by the Revenue, the Tribunal relying on the decision of the Supreme Court in Gurjargravures (P.) Ltd.'s case (supra), held that the AAC had no jurisdiction to entertain the additional ground. The assessee's application for reference was dismissed by both the Tribunal and the High Court. On appeal, the Supreme Court reversed the decision of the High Court and held that since the tax liability was admitted and the ITO had also been heard and since the assessee's claim was based on the settled view of the law, the AAC had jurisdiction to permit the assessee to raise the additional ground. It is important to bear in mind that though the Supreme Court was dealing with a case, where the power of the first appellate authority to admit an additional ground was called in question, the principles laid down in the said decision are fully applicable to the present case. The Supreme Court, while dealing with the powers of the first appellate authority under Section 251(1)(a) of the Act held that the Appellate Assistant Commissioner had plenary powers in disposing of an appeal before him and the scope of his power is co-terminous with that of the ITO. Dealing with the decision of the Supreme Court in the case of Gurjargravures (P.) Ltd. (supra), the Supreme Court held that the observations in the earlier judgment do not rule out a case for raising an additional ground before AAC, if the ground so raised could not have been raised at the stage when the return was filed or when the assessment was made or if that ground became available on account of change of circumstances of law. The true ratio or principle laid down by the Supreme Court, in our humble understanding, regarding the power of the appellate authorities to admit additional grounds, is that the other side who is likely to be affected by the additional ground has to be given an opportunity of being heard and that the claim made in the additional ground must be one which arises out of a settled view of the law. The Supreme Court also upheld the powers of the AAC to admit the additional ground on account of the fact that the entire assessment is open before the AAC and that his powers are the same as that of the assessing authority. We have already seen that the Madras High Court, following the Supreme Court judgment in Mahalakshmi Textile Mills Ltd. 's case (supra), has taken the view that there is nothing in the Income-tax Act which restricts the Tribunal to the determination of the questions raised before the assessing authority and that it was open to the Tribunal to consider all matters relating to the assessment, whether of fact or law. The dispute before the Tribunal, as held by the Madras High Court is not a dispute or 'lis' in the sense in which the same is understood in adversary proceedings such as proceedings under the Code of Civil Procedure. The same was the view taken by the Patna and Calcutta High Courts as also the Special Bench of the Tribunal, as we have noticed earlier. The judgment of the Supreme Court in Gurjargravures (P.) Ltd. 's case (supra) relied on by the Id. D.R. before us is not relevant in the context of the dispute raised in the present case. That was a case, where the assessee claimed deduction under Section 84 of the Act and it was an admitted position that there were no materials before the Income-tax Officer to support the claim. The claim obviously could not have been made before the Income-tax Officer on account of absence of any material on record. It is clear that the assessee under Section 84 of the Act (it is now 80J) has to satisfy certain conditions before being entitled to claim the deduction thereunder and if there are no materials to support the deduction, there was absolutely no justification for entertaining the additional ground. That however, is not the position in the present case. Here the claim is more akin to the claim made by the assessee in Jute Corporation of India Ltd.'s case (supra). The claim of the assessee in the present case is for deduction of the surtax liability under Section 37 of the Act. The assessee has filed a return of chargeable profits on 28-12-1987. The law laid down by the Hon'ble Gauhati High Court in the case of Doom Dooma Tea Co. Ltd. (supra) is that the surtax liability is an allowable deduction while computing the taxable income under Section 37 of the Act. In view of this settled position of law laid down by the Gauhati High Court, which is binding on the Income-tax Department, the present case cannot be equated to the case of the assessee in the decision reported in Gujargravures (P.) Ltd.'s case (supra). As stated earlier, the case of the present assessee is similar to the Jute Corporation of India Ltd. 's case (supra) which claimed deduction in respect of the purchase tax liability on the basis of the judgment of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd.'s case (supra). It is not the case of the Department that the assessee was not liable to tax under the Surtax Act or that no return of chargeable profits had been filed. The only objection is that the surtax records are maintained separately and therefore cannot be looked into for the purpose of deciding the allowability of the assessee's claim. However, this objection cannot be accepted. The liability of the assessee to surtax has to be determined on the basis of the return filed by it under the Surtax Act and the Income-tax Department has also been entrusted in the administration of the Surtax Act. This is a case of a clear statutory liability and not a case where the assessee is to lead evidence regarding the satisfaction of certain conditions for eligibility of the claim as in the case of Gurjargravures (P.) Ltd. (supra). The law regarding the allowability of the surtax liability under Section 37 of the Act is also in favour of the assessee, as laid down by the Hon'ble Gauhati High Court in the case of Doom Dooma Tea Co. Ltd. (supra).
18. The Kerala High Court had occasion to deal with the question regarding the power of the Tribunal to entertain or admit additional grounds raised before it for the first time. This was in the decision reported in the case of CIT v. Kerala State Co-operative Marketing Federation Ltd. [1992] 193 ITR 624 (Ker.). The High Court after referring to the decision of the Supreme Court in the case of Jute Corporation of India Ltd. (supra) posed to itself the following questions :-
(i) Has the Tribunal the same powers as that of the CIT(A) as laid down by the Supreme Court in Jute Corporation case ?
(ii) Is the Tribunal entitled to admit a new ground which has not been raised before the lower authorities ?
After posing to themselves, these questions at page 636 of the report, Their Lordships went on to hold as under :
These are the questions which require answers in these references. The Tribunal gets power under Section 254(1) of the Income-tax Act which provides that the Tribunal may, after giving both parties to the appeal an opportunity of being beard, pass such orders thereon as it thinks fit. Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, enables the Tribunal to permit the appellant to urge any ground not set forth in the memorandum of appeal. That rule provides 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. It is further provided that it is open to the Tribunal to pass its decision on a ground not set forth in the memorandum of appeal and not taken by the leave of the Tribunal provided the party affected thereby has been afforded sufficient opportunity of being heard on that ground. An appellant before the Tribunal can, therefore, urge a new ground in appeal only with the leave of the Tribunal. The Tribunal has thus jurisdiction to permit the appellant to raise any ground which has not been raised before the assessing authority or the Commissioner of Income-tax (Appeals).
After holding as above and taking the view that the Tribunal has the power to admit the new ground not raised before any of the lower authorities, the High Court drew support for their view from the decision of the Supreme Court in the case of CIT v. McMillan & Co. [1958] 33 ITR 182. In that case, the Supreme Court had held that the powers of the appellate authorities under the Income-tax Act are co-equal to those of the assessing authority. The Supreme Court further held that even though a particular statutory provision mentioned by name only the assessing authority and not the appellate authority, as a matter of construction that power must be held to inhere even to the appellate authorities exercisable by them at the appellate stage, in the same manner as the assessing authority would do at the assessment stage. In our reading of the judgment of the Kerala High Court, the precise question that has arisen in the present case has been answered beyond any doubt by the aforesaid judgment. There is also a reference in the judgment to the judgments of the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case (supra), Gurjargravures (P.) Ltd.'s case (supra) and Hukumchand Mills Ltd.'s case (supra). Thereafter the Kerala High Court considered the judgment of the Madras High Court in the case of R. Brahadeeswaran (supra) which in effect reiterated the earlier Madras High Court decision in Indian Express (Madurai) (P.) Ltd.'s case (supra). After a reference to this decision, the Kerala High Court clearly held that once any new or additional ground is raised before the Tribunal, the Tribunal is "duty bound to entertain that ground and render a decision thereon either themselves or by remanding the matter if further investigation into the fact is necessary". [Emphasis supplied]. If, as held by the Kerala High Court, the Tribunal is duty bound to entertain the additional ground, we are unable to appreciate how we can shy away from the duty and refuse to entertain the additional ground raised by the assessee in the cross objection before us.
19. For these reasons, we admit the ground relating to the claim for deduction of the surtax liability.
20. The next point to be considered as to what order should be passed on the merits of the additional ground. The papers filed before us show that the assessee has submitted a return of chargeable profits under the Surtax Act on 28-12-1987. This primafacie establishes that the assessee is liable to pay surtax. It cannot be a gainsaid that the liability is a statutory liability. However, we do not know and no materials were placed before us to show whether any assessment has been made under the Surtax Act and what is the ultimate or eventual liability of the assessee. We, therefore, consider that the proper order to be passed in this case is to remand the claim to the file of the Assessing Officer who will ascertain the exact amount of surtax liability and apply the law laid down by the Hon'ble Gauhati High Court in Doom Dooma Tea Co. Ltd. 's case (supra) regarding the allowability of the claim.
21. The cross objection is partly allowed.