Income Tax Appellate Tribunal - Bangalore
Praveen Dress Mfg. Co. vs Seventh Income-Tax Officer. on 5 May, 1989
Equivalent citations: [1989]30ITD422(BANG)
ORDER
Per Shri A. V. Balasubramanyam, JM - This appeal by the assessee relates to assessment for the year 1980-81. The appeal has a history.
2. The assessee had export trade in garments during the previous year and in respect of certain items of expenditure weighted deduction under section 35B had been claimed. Among others, there were the following two the particulars of which are as hereunder :
i] Commission payment Rs. 18,037 ii] Legal charges paid in connection with suit filed Rs. 20,749 outside India.
In respect of commission, the Income-tax officer had allowed the claim. Relief in respect of legal charges had been refused. There were also other claims under section 35B in respect of which the assessee had failed before the income tax office.
3. The assessee had appealed from the assessment and the Appellate Asst. Commissioner allowed the claim vide his order dated 30-9-1983. For the sake of convenience we will call this order as the First order by the Appellate Asst. Commissioner. Objecting to the same the revenue had appealed to the Tribunal and the proceeding was ITA No. 1092/Bang/1983. This appeal was of along with appeal for 1979-80. The Tribunal restored the matter to the appellate Asst. Commissioner and the short order reads as hereunder :
"The appeals are by the revenue against the direction of the Appellate Asst. Commissioner to allow weighted deduction under section 35B of the Income-tax Act. The matter has been dealt with by us in detail in the assessees own case in ITA Nos. 162 & 163/Bang/1982 dated 21st. November, 1983. The order of the Appellate Asst. Commissioner is set aside and the appeals are restored to him for deciding the issue in accordance with law in the light of our earlier order."
ITA Nos. 162 & 163/Bang/82 referred to in the order certain to appeals for the years 1977-78 and 1978-79.
4. When the matter went back to the Appellate Asst. Commissioner he considered the eligibility in respect of the items involved. With regard to legal charges, the assessees claim failed once again. The Appellate Asst. Commissioner took up the claim in respect of commission presumable exercising powers under section 251[1] [a] being of the view that the Income tax officer had misdirected himself in allowing after giving an opportunity stipulated in sub section [2] of section 251. He held that weighted deduction in respect of commission was not allowable in view of the decision of the Madras High court in the case of CIT v. Southern Sea foods [P.] Ltd. [1983] 140 ITR 855 since, admittedly, the payment had been made in India.
5. The assessee is in appeal dissatisfied with the order passed by the Appellate Asst. Commissioner for the second time in appeal. We will first of all take up a legal issue relating to order in respect of commission payment Shri Prasad, appearing for the assessee, urged that the Appellate Asst. Commissioner had no jurisdiction to enhance the assessment by going into the eligibility reading commission payment inasmuch as the appeal was before him on account of an order of remand by the Tribunal and that his jurisdiction extended only in respect of the times which were specifically before the Tribunal at the first instance. His submission was that the power of the first appellate authority to enhance an assessment under section 251[1] [a] is restricted only to the appeal decided by him at the first instance and not if an appeal is heard on account or remand by a superior authority. In this connection, he invited our attention to the decision of the Bombay High court in the case of CIT v, Indo-Aden Salt works Co. [1959] 36 ITR 429. We now proceed to examine the validity of this submission.
6. It is advantageous to furnish facts of Indo-Aden Salt works Co. case [supra] for a proper appreciation of the legal merit. The Income tax officer had, in an assessment passed, allowed the claim for relief under section 25[4]. IT Act, 1922 but, however declined to grant relief of super tax. The assessee had carried the matter in appeal in respect of the rejection of relief in super tax. The Appellate Asst. commissioner dismissed the appeal on a short ground holding that the assessee [firm] not being an assessable entity could not claim relief as regards super tax. On further appeal to the Tribunal it was held that the disposal by the Appellate Asst. Commissioner on a shorter ground was not correct and at the instance of the assessee the matter was remanded to the Appellate Asst. Commissioner for fresh disposal. When the matter came up before the appellate Asst. Commissioner for the second time, he not only enquired about super tax relief but also, suo motu, went into the question whether the assessee was entitled to relief under section 25[4]. He held that relief could not be granted to the assessee under section 25[4] and it was with drawn. On appeal to the Tribunal again, it was held that the Appellate Asst. Commissioner power were expressly confined only to the point of super tax relief and that the other points had become final Upon reference, the Bombay High court held :
"that the order of the Appellate Tribunal, when read in the proper context restricted the scope of enquiry by the Appellate Assistant Commissioner only to the question of merits affecting the claim of the assessee for relief from super-tax and, therefore, the appellate Assistant commissioner had no jurisdiction to issue the notice of enhancement and to withdraw the relief in respect of income tax granted by the Income-tax officer under section 25[4]."
7. We find that the Madras High court has taken a decision which favour the revenue and that is in the case of Sri Gajalakshmi Ginning Factory Ltd. v. CIT [1952] 22 ITR 502 [Mad.] Their Lordships have pointed out :
There is no distinction between cases where the appellate Assistant commissioner is dealing with an appeal which is remanded by the Appellate tribunal and an appeal which is heard by him in the first instance. The only power which he can exercise in disposing of an appeal whether received by him after remand or directly against the order of the Income tax officer is the one conferred upon him by section 31 of the Indian Income-tax Act, 1922 and it is not subject to any restrictions arising out of the subject matter of the appeal :
Shri Prasad submitted that the above decision has been impliedly overruled in the case of V. Ramaswamy Iyengar v. CIT [1960] 40 ITR 377 [Mad.]. It is not so. The competence of the Appellate late Asst. Commissioner to exercise power of enhancement granted under section 31[1] of the 1922 act [corresponding to section 251[1] of the 1961 act] is the same as when he hears the appeal after remand by the Tribunal. Far from overruling, the correctness of the principle stated in Sri Gajalakshmi Ginning factory Ltd. case [supra] has been affirmed in V. Ramaswamy Iyengar case [supra]. But their lordship have only explained a situation. In the case of V. Ramaswamy Iyengar [supra] the facts, in so far as they are relevant to the present appeal, were like this. Receivers had been appointed by a court to a mange the properties involved in a suit. The Income tax officer had made assessments against the revivers under section 41 of the 1922 Act. The receivers had appealed to the Tribunal complaining about the assessments. The Appelleate Tribinal held that the receiver should be assossed diretly under sec. 10 as an AOP, cancelled the assessments made under section 41 and directed the Income tax officer to make fresh assessments under section 10. The madras high court held that the Tribunal had no power sou motu to enhance the tax so as to operate to the detriment of the assessee when the department did not make any objection to the assessment passed under section 41. So far as the Tribunal powers are concerned, there cannot be any dispute since the provisions of the Income-tax act do not vest any power in the Appellate Tribunal to enhance the tax except when there is an appeal by the revenue. But the powers of the first appellate authority [Appellate Asst. Commissioner of Income tax [Appeals] exercising powers under section 251 of the 1961 Act [31 of the 1922 Act] is larger and is not confined to subject matter of the appeal taken by the assessee. The power of the first appellate authority can only be traced to section 251. There is no dispute that the Tribunal can remand a matter to the first appellate authority for a fresh disposal. When once the remand is made, the power of the first appellate authority on remand is once again traceable to section 251[1]. Dealing with this aspect, their Lordships of the Madras High court stated [at page 399].
"... The appellate Tribunal in order to give relief to the appellant, might direct a remand. Once a remand is made, the power of the Appellate Assistant commissioner on remand, unless restricted by the order of the remand itself, would be governed by the provision of section 31. That section, conferring as it does unlimited powers of assessment on the Appellate Assistant commissioner, would enable him even to enhance the assessment. But such an enhancement could only be a fortunates result of an order which was intended for the benefit of the appellant. The decision in Sri Gajalakshmi Ginning Factory Ltd. v. Commissioner of Income- tax belongs to that category of cases.
It is clear from the above that the first appellate authority who had become a functus office after the disposal of the appeal at the first instance, on an happening by chance, was again in a position to exercise powers which he could have done earlier under section 251[1]. But the High court has pointed out two categories of case where the above principle cannot be applied. it is stated that where the remand is intended for the benefit of the respondent, or it would inevitable result in a prejudice to the appellant, then there can be no remand by the tribunal to indirectly do what it cannot do directly, namely, enhance the liability, Remand resulting in prejudice to the appellant has reference to issues remanded to the lower authority and it has no bearing on points outside the order of remand. If the facts of the present case are examined from the exception shown, it will be seen that this case is not one of that category.
8. The appeal to the Tribunal was by the revenue where it had challenged weighted deduction granted under section 35B in respect of few items. The remand had not been intended for the benefit of the respondent [assessee]. Reading the order of the Tribunal remanding the appeal [ITA No. 1092/Bang/83] we are left with no doubt that the entire order of the Appellate Asst. commissioner was set aside, and the appeals restored to him for deciding the matter afresh. Such being the case, the principle stated in Sri Gajalakshmi Ginning Factory Ltd.s case [supra] and reaffirmed in V. Ramaswamy Iyengars case [supra] should apply.
9. To the submission of Shri Prasad that the Tribunal cannot do indirectly what it had no power to do directly, if would be fallacious to think that the Appellate Asst. Commissioner exercised the power of enhancement under section 251[1] at the instance of the Tribunal. The Tribunal never meant or suggested anything in regard to items which were not in appeal. Identical submission had been made before the Bombay High court in the case of Indo Aden Salt works Co. [supra] and their lordships rejected them observing that they do not carry the assessees case any further. It had been urged before the Bombay High court that the Appellate Asst. Commissioner could exercise the power of enhancement inasmuch as the entire order appealed from had been set aside and this submission was not altogether rejected. On the contrary, their approval was expressed. But their lordship interpreting the order of remand passed by the Tribunal held that it had restricted the scope of enquiry by the Appellate Asst. Commissioner only to the question relating to claim for super tax. It is in such circumstances the power of the Appellate Asst. Commissioner was held to be restricted to the issue taken to the Tribunal. That is not the position here. As we have made it clear the entire order of the Appellate Asst. Commissioner was set aside, and the Appellate Asst, commissioner was asked to dispose of the appeal once as a consequence of remand, in the same manner and dimension as it had been when it was presented to him by the assessee aggrieved by the original assessment.
10. Lastly, it was argued that when two interpretations of a provision are possible, the one in favour of the assessee should be adopted as explained by the Supreme court in the case of CIT v. Vegetable products Ltd. [1973] 88 ITR 192 which has been applaud in the case of Jindal Aluminium Ltd. [IT Appeal Nos. 855 and 856/Bang/1987]. The supreme court was dealing with the language of a taxing provision which was capable of more interpretations than one. The interpretation called for [Sec. 251[1]] is not a taxing provision and the above principle does not apply. The natural meaning of the language used in section 251(1) does not admit of any interpretation restricting the power of the Appellate Asst. Commissioner when a matter comes to him as a consequence of remand unless the order of remand itself fixes the compass of enquiry. Provisions conferring powers are to be broadly construed unless restrictions are in built in the provision itself. If the section contains no express provision excluding jurisdiction, the ordinary powers generally exercisable by the authority should be presumed to be existing if as a consequence of remand the first appellate authority should get seisin of the entire appeal. The powers of the first appellate authority under section 251[1] are not reduced unless in a given case the order of remand itself specifies the scope of enquiry in the issue remanded. In the present case, the order of the Tribunal placing no such limitation, the Appellate Asst. Commissioner was well within his authority to exercise all the powers under section 251(1) (a) as the order of Appellate Asst. Commissioner has been set aside in entirely. The ground relating to jurisdiciton is, therefore, pronounced against the assessee.
11. With regard to merits, Shri Prasad did not address. He concedes that the payment having been made outside India, The issue stands covered against him by the Madras High court in the case of southern sea foods [P.] Ltd. [supra] In view of this, the rejection of the claim is affirmed.
12. With regard to the other item, namely, legal charges, it was stated that a suit had been filed aboard. No particulars of the action were given. The appellate Asst. Commissioner has, in paragraph 7 of his order, pointed out that the assessee was unable to make out its case, In the absence of particulars we are unable to say under which sub-clause the claim will fit in For lack of evidence, this claim has to be rejected.
13. In the result, the appeal fails. It is dismissed.