Income Tax Appellate Tribunal - Chandigarh
Paras Rice Mills vs Asstt. Cit on 26 December, 2001
Equivalent citations: (2004)90TTJ(CHD)789
ORDER
P.K. Bansal, A.M.:
This matter is heard only for disposing of the application dated 6-1-2000, faed by the assessee for admission of additional grounds of the appeal.
2. The assessee has filed written submissions dated 3-4-2000. Learned Departmental Representative also filed written submissions dated 17-9-2001, objecting to the admission of the additional grounds. Vide application dated 26-9-2001, the assessee submitted rejoinder. Again, vide letter dated 18-10-2001, learned Departmental Representative filed objections. The assessee filed rejoinder/reply vide application dated 22-10-2001. Vide letter dated 21-11-2001, learned Departmental Representative requested the Bench to pass order regarding rejection or admission of the additional grounds,
3. Learned authorised representative submitted that the additional grounds can be raised for the first time for the purpose of adjudication. Additional grounds are pure questions of law involving no fresh facts and, therefore, the same deserve to be admitted. Additional grounds are merely elaboration of ground No. 1 taken in appeal. Learned authorised representative drew our attention to the decision in the case of Krishan Gopal Bhadra v. Income Tax Officer (1980) 124 ITR 580 (Cal), in which it was held that an assessee is entitled to raise a pure question of law for the first time before the Tribunal though it did not raise before Income Tax Officer/Appellate Assistant Commissioner. The Tribunal is under statutory obligation to entertain the plea and decide the same. He also relied on the decision in the case of Addl. CIT v. East Coast Flour Mills (P) Ltd. AIR 1994 SC 1513, in which it was held that a question of law can be raised for the first time before the Tribunal. He relied on the decision in the case of State of Punjab v. Baldev Singh (1999) 157 CTR (SC) 3 and pleaded that assessment proceedings in this case have taken place under Chapter XIV-B and it is incumbent upon the Tribunal to go into this aspect whether various safeguards provided under section 132 have been observed during search operation and, if not, then the search will become illegal, assessment framed under sectom 158BC(c) arise only in consequence of a search. Section 158BC(c) is a procedural section and Chapter XIV-B is a special procedure for assessment in such cases. If search is illegal, assessing officer will have no jurisdiction to frame assessment under section 158BC(c). Additional. grounds are legal grounds and go to the root of the jurisdiction under section 158BC(c) and, therefore, be permitted. The same could not be taken earlier because the assessee was not so advised by its counsel. But when the decision in the case of Dr. A.K. Bansaf v. Assistant Commissioner (2000) 73 ITD 49 (All)(TM) came, the assessee immediately moved the application. It should not be penalised for not taking the additional grounds earlier. The grounds of legality are not generally taken before the assessing officer in case of proceedings under section 147 also. If an appeal is filed under section 246 to learned Commissioner (Appeals), challenge to the legality of reasons are taken. The Tribunal in this case is the first appellate authority, therefore, it cannot be said that the issue was not before the first appellant authority.
3.1 learned Departmental Representative on the other hand, submitted that the additional grounds submitted by learned counsel for the assessee are not extension of ground No. 1 of appeal. These would require fresh investigation of facts which are not available on record. The reasons explained that these have been taken late only due to the decision in the case of Dr. A.K. Bansal (supra) is no ground. Action under section 132 is administrative action and not a judicial or quasi-judicial and, therefore, cannot be challenged before this forum. The assessee has not raised these grounds before the assessing officer during proceedings under section 158BC(c) and, therefore, it cannot be permitted to raise the same at this stage. She relied on the decision of Tribunal Delhi 'B' Bench in the case of Rakesh Gupta v. Asstt. CIT dated 18-10-2000 in IT(SS)A No. 184/Del/1997. She vehemently pleaded that the grounds cannot be accepted, as facts are not available on record.
3.2 In rejoinder, learned authorised representative submitted that the grounds are legal and facts relating thereto are available on record. The Tribunal is the final fact finding authority and has to examine the facts while recording such finding. Learned authorised representative relied on the decision in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). He submitted that the decision in the case of Rakesh Gupta (supra) is not correct appreciation of law in respect of admission of additional grounds. The Tribunal had relied on the case of Dr. Partap Singh & Anr. v. Director of Enforcement & Ors. (1985) 155 ITR 166 (SC). With due respect, the said decision does not relate to admissibility of additional grounds but to the legality of search. In case of search, reasons to believe are to be recorded by the officer who has issued warrants. Similarly, in case of proceedings under section 148 the reasons to believe are to be recorded by the assessing officer and whenever an appeal regarding legality of reassessment on the basis of reasons to believe is taken, the assessee is not required to challenge it before the assessing officer.
This aspect has not been dealt with by the Tribunal in the aforesaid case.
The Tribunal has wide powers to entertain grounds of appeal. Rule 11 of the Income Tax (Appellate Tribunal) Rules has not restricted the powers of the Tribunal to the grounds of appeal arising out of order of the assessing officer. Under proviso to this rule, the Tribunal is empowered to take any ground of appeal but the only requirement is that the affected party should be given sufficient opportunity of being heard. Acceptance of additional grounds is inherent powers of the Tribunal and derived from section 254. None of these pleas has been advanced or considered by the Delhi Tribunal. No further facts are required to be investigated because all the facts are available on record, before the tax authorities.
4. We have given our thoughtful consideration on the question of admission of additional grounds, though at one stage we had felt inclined to take a view that these cannot be admitted at this stage but on a deeper consideration of various aspects of the case and the judicial pronouncements on the point, we are of the considered opinion that we are bound to admit the additional grounds both on the basis that the additional grounds are the elaboration of ground No. 1 and also on merits. First, we will examine the plea of the assessee that the additional grounds taken are nothing but elaboration of ground No. 1. Ground No. 1 of the appeal reads as under :
"That learned assessing officer has completed the assessment under section 158BC(c) of Income Tax Act in utter disregard of the legal provisions and in violation of the principles of natural justice and is thus liable to be annulled being beyond the scope of statutory provisions, "
(Emphasis, italicised in print, provided), We do not agree with the plea of learned Departmental Representative that additional grounds which relate to the violation of non-compliance of various provisions under section 132 are not covered in ground No. 1. Assessment framed under section 158BC(c) is merely an order passed by the assessing officer determining undisclosed income and tax payable on the basis of such income. This order has to be based only when search under section 132 has been conducted or books of account or other documents or assets requisitioned under section 132A. Section 158BC has a heading 'Procedure for block assessment' starting with the preamble 'Where any search has been conducted This clearly denotes that the assessment order is passed under section 16BBC(c) in consequence of search carried out under section 132. No doubt, it is a post-search action, while search is a pre-search action but proceedings for block assessment get initiated as soon as a search is conducted and in consequence of search some undisclosed asset is found, as defined under section 158B(b). If we look at Chapter XX-A, which was in existence prior to Chapter XX-C on the statute. which related to acquisition of immovable property there also the action of acquisition proceedings was divided in two parts : first pre-acquisition, i.e., initiation of acquisition proceedings and recording of reasons by the competent authority, and post-initiation, i.e., actual initiation of acquisition proceedings, once the competent authority was of the opinion that the proceedings were to be initiated on the basis of reasons to believe that the conditions stated under section 269C(1) were satisfied. Proceedings for acquisition actually get initiated after compliance of provisions of section 269D. Under section 269G, an appeal could be filed before the Tribunal challenging the acquisition. In a number of decisions, the Tribunal has passed order and entertained grounds of appeal that the acquisition proceedings were illegal, as there was no reason to believe in compliance with the conditions as laid down under section 269C (i.e. pre-initiation). We, therefore, reject the plea of learned departmental Representative and permit the assessee to raise the additional grounds.
4.1 The main objection of learned Departmental Representative is that the facts relating to the compliance of various provisions of section 132 are not on record and are to be investigated and it involves certificate from the file of the Director of Investigation. We have gone through the de ' cision in the case of Rakesh Gupta (supra), relied upon by learned Departmental Representative and find that the ratio of the said decision is not applicable to the facts of the case. In the aforesaid case, the Bench has not considered various decisions. The Apex Court in the case of National Thermal Power Co. Ltd. (supra) has clearly held in respect of new ground of appeal which has not been taken before any authority earlier as under :
"There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/CO before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier, The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal."
In. view of the above, we do not agree with the finding of the Delhi Bench (supra) that the assessee cannot challenge the validity of search under section 132 for the first time before the Tribunal when it has not challenged its validity during the course of assessment proceedings under section 158BC(c), 4.2 We feel that the judgment in the case of Indo Java & Co. v. IAC (1989) 35 TTJ (Del-Trib) 111 : (1989) 30 ITD 161 (Del-Trib)(SB) (consisting of five members) will have a binding effect on the decision in the case of Rakesh Gupta (supra). Special Bench has referred to the entire case law on the admissibility of additional grounds and has taken a view that it was open to the assessee to take an additional ground, with leave or permission and the Tribunal should admit the same and adjudicate upon the merits of the ground. The only condition held to be was that sufficient opportunity of being heard is given to the affected party. There is no restriction placed on the admission of new/additional ground. Rule 11 of the Income Tax Appellate Tribunal Rules is not determinative of jurisdiction nor does it confer or invest any jurisdiction on the Tribunal which it does not already have but it regulates the exercise of jurisdiction. The only restriction laid down in rule 11 is that an opportunity of being heard be afforded to the affected party. The Tribunal can admit any ground, if law supports it, even if there is no material to support it. The Tribunal is a final fact finding authority, 4.3 In the case of Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC), the revenue was permitted to take a new ground for the first time. It was held that the rules framed by the Tribunal for regulating their own procedure including the procedure relating to additional ground are merely self-regulating in character and did not circumscribe or control the powers of the Tribunal as an appellate authority. This judgment, which deals with admission of additional ground, has not been considered in the case relied upon by learned Departmental Representative. On this aspect, the Special Bench in the case of Indo Java & Co. (supra), while discussing the observations in the cases of Income Tax Officer v. M.K. Mohammed Kunhi (1969) 71 ITR 815 (SC) and CIT v. Bansi Dhar Sons : (1986) 157 ITR 665 (SC), held as under :
"The next point, therefore, which requires consideration is as to whether the subject-matter of appeal is immutable or it can be enlarged or expanded. But before we do that, we may look at the nature of the power of the Tribunal under section 254. In the case of M.K. Mohammed Kunhi (supra), it was held by the Supreme Court that the right of appeal is a substantive right and the questions of fact and law are at large open to review by the Appellate Tribunal. It also held that it is a firmly established rule that an express grant of a statutory power carries with it by necessary implication, the authority to use all reasonable means to make such grant effective. It also held that the powers which have been conferred by section 254 on the Tribunal, with widest possible amplitude must carry with them by necessary implication, all powers and duties incidental and necessary to make the exercise of those powers fully effective. To the same effect are the observations of the Supreme Court in Bansidhar & Sons case (supra) and of the Bombay High Court in New India Life Assurance Co. Ltd.'s case (supra) which have been followed by the Delhi High Court in Edward Keventer (Successors) (P) Ltd.'s case (supra). In fact in the case of H.H. Maharaja Martand Singh Ju Deo v. CET (1983) 140 ITR 786 (MP), it has been referred to as an inherent power. Thus no express or separate provision like section 151 of Cicil Procedure Code was found necessary here. Therefore, the source of the Tribunal's power to admit additional grounds of appeal lies under section 254 itself as incidental or ancillary to its appellate jurisdiction for being exercised ex debito justitiae, i.e., in the interests of substantial justice. There no provision in the Act prescribing any restrictions on the admission of new or additional grounds of appeal. It follows the pattern of second appeals before the civil courts.
The marginal heading to section 254 would also not assist the department, in its interpretation as above. It has thus, been recognised that though the Tribunal may not be a court, by virtue of its duty to decide the case, it has inherent powers to do all such acts as are necessary to arrive at an effective decision. That means that the Tribunal has the power to go into every point which has a bearing on the determination of the chargeable income even if the parties before it have not taken those points and to permit the parties to take such points subject only to the limitation that the appellant shall not be placed in a position worse than what it was in before he filed the appeal."
In view of the above, we are unable to accept the finding in the case of Rakesh Gupta (supra). We also do not agree with the observations made in the said case that additional grounds involve verification of facts from the file of Director of Income Tax (Inv.) and investigation of facts confrontation of the concerned record with the concerned persons, etc. which would not be proper and warranted in the case at the stage of the Tribunal. In the case of National Thermal Power Co. Ltd. (supra), the Apex Court has held that :
"......... the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee."
The Apex Court has accepted the discretionary power of the Tribunal in respect of additional grounds. It has observed that the additional ground has to be allowed by the Tribunal where a question of law arises out of facts which are on record of the IT authorities.
4.4 In the case of Rakesh Gupta (supra), the Tribunal has not considered the meaning of the word 'record'. The narrow approach which the Tribunal has given to the word 'record' cannot be accepted. The term 'record' is not defined in the Act. For determining the true scope of this provision and the meaning to be properly assigned to the term 'record', it is necessary to keep in view the object of the provision and the nature of the power conferred on the authorities under that provision. The absence of definition cannot have the consequence of limiting its meaning to a very narrow and limited sphere of the record of the assessing officer or Departmental Representative alone. -
4.5 The assessing officer is entrusted with the jurisdiction of making assessment under section 158BC(c) only after the initiation of a valid search under section 132. Section 132 has included, the terms authorised officer and the assessing officer also. Provision for handing over of the record by the authorised officer to the assessing officer, if he is not assessing officer, has been made. Under section 2(7A), the assessing officer has been defined to mean the Assistant Commissioner or DC or AD or DD or the Income Tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under section 120(1)/(2). It also includes Joint Commissioner or Jt. Director who is directed under section 120(4)(b) to exercise or perform all or any of the powers and functions of the assessing officer. Under section 116, all these officers fall under Income Tax Authorities. Therefore, it cannot be held that the facts relating to compliance of various provisions as stipulated under section 132 are not available on record of the Income Tax Authorities. The Tribunal has only to examine the facts for rendering justice to the parties before it. We cannot hold that the facts relating to compliance of section 132 are not available on record. The Tribunal is a final fact-finding authority and is to give verdict or finding of fact on record before IT authorities. Whenever a finding has to be given by the Tribunal, the facts are to be examined by it. No finding can be given without examination of facts. Examination of facts is the basic and prime duty of the Tribunal for returning a correct factual finding.
4.6 If we analyse the nature of additional grounds, we find that the same are grounds which are left out or not taken at the time of filing of the appeal. This aspect has also not been considered in the case of Rakesh Gupta (supra). If the question of law and facts can be raised in the main ground, the same can also be raised by way of additional grounds. Under section 253(5), the Tribunal is empowered to entertain appeal, etc. by condoning the delay. Therefore, we can entertain additional grounds, if there is sufficient reason to condone the delay. The provision for condoning the delay is made for rendering substantial justice. In this case, the assessee has explained the reasons for filing additional grounds late due to the decision of Third Member (supra), which is sufficient reason to file additional ground after filing the appeal. We cannot reject the admission of additional grounds merely on technical consideration. The approach of the Tribunal should be justice-oriented and it should not avoid its duty on technical considerations. In the -case of Collector, Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC), it was held as under :
"When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay."
We cannot ignore the observations of Madras High Court in the case of CIT v. Indian Express (Madurai) (P) Ltd. (1983) 140 ITR 705 (Mad), in which the High Court while upholding the order of the Tribunal permitting the assessee to raise the additional grounds, held as under :
"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 fiscal jurisprudence, 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 the appeal 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 power of the Tribunal by such like notions as finality, subject-matter of 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 pasa 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 CIT v. Mahalakshmi Textile Mills (1967) 66 ITR 710 (SC) in one of the passages to which we have made reference, the Supreme Court has understood the Tribunal's appellate 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 CIT v. Nelliappan (1967) 66 ITR 722 (SC) as well as the Mahalakshmi Textiles Mills case, the Supreme Court had even used phrases which are reminiscent of the language which English Judges have used while describing a tax appeal. The Supreme Court observed that the Tribunal is not precluded from 'adjusting' the tax liabilities of the assessee 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 Rex v. Special Commissioner (1935) 20 Tax Cases 381 (CA); Greer L.J. in IRC v. Sheath (1932) 17 Tax Cases 149 (CA); Rome, LJ in the same case, IRC v. Sheath and Lord Wright M.R. in Rex v. Special Commissioner."
5. In view of the above discussions, we allow the assessee to raise the additional grounds of appeal.