Full Judgment Text
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PETITIONER:
JUTE CORPORATION OF INDIA LTD.
Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX AND ANR.
DATE OF JUDGMENT04/09/1990
BENCH:
SINGH, K.N. (J)
BENCH:
SINGH, K.N. (J)
THOMMEN, T.K. (J)
KULDIP SINGH (J)
CITATION:
1991 AIR 241 1990 SCR Supl. (1) 340
1991 SCC Supl. (2) 744 JT 1990 346
ACT:
Income Tax Act, 1961: Section 251-- Appeal before Appel-
late Assistant Commissioner--Additional grounds raised by
assessee which were not raised before the Income Tax Offi-
cer--Whether could be entertained.
HEADNOTE:
In respect of the assessment for the assessment year
1974-75, the appellant-assessee preferred an appeal before
the Appellate Assistant Commissioner. During the hearing of
the appeal, the assessee raised an additional ground as
regards its liability to Purchase Tax and claimed a deduc-
tion of Rs.11,54,995. After giving an opportunity of hearing
to the Income Tax Officer, the Appellate Assistant Commis-
sioner allowed the said claim.
The Revenue preferred an appeal before the Income Tax
Appellate Tribunal. The Tribunal held that the Appellate
Assistant Commissioner had no jurisdiction to entertain any
additional ground not raised before the Income Tax Officer
and set aside the order of the Appellate Assistant Commis-
sioner.
The assessee’s application for making reference to the
High Court was refused by the Tribunal. The High Court also
rejected the assessee’s application for calling the state-
ment of the case and reference from the Tribunal. Hence,
this appeal by special leave.
Disposing of the appeal, the Court,
HELD: 1.1 The declaration of law is clear that the power
of the Appellate Assistant Commissioner is co-terminus with
that of the Income Tax Officer. If that be so, there appears
to be no reason as to why the appellate authority cannot
modify the assessment order on an additional ground even if
not raised before the Income Tax Officer. No exception could
be taken to this view as the Act does not place any restric-
tion or limitation on the exercise of appellate power. Even
otherwise an Appellate Authority while hearing appeal
against the order of a subordinate authority has all the
powers which the original
341
authority may have in deciding the question before it sub-
ject to the restrictions or limitation if any prescribed by
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the statutory provisions. In the absence of any statutory
provisions to the contrary the Appellate Authority is vested
with all the plenary powers which the subordinate authority
may have in the matter. [155G-H; 156A-B]
1.2 If the Appellate Assistant Commissioner is satisfied
he would be acting within his jurisdiction in considering
the question so raised in all its aspects. Of course, while
permitting the assessee to raise an additional ground, the
Appellate Assistant Commissioner should exercise his discre-
tion in accordance with law and reason. He must be satisfied
that the ground raised was bona fide and that the same could
not have been raised earlier for good reasons. The satisfac-
tion of the Appellate Assistant Commissioner depends upon
the facts and circumstances of each case and no rigid prin-
ciples or any hard and fast rules can be laid down for this
purpose. [157D-F]
Commissioner of Income Tax v. Mc Millan & Co., [1958] 33
I.T.R. 182; Commissioner of Income Tax, U.P. v. Kanpur Coal
Syndicate,, [1964] 53 I.T.R. 225; Kedarnath Jute Mfg. Co.
Ltd. v. Commissioner of Income Tax (Central), Calcutta,
[1971] 82 I.T.R. 363; relied on.
Commissioner of Income Tax, Bombay v. Shapporji Patton
Ji Mistry, [1962] 44 I.T.R. 891; Addl. Commissioner of
Income Tax Gujarat v. Gurjargravures ?. Ltd., [1978] 111
I.T.R. 1; distinguished.
Rai Kumar Srimal v. Commissioner of Income Tax, West
Bengal 111, [1976] 102 I.T.R. 525, approved.
Narrondas Manordass v. Commissioner of Income Tax,
[1957] 31 1. T.R. 909 referred to.
2. In the instant case, the assessee was assessed to
Purchase Tax. The appellant disputed the demand and filed an
appeal before the Appellate Authority and obtained stay
order. The assessee thereafter claimed deduction for the
amount of Rs.11,54,995 towards his liability to pay Purchase
Tax as deduction for the assessment year 1974-75. The asses-
see had not actually paid the Purchase Tax as it had ob-
tained stay from the Appellate Authority; nonetheless its
liability to pay tax existed, and it was entitled to deduc-
tion of Rs. 11,54,995. [158B-C]
3. Since the view taken by the Income Tax Appellate Tribunal
is
342
not sustainable in law, the order of the Tribunal is set
aside and the matter is remitted to the Tribunal to consider
the merit of the deduction permitted by the Appellate As-
sistant Commissioner. If the Tribunal thinks it necessary,
it may remand the matter to the Appellate Assistant
Commissioner (Deputy Commissioner of Appeals) for hearing
[158F-H]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1935 of
1981.
From the Judgment and Order dated 8.4. 1980 of the
Calcutta High Court in Matter No. 143 of 1980.
Sukumar Bhattacharya and G.S. Chaterjee for the Appellant.
J. Ramamurthy. g. Rajappa and Ms. A. Subhashini for the
Respondents.
The Judgment of the Court was delivered by
K.N. SINGH, J. The appellant is a Government Corporation
engaged in jute industry. It was assessed to income tax for
the assessment year 1974-75 by the Income Tax Officer. The
assessee preferred appeal before the Appellate Assistant
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Commissioner. During the hearing of the appeal, the assessee
raised an additional ground claiming deduction of Rs.
11,54,995 on the ground of liability of Purchase Tax. The
assessee claimed that in view of the decision of this Court
in Kedarnath Jute Company Limited v. Commissioner of Income
Tax, [19771 82 I.T.R. 363 the aforesaid amount being tax
liability should be deducted from its income for purposes of
charging tax. The Appellate Assistant Commissioner permitted
the assessee to raise the additional ground and after hear-
ing the Income Tax Officer, he accepted the assessee’s claim
and allowed deduction of Rs. 11,54,995 in computing the
total income of the assessee for the assessment year 1974-
75. The Revenue preferred appeal before the Income Tax
Appellate Tribunal. The Tribunal held that the Appellate
Assistant Commissioner had no jurisdiction to entertain an
additional ground or to grant relief to the assessee on a
ground which had not been raised before the Income Tax
Officer. The Tribunal set aside the order of the Appellate
Assistant Commissioner placing reliance on the decision of
this Court in Addl. Commissioner of Income Tax, Gujarat v.
Gurjargravures P. Ltd.. [1978] 111 I.T.R.I. The assessee
made application before the Tribunal under Section 256(1) of
the Income Tax Act, 1961 for making reference to the High
Court. The Tribunal refused to refer the question on
343
the findings that the question stood covered by this Court’s
decision in Gurjargravures (supra). The assessee thereupon
approached the High Court under Section 256(2) of the Act
for calling the statement of case and reference from the
Appellate Tribunal. A Division Bench of the Calcutta High
Court held that the Tribunal was right in rejecting the
assessee’s application, therefore it refused to call state-
ment of case. The assessee thereupon approached this Court
under Article 136 of the Constitution. and obtained leave.
Hence this Appeal.
The question of law which the assessee sought to be
referred to the High Court under Section 256(1) of the Act
was:
"Whether on the facts and in the circumstances of the case.
the Income Tax Appellate Tribunal was justified in holding
that the Appellate Assistant Commissioner of Income Tax had
exceeded his powers in entertaining the additional ground of
appeal taken before him in respect of the claim for deduc-
tion of a sum of Rs. 11,54,995 representing liability for
raw jute Purchase Tax."
Section 251 of the Income Tax Act (hereinafter referred
to as the ’Act’) prescribes power of the Appellate Authority
hearing appeal against the order of..Income Tax Officer.
Clause (a) of Section 25 1(1) confers power on the Appellate
Authority namely the Appellate Assistant Commissioner [now
after the Amendment of 1987 the Deputy Commissioner (Ap-
peals)] according to which Appellate AUthority while hearing
appeal against an order of assessment. has power to confirm.
reduce, enhance or annual the assessment; he is further
empowered to set aside the assessment and remit the case
back to the Assessing Officer for making a fresh assessment
in accordance with its directions. after making such further
inquiry as may be necessary. If a direction is issued by the
Appellate Authority, the Assessing Officer is required to
proceed to make such fresh assessment and determine the
amount of tax, if any. payable on the basis of fresh assess-
ment. The Appellate Assistant Commissioner is thus invested
with wide powers under s. 251(1)(a) of the Act while hearing
an appeal against the order of assessment made by the Income
Tax Officer. The amplitude of the power includes power to
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set aside the assessment order or modify the same. The
question is whether the Appellate Assistant Commissioner
while hearing an appeal under s. 251(1)(a) has jurisdiction
to allow the assessee to raise an additional ground in
assailing the order of the assessment before it. The Act
does not contain any express provision debarring an assessee
from raising an addi-
344
tional ground in appeal and there is no provision in the Act
placing restriction on the power of the Appellate Authority
in entertaining an additional ground in appeal. In the
absence of any statutory provision. general principle relat-
ing to the amplitude of appellate authority’s power being
co-terminus with that of the initial authority should nor-
mally be applicable. But this question for the purposes of
the Income Tax Act has been an intricate and vexed one.
There is no uniformity in the judicial opinion on this
question.
Section 31 of the Income Tax Act, 1922 also conferred
power on the Appellate Assistant Commissioner to hear appeal
against the assessment order made by the Income Tax Officer.
The Chagla, CJ of the Bombay High Court considered the
question in detail in Narrondas Manordass v. Commissioner of
Income Tax, [1957] 31 I.T.R. 909 and held that the Appellate
Assistant Commissioner was empowered to correct the Income
Tax Officer not only with regard to a matter which had been
raised by the assessee but also with regard to a matter
which may have been considered by the Income Tax Officer and
determined in the course of the assessment. The High Court
observed that since the Appellate Assistant Commissioner had
revising authority against the decisions of the Income Tax
Officer; a revising authority not in the narrow sense of
revising those matters, which the assessee makes a grievance
but the subject matter of the appeal not only he had the
same powers which could be exercised by the Income Tax
Officer. These observations were approved by this Court in
Commissioner of Income Tax v. McMillan & Co., [1958] 33
I.T.R. 182 the Appellate Assistant Commissioner on an appeal
preferred by the assessee had jurisdiction to invoke, for
the first time provisions of Rule 33 of the Income Tax
Rules, 1922, for the purpose of computing the income of a
nonresident even if the Income Tax Officer had not done so
in the assessment proceedings. But in Commissioner of Income
Tax, Bombay v. Shapporji Pallon Ji Mistry, [1962] 44 I.T.R.
891 this Court while considering the extent of the power of
the Appellate Assistant Commissioner referred to a number of
cases decided by various High Courts including Bombay High
Court judgment in Narrondas case and also the decision of
this Court in McMillan & Co. case and held that in an appeal
filed by the assessee, the Appellate Assistant Commissioner
has no power to enhance the assessment by discovering new
sources of income, not considered by the Income Tax Officer
in the order appealed against. It was urged on behalf of the
Revenue that the words "enhance the assessment" occurring in
s. 31 were not confined to the assessment reached through
particular process but the amount which ought to have been
computed if the true total income had been
345
found." The Court observed that there was no doubt that this
view was also possible, but having regard to the provisions
of Sections 34 and 33B, which made provisions for assessment
of escaped income from new sources, the interpretation
suggested on behalf of the Revenue would be against the view
which had held the field for nearly 37 years. In this view
the Court held that the Appellate Assistant Commissioner had
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no power to enhance the assessment by discovering new
sources of income. This decision does not directly deal with
the question which we are concerned. Power to enhance Tax on
discovery of new source of income is quite different than
granting deduction on the admitted facts fully supported by
the decision of this Court. If the tax liability of the
assessee is admitted and if the Income Tax Officer is af-
forded opportunity of hearing by the Appellate Authority is
allowing the assessee’s claim for deduction on the settled
view of law, these appears to be no good reason to curtail
the powers of the appellate authority under Section 25
1(1)(a) of the Act.
In Commissioner of Income Tax, U.P.v. Kanpur Coal Syndi-
cate, [1964] 53 I.T.R. 225 a three Judge Bench of this Court
discussed the scope of Section 31(3)(a) of the Income Tax
Act, 1922 which is almost identical to Section 251(1)(a).
The Court held as under:
"If an appeal, lies, Section 31 of the Act describes the
powers of the Appellate Assistant Commissioner in such an
appeal. Under Section 31(3)(a) in disposing of such an
appeal the Appellate Assistant Commissioner may, in the case
of an order of assessment, confirm, reduce, enhance or annul
the assessment; under clause (b) thereof he may set aside
the assessment and direct the Income Tax Officer to make a
fresh assessment. The Appellate Assistant Commissioner has,
therefore, plenary powers in disposing of an appeal. The
scope of his power is conterminous with that of the Income
Tax Officer. He can do what the Income Tax Officer can do
and also direct him to do what he has failed
tO do. "
(emphasis supplied)
The above observations are squarely applicable to the
interpretation of s. 25 1(1)(a) of the Act. The declaration
of law is clear that the power of the Appellate Assistant
Commissioner is co-terminus with that of the Income Tax
Officer, if that he so, there appears to be no reason as to
why the appellate authority cannot modify the assessment
order on an additional ground even if not raised before the
Income Tax Officer. No
346
exception could be taken to this view as the Act does not
place any restriction or limitation on the exercise of
appellate power. Even otherwise an Appellate Authority while
hearing appeal against the order of a subordinate authority
has all the powers which the original authority may have in
deciding the question before it subject to the restrictions
or limitations if any prescribed by the statutory provi-
sions. In the absence of any statutory provision the Appel-
late Authority is vested with all the plenary powers which
the subordinate authority may have in the matter. There
appears to be no good reason and none was placed before us
to justify curtailment of the power of the Appellate Assist-
ant Commissioner in entertaining an additional ground raised
by the assessee in seeking modification of the order of
assessment passed by the Income Tax Officer.
In Additional Commissioner of Income Tax, Gujarat v.
Gurjargravures P. Ltd. (supra) this Court has taken a dif-
ferent view, holding that in the absence of any claim made
by the assessee before the Income Tax Officer regarding
relief, he is not entitled to raise the question of exemp-
tion under Section 84 before the Appellate Assistant Commis-
sioner hearing appeal against the order of Income Tax Offi-
cer. In that case the assessee had made no claim before the
Income Tax Officer for exemption under Section 84 of the
Act, no such claim was made in the return nor any material
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was placed on record supporting such a claim before the
Income Tax Officer at the time of assessment. The assessee
for the first time made claim for exemption under Section 84
before the Appellate Assistant Commissioner who rejected the
claim but on further appeal the Appellate Tribunal held that
since the entire assessment was open before the Appellate
Assistant Commissioner there was no reason for his not
entertaining the claim, or directing the Income Tax Officer
to allow appropriate relief. On a reference the High Court
upheld the view taken by the Tribunal. On appeal this Court
set aside the order of the High Court as it was of the view
that the Appellate Assistant Commissioner had no power to
interfere with the order of assessment made by Income Tax
Officer on a new ground not raised before the Income Tax
Officer, and therefore the Tribunal committed error in
directing the Appellate Assistant Commissioner to allow the
claim of the assessee under Section 84 of the Act. Apparent-
ly this view taken by two Judge Bench of this Court appears
to be in conflict with the view taken by the three Judge
Bench of the Court in Kanpur Coal Syndicate’s case (supra).
It appears from the report of the decision in Gujarat case
the three Judge Bench decision in Kanpur Coal Syndicate
(supra) case was not brought to the notice of the Bench in
the Gurjargravures P. Ltd. (supra). In the
347
circumstances the view of the larger Bench in the Kanpur
Coal Syndicate, (supra) holds the field. However we do not
consider it necessary to over-rule the view taken in Gurjar-
gravures P. Ltd. (supra) case as in our opinion that deci-
sion is rounded on the special facts of the case, as would
appear from the following observations made by the Court;
"As we have pointed out earlier, the statement of case drawn
up by the Tribunal does not mention that there was any
material on record to sustain the claim for exemption which
was made for the first time before the Appellate Assistant
Commissioner. We are not here called upon to consider a case
where the assessee failed to make a claim though there was
no evidence on record to support it, or a case where a claim
was made but no evidence or insufficient evidence was ad-
duced in support. In the present case neither any claim was
made before the Income Tax Officer, nor was there any mate-
rial on record supporting such a claim." The above observa-
tions do not rule out a case for raising an additional
ground before the Appellate Assistant Commissioner if the
ground so raised could not have been raised at that particu-
lar stage when the return was filed or when the assessment
order was made, or that the ground became available on
account of change of circumstances or law. There may be
several factors justifying raising of such new plea in
appeal, and each case has to be considered on its own facts.
If the Appellate Assistant Commissioner is satisfied he
would be acting within his jurisdiction in considering the
question so raised in all its aspects. Of course, while
permitting the assessee to raise an additional ground, the
Appellate Assistant Commissioner should exercise his discre-
tion in accordance with law and reason. He must be satisfied
that the ground raised was bona fide and that the same could
not have been raised earlier for good reasons. The satisfac-
tion of the Appellate Assistant Commissioner depends upon
the facts and circumstances of each case and no rigid prin-
ciples or any hard and fast rule can be laid down for this
purpose.
In Rai Kumar Srimal v. Commissioner of Income Tax, West
Bengal 111, [1976] 102 I.T.R. 525 a Division Bench of Cal-
cutta High Court presided over by Sabyasachi Mukharji, J.,
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as he then was held that the Appellate Assistant Commission-
er was entitled to admit new ground or evidence either suo
motu or at the invitation of the parties. If he is acting on
being invited by the assessee, then there must be some
ground for admitting new evidence in the sense that there
must be some explanation to show that the failure to adduce
earlier the evidence sought to be adduced before the Appel-
late Assistant Commissioner was not wilful and not unreason-
able. This view is reasonable and it finds favour with us.
348
In the instant case the assessee was carrying on manu-
facture and sale of jute. In the assessment year of 1974-75
he did not claim any deduction on its liability to pay
Purchase Tax under the provisions of the Bengal Raw Jute
Taxation Act, 1941, as the appellant entertained a belief
that it was not liable to pay Purchase Tax under the afore-
said Act. But later on it was assessed to Purchase Tax and
the order of assessment was received by it on 23.11. 1973.
The appellant disputed the demand and filed an appeal before
the Appellate Authority and obtained stay order. The asses-
see thereafter claimed deduction for the amount of Rs.
11,54,995 towards his liability to pay Purchase Tax as
deduction for the assessment year 1974-75. The assessee had
not actually paid the Purchase Tax as he had obtained stay
from the Appellate Authority nonetheless its liability to
pay tax existed, and it was entitled to deduction of Rs.
11,54,995 as was held by this Court in Kedarnath Jute Mfg.
Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta,
[1971] 82 I.T.R. 363. There was no dispute about these
facts. In these circumstances the Appellate Assistant Com-
missioner allowed the assessee to raise this question and
after hearing the Income Tax Officer, he granted the deduc-
tion from the assessee’s income. The Tribunal took a con-
trary view placing reliance on the decision of this Court in
Gujargravures P. Ltd. (supra). As already discussed the
facts in the instant case are quite clear, unlike the facts
involved in Gurjargravures case. We are, therefore, of the
view that the view taken by the Appellate Tribunal and the
High Court is not sustainable in law. In our opinion, the
High Court and Tribunal both committed error in refusing to
state the case, or making a reference.
The next question which arises for consideration is to
know what order should be passed in the present circum-
stances. In view of the findings recorded by us ordinarily
we should direct the High Court to call for the statement of
case from the Tribunal and thereupon decide the matter
afresh, but this procedure would be time consuming. Since we
have already discussed the correct position of law we do not
consider it necessary to follow the usual procedure. Since
the view taken by the Income Tax Appellate Tribunal is not
sustainable in law we grant leave against the order of the
Appellate Income Tax Tribunal under Article 136 and set
aside the same and remit the matter to the Appellate Income
Tax Tribunal to consider the merit of the deduction permit-
ted by the Appellate Assistant Commissioner. If the Tribunal
thinks it necessary it may remand the matter to the Appel-
late Assistant Commissioner (now Deputy Commissioner of
Appeals) for reheating. The appeal is accordingly disposed
of. There will be no order as to costs.
G.N. Appeal disposed of.
349