Gopal Rao Ekbote, C.J.
1. The following two questions have been referred to us by the Income-tax Appellate Tribunal, Hyderabad :
'1. Whether, on the facts and in the circumstances of the case, the method of revaluation of closing stock adopted by the Appellate Tribunal was a valid one?
2. If the answer to question No. 1 is in the affirmative, whether the relief in revaluation of stock should be restricted to the actual addition to the closing stock made by the Income-tax Officer or could exceed the same?' The assessee is a firm carrying on its business in mica mining. For theassessment year 1960-61, the closing stock valued by the assessee was found by the Income-tax Officer to be incorrect. The closing stock consisted of three items, crude mica, cut mica and waste rounds. The assessee valued cut mica and waste rounds at an average rate of Re. 1.01 per pound.
2. At the close of the accounting year, i.e., 31st March, 1960, the assessee's stock comprised of the following :
Pounds1.Crude mica4,12,6562.Cut mica including splittings1,46,5343.Waste rounds1,98,648The total quantity of crude micaprocessed in that year was 25,84,429 pounds.The said crude mica, when proces sed, yielded during the year : Pounds Cut mica2,49,398 Splittings2,105 Waste rounds5,33,085
3. The total processing cost was Rs. 4,42,465. The cost per pound thus came to 56 paise.
4. The assessee valued crude mica at the mining cost at 45 paise per pound. There is no dipute about this item.
5. Cut mica, splittings and waste rounds were valued at the mining cost plus the processing cost, i.e., at 45 paise plus 56 paise, i.e., at Re. 1.01 per pound.
6. The assessee valued the closing stock at the said rates and arrived at a total value of Rs. 5,34,329.
7. Crude mica of the quantity of 4,12,656 Ibs. was valued at the rate of 45 paise per pound at Rs. 1,85,695.
8. For 3,49,192 Ibs. of cut mica and waste rounds at the rate of Re. 1.01 per pound at Rs. 3,48,634, the total thus came to Rs. 5,34,329.
9. The Income-tax Officer, however, thought that the method adopted by the assessee does not bring out the true cost of cut mica. His opinion was that the only end product of crude mica is cut mica alone. The waste rounds being of inferior quality had to be valued on the basis of the wages paid at the rate of 22 paise per Ib. for picking them up from the waste scrap and not at the rate of cut mica. He thus divided the total cost of mining and processing with the cut mica produced in that year and arrived at an average cost of Rs. 6.62 per Ib. of cut mica. He, however, took into account the average market rate as it was less than the average cost of productionand, therefore, calculated the closing stock at the rate of Rs. 5'36, which was the market rate. His valuation was as uuder :
Rs.1.Crude mica 4,12,656lbs. at 40 paise per pound1,85,6952.Cut mica andsplittings at the average sale price of Rs. 5.36 per lb. for 1,46,534 lbs. 7,85,4223.Waste rounds 1,98,648 at 22 paise per pound43,702
Total value 10,14,819
10. He, therefore, added, a further sum of Rs. 4,80,490 to the value of the closing stock as the assessee had put.
11. The Income-tax Officer, consequently, had to revalue the opening stock on the same lines. He raised the value of the opening stock to Rs. 7,90,489 in place of Rs. 4,09,983 as was valued by the assessee.
12. As a result of these two valuations, he made an addition of Rs. 99,984 to the under-valuation of the closing stock made by the assessee. The assessee's appeal to the Appellate Assistant Commissioner was substantially rejected.
13. On further appeal by the assessee, the Tribunal reached the conclusion that the final products of crude mica are cut mica, splittings and waste rounds only. The quality of waste mica, according to the Tribunal, cannot be taken into consideration for determining the cost of the end products. Thus, the cost of crude mica together with wages and expenditure in processing, was declared to be the cost of final products. The Tribunal, therefore, rejecting the computation made by the Income-tax Officer as well as made by the assessee valued the crude mica which was produced in the relevant year at 23,87,361 Ibs. at 45 paise per Ib. at Rs. 10,63,707.
14. Since during the relevant year crude mica to the extent of Rs. 25,84,429 Ibs. was utilised its cost was arrived at 45 paise and that was declared to be the cost of the raw material. To this cost factory expenses amounting to Rs. 4,42,465 were added. The total cost thus arrived at was divided by the quantity of the end products, that is, 7,84,483 Ibs. The unit cost of the end product was thus arrived at for the year 1959-60 at Rs. 1.49 and for 1960-61 at Rs. 1.89.
15. The opening and closing stocks were, therefore, valued accordingly and the Tribunal reached the conclusion that, instead of addition of Rs. 99,984 being added as was done by the Income-tax Officer, according to their calculation, a sum of Rs. 10,644 alone has to be added. The appeal was, accordingly, allowed in part.
16. The assessee, thereafter, filed Miscellaneous Application No. 13 of 1969-70. The Tribunal, by its order dated 12th May, 1970, modified its earlier order as it reached the conclusion that there was a mistake in calculating the figures.
17. Before the Tribunal three points were raised in the said petition. The first was that instead of Rs. 1.49 per unit, Rs. 1.75 per unit should have been calculated. The mistake occurred because the total quantity of end products was not accurately kept in view. The second point was that the valuation of the closing stock in regard to cut mica should have been higher than the waste rounds. The third question was that the extent of crude and cut mica was improperly estimated.
18. The Tribunal agreed with the first contention. After calculating the figures accurately it reached the conclusion that there was arithmetical mistake and, therefore, corrected it. The Tribunal said :
'Making the above alterations the differences in closing and opening stocks would be Rs. 3,02,908 and Rs. 3,86,977, respectively. The above computation will result in a reduction of profit of Rs. 83,169 instead of an addition.'
19. The Tribunal, however, did not agree with the contention of the assessee that the abovesaid amount of profit, therefore, should be deducted from the total amount of profit. It thought that the matter on appeal before it related only to the addition of Rs. 99,984 and it was not competent to go further into the matter and give a greater relief to the 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, therefore, directed the deduction under Section 35(2) of the Act.
20. The first question referred to us calls for an answer regarding the method adopted by the Tribunal. We have already seen that the Tribunal disagreeing with the lower Tribunals treated crude mica separately and cut mica, splittings and waste rounds together. The cost of these two was worked out separately. This method is objected to by the department on the ground that the method adopted by the Income-tax Officer was more correct and should have been sustained by the Tribunal. In order to appreciate this contention, one has to find out what is really the end product of crude mica.
21. Now, mica mining and processing is an important industry in India. Mica is worked extensively in Bihar, Rajasthan and Andhra Pradesh. It is a thriving business in Andhra Pradesh. The Andhra Pradesh mica is greenish in colour, clear and comparatively free from inclusions, like Bihar mica. Mica is produced mainly in Nellore District in Andhra Pradesh. Nellore mica is of greenish colour, though ruby quality mica is also obtained from a few mines.
22. There are a large number of mica dealers whose main business is the purchase of mine crude mica and process it into block, splittings, etc. The petitioner is one such dealer.
23. Mica is invaluable in the electrical industry because of its unique combination of physical, chemical and thermal property, low power loss factor, dielectric constant and dielectric strength. Sheet mica is used in a number of electrical and electronic appliances in different shapes and sizes. The quality of mica for commercial purposes depends largely on the amount of staining, air-inclusions, the degree of flatness and the colour.
24. Prospecting of mica is still a matter of trial and error as no scientific method has so far been evolved for determining with certainty the occurrence of paying mica pegmatite.
25. Accordingly, mines are developed following the veins. The room and pillar method is adopted in mining.
26. The mica obtained from the mine is called 'crude mica'. It requires a little dressing to remove associated pegmatite dirt as well as defective portions such as buckled, wrinkled and wavy mica. They are rifted away with sickle.
27. Book mica split into a size is called ' block mica '. Block mica split into thin films of a given thickness is called ' mica film' and when they are less than a given thickness they are called 'splittings'.
28. The labourers engaged in mica mines and factories where mica is hand-dressed are experts in dressing the crude mica into block, films and splittings. They do it by visual aid only.
29. During the course of processing considerable portion of mica goes waste. It is termed as 'scrap mica' The ratio of scrap mica to crude may vary from 60 to over 80 per cent., depending on the defective portion in the crude mica.
30. For commercial purposes, mica is graded according to the quality. Indian Standards Institution has issued two specifications for grading and classifying of muscovite mica. The mica production is accordingly graded broadly into, (1) sheet mica which includes block, films and splittings, and (2) waste or scrap mica comprising the bulk of the total output. In India waste or scrap mica is mainly of muscovite variety obtained from mining, grading and trimming the sheet mica and is known in the trade as ' mica scrap 'or' factory scrap'. Scrap is thus a mica by-product obtained in the course of processing mica.
31. It is quite relevant to note that although 'rounds' are not expressly mentioned above, it was not doubted that keeping in view the spots, the round cuttings from crude mica is called 'rounds'. The rest of it is waste or scrap. These rounds admittedly are not just picked up from the scrapbut are cut by the labourer from the crude mica. 'Rounds' thus cannot be termed as waste or scrap. They are also part of the end product although their cost may be less than the cost of cut mica.
32. What follows from what is stated above is that the end product of crude mica is sheet mica which term includes block, films, splittings and rounds.
33. The result, therefore, is that the Tribunal was right in valuing the entire quantity of crude mica which went into processing. - The Tribunal was also correct in holding that the end product of crude mica is not only cut mica but also splittings and rounds and has rightly valued it bearing in mind the expenditure incurred on them on mining as well as processing. The average rate per unit arrived at by the Tribunal could not, in the light of above, be disputed before us. The Tribunal also was right in excluding the value of the waste or scrap mica left after processing the crude mica from valuing the closing stock. The method thus adopted by the Tribunal in determining the valuation of closing stock and in turn opening stock is, in our judgment, quite correct and unassailable.
34. We then turn to the second question. We have already referred to the facts relevant to the question. It would be plain that the answer to this question depends upon determining the scope of the appeal before the Tribunal.
35. Since the present case is governed by the Act of 1922, we have to consider Section 33 of that Act. The language of Section 33(4) clearly indicates that the Appellate Tribunal may or can pass orders 'thereon' on appeal 'as it thinks fit '. 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's 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.
36. The Act has thus left to the parties going up as appellants before the Tribunal to choose and set the scope of their appeal by raising questions arising out of the relevant proceeding. They can limit their attack on the determination of the first appellate authority and seek an intervention of the Tribunal only to the extent they consider necessary for getting the relief they intend to claim from the Tribunal, They are not, however, permitted to widen the scope of the proceedings determined by the Income-tax Officer or the first appellate authority. Within the outer limit of those proceedings, they are free to ask for 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 part of the order of the lower tribunal which has been made the subject-matter of the appeal before the Tribunal. 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 find 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.
37. This is the result produced by a reading of Section 35 read with , Rules 11 and 27 of the Income-tax (Appellate Tribunal) Rules, 1963. 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.
38. 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, apart from the limit which the word 'thereon' puts upon it, must be placed upon the generality of the words used. No one can suppose that the legislature intended to create a dictatorship in the Tribunal, if and whenever an appeal happened to be brought before it under this section. It is equally incredible that the sub-section should have been intended to give the Tribunal power to make any order it thinks fit relating to the assessment or transactions concerning it in general, or even in a case brought before it in particular, without any regard to the subject-matter of the appeal. The sub-section, after all, is not dealing with the powers of the Appellate Tribunal as such. It is dealing with its powers as an Appellate Tribunal exercising quasi-judicial functions and the order which the Tribunal may make as such. Hence, the Tribunal's decisions must be confined, as in the case of other judicial or quasi-judicial tribunals, to the questions brought before it on the appeal, and it must not travel outside it.
39. It is true that the powers of rectification bestowed on the Commissioner, Income-tax Officer and the Appellate Assistant Commissioner are extended by Section 35(2) to the Appellate Tribunal. But this power is exercisable only when there is a mistake in the judgment of the Tribunal. It is of course plain that after the mistake is thus corrected, the Tribunal will have the ancillary power to pass all consequential orders. But this should not be understood to extend the scope of the appeal in disposing of which there appeared some mistake. The error sought to be rectified, through an application under that section, should not be as a result of any fault of the party applying or the conduct of the appeal proceedings, but should be one attributable entirely to the Tribunal in working out correctly the arithmetic involved in the case. Section 35(2) itself sets the limit to the exercise of jurisdiction in that behalf. It does not enable an order to be revised or reviewed but permits only to correct such error which is apparent on the face of the record. The order would be amended to that extent. It is obvious that any fresh relief to which the applicant may become entitled as a result of correction can be allowed as a consequential order if and only if it is within the scope of the appeal itself. If the relief now claimed as a result of the correction was not asked either before the lower tribunals or even before the Appellate Tribunal it is evident that the Tribunal cannot give that relief. When the Appellate Tribunal had no jurisdiction to grant the relief originally because it would be beyond the scope of the appeal, it cannot grant it as a result of correction of the material error. What the Tribunal cannot do directly, it would not be able to do indirectly. Since power to review its judgment does not exist, the Tribunal cannot exercise that power. And in any case that power also, if available, would be again limited to the subject-matter of the appeal. Since we are of the view, as we will explain immediately, that the relief now claimed, in view of the correction of the error by the Tribunal not being the subject-matter of the appeal, no relief could have been granted to the assessee either in the appeal itself or in a proceeding under Section 35(2).
40. That takes us to the consideration of the question as to the scope of the appeal before the Tribunal. We have to find out what was the subject-matter of the appeal. We have gone through the grounds of appeal. The whole attack on the order of the Appellate Assistant Commissioner was concentrated on the method of valuation of the closing stock. The valuation alone was attacked. The second question was with regard to 'rounds'. The relief claimed was as follows :
'The Tribunal may be pleased to direct the Income-tax Officer to delete the addition of Rs. 99,984 from the income assessed for this year and reduce the tax accordingly.
41. It would immediately be seen that the purpose of attacking the method of valuation and the valuation was to get the relief of deleting the addition made by the Income-tax Officer of Rs. 99,984 and in consequence reduce the tax. It was never the case of the assessee that he is entitled to a further deduction of profit of Rs. 83,169. No question regarding this was even agitated either before the Income-tax Officer or before the Appellate Assistant Commissioner or even before the Tribunal. It was not the subject-matter of the appeal and the Tribunal, consequently, had no jurisdiction to award any relief not claimed by the assessee in that regard. We agree with the Tribunal's view 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 evaluation of the stock. It was not competent to go further into the matter and give a greater relief than what was asked for by the assessee in its appeal.
42. We would, accordingly, answer the first question in the affirmative and in favour of the assessee and against the department. We answer the second question as above in favour of the department and against the assessee.
43. We leave the parties to bear their own costs. Advocat's fee Rs. 250.