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Ferro Alloys Corporation Ltd. Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1983)6ITD521(Delhi)
AppellantFerro Alloys Corporation Ltd.
Respondentincome-tax Officer
Excerpt:
1. the revenue has filed it appeal no. 107 (nag.) of 1981. the assessee has filed cross-objection no. 5 (nag.) of 1981. in addition, the assessee has also filed an appeal in which the same grounds are taken as in the cross-objection and that appeal is ft appeal no. 157 (nag.) of 1981. all these relate to the assessment year 1972-73. it appeal no.157 (nag.) of 1981 has been filed late and the assessee has filed an application for condonation of delay. according to the assessee's application, the delay occurred because the assessee's appeals were heard in delhi being transferred from time to time by the president on the application of the assessee for the earlier years. for this year, the assessee sent the papers to delhi for filing the appeal but it was later on found that the appeal.....
Judgment:
1. The revenue has filed IT Appeal No. 107 (Nag.) of 1981. The assessee has filed cross-objection No. 5 (Nag.) of 1981. In addition, the assessee has also filed an appeal in which the same grounds are taken as in the cross-objection and that appeal is FT Appeal No. 157 (Nag.) of 1981. All these relate to the assessment year 1972-73. IT Appeal No.157 (Nag.) of 1981 has been filed late and the assessee has filed an application for condonation of delay. According to the assessee's application, the delay occurred because the assessee's appeals were heard in Delhi being transferred from time to time by the President on the application of the assessee for the earlier years. For this year, the assessee sent the papers to Delhi for filing the appeal but it was later on found that the appeal should have been filed only at Nagpur.

In this process a short delay occurred. Having perused the assessee's application and also having heard the arguments of both the sides, we condone the delay. As already mentioned, the grounds taken in the appeal are identical with the grounds taken in the cross-objection and, therefore, it makes no difference even if we condone the delay and hear the appeal along with the cross-objection.

2. At the outset, the learned standing counsel, Shri Wazir Singh, argued that we have no jurisdiction to hear the appeals as the President had no power to transfer these appeals from Nagpur Bench to Delhi Bench. He pointed out that by general order, namely, Standing Order No. 1 of 1973, the jurisdiction of the different Benches of the Tribunal has been set out in accordance with the power given to the President under Rule 4 of the Income-tax (Appellate Tribunal) Rules, 1963 and, therefore, that power is exhausted. Secondly, for transferring an appeal from one Bench to another, the President should have followed the principles of natural justice and the transfer is discriminatory because it causes inconvenience and hardship to the Commissioner. He relied on the decision of the Punjab and Haryana High Court in 18 STC 50 (sic). He has also referred to the decisions in [1948] 16 ITR 521 (sic) and Bidi Supply Co. v. Union of India [1956] 29 ITR 717, 723 (SC).

3. In our view, the objection raised by Mr. Wazir Singh is devoid of any substance. Section 255 of the Income-tax Act, 1961 ('the Act') deals with the procedure to be followed by the Tribunal. Sub-section (1) of Section 255 states that the powers and functions of the Tribunal would be discharged by Benches constituted by the President. No doubt, the Bench should consist of two members in accordance with Sub-section (2) of Section 255. The other sub-sections deal with the constitution of Special Benches and assigning cases to a Third Member in case of a difference of opinion and other related matters. Rule 4 reads as follows: (1) A Bench shall hear and determine such appeals and applications made under the Act as the President may by general or special order direct.

(2) Where there are two or more Benches of the Tribunal working at any headquarters, the President or, in his absence, the seniormost member present may transfer an appeal or an application from any one such Bench to any other.

This rule is made in accordance with the powers vested in the Tribunal to make its own rules for its functioning. As seen from the rule, the President can pass a general order by which cases are assigned to different Benches. He can also pass special order in respect of a class of cases or of a particular case. The general order passed by the President under Rule 4 is standing order No. 1 of 1973, which was from time to time amended in conformity with the needs. The President has also the power to pass a special order in respect of a particular case and it is by virtue of this provision that the President can transfer a case from one Bench to another Bench. Mr. Wazir Singh is not right in his submission that once a general order is passed under Rule 4, the power of the President would get exhausted. The President has the power to pass not only general order but also special order and merely by passing general order, lie does not lose the power of passing the special order.

4. It is by virtue of the powers vested in the President to pass a special order under Rule 4 that the present appeals have been transferred from Nagpur Bench to the Delhi Bench vide his order dated 24-7-1981. In fact, the order dated 24-7-1981 contains many other appeals of the assessee as well as of the revenue and in that order the present appeals are included. There is also no merit in the contention of the learned standing counsel that the order of transfer is not valid or that it is without jurisdiction. The procedure followed in the case of an application filed by an assessee for transfer of a case from one Bench to another is that the matter is first of all placed before the Bench concerned for its comments. Then the matter is sent to the President or the Vice President, as the case may be, for passing appropriate orders (The President has delegated the power to the Vice Presidents for transferring of a case from one Bench to another within his zone and the President passes an order for an inter-zone transfer).

Thereafter the application for transfer is sent to the opposite party for his objections. After getting the reply, the President or the Vice President, as the case may be, after giving due consideration to all aspects either passes an order of transfer or rejects the application for transfer. In this case also the same procedure has been followed.

The assessee's application was sent to the Commissioner. In fact, the assessee filed an application for transfer of all the pending and future appeals from Nagpur Bench to Delhi Bench but the said request was not accepted by the President. However, the President transferred pending appeals from Nagpur Bench to Delhi Bench by his order dated 25-7-1980 after calling for the objections from the Commissioner. The President duly considered the matter and passed the order of transfer.

When further appeals were sought to be transferred by the assessee on the same grounds, the President passed similar order, that is the order dated 24-7-1981. We are unable to understand as to how the order of the President transferring the appeals to Delhi Benches is without jurisdiction or discriminatory. First of all, there is no necessity of a hearing to be given when the President exercises his powers under Rule 4, which again is framed in accordance with the provisions of Section 255(5). Nobody has a vested right to be heard by a particular Bench. Secondly, the President has followed the normal procedure and there is no question of any discrimination much less any hardship. Such matters were being heard earlier without any objection. We fail to see how such an objection is tenable at this stage. The rulings cited by Mr. Wazir Singh have no application whatsoever to the situation arising in these appeals. The preliminary objection raised by the learned standing counsel is rejected and we proceed to dispose of the appeals and the cross-objection on merits.

5 to 29. [These paras are not reproduced here as they Involve minor issues.) 30. The next ground relates to the claim under Section 35B of the Act.

The assessee is a limited company carrying on manufacture of Ferro Chrome. There are also substantial exports effected by the assessee. It is in that view of the matter that the assessee made a claim for weighted deduction under Section 35B. Originally the assessee claimed weighted deduction in a revised return to the extent of 50 per cent of Rs. 2,52,334. Actually the assessee is entitled to one-third. The ITO, however, allowed weighted deduction to the extent of Rs. 14,137 only.

The matter was then taken up in appeal before the Commissioner (Appeals). Apart from reiterating the assessee's claim for weighted deduction as claimed in its return, the assessee filed additional claim in respect of Rs, 11,12,988. The additional ground has been rejected by the Commissioner (Appeals).

31. The Commissioner (Appeals) while dealing with the assessee's claim under Section 35B, on merits on his own, raised a query as to how the assessee would be entitled to relief under Section 35B as the assessee was not the real exporter and that Metals and Minerals Trading Corporation ('MMTC') as a Government undertaking is to channelise exports as well as to effect some exports on its own. The assessee was heard on this matter and the Commissioner (Appeals) following the decision of the Madras High Court in CIT v. Kasturi Palayacat Co.

[1979] 120 ITR 827 as well as the decision of the Supreme Court in Mod.

Serajuddin v. State of Orissa [1975] 36 STC 136 held that the assessee is not an exporter. Accordingly, he held that the assessee would not be entitled to any relief under Section 35B. He, therefore, directed the ITO to withdraw the relief already allowed by him and also rejected the assessee's claim for further relief. It is this portion of the order of the Commissioner (Appeals) that is now attacked by the assessee in its appeal as well as in its cross-objection.

32. Shri Salve for the assessee contended that the view taken by the Commissioner (Appeals) is erroneous as the principles which are laid down in the cases relating to sales tax, especially with reference to the expression 'in the course of the export' under Article 286(1) of the Constitution, has no application having regard to the provisions of Section 35B. He contended that the additional ground should have been accepted as the facts were all before the authorities below as admitted by the Commissioner (Appeals) himself. No doubt, reliance is also placed on the decision of the Delhi High Court relating to interpretation of Section 280ZC of the Act in Ferro Alloys Corpn. Ltd. v. R.C. Mishra [1978] 114 ITR 753 (Delhi).

33. The learned standing counsel vehemently opposed the submissions made on behalf of the assessee and relied on the order of the Commissioner (Appeals) and particularly those line of cases under the Sales-tax Act which lay down that the ultimate exporter is the real exporter and not the person who transfers the goods to the MMTC for export.

34 There was some argument with regard to the factual position but ultimately both sides agreed that the facts in the case of Mod.

Serajuddin (supra) are same as in the case of the assessee. In fact, the Delhi High Court having dealt with the assessee's own case has also narrated the facts. We, therefore, felt that it is not necessary to repeat the same except that we proceed on the facts as admitted by both the sides on the basis of the assessee's own case decided by the Delhi High Court as also the facts narrated in the case of Mod. Serajuddin (supra).

35. We are, however, clearly of the opinion that the objection taken up by the revenue has no merit. Section 35B postulates allowance of weighted deduction in respect of an expenditure incurred by an assessee coming under the various clauses except that the word 'exporter' is mentioned in the marginal notes and that too mentioning 'export markets development allowance' there is nothing in the section to indicate that a person to be entitled to the weighted deduction must export the goods or he must be an exporter. The only criterion fixed is that the assessee must incur the particular types of expenditure mentioned in Clause (b) of Sub-section (1) of Section 35B in respect of goods, etc., which he deals in. There is no other restriction or there is no other basic requirement to be fulfilled. Undoubtedly, in this case, the assessee deals in the particular type of goods and it is in respect of such goods that the assessee has incurred the expenditure and its claim is that it comes under various clauses of Section 35B. Thus, the whole exercise of considering the decisions either in the case of Mod.

Serajuddin (supra) or in the assessee's own case decided by the Delhi High Court will be fruitless. The requirements of Article 286(1) of the Constitution of India or those of Section 280ZC are totally different and they have no relevance whatsoever in deciding an issue arising under Section 35B. It is in respect of the assessee's goods that the assessee incurred certain expenditure with respect to which it claims weighted deduction under Section 35B. If the assessee fulfils the other requirements of the provision, it would be certainly entitled to the claim and it cannot be refused on the objection raised by Mr. Wazir Singh. In our opinion, by a bare perusal of Section 35B, the objection raised by the revenue is untenable.

36. The additional ground also should have been admitted by the Commissioner (Appeals) having regard to bis own observations in paragraph 62. All the particulars have been furnished by the assessee even at the assessment stage and it was only by inadvertence that the claim was not made for the full amount. There is no necessity of investigation into fresh facts. The facts are all there available on record. It is only by analysing those facts that the ITO will have to adjudicate the claim of the assessee. We may mention here that normally the claim should have been directed to be considered by the Commissioner (Appeals) as he has not admitted the ground nor considered the claim of the assessee in respect of the original claim on merits.

We, however, think that since the matter is already going to the ITO on the question of Section 80J of the Act, it would be fit to send the matter relating to claim under Section 35B to the ITO.36A. The next ground of appeal relates to claim under Section 80J. To be precise the ground may be quoted as under: (a) The Commissioner (Appeals) erred in law as well as on facts in sustaining the disallowance of Rs. 15,22,422 being claim under Section 80J. (b) The Commissioner (Appeals) erred in law as well as on facts in holding that the relief under Section 80J should be computed-- (i) without taking into account the average addition to the assets during the year, and (ii) by excluding borrowed moneys in the computation of capital employed under Section 80J.The main question in this connection is about the computation of capital employed. The assessee gave the computation on the basis of the decisions of the Calcutta High Court in the case of Century Enka Ltd. v. ITO [1977] 107 ITR 123/909. The assessee had also taken stores, spares, cash in hand and in current account on the basis of gross fixed assets of Ferro Chrome plant to the total gross fixed assets of the company.

The Commissioner (Appeals) held that in view of the amendment to Section 80J by the Finance (No. 2) Act, 1980, which has been given retrospective effect from 1-4-1972, the assessee's computation of capital employed cannot be accepted. He, accordingly, upheld the computation worked out by the ITO to the extent it conformed to Section 80J(1A) as amended. Similarly, he rejected the assessee's contention regarding allocation of stores and cash balances.

36B. While the appeal is pending before the Tribunal, the assessee, as in the case of many other assessees, filed a writ petition 7650 in the Hon'ble Supreme Court of India challenging the validity of the amendment to Section 80J and one of the respondents is the Tribunal as respondent No. 7. Prayers (a) and (b) read as follows: (a) to stay the operation of and/or restrain the respondent from taking any steps and/or giving effect to the provisions of Section 17 of the Finance (No. 2) Act, 1980, insofar as the same purports to amend Section 80J of the Income-tax Act with retrospective effect from 1st April, 1972; (b) to restrain respondent No. 7 while deciding appeals for the assessment years 1972-73, 1973-74, 1974-75, 1976-77 and 1977-78 as well as respondent No. 6 while deciding appeals for the assessment year 1975-76 from acting in pursuant to or from giving effect to the provisions of Section 17 of the Finance (No. 2) Act, 1980, insofar as the same purports to amend Section 80J of the Income-tax Act with effect from 1st April, 1972, and from completing the said appeal and/or the assessment proceedings on any basis other than by taking into account borrowed capital in computing the 'capital employed' for the purpose of Section 80J of the Act and restraining the 1st respondent and 2nd respondent from re-opening, rectifying or revising any of the completed assessment for the base years for the purposes of giving effect to the provisions of Section 80J(1A) to the extent it excludes borrowed money in computing the capital employed.

36C. So far as the claim regarding Section 80J is concerned, in view of the challenge to the validity of the amendment, number of Benches of the Tribunal have been sending the matters to the ITO to decide the matter of computation in the light of the decision of the Supreme Court that may be rendered. In other words, the Tribunal without deciding the matter one way or the other has been directing the ITO to keep the matter pending and to dispose it of in conformity with the judgment of the Supreme Court. We would follow the same procedure and direct the ITO to determine the question of computation of capital and relief under Section 80J in conformity with the judgment of the Supreme Court.

However, a question arose during the course of argument whether the Tribunal should deal with this ground in view of the stay order.

We do not think that the stay order would in any manner stand in the way in the manner we are disposing of the ground. The stay order restrains all the respondents including the Tribunal to give effect to the amendment. The process by which we are disposing of the ground would not be in any way conflict with the stay order. In fact, the assessee's counsel has submitted at the time of hearing orally as well as in writing, subsequently agreeing to the manner of disposal of the ground relating to Section 80J. The revenue also cannot have any objection to our order as the assessee can only have real grievance. So far as the revenue is concerned, it cannot ask for giving effect to the amended Section 80J. Thus, we adopt the same procedure as we have been adopting in relation to claims under Section 80J.37. The next ground, we shall now take up the department's appeal to dispose of the grounds therein. The first of these relates to the claim for payment of royalty. The facts are that the assessee entered into collaboration agreement with Aktiebolaget Electro-Invest having its registered office at Floragatan 9, Stockholm Sweden ('EI'), for the purpose of establishing a ferro chrome plant in Shreeamagar (Garbidi), Andhra Pradesh, and to produce 10,000 tonnes of low-carbon ferro chrome per year. The collaboration agreement also provided for the acquisition of technical know-how by the assessee regarding the plant and process of manufacture. Clause 1 of the agreement provides for EI to give technical know-how from Wargon which includes ideas, knowledge and experience not only regarding the plant and equipment but also the operation of the metallurgical processes to produce low-carbon ferro chrome. Clause 1.2 deals with the supply of designs, etc., for the plant and machinery while Clause 1.3 deals with the providing of technical know-how by the EI. Clause 1.4 reads as follows: The know-how supplied by EI shall remain his exclusive property and shall not be available to any third party in any way whatsoever without the written consent of EI.This shows that the technical know-how will remain with EI and is not transferred to the assessee permanently. Clause 1.9 deals with continuous supply of technical know-how during the currency of the agreement which is for 10 years. Clause 2 by and large deals with training and service of experts. Clause 3.2 deals with payment of royalty in respect of technical know-how relating to the supply of information regarding manufacture, etc. Clause 3.1 deals with the payment of lumpsum consideration for the supply of plant and equipment.

This part of the amount has been capitalised and that is not in dispute. It is only in respect of the payment made under Clause 3.2, namely, royalty that a controversy has been raised by the revenue before us. Before dealing with the actual question, one more clause in the agreement needs reference and that is Clause 6 which deals with the period of the agreement.

38. The ITO allowed the payment of royalty for this year as in the past. The assessee went up in appeal before the Commissioner (Appeals) against the assessment on some other items. While the appeal was pending, the ITO wrote a letter to the Commissioner (Appeals) that the royalty should have been disallowed and that the Commissioner (Appeals) might take up this issue and if necessary enhance the assessment. The Commissioner (Appeals) in the course of hearing brought this aspect to the notice of the assessee and after looking into the facts and the arguments of the assessee's counsel, held that the royalty was rightly allowed and there is no question of disallowing any royalty amount.

2. Oo the facts and in the circumstances of the case, the learned Commissioner (Appeals) erred in holding that the royalty payments amounting to Rs. 4,04,412 are of revenue nature and in disallowing the same.

It is evident from the above ground that the revenue wants to have a finding from the Tribunal in its favour. Mr. Salve, the learned Counsel for the assessee, raised an objection in the nature of preliminary objection that this ground should not be entertained as there can be no appeal against an order refusing to enhance the assessment or to consider a claim made by the ITO in the appeal filed by the assessee.

It is, therefore, necessary to consider this objection first. Mr.

Salve, no doubt, pointed out that in the appeals for the assessment years 1970-71 and 1971-72 also, similar issue came up before the Tribunal and the Tribunal upheld the assessee's objection and did not allow the revenue to raise this contention. Accordingly, the Tribunal felt that it was not necessary to consider the matter on merits regarding the allowability of royalty. Shri Wazir Singh, the standing counsel for the revenue, contended that the view taken by the Tribunal is erroneous and the passage in Kanga and Palkhivala's Law and Practice on Income-tax quoted by it in its order does not support the view taken by it and on the other hand, it supports the stand of the revenue.

According to Shri Wazir Singh, the revenue cannot take a point which affects adversely to an assessee without filing a cross-objection but in this case the revenue has come up in appeal specifically. He further pointed out that the Commissioner (Appeals) went into the question of allowability of royalty payment and specifically gave a finding that it is to be allowed and, therefore, this finding of the Commissioner (Appeals) is open to challenge by the revenue in the appeal filed by it. He referred to the provisions of Section 253(2) of the Act which says that the Commissioner is entitled to file an appeal before the Tribunal if he objects to any order passed by the first appellate authority and since in this case, an order regarding a finding that the royalty payment should be allowed has been passed, the same can be the subject-matter of appeal.

40. Mr. Salve, in reply, pointed out Section 251 of the Act which provides for the powers of the first appellate authority and pointed out that the first appellate authority may confirm, reduce, enhance or annul the assessment. This power, according to the learned counsel, can be exercised by the Commissioner, especially the power of enhancement.

It is his own power to be exercised and the ITO has no right to make an application or move the first appellate authority for enhancement of the assessment. Secondly, Mr. Salve stated that the Commissioner (Appeals)'s observations and the so-called finding does not tantamount to an order nor can it be said that there cannot be in law, an order refusing to enhance the assessment. If an appeal is permitted against the first appellate authority refusing to make an enhancement, it would virtually amount to giving a right of appeal to the ITO which is not envisaged in the Act. Reference has been made to the decision of the Supreme Court in the case of Dwarka Nath v. ITO [1965] 57 ITR 349/363.

41. Normally we would not have dealt with the matter once again as the Tribunal has already decided it on the question of maintainability of the appeal while deciding the appeals for the earlier years but, since the point has not been focused in the manner in which it has been brought now before us, we thought it better to discuss the same more elaborately. The scheme of the Act envisages an assessment to be made by the ITO under Section 143(3) of the Act apart from his power to make an ex parte assessment under Section 144 of the Act. Once the ITO makes an assessment after considering the entire matter and the evidence produced before him, he has no power to alter the same except as provided in law, namely, either under Section 154 or Section 147 of the Act which are again subject to certain limitations. Even if the ITO finds that what he has done is incorrect or ought not to have been done, he has only to bring it to the notice of the Commissioner, who has powers under Section 263 of the Act to revise an assessment in accordance with those provisions. No doubt if an assessee files an appeal, the ITO may bring a particular omission or a mistake to the notice of the first appellate authority but that is only by way of an information or bringing the same to the knowledge of the first appellate authority. In other words, the ITO has no right of appeal. He is himself an arbiter as well as a tax collector. In such circumstances, the Legislature rightly provided no appeal by the ITO as no one can conceive of an appeal to be filed against one's own order.

42. In this background one has to see the provisions of Section 251 which gives powers to the first appellate authority while dealing with an appeal filed at the instance of the assessee. The assessee, no doubt, has a right to file an appeal under Section 246 of the Act and the powers to be exercised by the first appellate authority are contained in Section 251. The first appellate authority, it is well-settled has vast powers and those powers are co-extensive with those of the ITO. It has not only got the power to reduce, cancel or annul an assessment or set aside an assessment but also it has got specific power of enhancement of the assessment. This power of enhancement is again circumscribed by certain limitations as pointed out by the judicial decisions. It is unnecessary to refer to those decisions as they are well known and well settled. But it is clear from the provisions of Section 251 that the ITO is not given any power to make an application to the first appellate authority with a prayer to enhance the assessment or to take into account a matter which has not been considered by him in his assessment. Generally, as already stated, the ITO if he finds that there is some omission he brings it to the notice of the first appellate authority and it is for the first appellate authority to consider it. Merely because the ITO brings it to the notice of the first appellate authority and the first appellate authority considers it while dealing with the appeal, the law nowhere envisages a right to the ITO to make an application. The first appellate authority has to act on its own and not at the instance of anybody, much less at the instance of the ITO. If the first appellate authority is convinced that an enhancement is required then he has to follow certain procedure provided under the law and make an enhancement. If he is not satisfied and he feels that no enhancement is justified, then he must stop at it. There is no question of passing an order refusing to make an enhancement. Passing of an order refusing to do a certain thing presupposes a right inhering with a particular party. If a party has no such right but moves an authority, there is no question of the authority passing an order refusing to exercise such a right. In other words, the law does not contemplate passing of an order refusing to make an enhancement. It contemplates only an order v/hereby enhancement is made. To make the matters explicit, let us take the instance in the Act itself dealing with rectification of a mistake.

Suppose an assessee makes an application to the ITO that a mistake is apparent on the record in the assessment to be rectified under Section 154. Here there is a right given to the assessee to make an application to the ITO. The ITO has to pass some order either accepting or refusing to make a rectification. If he makes a rectification then the assessee would be satisfied but if he refuses to make a rectification, then it amounts to an order and that is the reason why an appeal is provided under Section 246(1)(f) against an order of the ITO refusing to rectify a mistake said to have been committed by him, on the basis of an application filed by an assessee. An appeal is provided in the above situation because a right is given to the assessee to make an application under Section 154. If such a right is there, it is the duty of the authority to whom an application is made to pass an order and such an order can be challenged. There would be no obligation on the authority to whom such an application is made to pass an order on the application. It may be that in the exercise of his powers which are vested under the statute, the authority may take notice of what has been brought to his knowledge. The ITO, therefore, cannot make an application in law seeking for an enhancement in the assessment and there is no question of the first appellate authority passing an order, refusing to enhance. If he enhances the assessment, then that will be the subject-matter of appeal at the instance of the assessee before the Tribunal but if he does not like to enhance or he is not satisfied that the case requires an enhancement, there is an end of the matter. There is no question of passing an order refusing to make the enhancement.

When the first appellate authority is satisfied that the particular disallowance has been rightly allowed by the ITO then he has to keep quiet. No positive order is contemplated by him to be passed. When such is the position there is no question of an appeal being filed against that order.

43. If an ITO is allowed to apply for enhancement and if the first appellate authority does not agree with the ITO, the result is that the order of the ITO is found to be correct. The first appellate authority confirms what the ITO held and how can it be said that the ITO is aggrieved. If the ITO's order is accepted then there is no question of any grievance by the ITO. To say it otherwise, would virtually amount to allowing the ITO to file an appeal against his own order and that is clearly not permissible under the statute. It is true that the ITO noted that what he had done was not correct according to his own view of the matter and, therefore, filed an application before the Commissioner (Appeals). If the Commissioner (Appeals) does not agree with the ITO there is nothing that the ITO can do to challenge the inaction of the Commissioner (Appeals), if we may use that expression.

If we permit the ITO to raise an issue that the Commissioner (Appeals) ought to have enhanced the assessment, it would result in entertaining an appeal on a matter which the ITO himself decided. As pointed out by the earlier Bench, the Tribunal is asked to enhance the assessment indirectly because it is clear from the powers conferred on the Tribunal that it cannot enhance the income. The power of enhancement is not given to the Tribunal while it is given only to the first appellate authority. If an objection of the nature that is presented before us is entertained, it would definitely amount to the enhancement of the income in an indirect way and that, in our opinion, is impermissible in law.

44. Now the question will be as to the effect of what the Commissioner (Appeals) has stated as a finding on merits of the claim. In our considered view, the Commissioner (Appeals) need not have expressed any opinion in such an elaborate manner and given a finding at all. It was enough if he had not brought this matter in the order itself because he ultimately did not want to enhance the assessment. Merely because he discussed the facts and gave a finding, that finding does not tantamount to an order within the scope of the provisions of Section 251 nor it can be the subject-matter of appeal under Section 253(2) by the ITO. Such a finding, in our opinion, should be treated as superfluous and non est. The observations and the findings recorded by the Commissioner (Appeals) should be ignored. The law did not contemplate passing, of an order refusing to enhance the assessment and, therefore, such a finding does not create a right with the JTO to challenge that finding by way of an appeal to the Tribunal.

45. It may be mentioned, as rightly pointed out by Mr. Salve, that if the Commissioner (Appeals) refused to make an enhancement in spite of the fact that the matter has been brought to his knowledge, all that the ITO perhaps can do is to seek judicial review. It is well settled that if authority vested with a duty to act but fails to act, the Court under Article 226 can compel that authority to act in accordance with law. In other words failure to act or inaction as it may be called can be corrected by the judicial review at the instance of the aggrieved party. However, that does not give rise to any right to the ITO to file an appeal before the Tribunal when the law does not provide for it.

Thus, we are clearly of the view that the ground raised by the revenue is not maintainable before us. The finding and all the observations made by the Commissioner (Appeals) are not binding on any of the parties and they are treated as superfluous. In this view of the matter, it is neither proper nor desirable to decide the question on merits. It is needless to mention that there are many other remedies provided by the law to the revenue.

46. to 48. [These paras are not reproduced here as they involve minor issues.] 49. In the result, both the departmental appeals and the cross-objections are, therefore, dismissed and the assessee's appeal is allowed in part.


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