D.K. Kapur, J.
1. For the assessment years 1958-59, 1959-60 and 1960-61, the following question has been referred for our opinion in respect of the assessed who was the late R. S. Banarsi Dass of Delhi :
'Where, on the facts and in the circumstances of the case, the Tribunal was justified in refusing to entertain the department's contention that the profits from the sale of plots are assessable under the head 'capital gains' and that the Appellate Assistant Commissioner should have held accordingly ?'
2. The said assessed died on 10th February, 1961, and further proceedings were continued against his legal representatives. A consolidated reference and statement of the case has been made for the three years by the Tribunal.
3. The facts of the case are that the assessed had an estate at Lawrence Road and some plots were sold in the relevant financial years 1957 to 1960, which correspond to the three assessment years. The ITO considered that the sale of the plots constituted a business and the taxable profits in that business for the three years were Rs. 63,971 for 1958-59 assessment year, Rs. 1,61,489 for the assessment year 1959-60 and Rs. 39, 212 for the assessment year 1960-61. It appears that even for the two earlier assessment years, namely, 1956-57 and 1957-58, the same view had been adopted, but the Income-tax Appellate Tribunal had reversed the decision of the ITO and of the AAC, by its order dated 30th October, 1963. By that judgment the Tribunal had held that the sales of land were not an adventure in the nature of trade and hence these profits were not assessable to tax.
4. On appeal, for the three assessment years now under consideration, the AAC followed the decision of the Tribunal and set aside the assessments in respect of the aforementioned profits from the sale of land.
5. The ITO preferred appeals to the Tribunal and set out identical grounds of appeal for the three years. Although the grounds of appeal have been annexed to the statement of the case as annex. C, we find that in fact annex. C is not the grounds of appeal, but some other application. So, we are unable to pursue the said grounds. In any event, the Tribunal merely repeated its decision for the previous two years and also noted that a reference application to the High Court against the Tribunal's decision for the years 1956-57 and 1957-58 had failed. Then the Tribunal's noted in paragraph No. 5 of its order dated 24th October, 1968, that it was now contended that if the profits were not taxable as 'Business gains', then they were taxable under the head 'Capital gains'. This contention was opposed by the assessed on the ground that no such contention had been raised before the AAC and this ground should not now be allowed. The Tribunal held :
'This contention has to be upheld. The Income-tax Officer had notice of the hearing of the appeals by the Appellate Assistant Commissioners. On the date of the hearing of the said appeals, the order of the Appellate Tribunal in respect of the earlier years had already been received. The Income-tax officer should have, thereforee, expected the Appellate Assistant Commissioner to follow the order of the Appellate Tribunal and ought to have urged before him the consideration of the alternative contention. The Income-tax Officer not having raised the alternative contention before the Appellate Assistant Commissioner, it must be assumed that, according to the department, the profits in the sale of the land were either assessable under 'business income' or not assessable at all. The department cannot be permitted at this stage to raise this contention.'
6. There appear to be some typing errors in the paper book, but nevertheless, the sum and substance of the Tribunal's conclusion is that a new point cannot be raised in appeal. It is contended on behalf of the department that the conclusion of the Tribunal is wrong. On the other hand, the conclusion has been supported on various grounds by learned counsel for the assessed.
7. It may be at once noted that the order of the Tribunal merely amounts to be refusal to allow a new point to be urged by the department which was not taken up before the AAC. It is urged by Mr. Verma for the department that the ITO was not present, and, hence, he could not raise the point before the AAC, but nevertheless, the point arises on the facts of the case. It is urged that either the profits are to be charged as profits from business or the gain is to be charged as a 'capital gains '. Mr. Ray for the assessed submits that it does not necessarily follow that there is any profit by way of capital gain, and furthermore, it cannot be said from the record that the plots which were sold were not agricultural land, etc. In short, it is submitted that the calculation of capital gains as well as the question whether any capital gains as well as the question whether any capital gains are livable involves a number of additional facts. Particularly, it is pointed out that the capital gains have to be calculated keeping in view the price prevailing on 1st January, 1954, in view of what is stated in s. 12B of the Indian I.T. Act, 1922. The section as it stood at the relevant time was introduced by the Finance (No. 3) Act of 1956, with effect from 1st April 1957, and there is a proviso that the capital gains have to be taken in relation to the price prevailing on 1st January, 1954, so that the capital gains in these cases may be either negligible or non-existent. No doubt, the capital gains tax had only recently been introduced when these cases were under consideration and it may be that the capital gains were either non-existent or negligible. Undoubtedly, the facts for determining the capital gains did not exist on the record as the value of the plots on 1st January, 1954, cannot be ascertained by examining the income-tax assessments. However, if the Tribunal had allowed the new point to be taken, it is possible that the capital gains, if any, might have been assessed on remand. We are, however, concerned with the question that a new point was sough to be raised at the second appellate stage which was not permitted to be raised.
8. Learned counsel for the department urges that the provisions of s. 33 of the Act governing appeals to the Tribunal allow the Commissioner to direct the ITO to appeal in case the he objects to the order passed by the AAC and this is different from the right of appeal of an assessed. We fail to notice what is the difference between the right of appeal of the assessed and the right of appeal of the department. Section 33(1) and (2) reads as follows.
'33. Appeals against orders to Appellate Assistant Commissioner. -
(1) Any assessed objecting to an order passed by an Appellate Assistant Commissioner under section 28 or section 31 may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him.
(2) The commissioner may, if he objects to any order passed by an Appellate Assistant Commissioner under section 31, direct the Income-tax officer to appeal to the Appellate Tribunal against such order, and such appeal may be made within sixty days of the date on which the order is communicated to the Commissioner by the Appellate Commissioner.'
9. In both cases the right of appeal is the same. There must be an objection to the order passed by the AAC. If a point has not been taken before the AAC and is not mentioned in the order of the AAC, then the Commissioner cannot object nor can the assessed object. The right of appeal is the same in both cases. It seems to us that the word 'objects' must signify that there is some error or mistake or defect in the AAC's order. Clearly when the question of capital gains was never urged before him, he could not say anything on this matter and this is not an objection which arose from his order and, thereforee, cannot be a ground for attacking the order. This is also the reason that new points are not allowed to be urged in any appellate court except in exceptional circumstances. The very nature of an appeal is to bring to light error defects in the decision under appeal. There can be no error or defect on a point which is not urged, and hence, normally a new point is not to be permitted to be raised.
10. Some additional points have been urged before us to show that the correct procedure was followed by the Tribunal. It was held by the Gujarat High Court in CIT v. Karamchand Premchand p. Ltd. : 74ITR254(Guj) , that a new point could not be raised before the Tribunal which had not been raised before the AAC. Certain deductions had been claimed by the assessed in its return. One of these was a sum of Rs. 25,920 being expenses of various types incurred in connection with the issue of debentures by the assessed-company. Some of these deductions were disallowed including the expenses on the debenture issue. On a appeal to the AAC, the assessed challenged the ITO's order disallowing the deductions but did not raise any questions regarding the disallowance of the sum of Rs. 25,920 before the AAC. After the decision of the AAC, the Supreme Court gave a judgment in India Cements Ltd. v. CIT : 60ITR52(SC) , which led the assessed to raise the question of expenses relating to the debentures issue in a further appeal to the Tribunal. The Tribunal allowed the raising of this question and held that the expenses were an allowable deduction. There was a reference to the Gujarat High Court which held that there was no decision of the AAC in regard to the disallowance of the expenses relating to the debenture issue ; thereforee, this point could not be raised before the Tribunal. This view of the court was reiterated in another decision of the same High Court, CIT v. Steel Cast Corporation : 107ITR683(Guj) , in which it was held that only those points which had been decided by the AAC impliedly or expressly could be raised before the Appellate Tribunal.
11. Learned counsel for the assessed referred to Addl. CIT v. Gurjargravures P. Ltd. : 111ITR1(SC) . In this case, a claim was made before the AAC for relief under s. 84 of the I.T. Act, in a case where no such claim had been made before the ITO. The appeal was dismissed by the AAC on the ground that the claim for exemption not having been raised before the ITO, there was no error in the assessment. On further appeal, the Tribunal held that the claim could be entertained as the whole assessment was open before the AAC. This view was upheld by the High Court on a reference. However, the Supreme Court was not correct when relief had not been claimed before the ITO under s. 84 of the I.T. Act, and there was no material to support the same. There was no justification for allowing the exemption. The Supreme Court's judgment refers to two other decisions of that court, namely, CIT v. Rai Bahadur Hardutroy Motilal Chamaria : 66ITR443(SC) and CIT v. Shapoorji Pallonji Mistry : 44ITR891(SC) . Those two decisions also deal with a similar question. thereforee, there is a definite authority for the view that a point not taken before the ITO cannot be taken before the AAC. The same principle should apply, in our view, to appeals taken from the AAC to the Tribunal itself.
12. The Decision in CIT v. Shapoorji Pallonji Mistry : 44ITR891(SC) , aforementioned, is instructive on the point. It was held in this case that the AAC cannot enhance the assessment by discovering new sources of income not mentioned in the return of the assessed or considered by the ITO in the order appealed against. It is noteworthy that in the present case capital gains were not assessed by the ITO nor were they apparently mentioned in the returns. The court observed as follows (P. 895) :
'The only question is whether in enhancing the assessment for any year he can travel outside the record, that is to say, the return made by the assessed and the assessment order passed by the Income-tax Officer with a view to finding out new sources of income, not disclosed in either. It is contended by the Commissioner of Income-tax that the word 'assessment' here means the ultimate amount which an assessed must pay, regard being had to the charging section and his total income. In this view, it is said that the words 'enhance the assessment' are not confined to the assessment reached through a particular process but the amount which ought to have been computed if the true total income had been found. There is no doubt that this view is also possible. On the other hand, it must not be overlooked that there are other provisions like sections 34 and 33B, which enable escaped income from new sources to be brought to tax after following was special procedure. The assessed contends that the powers of the Appellate Assistant Commissioner extent to matters considered by the Income-tax Officer, and if a new source is to be considered, then the power of remand should be exercised. By the exercise of the power to assess fresh sources of income, the assessed is deprived of the finding by two tribunals and one right of appeal.
The question is whether we should accept the interpretation suggested by the Commissioner in preference to the one, which has held the field for nearly 37 years. In view of the provisions of sections 34 and 33B by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the power of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. It were not, one would expect that the legislature would have amended section 31 and specified the other intention in express words. The Income-tax Act was amended several times in the last 37 years, but no amendment of section 31(3) was undertaken to nullify the rulings, to which we have referred. In view of this, we do not think that we should interpret section 31 differently form what has been accepted in India as its true import, particularly as that view is also reasonably possible.'
13. This quotation would show that the Supreme Court was very definite in holding that if some income had escaped taxation, there were ss. 34 and 33B which enable escaped income from new sources to be tapped by recourse to those provisions provided the conditions were fulfillled.
14. In view of this state of the law, there is little doubt that the Tribunal was right in not allowing a new point to be raised in the circumstances of the case.
15. We may mention here that the learned counsel for the department had referred to Hukumchand Mills Ltd. v. CIT : 63ITR232(SC) and CIT v. Mahalakshmi Textile Mills Ltd., : 66ITR710(SC) , in both of which cases a new aspect of a point raised earlier was allowed to be raised before the Appellate Tribunal. No doubt, these cases would have great relevance if in the present case the income which was held not to arise from business was sought to be taxed in some other way as being income from business, profession or vocation. However, the income is admittedly not chargeable to income-tax, but if it is though that some other amount is chargeable to income-tax as capital gains under s. 12B of the Indian I.T. Act, 1922, then a completely different types of point is involved. We are in agreement with the view taken by the Tribunal that such a point cannot be raised and should not be permitted to be raised when not raised either before the ITO or the AAC.
16. We would, accordingly, answer the question referred to us in the affirmative, in favor of the assessed and against the department. The assessed will get costs. Counsel's fee Rs. 500.