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Commissioner of Income-tax, Gujarat-iii Vs. Steel Cast Corporation - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberIncome-tax Reference No. 72 of 1974
Judge
Reported in[1977]107ITR683(Guj)
ActsIncome Tax Act, 1961 - Sections 5A(8), 31, 37, 80J(3), 84, 246, 250, 250(2) and (5), 251, 251(1), 253, 254, 260(1) and 263
AppellantCommissioner of Income-tax, Gujarat-iii
RespondentSteel Cast Corporation
Appellant Advocate K.H. Kaji, Adv.
Respondent Advocate K.C. Patel, Adv.
Cases ReferredC) and Keshav Mills Co. Ltd. v. Commissioner of Income
Excerpt:
direct taxation - claim - sections 37, 80j, 250, 251, 253, and 254 of income tax act, 1961 - whether tribunal can direct appellate assistant commissioner to consider claim of assessee under section 80j which was not made either before income tax officer or appellate assistant commissioner - tribunal must first ascertain that whether claim was made before appellate assistant commissioner - in case where claim not urged before commissioner then grievance that it must be considered by him cannot form subject-matter of appeal before tribunal - not open to tribunal to allow assessee to raise any claim before tribunal for first time - held, tribunal cannot direct appellate assistant commissioner to consider claim not made either before income tax officer or appellate assistant commissioner. .....b.j. divan, c.j. 1. in this case, at the instance of the revenue, the following question has been referred to us for our opinio : 'whether, on the facts and in the circumstances of the case, the tribunal was right in law in directing the appellate assistant commissioner to consider the claim of the assessee under section 80j which was not made before the income-tax officer ?' 2. in our opinion, in order to bring out the real controversy in the matter and in order to see that the question is correctly related to the facts of the case, the question should be reframed and when reframed, the question will read as follow : 'whether, on the facts and in the circumstances of the case, the tribunal was right in law in directing the appellate assistant commissioner to consider the claim of the.....
Judgment:

B.J. Divan, C.J.

1. In this case, at the instance of the revenue, the following question has been referred to us for our opinio :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Appellate Assistant Commissioner to consider the claim of the assessee under section 80J which was not made before the Income-tax Officer ?'

2. In our opinion, in order to bring out the real controversy in the matter and in order to see that the question is correctly related to the facts of the case, the question should be reframed and when reframed, the question will read as follow :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Appellate Assistant Commissioner to consider the claim of the assessee under section 80J which was not made either before the Income-tax Officer or before the Appellate Assistant Commissioner ?'

3. We are concerned in this case with the assessment year 1967-68. The assessee came before the Tribunal with a grievance that though at the time of the arguments before the Appellate Assistant Commissioner the assessee had orally contended that relief under section 80J of the Income-tax Act, 1961, should have been granted, the Appellate Assistant Commissioner had not considered this submission made on behalf of the assessee. At the time of the hearing before the Appellate Assistant Commissioner the assessee had orally prayed for relief under section 80J(3) and the Appellate Assistant Commissioner had orally agreed to admit the said further ground but actually when he came to pass the order, the Appellate Assistant Commissioner had not given any relief under section 80J(3). When we turn to the grounds of appeal before the Tribunal, we find that the grounds of appeal are in substance tw : (1) The Appellate Assistant Commissioner had erred in not considering and deciding the appellant's oral contention that it should have been allowed relief due to it under section 80J(2) the appellant had to taxable income in the year under assessment and hence it could not claim carrying-forward relief under section 84 of the Act. However, a new section 80J [including sub-section (3)] was introduced and enacted later on retrospectively, so that relief under section 80J could be carried forward. Therefore, at the time of the hearing of the appeal before the Appellate Assistant Commissioner, the assessee orally prayed for relief under section 80J(3). The Appellate Assistant Commissioner had orally agreed to admit the said further ground but had erred in not granting relief. He ought to have ordered it to be carried forward under section 80J(3). In its order the Tribunal points out that when the appeal was heard before the Tribunal, the learned departmental representative urged that the point did not arise out of the order of the Appellate Assistant Commissioner and that the Tribunal should not deal with the point. The Tribunal observe :

'..... in our view, this is purely a legal matter and we are entitled to entertain this point even if it was raised for the first time before us.. We also do not propose to enter into the controversy whether the point was raised before the Appellate Assistant Commissioner orally or not. We allow the assessee to raise this point as this is a legal point and direct the Appellate Assistant 'Commissioner to consider this aspect and pass his orders after giving an opportunity to the Income-tax Officer and the assessee to put up their cases. In view of this direction, the assessee's appeal will be treated as allowed.'

4. The Tribunal has proceeded upon the footing that the assessee had not raised the point regarding section 80J before the Appellate Assistant Commissioner and it has not tried to find out whether in fact the assessee had orally argued the question of relief under section 80J at the time to hearing of the appeal before the Appellate Assistant Commissioner. The Tribunal was content to proceed upon the footing that the assessee had not in fact urged this point before the Appellate Assistant Commissioner and that it was for the first time that the question relating to relief under section 80J was being raised at the stage of the appeal before the Tribunal.

5. The question of the extent of the jurisdiction of the Tribunal in allowing the parties before it to raise points which were not raised before the departmental authorities or which are alleged not to have been raised before those authorities have been discussed in a series of decisions and we find that there are two decisions of the Supreme Court which deal directly with this point. In Hukumchand Mills Ltd. v. Commissioner of Income-tax : [1967]63ITR232(SC) , the question has been considered. The Supreme Court in that case was concerned with the provisions of section 33(4) of the Indian Income-tax Act, 1922. Ramaswami J., delivering the judgment of the Supreme Court, has observed at page 23 :

'The powers of the Tribunal in dealing with appeals are expressed in section 33(4) of the Act in the widest possible terms. Section 33(3) of the Act states that 'an appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner...' Section 33(4) reads as follow : '33, (4) The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner.'

6. The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words 'pass such orders as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act. Consequently, the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income-tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. Rule 12 of the Appellate Tribunal Rules, 1946, made under section 5A(8) of the Act provides as follow :

'The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rul :

Provided that the Tribunal shall not rest its decisions on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.'

Rule 27 state :

'The respondent, though he may not have appealed, may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him.'

Rule 28 is to the following effect :

'Where the Tribunal is of opinion that the case should be remanded, it may remand it to the Appellate Assistant Commissioner or the Income-tax Officer, with such directions as the Tribunal may think fit.' In the case before the Supreme Court in Hukumchand Mills Ltd. v. Commissioner of Income-tax : [1967]63ITR232(SC) the subject-matter of the appeal before the Tribunal was the question as to what should be the power written down value of the buildings, machinery, etc., of the assessee for calculating the depreciation allowance under section 10(2)(vi) of the Act of 1922. It was certainly open to the department, in the appeal filed by the assessee before the Tribunal, to support the finding of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. Thus, in this decision of the Supreme Court, three distinct phrases, namely, 'jurisdiction of the Tribunal', 'power of the Tribunal' and 'the grounds of appeal' have been used. The jurisdiction of the Tribunal, as observed by the Supreme Court, is restricted to the subject-matter of the appeal. In the exercise of that jurisdiction, the Tribunal can pass such orders as the Tribunal thinks fit and hence the Tribunal has all the powers except possibly the power of enhancement which are conferred upon the Appellate Assistant Commissioner under section 31 of the Act. All these powers can be exercised by the Tribunal only within the four corners of the jurisdiction which is restricted to the subject-matter of the appeal. While dealing with the subject-matter of the appeal in the exercise of the wide amplitude of its powers, the Tribunal may allow the party to take up a new ground of appeal provided ample opportunity is given to the other side to meet this new ground of appeal. But even the new ground of appeal must relate to the same subject-matter of appeal because the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal. It must also be pointed out that so long as the subject-matter of the appeal remains the same and the relief which is sought before the Tribunal is on the same ground as before, a new section of the Act can be relied upon which was not relied upon before either the Income-tax Officer or the Appellate Assistant Commissioner. But that is a new ground of appeal which is a distinct thing from the subject-matter of the appeal or from the powers which the Tribunal is entitled to exercise while hearing the appeal before it. In our opinion, unless a clear distinction between these three concepts, namely, jurisdiction of the Tribunal which is restricted to the subject-matter of the appeal, the powers of the Tribunal which are very wide but which can only be exercised within the four corners of the jurisdiction enjoyed by the Tribunal and the grounds of appeal is borne in mind, a lot of unnecessary confusion is likely to arise.

7. In Commissioner of Income-tax v. Mahalakshmi Textile Mills Ltd. : [1967]66ITR710(SC) the question before the Supreme Court was in connection with development rebate. The assessee, which carried on business of manufacture and sale of cotton yarn, spent Rs. 93,215 for introduction of the 'Casablanca conversion system' in its spinning plant. The assessee claimed development rebate on the ground that introduction of 'Casablanca conversion system' involved installation of new machinery, and for the first time before the Appellate Tribunal claimed in the alternative that the amount laid out was in any event expenditure for current repairs allowable under section 10(2)(v) of the Indian Income-tax Act, 1922. The Tribunal inspected the factory, studied the working of the machinery and considered the literature of the manufacturers and held that though development rebate was not admissible the amount spent was admissible under section 10(2)(v) since as a result of the stress and strain of production over a long period there was need for change in the plant, and that the assessee had replaced old parts. One of the questions before the Supreme Court was whether the Tribunal had the jurisdiction to allow this plea about the sum of Rs. 93,215 having been earlier claimed in respect of development rebate, being claimed now as business expenditure to be raised for the first time before the Tribunal and Shah J., as he then was, delivering the judgment of the Supreme Court, observed (pages 712, 713 :

'By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the departmental authorities is canvassed. Under sub-section (4) of section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribuna :

If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him.......

The subject-matter of the appeal in the present case was the right of the assessee to claim allowance for Rs. 93,215. Whether the allowance was admissible under one head or the other of sub-section (2) of section 10, the subject-matter for the appeal remained the same, and the Tribunal having held that the expenditure incurred fell within the terms of section 10(2)(v), though not under section 10(2) (vib), it had jurisdiction to admit that expenditure as a permissible allowance in the computation of the taxable income of the assessee.'

8. If the first part of the passage which we have quoted above is read divorced from the second part, it might appear that the Supreme Court has interpreted the jurisdiction of the Tribunal to be unlimited. But, that is not so. Though the decision of the Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) was not cited before the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) it is obvious from the second part of the passage quoted above that the Supreme Court was very much conscious of the restriction as to jurisdiction while dealing with the same case and it must not be forgotten that out of the three judges who heard Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) , Shah and Ramaswami JJ., were also members of the Bench while heard Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) . Under these circumstances, it is but obvious that being conscious of what had been observed in Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) and in Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) , the Supreme Court in the second part of the passage quoted above emphasized that the subject-matter had remained the same and the Tribunal had the jurisdiction to admit the expenditure as a permissible allowance which was in connection with the same subject-matter of the appeal. Therefore, the first part of the passage which is in very wide terms must be read in the context of the powers which the Tribunal could exercise within the four corners of the jurisdiction which is restricted to the subject-matter of the appeal. All that Shah J., is emphasizing in the first part of the passage quoted above is that within the four corners of the jurisdiction which is restricted to the subject-matter of the appeal, the Tribunal has very wide powers and even though a particular ground of relief relating to the same subject-matter might not have been raised at any earlier stage either before the Income-tax Officer or before the Appellate Assistant Commissioner, it can be raised for the first time at the stage of appeal before the Tribunal but it must be in connection with the subject-matter of the appeal, and that is why Shah J., emphasised at page 71 :

'If for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief.'

9. So Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) cannot be read as holding that the Tribunal was unlimited jurisdiction to cover all possible points that may be urged before it. The power to deal with all questions of law or fact must be exercised within the four corners of the jurisdiction which is restricted to the subject-matter of the appeal.

10. It is in the light of this clear distinction between the subject-matter of the appeal, the powers which the Tribunal can exercise while exercising that jurisdiction and the grounds of appeal, that we must now read the different authorities of the different High Courts. In Commissioner of Income-tax v. Karamchand Premchand P. Ltd. : [1969]74ITR254(Guj) , the facts were rather peculiar and it was in the light of the facts of that case that the question relating to the scope and ambit of the jurisdiction of the Tribunal were considered by this High Court. At the stage of the proceedings before the Income-tax Officer in that particular case, the assessee made, inter alia, three claims for deductio : one was for depreciation in respect of the land on which stood the building of the assessee; the other was for development rebate in respect of certain machinery installed during the relevant accounting year and the third was for a sum of Rs. 25,920, being the aggregate amount of stamp duty, registration charges, lawyer's fees and other miscellaneous expenses incurred by the assessee in connection with the issue of debentures secured on the fixed assets of the assessee and issued to the Bank of India Ltd., to secure a loan borrowed for the purpose of the business of the assessee. Out of the three claims the first was rejected by the Income-tax Officer and the second was partially disallowed and so far as the third was concerned, it was wholly disallowed on the ground that it represented capital expenditure. The assessee being aggrieved by the order of assessment preferred an appeal to the Appellate Assistant Commissioner and in the memorandum of appeal, amongst others, two grounds were taken, one relating to the disallowance of the whole of the first claim and the other relating to the partial disallowance of the second claim and relief was sought that these two claims should be fully allowed as permissible deductions. The disallowance of the third claim was not challenged by the assessee in the memorandum of appeal nor did it form the subject-matter of any ground of appeal. No leave of the Appellate Assistant Commission was also sought to urge it as an additional ground of appeal. The result was that the Appellate Assistant Commissioner was not called upon to consider and decide whether the disallowance of the third claim was property made by the Income-tax Officer and there was no decision of the Appellate Assistant Commissioner on the point. The Appellate Assistant Commissioner considered the other two grounds urged on behalf of the assessee and decided that the first claim was rightly rejected by the Income-tax Officer but the disallowance of the second was improper and it should be allowed as a permissible deduction. The assessee thereupon carried the matter in further appeal to the Tribunal. Only one ground of appeal was originally taken in the memorandum of appeal and that related to the disallowance of the first claim. But, before the appeal came on for hearing, a decision was given by the Supreme Court in India Cements Ltd., v. Commissioner of Income-tax : [1966]60ITR52(SC) to the effect that expenditure such as the one claimed by the assessee as forming the subject-matter of the third claim must be held to be expenditure incurred wholly and exclusively for the purpose of the assessee's business and as such allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922, corresponding to section 37 of the Income-tax Act, 1961. The assessee thereupon made an application to the Tribunal for raising an additional ground of appeal challenging the disallowance of the third claim and this application was filed before the actual date of hearing of the appeal. When the appeal reached hearing, the first claim was not pressed by the assessee since it was already covered by a decision given in the meantime by the Supreme Court in Commissioner of Income-tax v. Alps Theatre : [1967]65ITR377(SC) . The main and the only controversy between the parties, therefore, at the stage of the appeal before the Tribunal, centered round the third claim sought to be agitated by means of the additional ground and the question before the High Court was ultimately, whether the Tribunal had jurisdiction to allow this contention about the third claim to be raised, and the question which was referred to the High Court in Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) was :

'Whether, on the facts and in the circumstances of the case, the Tribunal had jurisdiction to allow the assessee to raise the additional ground and to decide whether the assessee was entitled to a deduction of Rs. 25,920 ?'

11. Bhagwati C.J., delivering the judgment of the High Court, observed at page 25 :

'What is the order which the Appellate Assistant Commissioner makes when he disposes of an appeal against an order of assessment Section 246 which provides for an appeal to the Appellate Assistant Commissioner against an order of assessment confers the right of appeal only on the assessee and not on the revenue and says that the assessee may appeal if he is aggrieved by the order of assessment and objects to the amount of income assessed or to the amount of tax determined under the order of assessment. Now, the process of assessment of the amount of income and determination of the amount of tax would ordinarily involve consideration of diverse items or sources of income and reaching of several decisions by the Income-tax Officer and the assessee who is aggrieved by an order of assessment may object to the amount of income assessed or to the amount of tax determined on one or more grounds directed against the decisions reached by the Income-tax Officer in the course of the assessment. The assessee may be satisfied with some decisions given by the Income-tax Officer and may be dissatisfied with others and to the extent to which he is dissatisfied, he may challenge such decisions by rising specific grounds of appeal and urge that the amount of income assessed or the amount of tax determined as a result of such decisions be either set aside or reduced. Where such an appeal is preferred, section 250, sub-section (2), says that both the assessee and the Income-tax Officer shall have a right to be heard at the hearing of the appeal. Section 251 lays down the powers of the Appellate Assistant Commissioner in disposing of the appeal and sub-section (1), clause (a), says that on an appeal against an order of assessment, the Appellate Assistant Commissioner may confirm, reduce, enhance or annual the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer. The Explanation at the end of section 251 makes it clear that, in disposing of the appeal, the Appellate Assistant Commissioner may consider and decide any matter arising out of proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Appellate Assistant Commissioner by the assessee. The Explanation was not there in the old Act but even without the Explanation, the interpretation consistently placed by the High Courts on the corresponding provisions of the old Act was-vide Narrondas Manordass v. Commissioner of Income-tax : [1957]31ITR909(Bom) and this interpretation was confirmed by the Supreme Court in Commissioner of Income-tax v. McMillan and Co. : [1958]33ITR182(SC) and Commission of Income-tax v. Shapoorji Pallonji Mistry : [1962]44ITR891(SC) that once an appeal is preferred by an assessee, the powers of the Appellate Assistant Commissioner are not confined to a consideration of only those matters which are raised by the assessee in appeal but he may also consider and decide matters not raised in appeal but 'considered by the Income-tax Officer and determined in the course of the assessment'. The Explanation gives statutory recognition to this interpretation and accords legislative approval to it. The result is that if an assessee does not choose to appeal, the order of assessment becomes final subject to any power of revision which the Commissioner may have under section 263, but it, as observed by Chagla C.J. in Narrondas' case [1967] 31 ITR 90 :

'..... the assessment is opened up by the action of the assessee himself, then the powers conferred upon the Appellate Assistant Commissioner are much wider than the powers of an ordinary court of appeal. The statute provides that once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer not only with regard to a matter raised by the assessee but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment.' The powers of the Appellate Assistant Commissioner are not confined to the subject-matter of the appeal but extend to the subject-matter of the assessment. The entire assessment is thrown open before the Appellate Assistant Commissioner, and, so long as he does not travel outside the matters considered and determined by the Income-tax Officer, he can correct any decision of the Income-tax Officer in the course of the assessment even if the assessee is satisfied with it and has not challenged it in the appeal. But whatever be the points considered and determined by him-whether raised originally in the memorandum of appeal or with leave granted under section 250, sub-section (5) or considered suo motu-the Appellate Assistant Commissioner must set out in the order 'the points for determination, the decision thereon and the reasons for the decision'-vide section 250, sub-section (5). The order of the Appellate Assistant Commissioner would thus consist of various decisions on matters which may be raised in appeal by the assessee or considered suo motu by the Appellate Assistant Commissioner and the effect of these decisions would be to confirm or reduce or enhance or annual or set aside the assessment as stated in sub-section (1), clause (a), of section 251.

Turning now to section 253, which provides for an appeal to the Tribunal against an order passed by the Appellate Assistant Commissioner under section 250, we find that, unlike section 246, this section confers a right of appeal both on the assessee and the revenue-vide sub-sections (1) and (2)-and as appears clearly from the language of sub-section (4) and particularly the words 'the Income-tax Officer or the assessee may, notwithstanding that he may not have appealed against such order or any part thereof.... file a memorandum of cross-objections.... against any part of the order...' It postulates that in respect of the same order of the Appellate Assistant Commissioner, there may be an appeal by the assessee as to one part and an appeal by the revenue as to the other. The reason for this departure in the scheme is obvious. The order of the Appellate Assistant Commissioner, as pointed out above, would consist of various decisions on matters considered by him and out of these decisions, some may be against the assessee and some may be against the revenue. The assessee, if he does not accept the decisions which are against him, may prefer an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which comprises such decisions (vide sub-section (1)) and the revenue also, similarly, may, if it does not accept the decisions recorded against it, prefer an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which consists of such decisions (vide sub-section (2)). Where the assessee or the revenue has preferred an appeal to the Tribunal against that part of the order of the Appellate Assistant Commissioner which consists of decisions recorded against him, the other party, if he has not already appealed, may file cross-objections against that part of the order of the Appellate Assistant Commissioner which consists of decisions with which he is dissatisfied (vide sub-section (4)). The appeal by the assessee or by the revenue against any part of the order of the Appellate Assistant Commissioner is therefore really an appeal against the decisions of the Appellate Assistant Commissioner which are against him and by which he is aggrieved. It is, therefore, imperative that there must be decision of the Appellate Assistant Commissioner by which the assessee or the revenue is aggrieved before he can prefer an appeal against that part of the order of the Appellate Assistant Commissioner consisting of such decision. A fortiori, if a particular matter is not considered and decided by the Appellate Assistant Commissioner, and the decision on it does not form part of the order of the Appellate Assistant Commissioner, there can be no appeal against it. This much was not disputed, and indeed could not be disputed, by the learned advocate appearing on behalf of the assessee.'

12. We have quoted in extenso from this judgment in Commissioner of Income-tax v. Karamchand Premchand P. Ltd. : [1969]74ITR254(Guj) to point out that this High Court was very much conscious of the distinction between the powers and jurisdiction of the Appellate Assistant Commissioner on the one hand and the powers and jurisdiction of the Tribunal on the other while disposing of the appeals before those respective authorities. The jurisdiction of the Appellate Assistant Commissioner is with reference to the subject-matter of the appeal as well as to the subject-matter of the entire assessment whereas the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal and the subject-matter of the appeal can only be the grievance against one or the other decisions of the Appellate Assistant Commissioner. If the Appellate Assistant Commissioner has not decided a point even though he was invited to do so, it can be said that by failing to decide it, impliedly he has given his decision and even that implied decision can be made the subject-matter of the appeal before the Tribunal but only the express decision of the Appellate Assistant Commissioner or the implied decision of the Appellate Assistant Commissioner can be made the subject-matter of the appeal before the Tribunal. If there is no such decision on any part of the assessment, namely, the express decision or implied decision, there cannot be any appeal to the Tribunal and this has been clearly emphasised by Bhagwati C.J. in the passage that we have set out above. This High Court in Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) held ultimately that the Tribunal was not entitled to allow the assessee to agitate the question under the guise of granting leave under rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. If the matter had been the subject-matter of the appeal, it would have been open to the Tribunal to allow the assessee to raise a new ground of appeal but it must be with reference to the same subject-matter of the appeal and not with reference to a different subject-matter. The earlier decisions of the Supreme Court in Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) and in Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) do not lay down anything contrary to what has been observed by this High Court in Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) . Indeed, in Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) this High court merely emphasised that the Tribunal cannot step outside the four corners of its jurisdiction and deal with a matter which is not the subject-matter of the appeal before it and this High Court has in clear details spelt out what can be the subject-matter of the appeal before the Tribunal, namely, any decision which may be either implied or express, given by the Appellate Assistant Commissioner and any one of those implied or express decisions of the Appellate Assistant Commissioner can become the subject-matter of the appeal and it is only the party who is aggrieved by one or the other of those decisions of the Appellate Assistant Commissioner, be it the revenue or be it the assessee, who can file the appeal and can agitate the matter before the Tribunal. But there must be a decision of the Appellate Assistant Commissioner being aggrieved by which the revenue or the assessee carried the matter in appeal to the Tribunal and it is this decision against which the revenue or the assessee bears a grievance or by which he feels aggrieved, that forms the subject-matter of the appeal before the Tribunal. If in any particular case, as happened in the case of Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) , the Appellate Assistant Commissioner was never called upon to give his decision on a particular point, it cannot be said that the Appellate Assistant Commissioner had given a decision on that point and, therefore, it cannot be said that the assessee or the revenue was aggrieved by the decision of the Appellate Assistant Commissioner regarding that particular matter and if there was no grievance on the part of the appellant before the Tribunal regarding a particular subject-matter, it cannot be said that that particular item formed the subject-matter of the appeal before the Tribunal. One must keep in forefront the concept that the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal. Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) merely illustrates and exemplifies what can happen if the question sought to be agitated before the Tribunal does not pertain to the subject-matter of the appeal before the Tribunal.

13. In Commissioner of Income-tax v. Gurjargravures P. Ltd. : [1972]84ITR723(Orissa) , the question before this High Court was regarding the powers of the Appellate Assistant Commissioner and it was emphasized that where an assessee prefers an appeal against an order of assessment, the whole assessment order is thrown open before the Appellate Assistant Commissioner and he can interfere with any part of the assessment whether in favour of the assessee or against him. It was emphasized that the jurisdiction of the Appellate Assistant Commissioner is not confined to the subject-matter of the appeal but extends to the subject-matter of the assessment. It is true that, in that particular case the question involved was regarding the relief to be granted under section 84 of the Act of 1922 now replaced by section 80J of the Act and when the assessee claimed exemption of a portion of the profits brought to tax by the Income-tax Officer for the first time in an appeal to the Appellate Assistant Commissioner, it was held that as the Income-tax Officer had subjected to tax the portion of profit which was claimed to be exempt under section 84, it was open to the Appellate Assistant Commissioner to consider whether the assessment of this portion was right or wrong and hence he could examine the claim under section 84. Gurjargravures Pvt. Ltd.'s case : [1972]84ITR723(Orissa) , therefore, which deals with the powers of the Appellate Assistant Commissioner is not of much assistance to us in the instant case. It may be pointed out that the relief which was not even pressed for before the Income-tax Officer was held to be within the jurisdiction of the Appellate Assistant Commissioner since it was part of the entire assessment proceedings with which the Appellate Assistant Commissioner had the jurisdiction to deal.

14. In Commissioner of Income-tax v. Sayaji Mills Ltd. : [1974]94ITR26(Guj) again the question was of the powers of the Appellate Assistant Commissioner to deal with a claim of the assessee which was not raised before the Income-tax Officer and it was held that all questions, whether of law or of fact, which relate to the assessment of the assessee, may ordinarily be allowed to be raised by him in appeal even though not raised before the Income-tax Officer, if grant of relief would be available on the determination of such question. The Appellate Assistant Commissioner had been requested to permit the assessee to contend that in the assessment of the relevant years, the profits realised on the sale of machinery in the relevant previous years were not taxable because the business was not in existence at any time during the relevant previous years and this point which was not allowed to be raised by the Appellate Assistant Commissioner formed the subject-matter of the appeal before the Tribunal. The decision in Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) was considered by the Division Bench of this court in Sayaji Mills Ltd.'s case : [1974]94ITR26(Guj) and P. D. Desai J., delivering the judgment of the court, has observed at page 3 :

'It would appear from the provisions of section 33(4), as construed by the Supreme Court, that the legislature has conferred upon the Appellate Tribunal wide powers in dealing with appeals preferred to it. The jurisdiction of the Tribunal is undoubtedly restricted to the subject-matter of the appeal but once it is shown that a particular claim or contention was the subject-matter of the appeal before the Tribunal, the law authorises the Tribunal to pass such orders in relation to such claim or contention as it thinks fit.'

15. This precisely brings out the distinction between jurisdiction on the one hand and the powers of the Tribunal in the exercise of the jurisdiction on the other.

16. In view of what we have discussed above, it cannot be said that what has been held by this High Court in Karamchand Premchand P. Ltd.'s case : [1969]74ITR254(Guj) is in any way in conflict with the decisions of the Supreme Court in Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) and Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) . This High Court has merely applied one aspect of the principle when it found that the particular claim or contention which was sought to be raised before the Tribunal did not form part of the subject-matter of the appeal before the Tribunal. By analysing the different sections pertaining to the appeal, the High Court has merely pointed out what can possible be the subject-matter of the appeal before the Tribunal.

17. Our attention has been drawn to the following decisions of the different High Courts pertaining to the powers of the Tribunal and the question of the powers of the Tribunal and the jurisdiction of the Tribuna : Oriental Building and Furnishing Company v. Commissioner of Income-tax was decided by the Punjab High Court and it was held that the Tribunal's power of dealing with an order passed by an Appellate Assistant Commissioner is plenary and has been expressed in section 33(4) of the Indian Income-tax Act, 1922, as widely as can be conceived. In Ramgopal Ganpatrai & Sons v. Commissioner of Excess Profits Tax : [1953]24ITR362(Bom) the Bombay High Court dealt with the question of the powers of the appellate authority. The question was not raised before the assessing officer and was not stated in the grounds of appeal and the question was whether it can be considered by the Appellate Assistant Commissioner and the Tribunal. We have pointed out above that the entire subject-matter of assessment is open before the Appellate Assistant Commissioner and if the point was raised before the Appellate Assistant Commissioner and was decided by him one way or the other, it can certainly be raised before the Tribunal. In Commissioner of Income-tax v. Breach Candy Swimming Bath Trust : [1955]27ITR279(Bom) , what was sought to be done was that claim under a new provision of law was sought to be put forward before the Appellate Tribunal for the first time and it was not a question of something which was not the subject-matter of the appeal being raised before the Tribunal. In New India Life Assurance Co. v. Commissioner of Income-tax : [1957]31ITR844(Bom) , the question was of a new ground of appeal and there was no question of anything being urged before the Tribunal which was not the subject-matter of the appeal. In Commissioner of Income-tax v. Hazarimal Nagji & Co. : [1962]46ITR1168(Bom) , a new contention of law which was purely of law was raised for the first time before the Appellate Tribunal and the facts as found before the Income-tax Officer as well as before the Appellate Assistant Commissioner were not in dispute. Though this legal argument was not urged before either the Appellate Assistant Commissioner or the Income-tax Officer, it was allowed to be urged before the Tribunal, and the Bombay High Court held that this point of law arising on the facts as found could be raised before the Tribunal and it was within the jurisdiction of the appellate powers of the Tribunal to permit the party to raise the question which it sought to raise for the first time before the Tribunal. Therefore, this case merely illustrates that the subject-matter of the appeal remaining undisturbed, it is open to a party to support its contention by a new legal argument altogether though such a legal argument was not urged either before the Income-tax Officer or before the Appellate Assistant Commissioner.

18. In Beharilal Ramcharan Cotton Mills Ltd. v. Commissioner of Income-tax : [1966]62ITR212(Bom) , the claim for depreciation before the Income-tax Officer and the Appellate Assistant Commissioner was based on clause (via) of sub-section (2) of section 10 but in the grounds of appeal to the Appellate Tribunal, it was sought to be based on an alternative claim that on the materials on record, the assessee was entitled to depreciation under section 12(3) and it was held that no new case was being set up but only some provision of law was sought to be called in aid to support the claim for depreciation on the same set of facts and it was held by the High Court that the Tribunal was not justified in not considering the case of the assessee under section 12(3) of the Act on the material already on record. Hence, if the materials are on record and on those materials on record a new argument or contention of law is sought to be urged, the contention cannot be rejected by the Tribunal on the ground that it is a new contention.

19. In J. S. Parkar v. V. B. Palekar : [1974]94ITR616(Bom) , the matter came up for final hearing before Tulzapurkar J. on a difference of opinion between Deshpande and Mukhi JJ. Tulzapurkar J. ultimately agreed with the view of Deshpande J. but in his judgment Mukhi J. has dealt with the question of the powers of the Tribunal in allowing new points to be raised and Mukhi J. found that the point which was sought to be raised before the Tribunal was not being raised for the first time and he also held that the point also could be considered to be a pure question of law or a plea which could be considered on the evidence already on the record, and he has considered the powers of the Tribunal from this angle.

20. In Commissioner of Income-tax v. Krishna Minning Co. : [1977]107ITR702(AP) the Andhra Pradesh High Court has held (pp. 707-708 :

Although the powers of the Tribunal are expressed in very wide language, the work 'thereon' restricts the use of such wide powers of the Tribunal to the subject-matter of the appeal..... 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..... 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.... The Tribunal's decision 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.'

21. In our opinion, the legal position has to be considered ultimately in the light of the decisions in Hukumchand Mills Ltd.'s case : [1967]63ITR232(SC) and Mahalakshmi Textile Mills Ltd.'s case : [1967]66ITR710(SC) . First, it must be found out what is the subject-matter of the appeal and that an be expressly or impliedly decided. We must emphasize again that by implied decision, we mean that though a point might have been raised before the Appellate Assistant Commissioner, in his final order the Appellate Assistant Commissioner might not have dealt with that point and thereby impliedly rejected it. That is an implied decision of the Appellate Assistant Commissioner and a party may be aggrieved by an express decision of the Appellate Assistant Commissioner or by an implied decision of the Appellate Assistant Commissioner. The subject-matter of the appeal before the Tribunal can only be the decision express or implied of the Appellate Assistant Commissioner and the jurisdiction of the Tribunal is restricted to the subject-matter of the appeal. Once the subject-matter of the appeal is determined, the Tribunal has very wide powers to deal with all questions of fact and law pertaining to that subject-matter of appeal and it can allow a new question of law to be raised in support of the same claim for relief. On the facts found, if a new aspect of law can be applied, it can allow it to be urged even though that aspect of the law was not urged either before the Income-tax Officer or the Appellate Assistant Commissioner. The Tribunal is not restricted to the very grounds of appeal on which originally the decision of the Appellate Assistant Commissioner was sought to be challenged when the appeal was filed. It has wide powers to allow the party to add to or alter the grounds of appeal subject, of course, to the opportunity being given to the other side of being heard on this new ground of appeal. These are the restrictions and limitations within which the Appellate Tribunal can function and can exercise its jurisdiction but it must be emphasized that the jurisdiction of the Tribunal which is restricted to the subject-matter of the appeal must not be confused with the powers of the Tribunal to deal with an appeal within the four corners of its jurisdiction. The Tribunal cannot transgress the limits of that jurisdiction even though, in the exercise of that jurisdiction, its powers are plenary and very wide.

22. In the instant case we find that the grievance of the assessee before the Tribunal was that, though the question of relief under sections 80J and 80J(3) was orally urged before the Appellate Assistant Commissioner in the course of arguments, the Appellate Assistant Commissioner in his order had not dealt with this point and had not granted any relief. If in fact such a contention was orally urged, the Tribunal, in the first instance, should have found out whether factually the ground of appeal before it was correct or not, namely, whether such an oral contention had or had not been raised before the Appellate Assistant Commissioner. If such oral contention had been raised before the Appellate Assistant Commissioner, then the grievance of the assessee that the Appellate Assistant Commissioner had not dealt with this contention orally urged before the Appellate Assistant Commissioner at the time of the appeal formed the subject-matter of the appeal before the Tribunal and the Tribunal had the jurisdiction to deal with the question. In the exercise of that jurisdiction it was open to the Tribunal to remand the matter back either to the Income-tax Officer or to the Appellate Assistant Commissioner to ascertained the facts regarding this claim for relief under section 80J. The record of the Tribunal need not show and is not likely to contain whether in fact this contention was orally urged before the Appellate Assistant Commissioner by the assessee. In our opinion, therefore, the Tribunal should first ascertain for itself whether such a contention had in fact been urged before the Appellate Assistant Commissioner. If it comes to the conclusion that it was not urged by the assessee before the Appellate Assistant Commissioner, then the grievance that the Appellate Assistant Commissioner did not take that contention regarding section 80J into account cannot form the subject-matter of the appeal before the Tribunal and it is not open to the Tribunal to allow the assessee to raise the same plea before the Tribunal for the first time.

23. In view of the facts of this case, two courses are open to u : one is to call for a supplementary statement of the case from the Tribunal and the other is to leave the Tribunal to take appropriate steps to adjust its decision under section 260(1) in the light of the answer of this court. If we direct the Tribunal to submit a supplementary statement of the case, the Tribunal will, according to the decisions of the Supreme Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax : [1959]37ITR11(SC) , Petlad Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax : [1963]48ITR92(SC) and Keshav Mills Co. Ltd. v. Commissioner of Income-tax : [1965]56ITR365(SC) , be restricted to the evidence on the record and may not be entitled to take additional evidence. That may result in injustice. In the circumstances, we think it appropriate to decline to answer the question on the ground that the Tribunal has failed to consider and decide the question whether the point regarding relief under section 80J was urged before the Appellate Assistant Commissioner or not and it will be open to the Tribunal to dispose of the appeal under section 260, sub-section (1) of the Income-tax Act, in the light of the observations made by this court after determining the question which ought to have been decided first. That will be no order as to costs of this reference.


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