Corporation Of India Limited. vs CIT(SC)
Supreme Court Decision
The judgment of the court was delivered by
K. N- SINGH J. -The appellant is a government corporation engaged in jute industry. It was assessed to income-tax for the assessment year 1974-75 by the Income-tax Officer. The assessee preferred an appeal before the Appellate Assistant Commissioner. During the hearing of the appeal, the assessee raised an additional ground claiming deduction of Rs. 11,54,995 on the ground of liability to purchase tax. The assessee claimed that, in view of the decision of this court in Kedarnath Jute Mfg. Co. Ltd. v. CIT  82 ITR 363, the aforesaid amount being tax liability should be deducted from its income for purposes of charging tax. The Appellate Assistant Commissioner permitted the assessee to raise the additional ground and after hearing the Income-tax Officer, he accepted the assessee's claim and allowed deduction of Rs. 11,54,995 in computing the total income of the assessee for the assessment year 1974-75. The Revenue preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal held that the Appellate Assistant Commissioner had no jurisdiction to entertain an additional ground or to grant relief to the assessee on ground which had not been raised before the Income-tax Officer. The Tribunal set aside the order of the Appellate Assistant Commissioner placing reliance on the decision of this court in Addl. CIT v. Gurjargravures P. Ltd.  111 ITR 1. The assessee made an application before the Tribunal under section 256(1) of the Income-tax Act, 1961, for making reference to the High Court. The Tribunal refused to refer the question on the findings that the question stood covered by this court's decision in Gurjargravures' case  111 ITR 1. The assessee thereupon approached the High Court under section 256(2) of the Act for calling for a statement of case and reference from the Appellate Tribunal. A Division Bench of the Calcutta High Court held that the Tribunal was right in rejecting the assessee's application, and, therefore, it refused to call for statement of case. The assessee thereupon approached this court under article 136 of the Constitution, and obtained leave. Hence, this appeal.
The question of law which the assessee sought to be referred to the High Court under section 256(1) of the Act was (See  131 ITR 412, 413):
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the Appellate Assistant Commissioner of Income-tax had exceeded his powers in entertaining the additional ground of appeal taken before him in respect of the claim for deduction of a sum of Rs. 11,54,995 representing liability for raw jute purchase tax ?"
Section 251 of the Income-tax Act (hereinafter referred to as "the Act") prescribes the power of the appellate authority hearing an appeal against the order of Income-tax Officer. Clause (a) of section 251(1) confers power on the appellate authority, namely, the Appellate Assistant Commissioner [now, after the amendment of 1987, the Deputy Commissioner (Appeals) 1, according to which the appellate authority, while hearing an appeal against an order of assessment, has power to confirm, reduce, enhance or annul the assessment: he is further empowered to set aside the assessment and remit the case to the Assessing Officer for making fresh assessment in accordance with its directions, after making such further inquiry as may be necessary. If a direction is issued by the appellate authority, the Assessing Officer is required to proceed to make such fresh assessment and determine the amount of tax, if any, payable on the basis of fresh assessment. The Appellate Assistant Commissioner is thus invested with wide powers under section 251 ( 1 )(a) of the Act while hearing an appeal against the order of assessment made by the Income-tax Officer. The amplitude of the power includes power to set aside the assessment order or modify the same. The question is whether the Appellate Assistant Commissioner while hearing an appeal under section 251(1)(a) has jurisdiction to allow the assessee to raise an additional ground in assailing the order of assessment before it. The Act does not contain any express provision debarring an assessee from raising an additional ground in appeal and there is no provision in the Act placing restriction on the power of the appellate authority in entertaining an additional ground in appeal. In the absence of any statutory provision, the general principle relating to the amplitude of the appellate authority's power being coterminous with that of the initial authority should normally be applicable. But this question, for the purposes of the Income-tax Act, has been an intricate and vexed one. There is no uniformity in judicial opinion on this question.
Section 31 of the Indian Income-tax Act, 1922, also conferred power on the Appellate Assistant Commissioner to hear appeals against the assessment order made by the Income-tax Officer. Chagla C.J., of the Bombay High Court, considered the question in detail in Narrondas Manordass v. CIT  31 ITR 909 and held that the Appellate Assistant Commissioner was empowered to correct the Income-tax Officer not only with regard to a matter which had been raised by the assessee but also with regard to a matter which may have been considered by the Incometax Officer and determined in the course of the assessment. The High Court observed that since the Appellate Assistant Commissioner had revising authority against the decisions of the Income-tax Officer, a revising authority not in the narrow sense of revising what is the subject-matter of the appeal, not in the sense of revising those matters about which the assessee makes a grievance, but a revising authority in the sense that once the appeal is before him lie can