Ita/13/2013 Of The Kerala Minerals And Metals Ltd v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN WEDNESDAY, THE 10TH DAY OF DECEMBER 2014/19TH AGRAHAYANA, 1936 ITA.No. 13 of 2013 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 684/Coch/2010 of I.T.A.TRIBUNAL,COCHINBENCH DATED 27/7/12 APPELLANT(S): ------------------------ THE KERALA MINERALS AND METALS LTD. (A GOVERNMENT OF KERALA UNDERTAKING), SANKARAMANGALAM CHAVARA-691 583, KOLLAM. BY ADV. SRI.A.KUMAR RESPONDENT(S): ---------------------------- COMMISSIONER OF INCOME TAX ERNAKULAM-682 018. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 10-12-2014,ALONG WITH ITA. 87/2013, ITA. 151/2013, THE COURT ON THE SAME DAY DELIVEREDTHE FOLLOWING: ITA NO.13/13 APPENDIX APPELLANT'S EXHIBITS ANNEXURE A:TRUE COPY OF THE ORDER DT 11.12.1972. ANNEXURE B:TRUE COPY OF THE ORDER DT 12.8.2010. ANNEXURE C:TRUE COPY OF THE SPECIMEN OF THE MININGLEASE EXECUTED DT 9.7.1985. ANNEXURE D:TRUE COPY OF THE MINUTES OF THE MEETINGILLUSTRATIVELY HELD WITH THE LAND OWNERS DT 21.6.2003. ANNEXURE E:TRUE COPY OF the PAPER PUBLICATIONEFFECTED ON 4.4.2007. ANNEXURE F:TRUE COPY OF THE PAPER PUBLICATIONEFFECTED ON 26.8.2009. ANNEXURE G:COPY OF THE VALUATION STATEMENT PREPAREDDURING THE COURSE OF NEGOTIATED PURCHASE TOGETHER WITHTHE CONNECTED DOCUMENTS IN RESPECT OF THE VALUATION. ANNEXURE H:TRUE COPY OF THE SALE DEED EXECUTED INRESPECT OF THE PROPERTY FORMING THE NEGOTIATED PURCHASE. ANNEXURE I:TRUE COPY OF THE STATEMENT FOR THEASSESSMENT YEAR 2006-07. ANNEXURE J:TRUE COPY OF THE MEMORANDUM SEEKINGPERMISSION TO RAISE ADDITIONAL GROUND DT 19.6.12. ANNEXURE K:TRUE COPY OF THE ORDER DT 27.7.12. ANNEXURE L:TRUE COPY OF THE ASSESSMENT ORDER FOR THEASSESSMENT YEAR 2006-07 DT 13.11.2008. ANNEXURE M:TRUE COPY OF THE ORDER OF THE COMMISSIONEROF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2006-07DT 30.9.2010. //True Copy// PA to Judge ANTONY DOMINIC & ANIL K. NARENDRAN, JJ. =============================== I.T.A. Nos. 13, 87 & 151 of 2013======================= Dated this the 10[th] day of December, 2014 J U D G M E N T Antony Dominic, J. These appeals are filed by M/s. Kerala Minerals and MetalsLtd., under Section 260A of the Income Tax Act challenging theorders passed by the Income Tax Appellate Tribunal in ITANos.684/10, 685/10 and 307/09 whereby the appeals filed by theappellant concerning the assessment years 2005-06, 2006-07 and2007-08 were dismissed. 2.We heard the learned counsel for the appellant and thelearned standing counsel appearing for the department. 3.Since the issues raised in these appeals are connected,we heard these cases together and are disposing of the appeals bythis common judgment. The common issue raised before us by thelearned counsel for the appellant was regarding the legality of theorder passed by the Tribunal in rejecting their prayer to admit twoadditional grounds. 4.The additional grounds raised by the appellant, thecontentions urged and the decision taken thereon are seen from : 2 : paragraphs 9 and 10 of the order passed by the Tribunal in ITANo.307/09 arising out of assessment for the assessment year2005-06 and these paragraphs are extracted below for reference; “9. The assessee has moved a petition with aprayer to admit the following additionalgrounds:- 3.Since the issues raised in these appeals are connected,we heard these cases together and are disposing of the appeals bythis common judgment. The common issue raised before us by thelearned counsel for the appellant was regarding the legality of theorder passed by the Tribunal in rejecting their prayer to admit twoadditional grounds. 4.The additional grounds raised by the appellant, thecontentions urged and the decision taken thereon are seen from : 2 : paragraphs 9 and 10 of the order passed by the Tribunal in ITANo.307/09 arising out of assessment for the assessment year2005-06 and these paragraphs are extracted below for reference; “9. The assessee has moved a petition with aprayer to admit the following additionalgrounds:- a) whether on law, and having regard to thefacts and circumstances of the case, theexpenditure incurred by way of paymentseffected during the year for the buildings thatexisted on the land acquired for mining anddemolished immediately such acquisition toprepare such land acquired for the purpose ofmining operations, is allowable as revenueexpenditure incurred in the course of mining ofessential raw materials u/s.37(1) of the IncomeTax Act, 1961? b)without prejudice to the above, the costincurred for preparation of land to make itminable, for mining the essential raw materials,incurred under the authority of a statutorylicense vested with the appellant, if notallowable as revenue expenditure, is to betreated as an intangible asset eligible foramortization for depreciation being cost : 3 : incurred for acquiring business or commercialright in the nature of license? These grounds were not raised before thetax authorities and they have been raisedbefore the tribunal for the first time. It wassubmitted that these additional grounds involvelegal issue and accordingly the assessee prayedfor their admission. When the Tribunal askedthe Ld. AR as to whether the facts relating tothe above said legal issues are available onrecord, the Ld. AR fairly admitted that therelevant facts are not available on record.However, by placing reliance on the decision ofthe Hon'ble Kerala High court in the case of CITvs. Kerala State Co-operative MarketingFederation Ltd. (193 ITR 624), the Ld. ARpleaded for the admission of these additionalgrounds. 10. On the contrary, the Ld. DR submitted thatthese additional grounds cannot be admitted asthe relevant facts are not available on recordand for this proposition, she placed reliance onthe decision of the Hon'ble Supreme Court inthe case of National Thermal Power CorporationLtd. vs. CIT reported in 229 ITR 383 and also onthe decision of the Madhya Pradesh High Courtin the case of CIT vs. Tollaram Hassomal reported 298 ITR 22. In the judicial hierarchy,the decision of the superior court is required tobe preferred. On the issue whether a new claimraised for the first time before the tribunal canbe admitted or not, the decision of the Hon'bleSupreme Court in the case of National ThermalPower Corporation Ltd. vs. CIT (supra) isavailable as on today. According to the saiddecision, a new claim involving legal issue canbe admitted, provided all the facts relatingthereto are available on record. In the instantcase, though the additional grounds raised bythe assessee may involve legal issue, yet thefacts relating to there to are not available onrecord. Accordingly, by following the decision ofHon'ble Supreme Court in the case of NationalThermal Power Corporation, supra, we declineto admit the additional grounds raised by theassessee.” 5.According to the learned counsel for the appellant, theaccounts being part of the record before the assessing officer andsince expenditure claimed is reflected in the audited accounts,the Tribunal should not have accepted the contention of therevenue that the aforesaid grounds raised for the first time before : 5 : 5.According to the learned counsel for the appellant, theaccounts being part of the record before the assessing officer andsince expenditure claimed is reflected in the audited accounts,the Tribunal should not have accepted the contention of therevenue that the aforesaid grounds raised for the first time before : 5 : it could not be entertained since facts relating thereto were notavailable on record. Counsel sought to substantiate hiscontentions by referring to the judgment of this Court in C.I.T. v. Kerala State Co-op. Marketing Fed. Ltd (193 ITR 624) andalso referred to the Apex Court judgment in C.I.T. v. NirbheramDaluram [(1997) 10 SCC 373]. 6.On the other hand, learned standing counsel referredus to the admission on behalf of the appellant before the Tribunalas contained in para 9 extracted above that the relevant factswere not available on record. He also relied on the judgment ofthe Apex Court in National Thermal Power Co. Ltd. v. C.I.T.{1998 (229) ITR 383} and sought to sustain the order passed bythe Tribunal. 7.We have considered the submissions made by bothsides. Admittedly, the grounds which were raised by the appellantbefore the Tribunal and noticed by it in para 9 extracted aboveand the factual contention in support thereto were not raisedbefore the assessing officer or before the first appellate authority.The question is whether, in such a situation, the assessee is I.T.A. Nos. 13, 87 & 151 of 2013 : 6 : entitled to raise such an additional ground for the first time beforethe Appellate Tribunal. This precise question fell for considerationof the Apex Court in NTPC case (supra). In that judgment,following the earlier judgment in Jute Corporation of India Ltd. v. CIT {(1991) 187 ITR 688}, the Apex Court held thus; “Under section 254 of the Income-tax Act, theAppellate Tribunal may, after giving both theparties to the appeal an opportunity of beingheard, pass such orders thereon as it thinks fit.The power of the Tribunal in dealing withappeals is thus expressed in the widestpossible terms. The purpose of the assessmentproceedings before the taxing authorities is toassess correctly the tax liability of an assesseein accordance with law. If, for example, as aresult of a judicial decision given while theappeal is pending before the Tribunal, it isfound that a non-taxable item is taxed or apermissible deduction is denied, we do not seeany reason why the assessee should beprevented from raising that question before theTribunal for the first time, so long as therelevant facts are on record in respect of thatitem. We do not see any reason to restrict thepower of the Tribunal under section 254 only to decide the grounds which arise from the orderof the Commissioner of Income-tax (Appeals).Both the assessee as well as the departmenthave a right to file an appeal/cross-objectionsbefore the Tribunal. We fail to see why theTribunal should be prevented from consideringquestions of law arising in assessmentproceedings although not raised earlier. In the case of Jute Corporation of IndiaLtd. v. CIT (1991) 187 ITR 688, this court, whiledealing with the powers of the AppellateAssistant Commissioner observed that anappellate authority has all the powers whichthe original authority may have in deciding thequestion before it subject to the restrictions orlimitations, if any, prescribed by the statutoryprovisions. In the absence of any statutoryprovision, the appellate authority is vested withall the plenary powers which the subordinateauthority may have in the matter. There is nogood reason to justify curtailment of the powerof the Appellate Assistant Commissioner inentertaining an additional ground raised by theassessee in seeking modification of the order ofassessment passed by the Income-tax Officer.This court further observed that there may beseveral factors justifying the raising of a new : 8 : : 8 : plea in an appeal and each case has to beconsidered on its own facts. The AppellateAssistant Commissioner must be satisfied thatthe ground raised was bona fide and that thesame could not have been raised earlier forgood reasons. The Appellate AssistantCommissioner should exercise his discretion inpermitting or not permitting the assessee toraise an additional ground in accordance withlaw and reason. The same observations wouldapply to appeals before the Tribunal also. The view that the Tribunal is confinedonly to issues arising out of the appeal beforethe Commissioner of Income-tax (Appeals)takes too narrow a view of the powers of theAppellate Tribunal (vide, e.g., CIT v. AnandPrasad [1981] 128 ITR 388 (Delhi), CIT v.Karamchand Premchand P. Ltd. [1969] 74 ITR254 (Guj) and CIT v. Cellulose Products of IndiaLtd [1985] 151 ITR 499 (Guj) ).Undoubtedly, the Tribunal will have thediscretion to allow or not allow a new ground tobe raised. But where the Tribunal is onlyrequired to consider a question of law arisingfrom the facts which are on record in theassessment proceedings we fail to see whysuch a question should not be allowed to be : 9 : raised when it is necessary to consider thatquestion in order to correctly assess the taxliability of an assessee.” 8.Reading of the aforesaid paragraphs of the Apex Court judgment show that the Appellate Tribunal, which has beenconferred with wide powers under the Act, is entitled to permitthe parties before it to raise new questions before it for the firsttime. However, that freedom available to the Appellate Tribunaland the parties, is subject to the condition that the relevant factsin respect of the claim raised before the Tribunal are available on record. In Jute Corporation of India Ltd., (supra), SupremeCourt has also laid down that each case has to be considered onfacts and that where the appellate authority is satisfied that theground raised was a bona fide one and that the same could nothave been raised earlier for good reasons, the appellate authorityis entitled to permit the parties to urge new contentions. 9.In so far as these cases are concerned, we havealready referred to the statement made by the authorisedrepresentative, who appeared for the appellant before theTribunal that the relevant facts were not available on record. However, this statement made by the authorised representativewas sought to be explained by the learned counsel for theappellant by contending that what he intended was that the factswere not available in the records before the Tribunal. However,since the statement made before the Tribunal is not a qualifiedone, as now sought to be made out, we are unable to accept theargument now urged. If that be so, the view taken by theTribunal is fully supported by the principles laid down by theSupreme Court in Jute Corporation of India (supra) and NTPCcase (supra). 10.In so far as the Division Bench judgment of this Courtin the Kerala State Co-operative Marketing FederationLtd., (supra) is concerned, learned counsel for the appellantrelied on paragraphs 23 and 24 thereof, which reads thus; “23. Following the decisions of the SupremeCourt cited above and agreeing with the viewexpressed by the Madras High Court inR.Brahadesswaran's case (supra), we hold thatan appellant before the Tribunal could raise anynew or additional point for the first time inappeal before the Tribunal even though it had not been raised in any form either before theassessing authority or before the Commissioner(Appeals). We further hold that when once anysuch new or additional ground is raised beforethe Tribunal, they are duty bound to entertainthat ground and render a decision thereoneither themselves or by remanding the matter iffurther investigation into the facts isnecessitated. “23. Following the decisions of the SupremeCourt cited above and agreeing with the viewexpressed by the Madras High Court inR.Brahadesswaran's case (supra), we hold thatan appellant before the Tribunal could raise anynew or additional point for the first time inappeal before the Tribunal even though it had not been raised in any form either before theassessing authority or before the Commissioner(Appeals). We further hold that when once anysuch new or additional ground is raised beforethe Tribunal, they are duty bound to entertainthat ground and render a decision thereoneither themselves or by remanding the matter iffurther investigation into the facts isnecessitated. 24. The Tribunal permitted the assessee toraise the additional ground claiming deductionof the amount accrued as per the KeralaGeneral Sales Tax Act towards purchase tax forpepper. Accepting the contention of theassessee that it was omitted to be claimedbefore the ITO, the assessee was also foundentitled to claim the same since that is astatutory liability which accrued during the yearin question. A contention was also raised beforethe Tribunal that the same liability was allowedin a subsequent assessment year. It was forthese reasons that the Tribunal permitted theassessee to raise the additional ground andremitted the matter to the file of theCommissioner (Appeals) to look into the matterafresh and decide the same according to law.” I.T.A. Nos. 13, 87 & 151 of 2013 : 12 : 11.First of all, this case was decided before the NTPCcase (supra) was decided by the Apex Court. Secondly, this casealso does not strike a note of departure from the principles laiddown in Jute Corporation of India Ltd., (supra) or NTPC case(supra)and all that this judgment recognises is the entitlement orthe duty of the appellate authority to entertain and deal with thecontentions raised before it for the first time. This judgment doesnot in any manner dispense with the requirements of availabilityof relevant facts on record, the bona fides of the ground raisedand the necessity of good reasons why the contention could nothave been raised on earlier occassions. Though, the omission tourge the fresh grounds may not have been due to any malafideintention, in so far as these cases are concerned, we are satisfiedthat the relevant facts were not on record and that the appellanthad no good reason whatsoever why these contentions were noturged on earlier occassions when the matter was pending beforethe assessing officer or the first appellate authority. 12.Resultantly, we have to confirm the order passed bythe Tribunal dismissing ITA No.307/Coch/2009. Since ITA Nos. I.T.A. Nos. 13, 87 & 151 of 2013 : 13 : 684 and 685/10, which are the subject matter of ITA Nos.13 and87/13, are also decided on the reasoning adopted by the Tribunalin ITA No.307/Coch/2009, these appeals also will have to bedismissed. Accordingly, these appeals are dismissed without any orderas to costs. Sd/- ANTONY DOMINIC JUDGE Rp Sd/- ANIL K. NARENDRAN JUDGE //True Copy//PA to Judge