Itr v. Smt.madhu Patani,Ekm

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HON'BLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER FRIDAY, THE 7TH NOVEMBER 2008 / 16TH KARTHIKA 1930 ITR.No. 10 of 2002 ------------------------ AGAINST THE ORDER IN RA.281/COCH/1998 IN ITA.699/COCH/1994 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADV. SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX. RESPONDENT: --------------------- SMT.MADHU PATNI,M/S.MADHU TRADING AGENCIES,T.D.ROAD,ERNAKULAM. BY ADV. SRI.K.SRIKUMAR THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 07/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - I.T.R. No.10 OF 2002 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 7[th] day of November, 2008 O R D E R H.L.DATTU, C.J. This Income Tax Reference is filed by the Revenue beingaggrieved by the orders passed by the Income Tax Appellate Tribunal,Cochin in I.T.A.No.699/1994 for the assessment year 1987-88. TheRevenue has framed the following question of law for ourconsideration and decision. The same reads as under: “Whether in the facts and circumstances ofthe case, the assessee is entitled to raise and thetribunal is empowered to consider the question oflimitation arising in the original orders ofassessment, in an appeal filed against the orderpassed while redoing the original assessment.” (2) In our opinion, there appears to be some typographicalerror while framing the question of law. It should have been, whether on the facts and circumstances of the case the assessee was entitled toraise the additional ground before the first appellate authority for thefirst time. (3) The facts, as narrated by the tribunal, in its order is asunder: ITR.NO.10/2002 The assessee is the proprietrix of Madhu Steel Company, dealing business in iron and steel. She is also a partner in M/s. MadhuTrading Agencies, also dealing business in iron and steel. For the assessmentyear 1987-88, the assessee had filed her original returns on 15.2.1988 underSection 139(4) of the Income Tax Act (the “Act” for short). Subsequently, asearch was conducted, both in the assessee's residence and in the businesspremises, and certain documents had been recovered by the Revenue. Aftersuch seizure by the revenue under Section 132 of the Act, the assessee had filedthe revised return on 12.6.1989. (4) The assessing authority had completed the assessment by its orderdated 18.2.1991 and had quantified the tax liability of the assessee. (5) Aggrieved by the said order passed by the assessing authority, theassessee had filed an appeal before the Commissioner of Income Tax(Appeals). The first appellate authority had set aside the order passed by theassessing authority and had remitted back the matter to the assessingauthority to redo the matter in accordance with law in the light of the orderspassed by him. (6) After such remand, a fresh assessment order was passed by theassessing authority on 24.3.1994. (7) The said revised assessment order was questioned by the assesseebefore the first appellate authority - Commissioner of Income Tax (Appeals). ITR.NO.10/2002 (5) Aggrieved by the said order passed by the assessing authority, theassessee had filed an appeal before the Commissioner of Income Tax(Appeals). The first appellate authority had set aside the order passed by theassessing authority and had remitted back the matter to the assessingauthority to redo the matter in accordance with law in the light of the orderspassed by him. (6) After such remand, a fresh assessment order was passed by theassessing authority on 24.3.1994. (7) The said revised assessment order was questioned by the assesseebefore the first appellate authority - Commissioner of Income Tax (Appeals). ITR.NO.10/2002 Before the first appellate authority, the assessee's representative had taken upan additional ground in support of the grounds of appeal raised in theMemorandum of Appeal. The additional ground was, that, the orders ofassessment passed by the assessing authority is barred by limitation, for thereason that the original return was filed by the assessee only under Section 139(4)of the Act and not under Section 139(1) and hence based on an invalid revisedreturn filed subsequently, the time limit for completing the assessment does not getextended by one year and as such, the assessing authority should have completedthe assessment on or before 31.3.1990. The first appellate authority hasaccepted the additional ground raised by the assessee, keeping in view theobservations made by this Court in the case of Eapan Joseph v. C.I.T [(1987)168 ITR 26] and also the observations made by the Bombay High Court inInventors Industrial Corporation Ltd., v. C.I.T [(1992) 194 ITR 548] andaccordingly has come to the conclusion that the orders passed by the assessingauthority is barred by limitation. (8) The Revenue, being aggrieved by the said order passed by the firstappellate authority, had carried the matter by way of second appeal before theTribunal in I.T.A.No.699/1994. The Tribunal has concurred with the viewexpressed by the first appellate authority and accordingly has rejected theRevenue's appeal. (9) Being aggrieved by the orders passed by the Income Tax Appellate ITR.NO.10/2002 Tribunal, the Revenue is before us in this reference proceedings. The questionof law framed by the revenue is already noticed by us . (10) Sri Jose Joseph, the learned counsel appearing for the Revenue would submit that the first appellate authority was not justified in permittingthe assessee to raise additional ground which was not raised by the assesseebefore the assessing authority when he completed the assessment on18.2.1991 and on 24.3.1994. Therefore the order passed by the first appellateauthority is contrary to the statutory provisions. The learned counsel wouldfurther submit, that, the Tribunal without appreciating the case pleaded by theRevenue has rejected the Revenue's appeal. (11) The learned counsel appearing for the assessee while defending the orders passed by the first appellate authority and the Tribunal has placedreliance on the decision of the Apex Court in the case of Jute Corporation of India Ltd., v. Commissioner of Income Tax and Another[(1991) 187 ITR688]. In the said decision, the Apex Court at page 693 has stated as under: “In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225,three Judge Bench of this court discussed the scope ofSection 31(3)(a) of the Indian Income-tax Act, 1922 which isalmost identical to section 251(1)(a). The court held asunder (at.p.229): “If an appeal lies, section 31 of the Act describes thepowers of the Appellate Assistant Commissioner in such anappeal, Under section 31(3)(a), in disposing of such anappeal, the Appellate Assistant Commissioner may, in thecase of an order of assessment, confirm, reduce, enhance India Ltd., v. Commissioner of Income Tax and Another[(1991) 187 ITR688]. In the said decision, the Apex Court at page 693 has stated as under: “In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225,three Judge Bench of this court discussed the scope ofSection 31(3)(a) of the Indian Income-tax Act, 1922 which isalmost identical to section 251(1)(a). The court held asunder (at.p.229): “If an appeal lies, section 31 of the Act describes thepowers of the Appellate Assistant Commissioner in such anappeal, Under section 31(3)(a), in disposing of such anappeal, the Appellate Assistant Commissioner may, in thecase of an order of assessment, confirm, reduce, enhance or annual the assessment; under clause (b) thereof he mayset aside the assessment and direct the Income-tax Officerto make a fresh assessment. The Appellate AssistantCommissioner has, therefore, plenary powers in disposing ofan appeal. The scope of his powers is conterminous withthat of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he hasfailed to do.” (emphasis supplied). The above observations are squarely applicable in theinterpretation of section 251(1)(a) of the Act. Thedeclaration of law is clear that the power of the AppellateAssistant Commissioner is co-terminous with that of theIncome-tax Officer, and if that is so, there appears to be noreason as to why the appellate authority cannot modify theassessment order on an additional ground even if not raisedbefore the Income-tax Officer. No exception could be takento this view as the Act does not place any restriction orlimitation on the exercise of appellate power. Evenotherwise, an appellate authority while hearing the appealagainst the order of a subordinate authority has all thepowers which the original authority may have in decidingthe question before it subject to the restrictions orlimitations, if any, prescribed by the statutory provisions. Inthe absence of any statutory provision, the appellate authorityis vested with all the plenary powers which the subordinateauthority may have in the matter. There appears to be nogood reason and none was placed before us to justifycurtailment of the power of the Appellate AssistantCommissioner in entertaining an additional ground raised bythe assessee in seeking modification of the order ofassessment passed by the Income-tax Officer”. (12) In National Thermal Power Corporation v. Commissioner of Income Tax [(1996) 229 ITR 387] the Apex Court has stated as under: “The view that the Tribunal is confined only toissues arising out of the appeal before the Commissionerof Income-tax (appeals) takes too narrow a view of the powers of the Appellate Tribunal (vide, e.g., CIT v. ANANDPRASAD [(1981) 128 ITR 388 (Delhi)], CIT v. KaramchandPremchand P.Ltd.[(1969) 74 ITR 254 (Guj)] and CIT v.Cellulose Products of India Ltd. [(1985) 151 ITR 499 (Guj)(FB)]. Undoubtedly, the Tribunal will have thediscretion to allow or not allow a new ground to beraised. But where the Tribunal is only required toconsider a question of law arising from the facts whichare on record in the assessment proceedings we fail to seewhy such a question should not be allowed to be raisedwhen it is necessary to consider that question in order tocorrectly assess the tax liability of an assessee”. powers of the Appellate Tribunal (vide, e.g., CIT v. ANANDPRASAD [(1981) 128 ITR 388 (Delhi)], CIT v. KaramchandPremchand P.Ltd.[(1969) 74 ITR 254 (Guj)] and CIT v.Cellulose Products of India Ltd. [(1985) 151 ITR 499 (Guj)(FB)]. Undoubtedly, the Tribunal will have thediscretion to allow or not allow a new ground to beraised. But where the Tribunal is only required toconsider a question of law arising from the facts whichare on record in the assessment proceedings we fail to seewhy such a question should not be allowed to be raisedwhen it is necessary to consider that question in order tocorrectly assess the tax liability of an assessee”. (15) In the instant case, as we have noticed earlier, while narrating theassessee's representation for the first time had raised an additional legal issue,which was not taken before the assessing authority or before the first appellateauthority. It is only after the assessing authority passed a fresh assessment orderand that order when it was called in question before the first appellate authority,for the first time an additional issue is raised and canvassed. This has beenallowed by the first appellate authority. The revenue has taken exception in thisregard in this tax reference case. In our opinion, elaborate discussion may not benecessary in view of the declaration of law made by the Apex Court, which wehave already noticed in the course of our judgment. Therefore, in our opinion, thequestion of law framed by the Revenue naturally requires to be answered ITR.NO.10/2002 against the Revenue and in favour of the assessee and we do so. Ordered accordingly. (H.L.DATTU)CHIEF JUSTICE (A.K.BASHEER) JUDGE cl/dk. ITR.NO.10/2002 H.L.DATTU, C.J. & A.K.BASHEER, J. I.T.R. No.10 OF 2002 O R D E R 7[th] November, 2008