Sanjay Sawhney v. Principal Commissioner Of Income Tax

* IN THE HIGH COURT OF DELHI AT NEW DELHI Reserved on: 25.09.2019Pronounced on: 18.05.2020 + ITA 834/2019 SANJAY SAWHNEY ...... Appellant Through: Mr. S. Krishnan, Advocate. versus PRINCIPAL COMMISSIONER OF INCOME TAX ...... Respondent Through: Mr. Zoheb Hossain, Sr. Standing Counsel. CORAM: HON’BLE MR. JUSTICE VIPIN SANGHI HON’BLE MR. JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J 1. The present appeal under Section 260A of the Income Tax Act, 1961 (‘the Act’) is directed against the order dated 25.03.2019 passed by the Income Tax Appellate Tribunal (‘ITAT’), Delhi Bench ‘F’ allowing Revenue’s appeal [ITA No. 4856/2015 for the Assessment Year 2008-09] and further remanding the matter to the file of the Assessing Officer (‘AO’) for fresh adjudication. Vide the aforesaid impugned order, the ITAT has inter aliarejected additional jurisdictional grounds urged by the Appellant- Assessee under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 (‘ITAT Rules’) to assail the findings of Commissioner of Income Tax (Appeals) [‘CIT (A)’]. By way of this appeal, the Appellant challenges correctness of the reasoning of the ITAT for declining to consider pertinent issues that go into the root of the matter and relate to assumption of jurisdiction and ITA 834/2019 Page 1 of 45 validity of the reassessment proceedings undertaken by the revenue under Section 153C of the Act. The Controversy- In brief 2. The revenue-initiated search action under Section 132 of the Act on Kouton Group on 19.02.2009 and during the search proceedings, it inter-aliaseized a document described as ‘Memorandum of Understanding’ (‘MOU’) relating to transaction of sale and purchase of share capital of M/s S.R. Resorts Private Limited. Consequent upon the seizure of the aforesaid document, a notice was issued to the appellant under Section 153C of the Act, calling for filing of return of income. Since there was no compliance to the said notice, another notice was issued under Section 142(1)(ii) of the Act. In response thereto, the appellant filed the original return of income declaring total income of Rs.8,90,760/- and submitted that the same be treated as a return in compliance to notice under Section 153C of the Act. The assessment proceedings culminated in framing of an assessment order dated 28.12.2010 whereby the return of income of the appellant stood assessed at Rs.1,46,15,445/-. In the appeal before CIT(A), besides challenging the additions made by the AO on merits, assessee also raised legal grounds qua the validity of the reassessment proceedings undertaken by the revenue under Section 153C of the Act. The jurisdictional challenge to reassessment proceedings was principally premised on two fundamental legal grounds, viz. (i) the AO failed to record a satisfaction note for initiating proceedings under Section 153C of the Act and, (ii) there was no nexus between the issues in the assessment proceedings and the incriminating material seized during the search. The CIT(A) rejected the aforesaid pleas and inter-alia held that there was no need for recording the satisfaction and ITA 834/2019 Page 2 of 45 that further the law postulated no requirement for existence of nexus between the assessment framed and the incriminating material as a precondition for reassessment proceedings. On merits, CIT(A) allowed the appeal in favor of the assessee and deleted all the additions/disallowances made by the AO. ITA 834/2019 Page 2 of 45 that further the law postulated no requirement for existence of nexus between the assessment framed and the incriminating material as a precondition for reassessment proceedings. On merits, CIT(A) allowed the appeal in favor of the assessee and deleted all the additions/disallowances made by the AO. 3. Revenue contested the order passed by the CIT(A) by filing an appeal under Section 253(2) of the Act before the ITAT, contending that the CIT (A) had erred in deleting the additions. In the said proceedings, appellant- assessee made an oral application under Rule 27 of ITAT Rules and urged additional grounds against the findings of the CIT(A) pertaining to the issue of recording of satisfaction note, and the necessary condition of existence of nexus between assessment and incriminating material by contending that these findings were in the teeth of the law as settled by various courts in respect of the said issues. The ITAT disagreed with Assessee and on a technical ground refused to consider the legal issues that were premised on Rule 27 of the ITAT Rules. However, at the same time, on merit, the ITAT overturned the decision of the CIT(A) and allowed the appeal in favour of the Revenue and restored the issues to the file of the AO for deciding afresh with further direction to the Assessee to produce all the necessary documentary evidence in support of its claim. The relevant extract of the impugned order reads as follows: “5. We have heard the parties on the issue of additional ground raised by way of referring Rule 27 of the ITAT Rules. We find that no application has been filed by the assessee under Rule 27 of the ITAT Rules for raising the legal ground challenging the validity of the proceedings under section 153C of the Act. In our opinion, the parties to the appeal are required ITA 834/2019 Page 3 of 45 to follow due procedure laid down in this regard under Rule 27 of the ITAT rules, which reads as under: “Respondent may support order on grounds decided against him. 27.The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” 6. Since the assessee has not filed any such application, the appellant, i.e., the revenue cannot be put to surprise by the respondent. Accordingly, the parties were requested to address on the grounds raised in the appeal before us. Since, we have not admitted additional grounds raised by the assessee, we are not adjudicating the issue raised in those additional grounds.” 4. The operative portion of the order directing remand reads as under:- to follow due procedure laid down in this regard under Rule 27 of the ITAT rules, which reads as under: “Respondent may support order on grounds decided against him. 27.The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” 6. Since the assessee has not filed any such application, the appellant, i.e., the revenue cannot be put to surprise by the respondent. Accordingly, the parties were requested to address on the grounds raised in the appeal before us. Since, we have not admitted additional grounds raised by the assessee, we are not adjudicating the issue raised in those additional grounds.” 4. The operative portion of the order directing remand reads as under:- 10.3 We have heard the rival submissions and perused the relevant material on record. The issue in dispute in the ground raised is whether the land which was sold by the assessee, was agricultural land in terms of the provisions of the Act. The assessee was required to prove that land was situated beyond 8 kms, from the municipal limit and agricultural activity was carried out by the assessee on the said land. Before us, the assessee has referred pages 43 to 45 of the paperbook, which are handwritten certificate issued by the Patwari (Land Revenue Authority). We agree with the observation of the learned DR that the handwritten certificate is not bearing any seal or name of the Patwari or the person who has issued the certificate. The learned counsel has also not produced the original return of income filed for the earlier years to establish that agricultural income was offered for rate purpose un those returns. The Assessing Officer objected admitting of the additional evidences, however, the Ld. CIT (A) admitted the evidence after giving his reasoning. But the Ld. CIT (A) was required to make compliance of the Rule 46A(3) of the Income Tax Rules,1962 and provide opportunity to the Assessing Officer to rebut those evidences as held by the Hon'ble Delhi High Court in the case of Manish Buildwell Private Limited (supra). In view of the above facts and circumstances, ITA 834/2019 Page 4 of 45 we feel it appropriate to restore this issue to the file of Assessing Officer deciding afresh; with the direction to the assessee to produce all the necessary documentary evidence in support of its claim. The assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is, accordingly, allowed for statistical purposes. (emphasis supplied) Question of Law 5. Although on merits, the controversy is still in the balance, the appellant- Assessee has approached this court aggrieved with the findings of the ITAT pertaining to Rule 27. The Appeal was admitted vide order dated 16.09.2019 and the following question of law was framed: “What is the scope of Rule 27 of the Appellate Tribunal Rules, 1964 in the context of Section 253 (4) of the Income Tax Act,1995?” we feel it appropriate to restore this issue to the file of Assessing Officer deciding afresh; with the direction to the assessee to produce all the necessary documentary evidence in support of its claim. The assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is, accordingly, allowed for statistical purposes. (emphasis supplied) Question of Law 5. Although on merits, the controversy is still in the balance, the appellant- Assessee has approached this court aggrieved with the findings of the ITAT pertaining to Rule 27. The Appeal was admitted vide order dated 16.09.2019 and the following question of law was framed: “What is the scope of Rule 27 of the Appellate Tribunal Rules, 1964 in the context of Section 253 (4) of the Income Tax Act,1995?” 6. With consent, we extensively heard arguments of learned counsels for both the parties for final disposal of the appeal. Mr. S. Krishnan, learned counsel for the appellant contended that the understanding of the ITAT is flawed and contrary to the settled legal position. He submitted that the assessee had relied upon Rule 27 of the ITAT Rules, however, for some strange reasoning, ignoring the basic tenet of law on the applicability of the said provision, the ITAT did not accept Appellant’s contentions. He argued that the ITAT Rules provide for three distinct and coordinate methods whereby a respondent before the ITAT can raise an issue decided against him/her by the Commissioner (Appeals). The said procedure in his words is interpreted as (i) On receipt of the Commissioner’s order, an appeal can be filed in terms of Rule 6, on issues decided against such party. Form 36 is notified for this purpose; (ii). On receipt of a copy of Ground of Appeal from the other contesting party, a cross-objection can be moved on such issues in ITA 834/2019 Page 5 of 45 terms of Rule 22. Form 36-A is notified for this purpose; (iii). At the time of hearing of the appeal, the Respondent therein may take up issues decided against him/it, and seek to support confirmation of the Commissioner’s order in this way. Rule 27 of the Rule provides for this. 7. He submitted that all the three above-stated remedies and mechanisms exist concurrently and demonstrated that all of them are bound by their own due process. Rule 27 of the ITAT Rules does not require an application to be structured in any particular manner, unlike in the case of cross-appeal or cross objection. He also submitted that the ITAT has applied the new ITAT Rules, 2017 which are yet to be notified and, therefore, have no mandate in law. Therefore, the ITAT has erred in mis-reading a requirement into the rules which does not exist in reality. Mr. Krishnan further argued that by shutting the doors on legal defenses that were available to the appellant and stood concluded in his favour by several precedents, the ITAT has failed to exercise its power and has caused extreme prejudice to the appellant. On both the legal issues viz. non recording of satisfaction note, as well as absence of nexus between reassessment and the material stated to be the basis of framing such assessment, the law stands settled in favour of the assessee. The ITAT has grossly erred by remitting the issues on merit to the file of the AO, without giving similar directions in respect of the legal grounds raised by the appellant by way of application under Rule 27 of the ITAT Rules. In support of his submissions, Mr.Krishnan relied upon Tranvancore Chemical & Manufacturing Company Ltd. v. CIT (1997) 226 ITR 429, PCIT, Vadodara-2 v. Sun Pharmaceuticals Industries Ltd. (2017) 86 taxmann.com 148 Guj. Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT (2005) 149 TAXMAN 456 (Guj.), CIT, Meerut v. Jindal Polyester Ltd. ITA 834/2019 Page 6 of 45 ITA 834/2019 Page 6 of 45 (2017) 82 taxmann.com 302 (All.) and PCIT v. M/s Dhara Vegetable Oil and Food Company Ltd. ITA no. 454/2019 (DHC). 8. Mr. Zoheb Hossain, learned senior standing counsel for revenue, on the other hand, defended the order of the ITAT by relying upon several case laws. He urged that since that the appellant did not file any cross-appeal or cross-objection under Section 253(4) of the Act, he cannot invoke Rule 27 of the ITAT Rules to question the validity of the proceedings under Section 153C of the Act. He further submitted that the issue qua the validity of the proceedings under Section 153C had attained finality and because the appellant chose not to challenge the same in appeal by way of cross-objections before the ITAT, Rule 27 cannot be brought into play to reopen the same. Permitting the appellant to do so would leave the revenue worse off in its own appeal. He further argued that Rule 27 cannot be invoked to expand the scope of the appeal and assail the decision on issues which are beyond the subject matter of appeal. In support of his submissions, Mr. Hossain relied upon the decisions in CIT vs. Divine Infracon Pvt. Ltd. 2015 SCC OnLine Del 10952; CIT vs. Edward Keventor Successive Pvt. Ltd. 1980 123 ITR 200 (Delhi) and CIT vs. Anil Kumar Bhatia 2013 352 ITR 493 (Delhi). 9. In rejoinder, Mr. Krishnan while reiterating his submissions, distinguished and clarified the import of the judgments relied upon by Revenue and in particular, the decisions in the case of CIT vs. Divine Infra Pvt. Ltd (supra)and CIT vs. Edward Keventor Successive Pvt. Ltd (supra). ITA 834/2019 Page 7 of 45 Analysis 10. The facts of the case reveal that the Revenue challenged the order of the CIT (A) dated 20.03.2015 before the ITAT on the grounds pertaining to deletion of additions on account of unexplained cash credits, unexplained investments, interest paid on cash borrowings, personal expenses, long term capital gains etc. The assessee [Respondent before ITAT], admittedly did not file a cross appeal or cross objections under section 253(4) of the Act and sought to invoke Rule 27 to question the validity of the proceedings under Section 153C. Thus, in the above noted factual background, we have to consider whether the approach adopted by ITAT in declining the Appellant- assessee [Respondent before ITAT] the right to question the findings of the CIT(A) is correct or not? 11. The Tribunal has taken a pedantic view on the interpretation of Rule 27 by holding that for availing the remedy under the said provision, an application in writing is necessary. In our opinion, this surmise is fallacious and we cannot countenance the same. We agree with Mr. Krishnan that Rule 27, as it stands today, does not mandate for the application to be made in writing. Revenue has not brought to our notice any particular Form notified for filing such an application. Revenue also does not controvert the contention of the Appellant that the draft Appellate Tribunal Rules 2017 proposing to insert a proviso to Rule 27, providing for an application to be made in writing, have not been notified, as yet. Therefore, the reasoning of the Tribunal for rejecting Appellant’s contentions is palpably wrong. If the provision does not specify any defined structure for making an application in a particular manner, the Tribunal ought not to have deprived the Appellant of an opportunity to raise a fundamental question of jurisdiction, taking a ITA 834/2019 Page 8 of 45 ITA 834/2019 Page 8 of 45 hyper technical viewpoint. The Tribunal has plainly refused to consider the additional grounds on an erroneous premise which is contrary to the statutory scheme of the Act, that permits the Respondent to urge all grounds in support of the order appealed, as provided under Rule 27. The appeal deserves to be allowed on this short ground and we would have no hesitation in doing so with a consequential direction to ITAT to reconsider the matter afresh on the additional grounds urged by the Appellant. However, that direction would not take the controversy to a logical conclusion. Mr. Hossain raises a more fundamental issue by arguing that in absence of an appeal by the Petitioner, or cross objections by it, the issue of validity had attained finality, and cannot be raked up by taking recourse to the said Rule putting them in a more disadvantageous position. He persists that irrespective of the format of the application and regardless of the reasons given in the impugned order, the appellant cannot be permitted to urge jurisdictional objections before ITAT. We feel clarity is required on this vital ground, particularly, since Mr. Hossain has attempted to substantiate his submissions by contending that this court has already taken a view that supports his line of arguments. In fact, this prompted the learned counsels for both the parties to cite plethora of case laws dealing with this jurisdictional question. 12. Before we proceed with our analysis, let us first examine the said provision and then consider the relevant case laws that deals with the interpretation of the said provision. Rule 27 of the ITAT Rules reads as under: “Respondent may support order on grounds decided against him. ITA 834/2019 Page 9 of 45 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” There are certain other provisions which are also germane to the question of law framed in the present appeal viz Rule 6 which provides for filing of appeal, Rule 22 which provides for numbering of cross objections and sub Section 4 of Section 253 of the Act. The said provisions read as under:- “Rule 6. Procedure for filing appeals. (1) A memorandum of appeal to the Tribunal shall be presented by the appellant in person or by an agent to the Registrar at the headquarters of the Tribunal at Bombay, or to an officer authorised in this behalf by the Registrar, or sent by registered post addressed to the Registrar or to such officer. (2) A memorandum of appeal sent by post under sub-rule (1) shall be deemed to have been presented to the Registrar or to the officer authorised by the Registrar, on the day on which it is received in the office of the Tribunal at Bombay, or, as the case may be, in the office of such officer. Rule 22.Cross-objections. A memorandum of cross-objections filed under sub-section (4) of section 253 shall be registered and numbered as an appeal and all the rules, so far as may be, shall apply to such appeal. Section 253. Appeals to the Appellate Tribunal. (1) xxxx (2) xxxx (3) xxxx (4) The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Commissioner (Appeals), has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner ITA 834/2019 Page 10 of 45 Section 253. Appeals to the Appellate Tribunal. (1) xxxx (2) xxxx (3) xxxx (4) The Assessing Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Commissioner (Appeals), has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner ITA 834/2019 Page 10 of 45 (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).” 13. The Rule 27, has been a subject matter of interpretation of several decisions of various High Courts and many of those have been relied upon by both the counsels. We do not perceive the need to elaborately advert to each and every case cited before us by the respective counsels. In-depth analysis is necessary of only those decisions that are strongly relied upon by the Revenue to support the impugned order of the ITAT on the proposition of law encapsulated in the foregoing paras. Let’s first dwell on a seminal decision rendered by Madras High Court quite some time back in Commissioner of Income Tax, Madras vs. Sundaram & Co. Pvt. Ltd. (1964) 52 ITR 763 (Madras), which is also relied upon by the Appellant. The law expounded in this judgment forms the bedrock for several other decisions on the subject. Indeed, majority of the recent judgments also refer to this decision, as the law therein has been elucidated in lucid and unequivocal terms and is still on the mark. In the said case, the High Court dealt with Rule 27 of the ITAT Rules, 1946 a provision pari materia with the instant Rule 27 of the ITAT Rules, and authoritatively held that although the assessee may not have preferred an independent appeal before the ITAT against the order of the Appellate Assistant Commission (AAC), it could still invoke the said provision to support the order on any of the grounds decided against him. The court interpreted the Rule and held that its invocation is not restricted to grounds decided favorably but would also include the grounds held against him by the authority whose decision is the subject matter of challenge. The relevant portion of the said judgment read as under: ITA 834/2019 Page 11 of 45 ITA 834/2019 Page 11 of 45 “11. The appellant has no right to urge any ground not set forth in the memorandum of appeal. But it would be open to the Tribunal to grant him leave to raise additional grounds. So far as the Tribunal is concerned, it would not be fettered in its decision by confining to the grounds set forth in the memorandum of appeal or even to those taken by the appellant with the leave of the Tribunal. So long as the principles of natural justice are not violated and the affected person is afforded an opportunity to be heard the Tribunal can dispose of the appeal in its own light. But of course the Tribunal should not act arbitrarily or capriciously but should adopt judicial standards. For example, questions of fact which had not been mooted or discussed or investigated by the Income-tax Officer or by the Appellate Assistant Commissioner should not be gone into at the stage of the appeal before the Tribunal, It would of course be open to the Tribunal to remand the proceedings for fresh ascertainment of facts. The substance of rule 12 is this. The appellant can only urge grounds either set forth in the memorandum of appeal or subsequently taken with the leave of the Tribunal, but the Tribunal's powers to decide the appeal are not subject to any such restrictions. Turning to rule 27 which permits the respondent before the Tribunal to support the order of the Appellate Assistant Commissioner on any of the grounds decided against him, it seems to be clear that this is a right conferred upon him. The Tribunal has no discretion to deprive the respondent of the benefit of this rule. It is an enabling provision which the respondent can avail himself of in order to retain the benefit which has accrued to him from the order appealed against. 12. The rule that a respondent before the court or Tribunal can justify and support the decision in his favor not merely on grounds favourably decided but also on other grounds held against held against him by an authority whose decision is challenged on appeal is nothing peculiar to the procedure before the Income-tax Appellate Tribunal. A similar provision is found in the Civil Procedure Code. Order XLI, rule 22, Civil Procedure Code, states: “(I) Any respondent, though he may not have appealed from any part of the decree, may not only support the decree on any of the ITA 834/2019 Page 12 of 45 grounds decided against him in the court below, but take any cross-objection to the decree which he could have taken by way of appeal.....” 13. The reason for such a rule is obvious. If the final outcome of a decision is favourable to a person it would not matter to him how and by what reasoning the decision is arrived at so long as it is not challenged by his adversary. But, if it is attacked he must be in a position to support it on every ground he urged before the deciding authority whether or not it found favour. If he were not given that amount of freedom he would be a victim of wrong reasons. This would be unjust in the extreme. If rule 27 had not been enacted there would still have been scope for invoking the principle underlying that rule in the name of natural justice. The true rule is that an appeal is a continuation of the original proceeding and that rights of parties cannot be defeated by the form of the order but by the actual decision. (emphasis supplied) (emphasis supplied) 14. It emerges that Rule 27 ought not to be applied narrowly and therefore we cannot agree with Mr. Hossain, that by permitting the Appellant- Assessee (respondent before the Tribunal) to invoke Rule 27 before the Tribunal, to challenge the ground decided against him, scope of the subject matter of appeal would get expanded. We must also bear in mind that jurisdictional issue sought to be urged by the appellant under Rule 27 is interlinked with the other grounds of appeal, and its adjudication would have a direct impact on the outcome of the appeal. The validity of the proceedings goes into the root of the matter and for this reason, the assessee should not be precluded from raising a challenge to that part of the order which was decided against him by the CIT(A). In this regard, it would be profitable to refer the following extract from the judgment of Sundaram & ITA 834/2019 Page 13 of 45 Co.(supra),where the court had also examined as to what constituted ‘subject-matter of an appeal’ and held as follows: “14. Learned counsel for the department contends that it would not be open to a respondent to travel outside the scope of the subject-matter of the appeal under the guise of invoking rule 27. This contention is unexceptionable and we do not think that the learned counsel for the assessee disputed it. But then, what is the subject-matter of an appeal? The answer is simple. The subject-matter is that which the Tribunal or the appellate court is called upon to decide and to adjudicate. The subject-matter cannot be identified with the grounds raised either by the appellant or bythe respondent. In the present case the subject-matter of the appeal before the Tribunal was the reduction of tax rebate in respect of Rs. 3,54,716. It is impossible to contend that the subject-matter of the appeal lay within a narrower limit and that it was the question whether the Appellate Assistant Commissioner was right in not allowing reduction of rebate on the ground mentioned by him. The assessee had obtained relief before the Appellate Assistant Commissioner to a particular extent. And this was objected to by the department in the appeal before the Tribunal. The applicability of section 34 of the Act was a general question raised by the assessee even before the Appellate Assistant Commissioner. It cannot be said that it became debarred from raising the question over again before the Tribunal because of the fact that it did not choose to file an appeal against other portions of the order of the Assistant Commissioner which was unfavourable to it. The scope of section 34 was a ground which was decided against the assessee before the Appellate Assistant Commissioner and we do not see how the assessee is precluded from relying upon rule 27 and urging that ground before the Tribunal with a view to support only that portion of the Appellate Assistant Commissioner's order which was favourable to it. 15. The decision of this court in V. Ramaswamy Iyengar v. Commissioner of Income-tax [[1960] 40 I.T.R. 377, 395.] is relied upon by the learned counsel for the department in support of the contention that the subject-matter of the appeal is ITA 834/2019 Page 14 of 45 confined only to the grounds of appeal raised on behalf of the appellant. We have no doubt that this decision is not authority for the position contended. The decision in that case was that where an appeal was only against part of an order the appellate authority would have no jurisdiction to interfere with the other part which does not form the subject of the appeal. Rama-chandra Iyer J., as he then was, after referring to the provisions of the Act and the Rules framed thereunder, observed thus: ITA 834/2019 Page 14 of 45 confined only to the grounds of appeal raised on behalf of the appellant. We have no doubt that this decision is not authority for the position contended. The decision in that case was that where an appeal was only against part of an order the appellate authority would have no jurisdiction to interfere with the other part which does not form the subject of the appeal. Rama-chandra Iyer J., as he then was, after referring to the provisions of the Act and the Rules framed thereunder, observed thus: “The aforesaid rules, including the power to remand, would be governed by the provisions of section 33(4), and, therefore, the jurisdiction of the Tribunal would be circumscribed by the subject-matter of the appeal—the subject-matter of the appeal being that contained in the original grounds of appeal, together with such other grounds as may be raised by the assessee by leave of the Tribunal. As the right of the respondent is only to support the order of the Appellate Assistant Commissioner on other grounds, it would follow that the Tribunal would have no jurisdiction to pass an order, so as to permit a ground to be raised by the respondent which, if allowed, would make the position of the appellant worse than what it was before.” 16. The principle underlying this decision is that the Tribunal has no power to enlarge the scope of the appeal before it by permitting either the appellant or the respondent to urge grounds which would have the effect of destroying the finality of that portion of the order of the original authority which had not been appealed against by either of the parties. But this does not mean that the respondent should be denied the opportunity of supporting a decision in his favour which has come up on appeal on a ground decided against him by the authority whose decision is challenged. ITA 834/2019 Page 15 of 45 17. We would like to refer to two decisions of the Bombay High Court on this question of the scope of appellate power of the Tribunal and the right of the respondent to support the decision on grounds decided against him. In J.B. Greaves v. Commissioner of Income-tax [[1963] 49 I.T.R. 107.] the Bombay High Court held, following two decisions of that court, New India Life Assurance Co. Ltd. v. Commissioner of Income-tax [[1957] 31 I.T.R. 844.] and Commissioner of Income-tax v. Hazarimal Nagji & Co. [[1962] 46 I.T.R. 1168.] , that the subject-matter of an appeal is confined to grounds specifically raised in the memorandum of appeal, the new grounds raised by the appellant with the previous permission of the Tribunal and the grounds urged by the respondent in support of the decree passed in his favour, even though the decision of the court, against which the appeal is filed, is against him. The learned judges of the Bombay High Court observed that this is a general rule and that the position of the Appellate Tribunal is the same as a court of appeal under the Civil Procedure Code and that its powers are identical with the powers enjoyed by the appellate court under the Code. At page 124 it is observed as follows: “Now, a respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the lower court in his favour may not have been based on those grounds. A respondent, unless he has filed an appeal himself or filed cross-objections in the appeal filed by his opponent, will not be entitled to challenge that part of the lower court's decree which is against him, and the appellate court will have no power or jurisdiction to permit him to do so………… ITA 834/2019 Page 16 of 45 “Now, a respondent in an appeal is undoubtedly entitled to support the decree which is in his favour on any grounds which are available to him, even though the decision of the lower court in his favour may not have been based on those grounds. A respondent, unless he has filed an appeal himself or filed cross-objections in the appeal filed by his opponent, will not be entitled to challenge that part of the lower court's decree which is against him, and the appellate court will have no power or jurisdiction to permit him to do so………… ITA 834/2019 Page 16 of 45 It thus follows that the subject-matter of appeal would get confined to the limits of the grounds specifically raised in the memorandum of appeal, the new grounds raised by the appellant with the previous permission of the Tribunal and the grounds urged by the respondent in support of the decree passed in his favour, even though the decision of the court, against which the appeal is filed, is against him.” 18. In Pokhraj Hirachand v. Commissioner of Income-tax [[1963] 49 I.T.R. 293.] the same principle is reiterated.” 19.We would like to disentangle the subject-matter of the appeal from the grounds upon which the appeal is raised or upon which the respondent would like to rely. As stated already the subject of an appeal is an item of dispute or controversy between the department and the assessee in regard to a particular question. Properly speaking, the subject of a tax appeal is the relief sought by the assessee and objected to by the department. The grounds are only missiles employed by the combatants to achieve their respective desired ends. It would not be possible to circumscribe the subject of the appeal by taking into account the rival contentions or the reasons or the grounds which are put forward either by the department or by the assessee. We have no doubt that in the light of the principles laid down by this court in V. Ramaswamy Iyengar v. Commissioner of Income-tax [[1960] 40 I.T.R. 377.] and also of the principle of the Bombay decision referred to above and on the principles which we have ourselves set forth, the Tribunal acted rightly in permitting the assessee to raise the question of the applicability of section 34 before it. Questions Nos. 1 and 2 raised in this reference will, therefore, be answered against the department and in favour of the assessee.” (emphasis supplied) 15. Now, we shall deliberate on the judgement of this Court in Commissioner of Income Tax Central – II v Divine Infracon Pvt. Ltd, ITA 834/2019 Page 17 of 45 (emphasis supplied) 15. Now, we shall deliberate on the judgement of this Court in Commissioner of Income Tax Central – II v Divine Infracon Pvt. Ltd, ITA 834/2019 Page 17 of 45 2015 64 taxman.com 472 (Delhi) which has been strongly relied upon Mr. Hossain to suggest that the court has taken a different view on Rule 27 that is in consonance with his contentions. Let’s first briefly refer to the facts of the said case. Here, the assessee filed an appeal before the CIT (A) against the order of the AO challenging additions made under section 68 of the Act, on merits, as well as on the ground that the same were beyond the scope of section 153A as the share application money was duly disclosed in its return and the addition was unrelated to any incriminating material found in the search. The CIT(A) decided that the addition was beyond the scope of 153A, however at the same time, he upheld the conclusion of the AO regarding the share application money and sustained the additions made by the AO. Assessee then filed an appeal before the ITAT. In this appeal, Revenue sought to assail the finding of the CIT (A) which held that the additions were outside the scope of section 153A. Although the Tribunal permitted the revenue to raise the contentions, it however, finally upheld the conclusion of the CIT (A). Thereafter, appeals were preferred before this Court by both, Asssesee as well as Revenue. During the proceedings, Assessee contented that since Revenue has not appealed against the order of the CIT (A), it could not raise the issue before the Tribunal and the scope of the subject matter of the appeal was limited to the finding of the CIT(A) with respect to the merits of the addition and the Tribunal could not have gone beyond the subject matter. In this context, this court held as under:- “5. He submitted that the scope of the subject matter of the Appeal was limited to the finding of the CIT (A) with regard to the merits of the addition made; the issue whether the same was beyond the scope of Section 153A of the Act was not the subject matter before the Tribunal and, thus, the Tribunal could not have entertained any plea in that regard. ITA 834/2019 Page 18 of 45 6. The learned counsel for the Assessee also referred to the decision of the Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. v. Jt. CIT [2007] 293 ITR 226/163 Taxman 355. In that case, the Tribunal had decided to reopen an appeal decided earlier and permitted the Assessee to urge a ground, which had not been considered by the Tribunal while deciding the appeal. The decision of the Tribunal to reopen the matter was not appealed against by the Revenue but, the Revenue successfully assailed the final order passed by the Tribunal before the High Court, inter alia, on the ground that the matter could not be reopened by the Tribunal. In this context, the Supreme Court held that, "We have already noticed that the order passed by the Tribunal to reopen the matter for further hearing as regards ground No. 7 has attained its finality. In the circumstances, the High Court could not have interfered with the final order passed by the Income-tax Appellate Tribunal." 7. We find considerable merit in the contention advanced on behalf of the Assessee. Concededly, the issue whether the additions made by the AO were beyond the scope of Section 153A had been decided by the CIT (A) in favour of the Assessee and the decision on the said issue had attained finality as the revenue had not preferred any appeal with regard to the CIT (A)'s order. 7. We find considerable merit in the contention advanced on behalf of the Assessee. Concededly, the issue whether the additions made by the AO were beyond the scope of Section 153A had been decided by the CIT (A) in favour of the Assessee and the decision on the said issue had attained finality as the revenue had not preferred any appeal with regard to the CIT (A)'s order. 8. It is also relevant to note that by virtue of Section 253(2) of the Act, the Principal Commissioner or Commissioner may, if he objects to an order passed by the CIT (A) under Section 250 of the Act, direct the AO to prefer an appeal to the Tribunal. It is not disputed that no such directions to file an appeal against the CIT (A)'s order dated 21[st] January, 2014 were issued by the concerned Income Tax Authority. 9. In the circumstances, there could be no dispute that the CIT (A)'s order in so far as it relates to the issue regarding the assessment being beyond the scope of Section 153A of the Act had attained finality, and thus, could not have been disturbed by the Tribunal. xxx xxx xxx ITA 834/2019 Page 19 of 45 12. Indisputably, the Revenue could also not take recourse to Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. By virtue of the said Rule, a respondent before the Tribunal can support the decision appealed against not only on the grounds decided in favour of the respondent but also on grounds decided against it. However, Rule 27 of the said Rules would not extend to permitting the respondent to expand the scope of an appeal and assail the decision on issues, which are not subject matter of the appeal. In CIT v. Edward Keventer (Successors) Pvt. Ltd. (supra), this court had reiterated that “it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking r 27. 13. The learned counsel for the Revenue has referred to the decision of the Supreme Court in National Thermal Power Corpn Ltd. v. CIT [1998] 229 ITR 383 (SC)in support of the contention that it is open for the Tribunal to consider all questions of law where no investigation into facts are necessary. We find that the aforesaid decision is wholly inapplicable to the facts of the present case. It is trite law that the Tribunal may, under Section 254(1) of the Act, pass such orders as it thinks fit; nonetheless, the decision must be in respect of the subject matter of the dispute. Indisputably, the Tribunal can examine all questions which relate to the subject matter of an appeal but, once an issue has attained finality and is not a subject matter of the dispute before the Tribunal, it would not be open for the Tribunal to reopen the issue on the pretext of examining a question of law.” (emphasis supplied) 16. On the strength of the above reasoning, Mr. Hossain argues that in the present case as well, since the Appellant has not preferred any cross appeal or objections, it cannot now be permitted to urge jurisdictional grounds. We do not agree. The factual situation in Divine Infracon (supra) is entirely distinguishable from what we have in hand. We had, in fact, summoned the judicial record of the said case in order to understand the context in which ITA 834/2019