1989-VIL-83-ITAT-DEL

Equivalent Citation: ITD 030, 161, TTJ 035, 111

Income Tax Appellate Tribunal DELHI

Date: 13.07.1989

INDO JAVA & CO.

Vs

INSPECTING ASSISTANT COMMISSIONER.

BENCH

Member(s)  : CH. G. KRISHNAMURTHY., GEORGE CHERIYAN., T. N. C. RANGARAJAN., V. P. ELHENCE., S. K. CHANDER.

JUDGMENT

Per Bench --- These cross appeals for the assessment years 1980-81 to 1982-83 arise out of separate orders dated 26-2-1986, 26-2-1986 and 27-2-1986 of the learned Commissioner of Income-tax (A), XII, New Delhi. The assessee M/s Indo Java & Co., 811, Ansal Bhawan, New Delhi is a registered firm which derives its income from the export of engineering goods. For the assessment years in question, the assessee offered for taxation, varying amounts by way of cash compensatory support (CCS), duty drawback (DDB) and proceeds of the sale of Import Entitlements (IE). However, by means of identical applications filed on 10-5-1988, the assessee sought to raise the following six identical additional grounds before the Tribunal in its appeals for the assessment years in question which were not set forth in the Memoranda of Appeals :

"1. That the learned IAC (Asstt.) and CIT (Appeals) failed to recognise and give due legal relief owing to, the fact that 'Cash Compensatory Support' received by the appellant of the amount of Rs. 30,96,943.20 was in the nature of capital receipt and that it was not taxable, notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profits of the appellant.

2. That the learned IAC (Asstt.) and CIT (Appeals) failed to recognise, and give due legal relief owing to, the fact that 'Drawback of Duty' of the amount of Rs. 23,02,930.73 was in the nature of capital receipt and that it was not taxable notwithstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

3. That the learned IAC (Asstt.) and CIT (Appeals) failed to recognise, and give due legal relief owing to, the fact that 'income from sale of Import Entitlement' of the amount of Rs. 4,56,517.70 was in the nature of capital receipt and that it was not taxable not-withstanding the fact that the same has been treated as a 'revenue receipt' and included in the taxable profit of the appellant.

4. That without prejudice to any of the aforesaid grounds of appeal, the appellant also claims that the learned assessing authority failed to apply the provisions of Sec. 10(17B) of the IT Act which, as a matter of duty, cast on it and determine that none of the amounts indicated above could be included by virtue of these provisions in the total income of appellant.

5. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority failed to determine the correct head of income under which the impugned receipts were to be brought to tax as income and, that, in any event, they erred in law in bringing them to tax under the head 'Income from profits and gains' of business.

6. That without prejudice to any one or more of the aforesaid grounds of appeal, the appellant submits that the assessing authority erred in taxing the grants made by the Government from the Consolidated Fund of India for specific purpose--for export promotion--under the various schemes to the exporters, ignoring that the same are not taxable as per the charging provisions of the IT Act, 1961, thus violating Article 266(3) of the Constitution of India. In the applications, it was said that they were purely legal grounds whose admission did not require any facts other than those already on the record. Shri Sharma submitted that the schemes were Government schemes and these were not facts within the special knowledge of the assessee. He next submitted that the assessee was not guilty of any latches. It was said that the necessity for these applications arose on account of the decision dated 25-3-1988 of the Special Bench in the case of Gedore Tools (India) (P.) Ltd. v. IAC [1988] 25 ITD 193 (Delhi). A question, therefore, arose whether such grounds could be permitted to be raised for the first time before the Appellate Tribunal in terms of Rule 11 of the Income-tax Appellate Tribunal Rules, 1963, and these applications are stoutly contested by the Department.

2. A very large number of decisions were cited at the Bar by the learned representatives on both the sides as also by the Interveners and detailed submissions were heard by us in support of their contentions. Shri G.C. Sharma, the learned counsel for the assessee submitted at the outset that Article 265 of the Constitution of India, which states that no tax shall be levied or collected except by an authority of law, is not to be impeded by any procedural hurdles if under the Law an item of income is not to be taxed at all. He submitted that the matter under consideration required to be viewed from a jurisprudential plane. He submitted that the primary purpose of the Income-tax Act, 1961 is to levy and collect income-tax after fixing the tax liability according to Act. He said that the Scheme of the Act did not contemplate any restrictions on the ambit and power of the Tribunal by any notions of finality or subject matter of appeal etc. He submitted that the functions of the assessing authority, first appellate authority and of the Appellate Tribunal as a second appellate authority were identical, and in a sense complementary to each other, although the Tribunal functions independently and that is why there is no lis or dispute before it as in a civil litigation. He submitted that the proceedings before the First and Second Appellate Authority were also continuation of assessment proceedings. He referred to the provisions of Sections 250, 253 and 254 and submitted that there were no restrictions placed in the Act on the admission of new or additional grounds of appeal. He pointed out that u/s 253 of the Act, an assessee can file an appeal, if he is "aggrieved" of the order of the First Appellate Authority, whereas the Department can file appeal "if it objects" to such an order. He distinguished between the assumption and the exercise of jurisdiction. According to him, Rule 11 of the Income-tax Appellate Tribunal Rules, 1963 is not determinative of jurisdiction nor does it confer or invest the Appellate Tribunal with any jurisdiction which it does not already possess but it only regulates the exercise of jurisdiction. Shri. Sharma argued that the only restriction prescribed in Rule 11 is that an opportunity of hearing should be afforded to the other side. Elaborating on the wide discretion of the Appellate Tribunal, Shri Sharma submitted that even if in a case there are no materials to support a ground, but if law supports it, the Tribunal can admit an additional ground. He explained that the mere necessity to go into the facts need not hamper the discretion of the Tribunal He pointed out that even in cases where an assessee had himself tendered a particular receipt as 'income', the assessee could always show that the said receipt was not taxable in law. In much the same way an assessee can claim a deduction if relevant facts are available though not claimed earlier. In this connection, he referred to the decision of the Supreme Court in Kamala Mills Ltd. v. State of Bombay [1965] 57 ITR 643, for the proposition that despite the bar in Section 293 of the Income-tax Act, 1961, a suit for the recovery of illegal tax is not barred. He submitted that the onus lies on the assessing authority to examine as to whether a particular receipt can be taxed in law. Shri Sharma sought to distinguish and explain the various decisions of the Supreme Court, High Courts and of the Tribunal. He pointed out that in the case of Gedore Tools India (P.) Ltd. for the assessment year 1975-76 two cross appeals ITA No. 1143 and 1826/Del/79 were filed whereas for the assessment year 1976-77, ITA No. 696/Del/82 was filed in which the assessee sought to raise before the Appellate Tribunal, identical additional grounds for the first time and that the Appellate Tribunal vide its order dated 19-9-1983, had admitted these additional grounds. He also pointed out that the Reference Applications R.A. No. 402 and 403/Del/84 filed by the Department against the said decision were rejected by the Tribunal vide its order dated 27-10-1984 and the Civil Writ Petition No. 663/1985 filed by the Department had also been dismissed by the Hon'ble Delhi High Court in limine on 22-3-1985 (copy filed). Again referring to the decision of the Supreme Court in CIT v J.K. Hosiery Factory [1986] 159 ITR 85, he submitted that if there is a doubt whether or not jurisdiction is there, an interpretation which favours existence of jurisdiction should be preferred i.e. the one which favours the remedy rather than that which favours its shut off.

3. Shri R. Ganeshan, the learned counsel for the Intervener M/s Khosla, New Delhi (ITA No. 1960/Del/86) said that the Intervener had 100 per cent exports. He reiterated the submissions made on behalf of the assessee by Shri Sharma and emphasised that the Tribunal does not act like a Civil Court and it has to decide regarding the taxes payable by the assessee. He also submitted that in the earlier Special Bench decision in the case of National Thermal Power Corpn. v. IAC [1985] 12 ITD 99 (Delhi), the decisions of the Supreme Court in Addl. CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 and of the Delhi High Court in CIT v. Anand Prasad [1981] 128 ITR 388 had been misunderstood. He submitted that on the question of admission of new or additional grounds of appeal, the Rules do not circumscribe the Tribunal's power. Referring to the decision of Delhi High Court in CIT v. Bharat General Reinsurance Co. Ltd. [1971] 81 ITR 303 where the assessee had wrongly included some income in its return, Shri Ganeshan pointed out that that fact by itself could not confer jurisdiction on the Department to tax that income if it did not pertain to that year as there is no estoppel against the Statute.

4. Shri P.N. Monga, the learned counsel for the Intervener M/s Atlas Cycle Industries, Sonepat (ITA No. 1412 and 368/Del/86) submitted that on the question of admission of additional grounds of appeal, the power of the Tribunal u/s 254 of the IT Act, 1961 read with Rule 11 of the Income-tax Appellate Tribunal Rules, 1963 (which is pari-materia with order 41 Rule 2 CPC) is unfettered. He also submitted that an assessee could resile from an admission made earlier and that there could be no estoppel on a point of law.

5. Shri O.P. Vaish, the learned counsel for the Intervener M/s Ram Nath Industries (ITA No. 2896/Del/85) additionally submitted that the facts of each case had to be considered. He also referred to the observations of Rt. Hon'ble Sir Charles Russell (1969) in relation to the judgments of the Court of Appeal in his address titled "Behind the Appellate Curtain" from the book "The Lawyer and Justice" published by Sweet & Maxwell, London. Eight points were highlighted therein while understanding them. A copy of those eight points was also placed by Shri Vaish on the record.

6. Shri M.S. Syali, the learned counsel for the Intervener M/s Singh Enterprises (Exports) (P), New Delhi (ITA No. 5006/Del/86) submitted that the decision of the Gujarat High Court in CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499 (FB) was not against the assessee. He submitted that the jurisdiction of the Tribunal to admit additional grounds of appeal was not disputed. He next submitted that the Supreme Court decision in the case of Gurjargravures (P.) Ltd. was of two Judges, whereas the following three judgments of the Supreme Court were of three Judges each and had, therefore, to be preferred :

1. Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC).

2. CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC).

3. CIT v. S. Nelliappan [1967] 66 ITR 722 (SC).

In this connection, he referred to the decision of Delhi High Court in Yogiraj Charity Trust v. CIT [1984] 149 ITR 7 at 17, wherein it was held that in case of two judgments of the same Court (in that case of the Supreme Court), the judgment of a larger Bench had to prevail over the other judgments. He also referred to the decision of the Bombay High Court in CIT v. Western Rolling Mills (P.) Ltd. [1985] 156 ITR 54 at pages 57 and 58 wherein it was held that where there was not merely substantial but almost full material on the record to enable the consideration of a claim for Special deduction u/s 80-I, the AAC had jurisdiction to consider the question of relief u/s 80-I for the first time.

7. Shri O.S. Bajpai, the learned Senior Departmental Representative worked assiduously, took great pains and addressed us exhaustive arguments by referring to case law. At the outset, he submitted that out of the additional grounds sought to be raised, at best only the admissibility of the ground relating to the CCS could justify a second look if at all, as in respect of the remaining grounds concerning DBK and IE the jurisdiction sought to be given by the assessee could not hold good. Next, he submitted that sitting at Delhi, the decision of the Special Bench in the case of National Thermal Power Corpn. was binding on this Special Bench. He submitted that that decision was based on the decision of the Delhi High Court in the case of Anand Prasad and even if another view of that decision was possible, the decision in the case of National Thermal Power Corpn. could not be disregarded as there was no room for taking another view., He sought to question the judicial propriety of constituting a larger Special Bench in such cases. He submitted that the constitution of a Special Bench was not necessary for the interpretation of Supreme Court judgments. Referring to the observations of the Supreme Court in Distributors (Baroda) (P.) Ltd. v. Union of India [1985] 155 ITR 120, he submitted that the larger Bench should not interfere with the view taken by a smaller Bench merely because it is the better view. He also submitted that if an entirely new ground was raised [a part from the question of the raisability of a new approach, argument, aspect, issue, perspective or plea with reference to an existing ground or grounds-vide Doveton Cafe v. State of Tamil Nadu [1981] 47 STC 345 (Mad.) and other cases referred to], there is a bar at the threshold; that is connected with the right to come in appeal and there is no question of any discretion in the Tribunal. Shri Bajpai sought to address his arguments with reference to the following ten points:

1. Right to appeal is not an inherent right:

It is the creature of statute. The appeal before the Appellate Tribunal can only be from an order of AAC/CIT (Appeals) and there can be no direct appeal before the Appellate Tribunal against the assessment order, if there is no decision of the AAC/ CIT (Appeals) - vide Easun Engg. Co. Ltd. v. Government of Madras [1974] 33 STC 350 (Mad.).

2. Under section 253, an assessee can file an appeal if he is aggrieved by the order of the AAC/CIT (Appeals). An assessee cannot be aggrieved if he has himself tendered an income or given up or abandoned a claim or if a ground which could be raised before the AAC/CIT (Appeals) was not raised or was not pressed. A claim abandoned was not better than a claim considered and rejected. Regarding abandonment of claim reference was made to Central Camera Co. (P.) Ltd. v. Government of Madras [1971] 27 STC 112 (Mad.). The concept of finality in regard to the portion of the order of ITO/AAC/CIT (Appeals) not appealed against is very relevant. The expressions "the appeal" and "thereon" u/s 254 limit the scope of the Tribunal's power "to pass such orders as it thinks fit", in regard to the subject matter of the appeal or the appeal before it. If the matter is not kept alive, a new ground cannot be raised nor can even the decision of the Supreme Court be taken advantage of. A decision of the Supreme Court does not operate retrospectively. The heading to Section 253 is also relevant in this regard. The decision of the Supreme Court in the case of Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 is an authority for the proposition that marginal note or heading to a section is a relevant factor to be taken into consideration in construing the ambit of the Section.

3. Distinction between 'jurisdiction' and 'restrictions'. The Tribunal cannot find a remedy for the assessee where it is barred. Jurisdiction can be exercised by the Tribunal only in relation to a new ground if it is related to the existing subject matter of appeal and not outside it. If the AAC could not admit a ground, the Tribunal could also not do so. Rule 11 does not extend the Tribunal's jurisdiction. Even under order 41, Rule 2 CPC, the Supreme Court held in M.P. Shreevastava v. Mrs. Veena AIR 1967 SC 1193, that a ground not taken before the lower Court could not be taken before the Supreme Court.

4. Distinction between jurisdiction and exercise of the powers within the jurisdiction: The powers of the AAC extend even to the subject matter not appealed against before him ; that is to the entire assessment order but the power of the Tribunal is restricted to the grounds of appeal before it. The Explanation below Section 251(2) enlarges the scope of the AAC's power. There is no such provision in the case of the Appellate Tribunal.

5. Distinction between issue and approach, argument, aspect, perspective, plea and point --If they relate to an existing ground, they can be considered for admission as additional ground, subject to the exercise of discretion by the Appellate Tribunal, but the same cannot be said of an issue which is entirely new and does not arise from the order appealed against.

6. There can be no direct appeal to the Tribunal against the assessment order. If on a point, the assessee did not come up in appeal before the AAC/CIT (Appeals) either because there was a tender of receipt as income or a claim was given up, no appeal can be thereon such a point for the first time before the Tribunal.

7. Limits on the Tribunal's power of enhancement.

8. The application of the principle of Stare Decisis. The decision of the jurisdictional High Court of Delhi in Anand Prasad's case and in the case of CIT v. Edward Keventer (Successors) (P.) Ltd. [1980] 123 ITR 200 (Delhi) which was similar, though indirect, bind the Special Bench. The decision of the Delhi High Court in Anand Prasad's case was followed by a Full Bench of the Gujarat High Court in the case of Cellulose Products of India Ltd. The decision of the earlier Special Bench in the case of National Thermal Power Corpn. which considered the decisions of the Supreme Court in Gurjargravures (P.) Ltd.'s case the decisions of Delhi High Court in Edward Keventer (Successors) (P.) Ltd.'s case and Anand Prasad and Full Bench decision of the Gujarat High Court in Cellulose Products of India Ltd.'s case, could not be disregarded. The concern for consistency cannot be disregarded. (Shri Bajpai dwelt at considerable length on the decision of the Gujarat High Court in the case of Cellulose Products of India Ltd.

9. Rule 11 is procedural : It only relates to the exercise of discretion within the subject matter of appeal i.e. to grounds which form an approach, argument, aspect, contention, issue, perspective, plea or point related to the existing subject matter of appeal and all are related to the word 'ground' in this Rule as meaning reason and not a new issue altogether.

10. Effect of abandonment, admission or concession (Already dealt with under Sl. No. 2).

8. In reply Shri G.C. Sharma, the learned counsel for the assessee submitted that the principle of Stare Decisis applies to Courts and not to Tribunals and that this principle does not restrain a Special Bench from considering decisions of the Supreme Court, the High Courts and the earlier decisions of the Tribunal and then to come to the same or a different conclusion. He also submitted that the judicial propriety had already been observed in this case since the President of the Tribunal had thought fit to constitute a Bench of Five Members u/s 255(3) noticing that the Special Bench which decided the case of National Thermal Power Corpn. consisted of three Members. Next he submitted that the principle of rigid or strict interpretation does not apply to machinery or procedural provisions. In this connection, reliance was placed by him on the decision of the Supreme Court in CIT v. National Taj Traders [1980] 121 ITR 535. He submitted that just because the decision of the Gujarat High Court in the case of Cellulose Products of India Ltd. is a Full Bench decision it would not whittle down the efficacy of other decisions. He explained that decision as also the decision of the Supreme Court in the case of Gurjargravures (P.) Ltd. He said that it did not overrule the earlier decisions of the Supreme Court. In this regard, reference was made by him to the decision of the Supreme Court in Union of India v. K.S. Subramanian AIR 1976 SC 2433 at 2437. He also explained the decisions of Delhi High Court in the cases of Edward Keventer (Successors) (P.) Ltd. and Anand Prasad and the decision of the Special Bench in the case of National Thermal Power Corpn. He also submitted that in the present case, the Special Bench was not considering any claim but the point whether a receipt offered for taxation was taxable in law. He said that from the tender of a receipt as income, no estoppel could result. Shri Sharma said that it was not a case of abandonment of a claim. He submitted that there were no restrictions on the power of the Appellate Tribunal to permit additional grounds to be raised. For this proposition, he relied upon section 254 of the IT Act, 1961 read with section 255(5) and Rule 11 of the Income-tax Appellate Tribunal Rules, 1963. He also relied upon the decision of Chagla, C.J. of the Bombay High Court in New India Life Assurance Co. Ltd. v. CIT [1957] 31 ITR 844 which was affirmed by the Supreme Court in the case of ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815 and had also been relied upon by Delhi High Court in the case of Edward Keventer (Successor) (P.) Ltd. He referred to that decision of the Supreme Court as also another decision of the Supreme Court in CIT v. Bansi Dhar & Sons [1986] 157 ITR 665 regarding the existence of incidental and ancilliary powers of the Appellate Tribunal u/s 254. Explaining the nature of on appeal, he submitted that even if a point was not raised before the AAC, it could be raised before the Appellate Tribunal. Referring to the Civil Court's inherent power u/s 151 CPC, he submitted that the Appellate Tribunal derived its power to permit additional grounds of appeal from See. 254 and inherent power to do substantial justice. He submitted that the express grant of a statutory power carried with it with necessary implication all powers necessary and inherent therein. Comparing the powers of the AAC with those of the Tribunal, Shri Sharma explained that the powers of the AAC were all specified in the provisions and excluded inherent powers. He also submitted that 'grounds' meant grounds of appeal and not reasons. Lastly he submitted that the exercise of discretion was not to be confused with the exercise of jurisdiction.

9. In reply Shri R. Ganeshan, referring to the decision of the Supreme Court in the case of Hukumchand Mills Ltd. submitted that the subject matter of appeal means the appeal itself. Referring to the provisions of Sec. 297(2), Sh. Ganeshan submitted that assessment proceedings included the stages from the Income-tax Officer's assessment to the disposal of the appeal by the Tribunal as also further proceedings of reference to High Court and thence to Supreme Court. Referring to the consideration by the ITO he submitted that it referred to consideration of the taxability of receipts etc. and assessee's eligibility to claim exemption. He also submitted that these considerations could be made either in the light of admissions made by the assessee or after contest and discussion.

10. Shri P. N. Monga, referring to the decision of the Madras High Court in State of Tamil Nadu v. Arulmurugan & Co. [1982] 51 STC 381 (FB) submitted that it had been recognised that the power and discretion of the Appellate Authority is no different and no less wide than the power of the assessing authority. He also referred to the decision of the Hon'ble Punjab and Haryana High Court in Atlas Cycle Industries Ltd. v. CIT [1982] 133 ITR 231 and submitted that the power of the Appellate Tribunal to allow additional pleas was given to do substantial justice between the parties and the Tribunal could allow or disallow the additional pleas after applying its judicial mind.

11. We have carefully considered the rival submissions as also all the decisions cited, whether or not specifically referred to or discussed in this order and have also discussed the matter thoroughly amongst ourselves. By virtue of the convention developed over the years, a Division Bench, if it feels that the view of another Division Bench or of Special Bench needs reconsideration, it can request the President of the Income-tax Appellate Tribunal u/s 255(3) of the Income-tax Act, 1961 to constitute a Special Bench for the disposal of the case. In the present appeals also, the Division Bench which originally heard them had made a proposal u/s 265(3). It had pointed out that in the following decisions, the Appellate Tribunal had taken the view that additional grounds could be raised before the Appellate Tribunal for the first time :

(1) Order dated 12-10-1978 of Madras Bench 'B' (SB) in the case of R. Brahadeeswaran v. ACED [1983] 3 SOT 101.

(2) Order of Delhi Bench 'D' for assessment years 1975-76 and 1976-77 in the case of Gedore Tools India (P.) Ltd. [IT Appeal Nos. 1143, 1826 (Del.) of 1979 and 696 (Del.) of 1982, dated 19-9-1983].

(3) Order dated 16-8-1985 of Delhi Bench 'E' (TM) in the case of CWT v. Smt. Tulsi Devi [1985] 14 ITD 283.

(4) Order of Delhi Bench 'D' in the case of Avis International (P.) Ltd. [IT Appeal Nos. 1012 and 1013 (Delhi) of 1986, dated 22-8-1988]. On the other hand, in the following cases, it had been pointed out that the view taken was that the additional grounds could not be permitted to be raised :---

Order of Delhi Bench 'A' in National Thermal Power Corpn's case, Order of Delhi Bench 'C' in Modi Spg. & Wvg. Mills Co. Ltd. [IT Appeal Nos. 1090 and 2758 (Delhi) of 1985, dated 30-5-1988], Order of Delhi Bench 'A' in the case of Raunaq International Ltd. [IT Appeal No. 2918 (Delhi) of 1986, dated 13-12-1985] and Order of Delhi Bench 'E' in the case of Radhika Wool Silk Mills (P.) Ltd. [IT Appeal No. 1940 (Delhi) of 1985, dated 13-1-1985]. Since earlier decisions referred to above had been rendered by Special Benches, consisting of three Members, the President in exercise of his discretion, constituted the present Special Bench consisting of five Members. This Special Bench can, therefore, consider whether the view taken in the earlier Special Bench needs any reconsideration. This view was expressly laid down by the Madras High Court with reference to See. 254 of the IT Act in CIT v. L. G. Ramamurthi [1977] 110 ITR 453 (Mad.). The submission made on behalf of the Revenue that the Constitution of this Special Bench of five Members was not necessary or that it lacked judicial propriety or that the decision of the Special Bench in the case of National Thermal Power Corpn. is binding, cannot, therefore, be accepted as it was opposed to the law as by now settled as is detailed below. We have to reach a similar or a different decision, after considering the detailed submissions and the decisions cited at the Bar. So fax as the decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. is concerned, no doubt it was observed by the Supreme Court that "a larger Bench should not interfere with the view taken by a smaller Bench merely because it is the better view" but it also said that 'if the decision of the smaller Bench is erroneous, a larger Bench has to interfere'. The Supreme Court had also observed that "the doctrine of stare decisis should not deter the Court from overruling the earlier decision, if it is satisfied that such decision is manifestly wrong or proceeds upon a mistaken assumption in regard to the decision or continuance of a statutory provision or is contrary to another decision of the Court.

12. The principle of stare decisis is in essence a doctrine of the binding force of precedents and thus it is evolved on expediency and Public Policy and it aims at uniformity and consistency of decisions to ensure certainty and to reduce avoidable litigation. We are further of the clear view that the principle of stare decisis does not come in our way. Our reasons for saying so are the same as given in the Special Bench decision in the case of Gedore Tools India (P.) Ltd. wherein the following observations were made at pages 212 and 213 :---

"We are of the clear view that the doctrine of stare decisis cannot operate as a bar to the Special Bench considering the matter afresh in the light of contradictory decisions of two Benches of the Tribunal in regard to the same point. The principle of stare decisis is derived from 'stare decisis et non quieta movere' (to abide by and adhere, to decide and not to unsettle things which are established). This rule is not so imperative or inflexible as not to permit a departure therefrom in any case. Therefore, its application has to be determined in each case by the discretion of the Court and the previous decisions need not be followed to the extent that error may be perpetuated and grievous wrong may result (vide Maktul v. Mst. Manbhari AIR 1958 SC 918). Under the stare decisis rule a principle of law which has become settled by a series of decisions is generally binding on the Courts and should be followed in similar cases. This rule is based on expediency and public policy and although generally it should be strictly adhered to by the Courts, it is not universally applicable. Thus the principle of stare decisis really is that the Court must always hesitate to overrule decisions which are not manifestly erroneous or mischievous and which have stood for many years unchallenged and which from their nature, may reasonably be supposed to have affected the conduct of a large portion of the community in matters relating to rights of property. Having regard to the nature of the principle of stare decisis, we are of the view that it will not come in the way of the Special Bench in considering the matter afresh.

13. The learned Sr. Departmental Representative has put forward the case that only such a ground can be raised before the Appellate Tribunal for the first time which represents a new or additional approach, argument, aspect, claim, contention, issue, item, plea, point, question or submission which is connected with the grounds or the subject matter of the appeal already before the Tribunal. He says that an entirely new ground cannot be so taken up before the Tribunal for the first time. We, therefore, need to know the fountain head or the source of the Tribunal's power in this regard and to examine the true nature, scope and the restrictions, if any, to which that power is subject. It is, therefore, also useful to enquire into the scope of the assessment, the first Appellate powers and the second Appellate powers under the Income-tax Act, 1961.

14. Undoubtedly the primary purpose of the Income-tax Act is to levy and collect tax after ascertaining the liability of an assessee. The duties and functions of every authority in the hierarchy are exercised only for the purpose of determining the total taxable income of an assessee correctly. The scope of the assessment is governed by the return filed and the assessable income as determined by the Assessing Officer from the sources of income considered by him originally or as a result of re-assessment, following the reopening of the assessment u/s 147 or revision by the Commissioner u/s 263 or in pursuance of the directions of the Appellate Courts. An assessee aggrieved by any of the orders of the Assessing Officer as enumerated under sub-sections (1) and (2) of Sec. 246 has the right to come up in appeal before the first Appellate Authority. The proposition that the right of appeal is not an inherent right and that it is a creature of statute is indisputable. Section 250 prescribes the procedure in such appeal whereas section 251 specifies the powers which the first appellate authority can exercise. The powers are detailed in respect of appeals against orders of assessment and imposition of penalty but in respect of "any other case" he can pass such orders in the appeal as he thinks fit. Section 251(2) gives him the power of enhancement of the assessment or penalty or reduction of the amount of refund. The explanation to section 251 clarifies that the first appellate authority may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised by the appellant before it. Thus the first appellate authority has plenary powers in disposing of an appeal and the scope of his powers is co-terminus with that of the Assessing Officer [CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 (SC)]. However, as held in CIT v. Shapoorji Pallonji Mistry [1962] 44 ITR 891 (SC), the power of enhancement cannot be exercised by discovering new sources. This was further clarified in CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443 (SC) by saying that AAC has no jurisdiction to assess a source of income which is not disclosed either in the return or in the assessment order. This leads to two results. Firstly, the scope of the jurisdiction of the AAC extends to assessment as well as enhancement of income/penalty resulting from the sources disclosed in the return or considered in the assessment. Secondly, the I consideration" by the assessing authority is of taxable income from such sources. The consideration may be on the basis of an admission, consent, or tender by the assessee or it may be after discussion due to a contest put in by the assessee. Such a consideration is mandated not only under the Income-tax Act, 1961 but also by virtue of Article 265 of the Constitution of India, according to which no tax can be levied or collected without authority of law. The only thing which an assessing authority can be said to have not considered is income which falls outside the assessment record or income from a new source not considered in the assessment order. The onus of examining whether a particular receipt or sum can be taxed in law remains on him. Section 250(5) provides that at the hearing of an appeal, the first appellate authority may allow the appellant to go into any ground of appeal, not specified in the grounds of appeal if he is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. This provision has been made in the Act itself under the heading "procedure for appeal" and has not been left to be provided for in the Rules. We are not concerned in these appeals with the scope of the inherent power, if any, of the First Appellate Authority or of the scope of its power to admit additional grounds of appeal. We, therefore, need not go farther than what has been observed above.

15. Section 253 relates to the filing of appeals before the Appellate Tribunal. An assessee aggrieved by any of the specified orders can appeal to the Tribunal. The Commissioner, may if he objects to any order passed by the First Appellate Authority also appeal to the Appellate Tribunal against the order. As held by the Supreme Court in the case of Amarjit Kaur v. Pritam Singh [1975] 1 SCR 605 an appeal is a rehearing. There is no difference between the right of appeal of the assessee and the right of appeal of the Department. In both the cases, the right of appeal is the same. An assessee can be said to be aggrieved by the amount of income assessed or the tax determined or the amount of loss computed or the status under which he is assessed or if he denies his liability to be assessed. So far as the department is concerned, the expression "if he objects" may have been used because the Department would file an appeal if it objects to the grant of relief to the assessee in any form. Section 254, relates to the disposal of the appeal by the Appellate Tribunal, Section 254(1) provides that the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard pass such orders thereon as it thinks fit. Its powers of disposal are not so circumscribed as that of the First Appellate Authority u/s 251. Its powers are very wide. In CAIT v. V.N. Narayanan Bhattadiripad [1972] 83 ITR 453 (SC), it was held that the Tribunal has all the powers of assessing authority. In CIT v. Manick Sons [1969] 74 ITR 1 (SC), it was observed that though the power of the Tribunal is wide, but it is a judicial power. As held in CIT v. Pratapsingh [1987] 164 ITR 431 (Raj.), the wordings or phraseology used in Section 254(1) know no limitation. The learned D. R. sought to contend that by the use of the expression "the appeal" in Section 254 the scope of the Tribunal is limited to the points arising out of that appellate order and not dehors it. In our view this is not so, When the Act refers to the right of appeal, it says that an appeal may be filed and after it is filed, it is referred to as the appeal. There is nothing more to it, and in any event does not decide the issue before us as to what is meant by the appeal.

16. The next expression which came up for consideration is the preposition used in section 254(1) namely "thereon". There is unanimity of view that "thereon" means the subject matter of appeal i.e. the appeal itself. In fact in the case of State of Andhra Pradesh v. Sri Venkata Rama Lingeshwara Rice Mill [1977] 39 STC 57 (AP) (FB), it was held by the Andhra Pradesh High Court that the absence of the expression "thereon" does not make much of a difference as the powers of the Tribunal have to be construed only with reference to the subject matter of the appeal. The expression "subject matter of appeal" is not used in the Act.

16.1 The next point, therefore, which requires consideration is as to whether the subject matter of appeal is immutable or it can be enlarged or expanded. But before we do that, we may look at the nature of the power of the Tribunal u/s 254. In the case of M.K. Mohammed Kunhi, it was held by the Supreme Court that the right of appeal is a substantive right and the questions of fact and law are at large open to review by the Appellate Tribunal. It also held that it is a firmly established rule that an express grant of a statutory power carries with it by necessary implication, the authority to use all reasonable means to make such grant effective. It also held that the powers which have been conferred by Section 254 on the Appellate Tribunal, with widest possible amplitude must carry with them by necessary implication, all powers and duties incidental and necessary to make the exercise of those powers fully effective, To the same effect are the observations of the Supreme Court in Bansidhar & Sons' case and of the Bombay High Court in New India Life Assurance Co. Ltd.'s case which have been followed by the Delhi High Court in Edward Keventer (Successors) (P.) Ltd.'s case. In fact in the case of H.H. Maharaja Martand Singh Ju Deo v. CET [1983] 140 ITR 786 (MP), it has been referred to as an inherent power. Thus no express or separate provision like Section 151 of the CPC was found necessary here. Therefore, the source of the Appellate Tribunal's power to admit additional grounds of appeal lies u/s 254 itself as incidental or ancillary to its appellate jurisdiction for being exercised ex debito justitiae i.e. in the interests of substantial justice. There is no provision in the Act prescribing any restrictions on the admission of new or additional grounds of appeal. It follows the pattern of second appeals before the Civil Courts. The Marginal heading to Section 254 would also not assist the department, in its interpretation as above. It has thus been recognised that though the Tribunal may not be a Court, by virtue of its duty to decide the case, it has inherent powers to do all such acts as are necessary to arrive at an effective decision. That means that the Tribunal has the power to go into every point which has a bearing on the determination of the chargeable income even if the parties before it have not taken those points and to permit the parties to take such points subject only to the limitation that the appellant shall not be placed in a position worse than what it was in before he filed the appeal.

16.2 The argument that by showing an amount as income in the return, the assessee must be taken to have abandoned the claim is without substance because, the question of abandonment would arise only when it has been taken earlier and deliberately given up and not where the amount has been shown as income without knowing the correct implications of the tax laws. Again, the cases relied on by the Revenue to show that the grounds were not entertained where the assessee was not aggrieved indicate that the assessee had consciously given up the ground taken earlier and thus estopped from saying that he was any further aggrieved. The argument that there should be some finality to the orders of the authorities below, is also misconceived because, firstly the finality attaches u/s 250(4) only to the order of the Tribunal and there is no question of any finality with reference to the orders where appeals are pending. The period of limitation prescribed is only to see that the appeals are made without delay and assessment proceeding' came to an end as soon as possible with a final adjustment of the tax liability of the assessee at the level of the Tribunal. If no appeal is filed, within the period of limitation, then it could be said that the assessee had abandoned any claim that the tax liability is exigible. But where an appeal is filed within the period of limitation, there can be no restriction on the points that lie may raise for consideration with reference to the computation of that tax liability. In this context the most liberal and friendly attitude adopted by the Board, by directing its Officers to help the assessee to claim relief though not claimed by them, by circular No. 14 (XL-35) dated 11-4-1955 becomes very relevant and significant, as to how the authorities should proceed to deal with the claims of the assessee. A proper functioning of the Tribunal alone is the Constitutional guarantee that no tax shall be levied or collected except by the authority of law and can effectuate the policy of the government that not a pie more will be charged to income-tax nor a pie less.

17. Rule 11 of the Income-tax Appellate Tribunal Rules, 1963 (corresponding to Rule 12 of the Income-tax Appellate Tribunal Rules, 1946 under the Old Act) is in the same terms as order 41, Rule 2 of the Code of Civil Procedure. That is why the Nagpur High Court in Byramji & Co. v. CIT [1943] 11 ITR 286 and the Bombay High Court in New India Life Assurance Co. Ltd.'s case recognised that the position of the Appellate Tribunal is the same as a Court of appeal under the Code of Civil Procedure and that the powers of the Appellate Tribunal are identical to the powers enjoyed by an Appellate Court under the Code. In Ramgopal Ganpatrai & Sons Ltd. v. CEPT [1953] 24 ITR 362 it was held by the Bombay High Court that it is the inherent jurisdiction of every Appellate Tribunal to decide any question of law arising out of an order of the Subordinate Court which order is before it in appeal. Rule 11 makes it clear that an appellant cannot urge any ground before the Appellate Tribunal which does not figure in the grounds set forth in the memorandum of appeal or for raising which leave has not been obtained from the Tribunal. The Rule, therefore, gives wide discretion to the Tribunal to give or to refuse leave to raise additional grounds. The appellant can raise the additional ground with the permission of the Court and the Court can permit it to be argued, if for some good cause a vital point has been overlooked. Leave is not to be granted unless particular reasons are shown for it. The Appellate Court may grant leave but it is not bound to do so. The provision aims at substantial justice, The only procedural restriction or safeguard placed in this Rule is that if the Tribunal rests its decision on any other ground, it shall give to the party who may be affected thereby a sufficient opportunity of being heard on that ground. The provision in an Act may confer, create or bar, the jurisdiction of authorities in regard to certain matters whereas the Rules lay down as to how the jurisdiction so created or conferred under the Act is to be exercised or regulated. Thus in cases where the Act contains no restrictions as in the present case of appeals before the Appellate Tribunal, we have to assume that the jurisdiction is inherent with the Appellate Tribunal to permit additional grounds of appeal to be raised before it, subject to the regulatory provisions of Rule 11 of the Income-tax Rules, 1963. Thus the power to admit additional ground is not conferred on the Tribunal by Rule 11 of the ITAT Rules, 1963 as a rule cannot confer a power, which is not conferred by the Statute under which the rules are made. The rule only regulates the exercise of the power inherent in the Appellate Tribunal, so that the parties before it do not as a matter of right claim to be heard on each and every point raised or not raised in the grounds of appeal. Inherent in the powers of the Tribunal is also the power to allow a party to give up a point, though not specifically referred to in Section 255(4) of the Act.

17.1 The expression 'jurisdiction' is not only used in the decisions of the various High Courts as connoting the competence of the Appellate Tribunal but also as connoting the discretion of the Tribunal. In the sense of connoting discretion, jurisdiction has sometimes been referred to as the authority of the Tribunal vide decision of the Bombay High Court in CIT v. B.C. Swimming Bath Trust [1955] 27 ITR 279. In the cases of Hukumchand Mills Ltd., Mahalakshmi Textile Mills Ltd., and in some decisions of the High Courts of Allahabad, Andhra Pradesh, Bombay, Calcutta and Mysore, the same has been referred to as the power of the Tribunal.

17.2 In the case of Moti Ram v. CIT [1958] 34 ITR 646 (SC), the consideration of additional grounds of appeal by the Appellate Tribunal was viewed as an exercise of discretion on its part. The same was the position in the case of Chittoori Subbanna v. Kudappa Subbanna AIR 1965 SC 1325 and Manji Dana v. CIT [1966] 60 ITR 582 (SC). In the case of Hukumchand Mills Ltd., the Supreme Court held that Rules 12 and 27 of the Income-tax Appellate Tribunal Rules, 1946 are not exhaustive of the powers of the Appellate Tribunal and that they are merely procedural in character and do not in any way circumscribe or control the power of the Tribunal u/s 33(4) of the Income-tax Act, 1922 (corresponding to sec. 254 of the IT Act, 1961). In this decision, the Supreme Court used both the expressions 'jurisdiction' and 'power' to connote the Tribunal's competence to exercise its discretion under Rule 12. In Mahalakshmi Textile Mills Ltd.'s case, the Supreme Court held that there is nothing in the Income-tax Act which restricts the Tribunal to the determination of the question raised before the Departmental Authorities and that all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. The Supreme Court specifically held that the right of the assessee to relief is not restricted to the plea raised by him. It also held that if for reasons recorded by departmental. authorities in respect of contention raised by the assessee, grant of relief to him on another ground is justified, it will be open to the departmental authorities and the Tribunal and indeed they would be under a duty to grant that relief. Thus the power of the Tribunal is widened only to fix the correct liability to tax. In the case of S. Nelliappan, it was again held that in hearing an appeal, the Tribunal may give leave to the assessee to urge grounds not set forth in the memorandum of appeal and in deciding the appeal, the Tribunal is not restricted to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. In the case of Ram Kristo Mandal v. Dhankisto Mandal AIR 1969 SC 204, the plea as to the invalidity of exchange of raiyatwari holding u/s 27 of the Sonthal Parganas Settlement Regulation raised at the stage of arguments in second appeal was held to be permissible.

18. In New India Life Assurance Co. Ltd.'s case, Bombay High Court held that the subject matter of the appeal is constituted by the grounds of appeal unless with leave that subject matter is expanded or enlarged by adding a new ground after leave has been given by the Tribunal. This decision has been noticed and approved by the Supreme Court in the case of M.K. Mohammed Kunhi and by the Delhi High Court in the case of Edward Keventer (Successors) (P.) Ltd. In that case, it was held by the Delhi High Court that the subject matter of appeal should not be understood in a narrow and unrealistic manner but should be so comprehended as to encompass the entire controversy between the parties which is sought to be got adjudicated upon by the Tribunal. The same view has been expressed by the Allahabad High Court in the case of J.K. Bankers v. CIT [1974] 94 ITR 107 and S.P. Kochhar v. ITO [1984] 145 ITR 255, by the Madras High Court in Panchura Estate Ltd. v. Government of Madras [1973] 87 ITR 698 and by Gujarat High Court in the case of CIT v. Orient Prospecting Co. [1983] 141 ITR 301. In fact in the case of Panchura Estate Ltd. , the Hon'ble Madras High Court only emphasised the requirement on the part of the Tribunal to consider the delay in filing additional grounds of appeal before admitting them. The same was the view of Delhi High Court in the case of Edward Keventer (Successors) (P.) Ltd. In CIT v. Delhi Sanitary Stores [1981] 127 ITR 822, the Rajasthan High Court held that the Appellate Tribunal has jurisdiction to allow a question to be raised for the first time in appeal ; that it is within the jurisdiction of the Tribunal to grant relief on a ground different from that urged before the lower authorities and that it can even allow a new plea after taking fresh evidence or without taking any evidence in the matter. The High Court of Mysore held in CIT v. Surjirkar's Tile Works (P.) Ltd. [1975] 99 ITR 482 that the jurisdiction of the Tribunal to allow a new ground not raised before the AAC is very wide and extensive and that all questions whether of law or of facts, which relate to the assessment may be raised before the Tribunal.

19. We may now examine the effect of tender of a receipt as income by the assessee himself before the ITO, In Pt. Sheo Nath Prasad Sharma v. CIT [1967] 66 ITR 647, the Allahabad High Court held that the admission that certain sums of money had been received by the assessee would be an admission as to a state of fact but whether the receipt can be considered as taxable income is quite another matter and the consideration of that question leads into the realm of law. If the ITO assessees an assessee upon a receipt which is not taxable in law, it is always open to the assessee to take the case in appeal to examine the validity of the assessment to tax of a receipt which, though admitted, was not taxable at all. Again in Bharat General Reinsurance Co. Ltd.'s case, the assessee had wrongly Included some income in its return for the particular year. It was held that that fact by itself could not confer jurisdiction on the department to tax that income if it did not pertain to that year. But the High Court held that such an admission did not operate as an estoppel. In Ram Kumar Jalan v. CIT [1977] 108 ITR 30 (Bom.), in the return filed by the assessee, certain income was treated as a revenue receipt. Before the Appellate Tribunal, the assessee raised an additional ground of appeal by means of an application that the sum received by it was not a revenue receipt. The High Court held that the rejection of the application on the part of the Tribunal was proper exercise of the discretion by the Appellate Tribunal. However, in CWT v. N.A. Narielwalla [1980] 126 ITR 344 (Bom.), it was held that consent does not give jurisdiction to any authority and that if there is inherent want of jurisdiction, the failure of the aggrieved party to challenge the jurisdiction would not confer jurisdiction on the said authority. In Arjun Singh v. CWT [1989] 175 ITR 91 (Delhi), it was held that though an admission is an important piece of evidence, but it is not conclusive and that it is open to the assessee to show that it is incorrect. The result is that though prima facie, an ITO can tax a receipt which is tendered by the assessee himself as a revenue receipt, such an admission cannot operate as an estoppel, against the assessee if in fact and in law that receipt was not of a taxable nature or if it did not pertain to the assessment year under consideration. If the assessee is able to satisfy the Tribunal that the earlier admission made by him was the result of a mistake of law or fact or had been made due to ignorance, or other factors, it may not come in his way of raising an additional ground. Admissions depend much upon the circumstances under which they are made.

20. If before the First Appellate Authority, a ground of appeal is raised but is later on not pressed, it would normally not survive for consideration. In Madhu Jayanti (P.) Ltd. v. CIT [1985] 154 ITR 277 (Cal.). The Tribunal had refused to allow additional items to be claimed u/s 35B which had not been pressed in earlier proceedings. The Calcutta High Court held that the Tribunal was not justified in doing so. In Vijay Kumar Jain v. CIT [1975] 99 ITR 349 (Punj. & Har.), it was held that the invalidity of the notice u/s 148 even though not pressed before the AAC could be considered by the Appellate Tribunal. Therefore, if the assessee is able to show that the ground was finally pressed but that the first appellate authority mistook it or that the non pressing of the ground was the result of a mistake, ignorance or other just cause, the ground must be allowed by the Appellate Tribunal to be again raised before it.

21. In Mahalakshmi Textile Mills Ltd.'s case it was held that all questions whether of law or of facts which relate to the assessment of the assessee may be raised before the Tribunal. To the mere effect were the decisions of the Allahabad, Bombay, Calcutta, Madras, Mysore, P&H and Rajasthan High Courts. However, in CIT v. Gilbert & Barker Mfg. Co. [1978] 111 ITR 529 (Bom.) and in CIT v. Madras Industrial Investment Corpn. Ltd. [1980] 124 ITR 454 (Mad.), it was held that if new facts are required, the additional grounds would not be permitted. There is unanimity of view that if there is pure question of law, additional ground has to be allowed. In fact in the following cases, it was held that such a point was necessarily to be allowed to be raised if it went to the root of the matter or assessment or jurisdiction of the assessing Officer :

1. Byramji & Co's case,

2. Ganga Das Sarda v. CIT [1956] 29 ITR 799 (Pat.),

3. Gundathur Thimmappa & Sons v. CIT [1968] 70 ITR 70 (Mys.),

4. N.A. Narielwalla's case, and

5. CIT v. Belapur Sugar & Allied Industries Ltd. [1983] 141 ITR 404 (Bom.).

If the grounds involve mixed questions of law and fact where there is material on the record, the decisions uniformly are that such grounds are to be allowed. In fact, it is only the following cases that it has been laid down that the delay in raising the additional ground has to be explained :

1. Panchura Estate Ltd.'s case,

2. Edward Keventer (Successor) (P.).Ltd.'s case, and

3. Orient Prospecting Co.'s case.

In CIT v. Behari Lal Ramchandra [1937] 5 ITR 417 (Oudh.) it was held that there is no limitation for raising additional grounds. The same view has been expressed by the Supreme Court in S.S. Gadgil v. Lal & Co. [1964] 53 ITR 231 and in Kamala Mills Ltd.'s case. In respect of questions of fact raised, which cannot be decided without taking further evidence, the decisions are of both types depending upon the facts of each case. If it is a mixed question of fact and law necessitating remand to ITO, the position is the same although in the case of Hukumchand Mills Ltd. the Supreme Court held that the additional ground was admissible. However, the P & H, Calcutta and Andhra Pradesh High Courts have held that mixed questions of law requiring facts cannot be admitted as additional grounds. So far as alternative grounds are concerned, which require facts, the decisions of Bombay, Gujarat and Karnataka High Courts are to the effect that such additional ground should not be allowed. Additional grounds raising a question of status have also been held to be not admissible. On this point, there are decisions of the Calcutta and Madras High Courts as also of the Supreme Court in Manjidana's case. There are only two decisions of the Karnataka High Court on the question of admissibility of additional ground relating to procedural matters, in both of which it has been held that such additional grounds should not be allowed. They pertain to service of notice requiring investigation into facts. There are no decisions of other High Courts. If the additional ground relates to a new and inconsistent point hinting at a new source of income, such additional grounds have been held by Bombay, Calcutta, Delhi and Madras High Courts to be not allowable. This is easily understandable in view of the ratio of the decisions of the Supreme Court in the cases of Shapoorji Pallonji Mistry and Rai Bahadur Hardutroy Motilal Chamaria that is such cases fall outside the scope of the assessment order. However, all these cases proceed on their own facts and serve as guidelines to inform the mind of the Appellate Tribunal before exercising its judicial discretion in the matter of admitting or refusing additional grounds.

22. The learned D.R. had referred to a number of decisions of Madras High Court in STC. Those decisions were all under Tamil Nadu General Sales Tax Act, 1959. In Easun Engg. Co. Ltd.'s case it was held that so long as the assessee had not disputed the turnover in the appeal before the AAC, he could not straightaway file an appeal before the Tribunal in respect of that turnover. To the same effect was the decision in State of Madras v. Spencer & Co. Ltd. [1974] 34 STC 249 (Mad.) and Doveton Cafe's case. However, in Dy. Commissioner v. G. Govindaraju Chettiar [1980] 46 STC 341 (Mad.) where also the case was under Tamil Nadu. General Sales Tax Act, 1959, it was held by Ram Prasada Rao, CJ. acting as Third Judge on a difference of opinion between two Judges, that the powers of the Sales Tax Appellate Tribunal are not of the same amplitude as that conferred on the Appellate Tribunal functioning under the Indian Income-tax Act. Having regard to these observations, therefore, the decisions in STC relied upon on behalf of the Department would not assist it.

23. In decided cases, the expressions, argument, aspect of or approach, claim, contention, issue, item, plea, point, question, and submission have been used as synonymous to a ground and not necessarily to an existing ground. However, there have been some cases where the admissibility of an aspect of an existing ground was considered and accepted, although those decisions cannot be taken as authorities for the extreme proposition sought to be canvassed on behalf of the Department. Thus in Madhu Jayanti (P.) Ltd. v. CIT [1985] 154 ITR 277 (Cal.) and CIT v. Govardhandas Jerambhai [1985] 154 ITR 288, the Calcutta High Court allowed the raising of further claims to the existing claims u/s 35B. In the case of Arundhati Balkrishna v. CIT [1982] 138 ITR 245 (Guj.) a plea pertaining to the ascertainment of the date of transfer of non-agricultural land was allowed to be raised. In Cellulose Products of India Ltd.'s case , which we would be discussing in detail later, the aspect relating to the deduction of debts and liabilities while computing the capital for purposes of sec. 80J relief was allowed to be raised. Lastly in N.P. Saraswathi Ammal v. CIT [1982] 138 ITR 19 (Mad.), another aspect supporting the assessment of the assessee in AOP status was allowed to be raised by the Department.

23.1 In CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705 (Mad.), it was held that it would not be in accord with the scheme of the Act to impose restrictions on the ambit and power of the Tribunal by notions such as finality, subject matter of the appeal etc. Thus the argument of the learned D.R. to the contrary cannot be accepted.

24. We may now notice certain decisions which apparently seem to support the department, although when they are read in their proper context, it is not found to be so. In V. Ramaswamy Iyengar v. CIT [1960] 40 ITR 377 (Mad.), it was held that when the matter comes before the Appellate Tribunal by way of appeal, the same principle (i.e. the power not being confined to the subject matter of appeal taken by the assessee and its being wider) cannot apply. The High Court held that the jurisdiction of the Appellate Tribunal, should, in the absence of express words in the statute, be governed by the subject matter of the appeal. Firstly, we find that in subsequent cases, the Madras High Court had itself taken the other view which has been taken by the Supreme Court in the cases referred to above and by other High Courts, particularly in view of the fact that the subject matter of appeal before the Appellate Tribunal is not an immutable concept but it can be expanded or enlarged with the leave of the Appellate Tribunal under Rule 11. This decision, therefore, does not come in the way of the assessee.

25. The next decision is of Gujarat High Court in CIT v. Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254, wherein it was held that where, in appeal to the AAC by an assessee against an order of assessment, the assessee has not questioned the decision of the officer on a point decided, and the AAC has not in his order considered that point, and the Tribunal held that the assessee cannot be permitted to raise that question in an appeal to it against the order of the AAC, the High Court held that the discretion was rightly exercised by the Appellate Tribunal, under Rule 11 against the assessee because the admission and conduct had not been explained by the assessee. This decision thus proceeded on its own facts, even then the decision of the Tribunal was upheld because of latches on the part of the assessee to explain.

26. The next decision is of the Supreme Court in Gurjargravures (P.) Ltd.'s case. This decision has often been misquoted or misunderstood. However, as a preliminary observation, we may point out that even in the case of National Thermal Power Corpn.'s case , the Special Bench observed in para 16 at page 114 that "it will be too much to read that that would also be so in the case of a fresh ground taken before the Tribunal". Therefore, the Special Bench was not relying upon the decision of the Supreme Court in the case of Gurjargravures (P.) Ltd. In this case, the power of the AAC (and not of the Tribunal) to admit a new claim was involved. What had happened in that case was that before the AAC, the assessee sought to raise a claim regarding relief u/s 84 (which involved mixed question of fact and law) even though no such claim had been made before the ITO nor was there any material on the record in support thereof. The AAC refused to permit the assessee to raise such a ground. In appeal, the Appellate Tribunal not only held that the assessee could raise such a new claim, but it also directed the ITO to allow that claim merely for the reason that a similar claim had been allowed in subsequent years without seeing whether the conditions prescribed u/s 84 were fulfilled by the assessee or not. The Gujarat High Court upheld the view taken by the Appellate Tribunal. However, in appeal, the Supreme Court reversed the decision of the High Court and held that the Tribunal was not competent to hold that the AAC should have entertained the question of relief u/s 84 or to direct the ITO to allow it. This decision, therefore, took exception not only to the reception of a new claim but also to allowing it without, investigation whether the conditions prescribed u/s 84 were fulfilled in the assessment year in question merely on the basis that such a claim had been allowed in subsequent years. The ratio of this decision, therefore, needs to be carefully applied with reference to facts. It is also relevant to notice that the decision of the Supreme Court in the case of Gurjargravures (P.) Ltd. does not refer to the earlier decisions of the Supreme Court where in categoric terms, it had been held that the Tribunal has the power to admit all questions whether of law or fact which relate to the assessment of the assessee. Those earlier decisions were by three Judges whereas the decision in the case of Gurjargravures (P.) Ltd. was by two Judges. It has already been held by the Delhi High Court in Yogiraj Charity Trust's case that in case of two judgments of the Supreme Court, the judgment of a larger Bench has to prevail over the other judgments. This is obviously based on the Supreme Court's own decision in K.S. Subramanian's case where it was held that it was the duty of the High Court to follow opinions expressed by larger Benches of the Supreme Court in preference to those expressed by the smaller Benches and that that is the practice followed by the Supreme Court itself. The Supreme Court further observed that that practice had now crystallised into a Rule of law declared by the Supreme Court. In any case, we are inclined to the view that the decision of the Supreme Court in the case of Gurjargravures (P.) Ltd. dealt with a different situation altogether and did not dissent from its earlier decisions referred to and therefore has to be read as confined to its own facts and, therefore, no contradiction can be read or inferred between this decision and the earlier decisions of the Supreme Court. It is also very pertinent to note from the decision that the Supreme Court found that in the statement of case drawn by the Tribunal, it never mentioned that "there was any material on record to sustain the claim for exemption which was made for the first time before the AAC " meaning thereby that if there was material before the AAC, the discretion exercised by the Tribunal to consider the claim, would have been proper and sustainable. In fact in the case of Kooka Sidhwa & Co. v. CIT [1964] 54 ITR 54 (Cal.) it was held that where there are more than one decisions of the Supreme Court on the same point and in a later decision, attention has not been drawn to an earlier decision or the earlier decision is noted but is neither expressly overruled nor explained or followed, it would be the duty of the High Court to attempt to reconcile and harmonise all the decisions and that it is not proper to ignore or by-pass or not to take notice of all the Supreme Court decisions relevant on the point Therefore, the decision in the case of Gurjargravures (P.) Ltd. does not come in the way of the assessee. But in the way we have understood it, it even supports the case of the assessee, provided there is material in support of the stand of the assessee.

27. Next we come to the decision of Delhi High Court in Edward Keventer (Successors) (P.) Ltd.'s case. This decision follows the decision of the Bombay High Court in the case of New India Life Assurance Co. Ltd. and of the Madras High Court in Panchura Estate Ltd. and is actually in favour of the assessee and not in favour of the Department. It lays down that the subject matter of an appeal should be understood not in a narrow and unrealistic manner but should be so comprehended as to encompass the entire controversy between the parties which is sought to be adjudicated upon by the Tribunal. In that case, the AAC held certain transactions to be genuine though collusive and computed profit and allowed consequential interest on borrowing. In appeal, to the Tribunal, originally challenge was made only to the profit assessed. The Department contended that if the transaction was held not to be genuine, consequential interest ought also not to be allowed. The Appellate Tribunal did not permit the department to raise such a contention. The Delhi High Court held that the Tribunal ought to have entertained the contention raised on the disallowance of interest. The High Court held that normally additional grounds can be urged only in relation to the subject matter already appealed against but that where an appellant seeks to bring in new items which had nothing to do with the subject matter of an appeal as originally filed, it will be as if the appeal in this regard has been filed belatedly and the Tribunal can entertain that only after considering whether there are grounds to excuse the delay in filing the appeal. The High Court thereafter observed that where permission is granted by the Tribunal, the scope of the original appeal will stand expanded or enlarged so as to cover the matters raised in the additional grounds. It also observed that the subject matter of the appeal is constituted by the original grounds of appeal and such additional grounds as may be raised by leave of the Tribunal. The Gujarat High Court followed this decision in Orient Prospecting Co.'s case. Thus, this decision is entirely in favour of the assessee in regard to the raisability of an additional ground for the first time before the Appellate Tribunal. No doubt in the case of National Thermal Power Corpn. the Special Bench had made the following observations in para 13 at page 110 :

"Similar view has been indirectly taken by the Delhi High Court in the case of Edward Keventer (Successors) (P.) Ltd."

This observation does not seem to be correct in as much as directly or indirectly, this decision of the Delhi High Court was not in favour of the Department.

28. We next come to the subsequent decision of the Delhi High Court in Anand Prasad's case, the case on which strongest reliance was placed by the learned D.R. as also by the Special Bench in NTPC. In this case, what happened was that the ITO had held that the sale of plots constituted a business and, therefore, he assessed the profits therefrom as business income. The AAC held that the sale of plots did not constitute a business and set aside the assessment in respect of profits from the sale of land. The ITO at that stage did not raise any alternative plea that the capital gains arose from the sale of plots of land which had to be taxed, Before the Tribunal in further appeal, it was contended for the Revenue that profits were taxable if not as business income, then as capital gains. The Tribunal refused to permit the department to raise this alternative contention. The High Court held that the alternative contention involved some other amount chargeable to income-tax as capital gains and was a completely different point and that the Tribunal was right in holding that such point would not and should not be permitted to be raised before it. The relevant observations appear at pages 392 and 394 of the report. This decision also, to our mind, does not assist the department. In terms of sec. 14 of Income-tax Act, 1961, "income from business" and "capital gains" are different sources of income or different heads of income. The High Court, therefore, referred to the decision of the Supreme Court in Shapoorji Pallonji Mistry's case and of R.B. Hardutroy Motilal Chamaria's case , which prohibit a new source of income from being taken into consideration by the AAC. Therefore, the ground raised by the Department actually fell outside the assessment order and, therefore, this decision is in accord with the uniform principle emerging from the foregoing discussion. Another point which the Hon'ble High Court noticed in this case was that the calculation of capital gains as well as the question whether any capital gains were leviable involved a number of additional facts (vide page 391). In fact, the following observation made by the Delhi High Court in this case and the reference to the decisions of the Supreme Court examined therein assist the assessee :

"This is also the reason that new points are not allowed to be urged in any Appellate Court except in exceptional circumstances" (page 392).

Therefore, this decision of the Hon'ble Delhi High Court also does not assist the Department. The Special Bench of the Tribunal in National Thermal Power Corpn.'s case does not seem right in construing this decision as if it laid down the rule that the Tribunal cannot permit an assessee to raise grounds not taken up before the AAC. This is again a decision confined to its own facts, not laying down a rule of universal or absolute application.

29. We now come to the decision of the Gujarat High Court in Cellulose Products of India Ltd.'s case. In this case, it was held that the scope of appeal before the Appellate Tribunal is restricted to the subject matter of appeal before AAC and a new ground based on different aspect of or approach to the same claim or relief could be raised before the Tribunal. It was held that it was not necessary that question should have been raised before AAC so long as it pertains to or falls within the contours of the subject matter of appeal before AAC but that if the matter is not made the subject matter of appeal to AAC, the Tribunal can not permit it to be raised, meaning thereby that it falls outside the scope of assessment. However, the facts of that case were that the assessee's case was that capital must be computed for the purposes of relief u/s 80J in relation to the profit of the new industrial undertaking by allocating capital not on the basis of the actual capital employed by the new unit vis-a-vis that employed by the older unit but on the basis of the proportionate value of fixed assets of the two units and the High Court held that perhaps the assessee would get the relief in respect of computation of capital even on another approach to such computation such as on the premise that debts and liabilities should not be deducted. The High Court, therefore, held that the subject matter would remain the same notwithstanding allowing such a new ground based on a different approach to be raised. Firstly, therefore, this decision depended on its own facts. Secondly, at page 513 of the report, the following observations made by the Hon'ble High Court show that this decision cannot be said to be related to jurisdiction of the Tribunal, but to the exercise of its discretion :

"Indeed, it may be possible that he seeks and obtains relief sought by him in the appeal by a different approach, an approach not reflected in his appeal memorandum. Whether, he should be allowed to make that approach or not, is not a matter of jurisdiction. It is a matter of discretion which should be understood as distinct from the jurisdiction. It is open, in the exercise of discretion, to an appellate authority vested with powers of accepting or rejecting fresh ground to entertain a fresh ground or not. Of course, he has to act judicially, but this discretion is distinct from the jurisdiction with which alone we are concerned here."

Again at the end of page 513 the Gujarat High Court specifically held that the matter of allowing a plea not raised in the appeal is discretionary :

"When such a plea is not before the Appellate Tribunal, when the appeal is filed, but is raised later, the question whether it should be allowed or not is a matter of discretion as mentioned. The fact that the assessee had failed to make the approach which he makes before the Tribunal before the first appellate authority should not in any way preclude him from making that approach."

The High Court had referred to the decisions of the Supreme Court in Hukumchand Mills Ltd.'s case (which it applied) and to the decision in Mahalakshmi Textile Mills Ltd.'s case and Gurjargravures (P.) Ltd.'s case. The High Court had also agreed with the decision of the Delhi High Court in Anand Prasad's case. Even if for the sake of argument, it were to be taken that this decision of the Gujarat High Court helps the Department, it cannot come in the way of admission of additional grounds of appeal in another case on the basis of the decision of the Supreme Court and other High Courts referred to above. The learned D.R. is not right in saying that since this is a Full Bench decision and it follows the decision of the Delhi High Court in the case of Anand Prasad , it should be treated as binding on the Special Bench. We have already seen above that decision of the jurisdictional High Court of Delhi in the case of Anand Prasad cannot be said to assist the Department.

30. Lastly we come to the decision of the Special Bench in the case of National Thermal Power Corpn.'s case. In that case, the facts were that prior to the commencement of its business, the assessee-company had put some spare funds in short-term deposits and had earned interest thereon. Originally, it had offered such interest for assessment and on appeal before the Commissioner (Appeals), though the assessee challenged various additions and disallowances, it did not challenge the inclusion of the impugned amount of interest. Objection to the inclusion of the impugned amount of Interest was not taken before the Tribunal in the grounds of appeal originally taken. The question which fell for determination before the Special Bench was whether the assessee could raise an additional ground in this regard before the Tribunal for the first time, challenging inclusion of the impugned amount of interest. The Special Bench noticed that the Delhi High Court in the case of Bharat General Reinsurance Co. Ltd. had held that the fact that the assessee had wrongly included some income in its return for a particular year by itself could not confer jurisdiction on the Department to tax that income in that year if legally such an income did not pertain to that year and that there was no estoppel against the assessee to challenge the validity of taxing an income which it had itself wrongly included in its return. The Special Bench had also noticed that the case of the assessee was that just as the assessee can resile before the ITO from the position it had wrongly taken while filing the return, it could do so before the AAC before whom the entire assessment was open.

31. Now we would deal with the observations which were made by the Special Bench. The first observation was that the decision had to depend primarily upon the ratio of the three decisions of the Supreme Court namely in Mahalakshmi Textile Mills Ltd.'s case, S. Nelliappan's case and Hukumchand Mills Ltd.'s case in the light of the decision of the Madras High Court in Indian Express (Madurai) (P.) Ltd.'s case and the P & H High Court decision in the case of Atlas Cycle Industries on one side and of the Gujarat High Court in the case of Cellulose Products, of India Ltd., Bombay High Court decision in the case of Ugar Sugar Works v. CIT [1983] 141 ITR 326 and of the Delhi High Court in the case of Edward Keventer (Successors) (P.) Ltd. and Anand Prasad on the other., We have already seen that the decisions of the Gujarat,. Bombay and Delhi High Courts referred to above do not whittle down or efface the clear propositions, laid down by the Supreme Court, the Madras High Court and the Punjab High Court in the above decisions. The second observation made by the Special Bench was that similar view had been indirectly taken by the Delhi High Court in the case of Edward Keventer (Successors) (P.) Ltd. We have already seen that this observation is also not borne out by the decision of the Delhi High Court which is really in favour of the assessee. The third observation was that Delhi High Court decision was binding on the Bench and, therefore, following the same, new grounds taken by the assessee for the first time before the Tribunal could not be entertained. Here also, even after following the decision of the Delhi High Court, the additional grounds raised before us in the present appeals will have to be admitted as we shall presently see. The fourth observation made by the Special Bench was that the benefit of the Full Bench decision of the Gujarat High Court was not available to the Madras High Court and that moreover that is the view taken by the Delhi High Court in Anand Prasad's case. From what has been stated above, this observation would also not hold. The fifth observation made was that while the outer limit of the subject matter of appeal before the first appellate authority would be the subject matter of assessment, the outer limit of the subject matter of appeal before the Tribunal would be the issues raised before or actually decided by the First Appellate Authority, the outer limit getting further restricted in the case of an appeal by the grounds decided against the appellant by the First Appellate Authority and in the case of respondent to inter-linked issues having a bearing on the subject matter of appeal. We have already noticed that these observations go against the decisions of the Supreme Court and High Courts referred 'to above because the subject matter of appeal or the appeal can be expanded or enlarged by leave of the Appellate Tribunal under Rule 11, in exercise of its judicial discretion. In para 17 of that report, the Special Bench had also made the following observations

"Apart from the fact that the decision on the additional grounds will require further investigation, we do not finally express ourselves on that aspect, in view of our decision against the admission on the basic question."

We will advert to this aspect a little later in summing up. However, in terms of the decision of the Supreme Court in the case of Distributors (Baroda) (P.) Ltd. , the doctrine of stare decisis cannot deter this Special Bench from taking a different view because the decision of the earlier Special Bench has been found to have proceeded upon a mistaken assumption. as to the real purport of the decisions which were treated as binding on it.

32. To sum up, therefore, it is clear that :

(a) the order of the AAC must be considered to be a substituted assessment order modifying the assessment. [Indian Express (Madurai) (P.) Ltd.'s case.]

(b) The appeal to the Appellate Tribunal must be considered to be an appeal against the entire assessment itself as modified by the AAC. [Indian Express (Madurai) (P.) Ltd.'s case.]

(c) The appellant aggrieved by any part of the assessment as modified by the AAC can take grounds relating to any of the points arising therefrom, whether of law or fact or of both.

[Mahalakshmi Textile Mills Ltd.'s case.]

(d) The point which can be agitated in the appeal before the Appellate Tribunal, by an appellant may also include points which impinge on the computation of income (as shown by the assessee himself, by mistake or otherwise) and not agitated either before the ITO or the AAC.

(e) Any grounds which can be taken originally before the Tribunal can also be taken, with the permission of the Tribunal, as additional grounds before hearing the appeal. However, leave is not to be granted to the appellant on mere asking but particular reasons or justification has to be established, and if the Tribunal considers that the reasons given for not urging the points at an earlier stage are not germane or are unreasonable, the new grounds can be refused to be entertained.

(f )The power of the Appellate Tribunal to admit additional grounds is not a matter of jurisdiction but of the exercise of its judicial discretion. It is a part of its inherent power to be exercised in the interests of substantial justice. Moti Ram's case, Chittoori Subanna's case, H.H. Maharaja Martand Singh Ju Deo's case and Manjidana's case.

(g) Whenever additional grounds are permitted to be raised the party who may be affected thereby is to be given a sufficient opportunity of being heard on that ground by the Tribunal, before resting its decision thereon [R. 11 of the Income-tax Appellate Tribunal Rules, 1963.]

(h) Notwithstanding the fact whether or not any grounds are set forth by either party in the memorandum of appeal or taken by leave of the Tribunal, the Tribunal can suo motu take any ground for consideration and in fact it is its duty to do so whenever it deems it necessary so to do in order to bring the assessment in conformity with law. This is so because as per the settled law, the Tribunal must decide the appeal in the light of the law as it obtains on the date of hearing of appeal (See latest Supreme Court decision on Benami Transactions in Mithilesh Kumari v. Prem Behari Khare [1989] 177 ITR 97) and that being the legal position, the Tribunal, while giving effect to a Supreme Court decision received after assessment, or of a jurisdictional High Court's decision received after assessment, or retrospective amendment brought into the Act, has to admit additional grounds, which it can do only by invoking its inherent powers. It is, therefore, firmly established that the powers u/s 254 of the Income-tax Act. 1961 read with Rule 11 of the Income-tax Appellate Tribunal Rules, 1963 being very wide, there is no authority in support of the proposition sought to be put forward on behalf of the Department that only such a ground could be raised before the Appellate Tribunal for the first time which represents a new or additional approach, argument, aspect, claim, contention, issue, item, plea, points, question, or submission which is connected with the grounds on the subject matter of the appeal already before the Tribunal.

33. Coming to the justification for admitting the additional grounds of appeal in these appeals, we find that the grounds raised involve mixed question of fact and law which go to the root of the assessment. It cannot be said that the assessee could not be aggrieved before the Appellate Tribunal in respect of them. Substantial details and materials in regard to them are already on the record. The assessee is also an exporter of engineering goods as in the case of Gedore Tools India (P.) Ltd. The reasons for not urging these grounds at an earlier stage are found to be germane and reasonable. The assessee can also, not be said to be guilty of any latches. We do not agree with the sub-mission of the learned Departmental Representative that at best only the admissibility of the ground relating to the CCS could justify a second look. This is not a case of abandonment of claim and the circumstances attending the tender of the receipt originally as income have been explained. Thus on a consideration of all the facts and circumstances of the case, in the light of the foregoing discussion, we admit the additional grounds. The appeals will now be posted for hearing on merits on original as well as the additional grounds admitted.

34. Ordered accordingly.

 

DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that VATinfoline Multimedia is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.