1995-VIL-35-SC-DT

Equivalent Citation: [1998] 231 ITR 507 (SC)

Supreme Court of India

Date: 04.04.1995

BHAVANA CHEMICALS LTD.

Vs

COMMISSIONER OF INCOME-TAX

BENCH

B. P. JEEVAN REDDY., G. T. NANAVATI. and SUHAS C. SEN.

JUDGMENT

These appeals are preferred against an order of the Gujarat High Court declining to direct the Tribunal to state the questions of law as suggested by the assessee. The questions of law suggested by the assessee are :

"1. Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 254; the Tribunal was competent and justified in entertaining and deciding the preliminary point raised by the Revenue.

2. Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 254, the Tribunal was competent and justified in setting aside the assessment and restoring the matter to the Income-tax Officer in the manner in which it has done."

Against the order of assessment for the assessment years 1969-70 and 1970-71, the assessee filed an appeal claiming certain deductions which were disallowed by the Income-tax Officer. The Appellate Assistant Commissioner allowed those deductions. The order of the Appellate Assistant Commissioner was challenged by the Revenue by way of an appeal before the Tribunal. When the matter came up before the Tribunal for final hearing, the Revenue raised, what is termed, a "preliminary point" to the effect that the Income-tax Officer while computing the income of the assessee-company had erroneously brought to tax income from agriculture and had also correspondingly allowed certain expenses in connection with the agricultural operations. It was argued that the assessee had earned income from agriculture which was not subject to tax and that by allowing expenses which were connected with the agricultural activities, the Income-tax Officer committed an error in making the assessment. The Tribunal accepted the said preliminary objection, allowed the appeal and remanded the matter to the Income-tax Officer for making a fresh assessment. The Tribunal observed :

"Allowance or otherwise of the claim for various expenses made before us, in our opinion, would depend entirely on the question whether the impugned expenses are closely related to the agricultural activities of the assessee or not. We also feel that it will be unfair to deal only with the aspect regarding agricultural expenses without taking into consideration the fact that the assessee has also large scale income from agriculture. It is, therefore, necessary, in our opinion that the income relating to the agricultural activities of the assessee-company must be segregated and only non-agricultural income should be brought to tax. Since this aspect of the matter has been overlooked by the Income-tax Officer, we think that in the interest of justice, we must set aside these assessments and restore the matter to the file of the Income-tax Officer so that he may remake the assessments in accordance with law, in the light of our above observation."

The assessee filed an application under section 256(1) asking the Tribunal to refer the above questions which, on being declined, it went to the High Court which also declined the assessee's request.

Mr. P. H. Parekh, learned counsel for the assessee, contended that the point which has been accepted by the Tribunal and the matter remanded was not open to the Revenue in the said appeal and should not have been allowed to be raised. He submitted that the said ground was not even raised in the grounds of appeal before the Tribunal and was raised for the first time at the time of hearing of the appeal. Learned counsel submitted that the order of assessment may well result in enhancement of the tax payable by the assessee and that such a course is not open to the Tribunal, though it can be done by the Appellate Assistant Commissioner. Learned counsel submitted that there is a sharp difference of opinion among the High Courts on the powers of the Tribunal to make orders which have the effect of enhancing the assessable income of the assessee. These submissions are met by Mr. J. Ramamurthy, learned counsel for the Revenue, relying principally upon the decision of this court in CIT v. Assam Travels Shipping Service [1993] 199 ITR 1 . Mr. Ramamurthy relies upon rule 11 of the Income-tax (Appellate Tribunal) Rules which empowers the Tribunal not only to permit a party to raise fresh grounds of appeals but also to raise such questions suo motu if it thinks appropriate in the circumstances of the case.

We are, however, not inclined to go into this question at this stage. The matter has been remanded. Let the Income-tax Officer make an assessment. If the assessee feels aggrieved with the assessment, he can adopt the remedies provided by law wherein he can raise, inter alia, the present questions as well. In this view of the matter, we do not think it necessary to examine the question of power of Tribunal in this matter.

The appeals are accordingly dismissed with the aforesaid observations. No costs.

 

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