Facts

The Appellant before the Hon’ble Supreme Court is a Government Corporation engaged in jute industry. While filing the return for the assessment year 1974-75, the Appellant had not claimed any deduction on its liability to pay purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as the Appellant was under the bonafide belief that it is not liable to pay purchase tax. However,   the AO while passing the assessment order assessed the purchase tax. The Appellant being aggrieved by the assessment order preferred an appeal before  the AAC. During the pendency of appeal proceedings, the Appellant raised an additional ground claiming deduction of certain amount on account of liability      of purchase tax. The AAC  permitted the assessee to raise the additional ground  and after hearing the AO, accepted the assessee’s claim and allowed the claim of  the assessee. The department being aggrieved filed an appeal before the Appellate Tribunal. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief to the assessee on a ground which had not  been raised before the AO. The Tribunal further rejected the assessee’s application for reference under section 256(1). On an application under section 256(2), the High Court also refused to call for a statement of the case.

The Appellant being aggrieved by the decision of the High Court filed present SLP before the Hon’ble Supreme Court.

Issue

Question that arose for the consideration of the Hon’ble Supreme Court was whether additional grounds can be raised before the appellate Authority in respect    of a claim not made during the course of assessment proceedings.

View

There is no provision in the Act which put restrictions on the right of the assessee from raising an additional ground in appeal. Further, there is no provision in the Act placing restriction on the power of the appellate authority      in entertaining an additional ground of appeal. In the absence of any statutory provision, the general principle relating to the amplitude of appellate authority’s powerbeing co-terminus with that of AO should normally be applicable. If the

tax liability of the assessee is admitted and if the AO is afforded opportunity of hearing by the appellate authority in allowing the assessee’s claim for deduction   on the settled view of law, there appears to be no good reason to curtail the powers of the appellateauthority under section 251(1)(a) of the Act.

Held

Reversing the order of the High Court, Hon’ble Supreme Court held that there may be several factors justifying the raising of additional ground in appeal, and each case has to be considered on its own facts. If the AAC  is satisfied, he would  be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the AAC  should exercise his discretion in accordance with law and reason. He must  be satisfied that the ground raised was bonafide and that the same could not have been raised earlier for good reasons. The satisfaction of the AAC  depends upon   the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose. (AY.  1974-75) (CA No. 1935 of 1981    dt. 4-9-1990)

Editorial : CIT v. Kanpur Coal Syndicate [1964] 53  ITR 225 (SC) [relied  and followed] wherein it has been held that the scope of powers of CIT(A) is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do.

“I have always held  that  social  justice, even to the least the lowliest, is impossible of attainment by force.”

– Mahatma Gandhi