1961 (10) TMI 78 - HC - Income Tax

High Court affirms Tribunal's decision on new grounds, rejects direction under section 34(3)

Commissioner of Income-Tax Versus Hazarimal Nagji and Co.

The High Court upheld the Tribunal's decision to allow the assessee to raise a new ground at the Tribunal stage, emphasizing the respondent's right to ... - Issues Involved:1. Whether the Tribunal exercised its discretion judicially in permitting the assessee respondent to raise a fresh ground at the Tribunal stage.2. Whether the refusal by the Tribunal to give a direction under the provisions of section 34(3) of the Act was valid.Issue-wise Detailed Analysis:1. Whether the Tribunal exercised its discretion judicially in permitting the assessee respondent to raise a fresh ground at the Tribunal stage:The Tribunal allowed the assessee to raise a new point at the Tribunal stage, which was not raised before the Income-tax Officer or the Appellate Assistant Commissioner. The point was that since the credits arose in the financial year 1947-48 and were considered income from an undisclosed source, the relevant previous year for that income was the financial year 1947-48, and it could only be taxed in the assessment year 1948-49, not in 1949-50. The Tribunal accepted this point in favor of the assessee, relying on the decision in Commissioner of Income-tax v. P. Darolia & Sons.The High Court reframed the first question to clarify whether the Tribunal erred in law by permitting the assessee to raise this fresh ground. The court analyzed Section 33(4) of the Indian Income-tax Act and the relevant rules, comparing the Tribunal's powers to those of an appellate court under the Civil Procedure Code. The court concluded that a respondent in an appeal is entitled to support the decree in his favor on any grounds available to him, even if not raised before the lower authorities, provided the facts necessary to sustain the new ground are already on record and the contention is a pure question of law.The court rejected the argument that the Tribunal lacked jurisdiction to permit the respondent to raise a new ground. It emphasized that the Tribunal's powers are similar to those of an appellate court, and a respondent can support the decree in his favor on fresh grounds, subject to certain limitations. The court distinguished the present case from other cases cited by the revenue, noting that the new ground raised by the assessee did not adversely affect the appellant's position.Therefore, the High Court answered the first question in the negative, concluding that the Tribunal did not err in permitting the assessee to raise the fresh ground.2. Whether the refusal by the Tribunal to give a direction under the provisions of section 34(3) of the Act was valid:The department requested the Tribunal to give a direction under section 34(3) to bring the sum to tax in the assessment year 1948-49. The Tribunal refused, citing that no useful purpose would be served by such a direction in light of the decision in Hiralal Amritlal Shah v. K.C. Thomas, I Income-tax Officer, M-Ward, Bombay.The High Court considered whether the refusal was valid, focusing on the legality rather than the correctness of the refusal. It noted that the Tribunal's decision was influenced by the binding precedent of Hiralal Amritlal Shah's case. The court acknowledged that it was not obligatory for the Tribunal to give the direction requested by the department and that the Tribunal's refusal was justified based on the prevailing legal interpretation.The court also addressed the revenue's argument that the Tribunal's reason for refusal was erroneous, given the pending appeal before the Supreme Court challenging the decision in Hiralal Amritlal Shah's case. However, the High Court maintained that the Tribunal's decision was valid as it adhered to the binding precedent at the time.Consequently, the High Court answered the second question in the affirmative, affirming the validity of the Tribunal's refusal to give a direction under section 34(3).Conclusion:The High Court concluded that the Tribunal acted within its jurisdiction in permitting the assessee to raise a fresh ground and that the refusal to give a direction under section 34(3) was valid. The department was directed to pay the costs of the assessee.