1981 (9) TMI 16 - HC - Income Tax

Tribunal's Jurisdiction Ruling on Grounds

The Tribunal was justified in disallowing the assessee from raising an additional ground related to the admissibility of development rebate on electric ... Appeals Issues Involved:1. Jurisdiction of the Tribunal regarding appeals not raised before the Appellate Assistant Commissioner (AAC).Detailed Analysis:Jurisdiction of the Tribunal:The primary issue in this case is whether the Tribunal was justified in disallowing the assessee from raising an additional ground related to the admissibility of the development rebate on electric motors, which was neither raised before nor considered by the AAC, although it involved a point of law.Facts of the Case:The assessee, a public limited company, claimed a development rebate on various items including electric motors in its return for the assessment year 1959-60. The Income Tax Officer (ITO) rejected the claim for development rebate on electric motors, relying on a previous court decision. The assessee did not challenge this finding before the AAC, although it did challenge other disallowances. Consequently, the AAC did not adjudicate on the ITO's finding regarding the electric motors. Later, the assessee sought to raise this issue before the Tribunal, which disallowed it based on a Gujarat High Court decision.Legal Provisions:- Section 250 and 251 of the I.T. Act, 1961: These sections outline the procedure and powers of the AAC, allowing the AAC to consider any matter arising out of the proceedings, even if not raised in the appeal.- Section 254 of the I.T. Act, 1961: This section provides that the Tribunal can pass such orders on the appeal as it thinks fit, restricted to the subject-matter of the appeal.- Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963: This rule allows the Tribunal to grant leave to raise new grounds not set forth in the memorandum of appeal.Tribunal's Jurisdiction:The Tribunal's jurisdiction is limited to the subject-matter of the appeal before it. The term 'thereon' in Section 254(1) restricts the Tribunal's jurisdiction to the subject-matter of the appeal. The Supreme Court in Hukumchand Mills Ltd. v. CIT held that the Tribunal's powers are vast but must be exercised within the jurisdictional limits, which do not include enhancement powers.Case Analysis:- Assessee's Argument: The counsel for the assessee argued that since the issue involved a point of law, the Tribunal had the power to allow the new ground.- Revenue's Argument: The Revenue contended that the Tribunal had no jurisdiction to entertain the new ground as it was not raised before the AAC, thereby accepting the ITO's finding.Court's Decision:The court analyzed the provisions of the I.T. Act and previous judgments, concluding that the Tribunal's jurisdiction is restricted to the subject-matter of the appeal. Since the assessee did not challenge the ITO's finding before the AAC, it accepted the finding, and thus, it could not be a subject-matter of appeal before the Tribunal. The Tribunal lacked jurisdiction to adjudicate on the new ground.Supporting Judgments:- CIT v. Karamchand Premchand P. Ltd.: The Gujarat High Court held that if a point was not raised before the AAC, it could not be raised before the Tribunal.- CIT v. Steel Cast Corporation: Reaffirmed that the Tribunal's jurisdiction is restricted to the subject-matter of the appeal.- Hukumchand & Mannalal Co. v. CIT: The Madhya Pradesh High Court supported the view that the Tribunal cannot entertain issues not raised before the AAC.Contrasting Judgments:- CIT v. Mahalakshmi Textile Mills Ltd.: The Supreme Court allowed raising new grounds if they pertain to the same subject-matter.- J. S. Parkar v. V.B. Palekar: The Bombay High Court held that the Tribunal must entertain pure questions of law raised at any stage.- Vijay Kumar Jain v. CIT: The Punjab and Haryana High Court allowed raising jurisdictional issues at any stage.Conclusion:The court concluded that the Tribunal was justified in disallowing the additional ground as it was not within its jurisdiction. The assessee, having not challenged the ITO's finding before the AAC, could not raise it before the Tribunal. The question referred to the court was answered in the affirmative, against the assessee, with costs of the reference to be paid by the assessee.