TaxTMI 
TaxTMI 
2005 (11) TMI 186
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....ring." 3. The assessee thereafter filed the following additional grounds of appeal common to all the assessment years under appeal:- "(i) That the action of initiating proceeding under section 10 on the alleged ground of escapement of interest chargeable to tax, is bad in law. (ii) That the Ld. Assessing Officer erred in having entertained this belief without holding that assessee is a Credit Institution falling within the ambit of section 2(5A) or 2(5B) of the Interest-tax Act, 1974. (iii) That the Ld. Assessing Officer further erred in having computed the chargeable interest without setting of the interest paid for earning of such interest received and thereby wrongly calculated chargeable interest at Rs. 1,17,13,969. (iv) That the order of the ld. Assessing Officer and the CIT(A) being bad for lack of jurisdiction, the same should be declared as bad in law and annulled." 4. We shall first take up the issue regarding admission of additional grounds of appeal, reproduced above, raised by the assessee. According to the learned counsel of the assessee, these additional grounds are legal issues and no new facts which are not on record, are in....
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.... the view that no additional ground can be taken, thus, the ratio of the decision come to the help of the revenue. 6. We have heard the rival submissions of the parties and we have perused the decisions on which reliance is placed from both the sides. The Tribunal, while dealing with the subject-matter of the appeal in exercise of its power, it may allow the party to take up a new ground of appeal. In other words, the Tribunal has power to permit the assessee to raise a new ground of appeal, not set forth in the Memorandum of Appeal, even without formal amendment of the grounds set forth in the Memo of Appeal provided that a new ground does not involve a further investigation into the facts. This power of Tribunal is spelt out from rule 11 of Income-tax (AT) Rules, 1963. Hon'ble Punjab & Haryana High Court has held in the case of Vijay Kumar Jain v. CIT [1975] 99 ITR 349 that the Tribunal may allow a party to press a ground which he does not press before the 1st Appellate Authority although he has taken and include in the grounds of the first appeal. The proposition of law on the issue of admission of additional or new grounds by 1st Appellate Authority was laid down by the ....
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....m. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal." 6.1 Thus, the settled legal position, which emerges from the aforesaid judicial pronouncements, is that the purpose of assessment proceeding is to tax/assess the taxable liability/income of the assessee correctly in accordance with law and if the assessee is entitled to certain relief, deduction or benefit, the assessee should not be denied or deprived of it, even if the claim pertaining to the same is made for the first time before the Tribunal during pendency of appeal before it. In the present case, the issues raised in additional grounds are the legal issues which goes to the root of th....
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....:- "(a) the Assessing Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return under section 7 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for any assessment year, chargeable interest for that year has escaped assessment or has been under assessed or has been made the subject of excessive relief under this Act, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has, in consequence of information in his possession, reason to believe that chargeable interest assessable for any assessment year has escaped assessment or has been under assessed or has been the subject of excessive relief under this Act." From the analysis of the above provisions, it is clear that it is prerequisite that the Assessing Officer should record the reasons to the effect that interest income has escaped assessment under Interest-tax Act, 1974. While recording the reasons the Assessing Officer must have reasons to believe on the basis of material available with him that income charg....
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....n that it has raised an issue which is purely legal issue and it is almost settled proposition that an opinion of audit party on any point of law can E not be regarded as "information" occurring in relevant section 10 of the Interest Tax Act, 1974. In the case of Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996, 997, Hon'ble Supreme Court has observed that- "... In every case, the ITO must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. The true evaluation of law in its bearing on the assessment must be made directly and solely by the ITO." Even for the sake of argument, it is taken that audit observation will form the basis of initiation of reassessment proceeding, in the present case, the audit party has simply observed that "under the Interest Tax Act, Int....
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....'credit institution' falling within the ambit of sections 2(5A) and 2(5B) of Interest-tax Act, 1974. 12.1 The Ld. Counsel submitted that section 4 of the Interest-tax Act is the charging section. Sub-section (2) of this section provides that there shall be charged on every credit institution/ finance company for every assessment year commencing on and from 1-4-1992, interest-tax in respect of its chargeable interest of the previous year at the rate of 3 per cent of such chargeable interest. The Ld. Counsel continued and submitted that it is clear that the only credit institutions arc liable to interest-tax on the chargeable interest earned during the previous year. The Ld. Counsel also submitted that in the assessment year 1992-93 no such proceeding was initiated. The Ld. Counsel further submitted that to attract Interest Tax Act it is to be determined whether the assessee is a credit institution or financial company. On perusal of the assessment order, it is amply clear that there is no such finding recorded, except merely the recording of alleged belief that the assessee-company earned interest income and there was escapement of chargeable interest on the said interest....
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....-4-1975, a tax (in this Act referred to as interest-tax) in respect of its chargeable interest of the previous year at the rate of seven per cent of such chargeable interest: Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or arising after 31-3-1983, shall be three and a half per cent of such chargeable interest. (2) Notwithstanding anything contained in sub-section (1) but subject to the other provisions of this Act, there shall be charged on every credit institution for every assessment year commencing on and from 1-4-1992, interest-tax in respect of its chargeable interest of the previous year at the rate of three per cent of such chargeable interest:" Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or arising after 31-3-1977, shall be two per cent of such chargeable interest. (3) Notwithstanding anything contained in sub-sections (1) and (2), no interest-tax shall be charged in respect of any chargeable interest accruing or arising after 31-3-2000." Now, it is clear from the provisions from charging section that interes....