1 TXA 67 2014 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 67 OF 2014 M/s. Siva Equipment Pvt. Ltd., D2-34, Sancoale Industrial Estate, Zuarinagar, Goa. Appellant Versus 1. Asst. Commissioner of Income Tax, Circle-2, Margao, Goa. 2. Union of India, Through Secretary (Revenue), Ministry of Finance, North Block, New Delhi 110001. Respondents Mr. Rohan Deshpande, Advocate with Adv. Palyekar Vinita Vishram for Appellant. Ms. Susan Linhares, Standing Counsel for Respondents. Coram:- M. S. SONAK & SMT. M. S. JAWALKAR, JJ. Date:- 5th February, 2020. Judgment (Per M. S. Sonak, J) : Heard Mr. Rohan Deshpande, who appears along with Ms. Vinita Palyekar for appellant and Ms. Susan Linhares, learned Standing Counsel for Respondents. 2 TXA 67 2014 2. This appeal was admitted on 25/11/2014 on following substantial questions of law: (1) Whether on facts and in circumstances of case and in law, ITAT is correct in holding that CIT(A) was not empowered to adjudicate o grounds raised before him by assessee (despite fact that said grounds were arising out of assessment and that decision on grounds was neither fruitless nor academic) and that appeal before CIT (A) was not maintainable? (2) Without prejudice to above, whether on facts and in circumstances of case and in law, ITAT is correct in holding that CIT (A) was not empowered to adjudicate on grounds raised before him by assessee, despite settle position in law that CIT (A) has powers to admit and adjudicate even fresh claims, and there is no requirement in law that claims should be made either in revised return or during he course of assessment proceedings? 3. aforesaid substantial questions of law arise for determination in context of return filed by appellant for assessment year 2009-2010 declaring total income of Nil. Assessing Officer, (AO) vide its order dated 12/12/2011 made under section 143(3) of Income Tax Act 1961 (the said Act) assessed he total income of appellant at Rs.70,80,040/- and imposed tax liability of Rs.27,62,035/-. 3 TXA 67 2014 4. appellant on 21/1/2012 filed application for rectification under section 154 in respect of aforesaid order dated 12/12/2011 by pointing out that amount of Rs.52,14,543/- of short term capital gain on sale of debts funds was inadvertently considered as business income in appellant's return instead of short term capital gain. appellant also pointed out that amount of Rs.5,90,093/- was earlier incorrectly added to business income in return as balancing charge on sale of factory building. 5. appellant's application under section 154 of said Act was, however, rejected by assessing officer on 29/3/2012 inter alia by observing that appellant having failed to file revised return within prescribed period of limitation or having failed to make relevant claims during course of assessment proceedings was not entitled to seek for any rectification under section 154 of said Act. As against order dated 29/3/2012, appellant on 26/4/2012 preferred appeal to Commissioner of Income Tax (Appeals) CIT (Appeals). 6. appellant, also instituted appeal against order dated 12/12/2011 made under section 143(3) of said Act by Assessing Officer. 4 TXA 67 2014 7. Both aforesaid appeals were taken up for consideration by CIT (Appeals) and disposed of by common order dated 26/9/2013. CIT (Appeals) dismissed appellant's appeal against order dated 29/3/2012 in relation to provisions of section 154 of said Act. However, CIT (Appeals) allowed appellant's appeal against order dated 12/12/2011 made under section 143(3) of said Act. 8. Aggrieved by aforesaid, respondent/Revenue filed appeal to Income Tax Appellate Tribunal (ITAT), which has, by impugned judgment and order dated 11/4/2014 set aside common order dated 26/9/2013 made by CIT (Appeals). Hence present appeal on aforesaid substantial questions of law. 9. Mr. Rohan Deshpande, learned counsel for appellant submits that impugned judgment and order made by ITAT is contrary to law laid down by division Bench of this Court in Commissioner of Income Tax Vs. Pruthvi Brokers & Shareholders P. Ltd. [2012] 349 ITR 336 (Bom). He submits that ITAT has misread and misconstrued decision. Apex Court in Goetze (India) Ltd. Vs. Commissioner of Income Tax [2006] 284 ITR 323 (SC), in as much as it clearly did not deal with powers of 5 TXA 67 2014 appellate authority under said Act. He submits that ITAT erred in placing reliance on decision of Apex Court in Additional Commissioner of Income-Tax, Gujarat Vs. Gurjargravures P. Ltd, 1978 111 ITR 1 (SC) since in Jute Corporation of India Ltd. Vs. Commissioner of Income Tax and anr, 187 ITR 688 (SC), Apex Court has held that view taken in Gurjargravures (supra) is in conflict with view taken by Three Judge Bench of Apex Court in Commissioner of Income Tax, U. P Vs. Kanpur Coal Syndicate, 53 ITR 225 (SC). Mr. Desphande pointed out that in any case, Gurjargravures (supra) has been considered, read and interpreted by Division Bench of this Court in Pruthvi Brokers (supra) in particular manner and such reading and interpretation was clearly binding upon ITAT, which could not have read decision in Gurjargravures (supra) in different manner. 10. For all these reasons Mr. Deshpande submits that ITAT clearly erred in holding that powers of CIT (Appeals) were restricted to entertain grounds, which were, originally unavailable to appellant at stage of assessment of proceedings before Assessing Officer. 11. Mr. Deshpande submits that in present case, respondent/revenue 6 TXA 67 2014 had not even questioned common order of CIT (Appeals) dated 26/9/2013 on merits and accordingly ITAT, lacked jurisdiction or in any case was not justified in upsetting findings recorded by CIT (Appeals) on merits. In support of his contention, Mr. Deshpande referred us to Memo of Appeal filed by respondent/revenue before ITAT. 12. Based upon aforesaid contentions, Mr. Deshpande submits that two substantial questions of law may be answered in favour of appellant and against respondent/revenue. 13. Ms. Susan Linhares, learned Standing Counsel for respondent defends impugned judgment and order on basis of reasoning reflected therein . She relies on Gurjargravures (supra), to submit that appellate authorities can entertain new grounds only if ground so raised could not have been raised at stage when returns were filed or when assessment order was made or when such ground became available on account of change of circumstances or law. She submits tat Memo of Appeal to which reference is made by Mr. Deshpande has to be construed liberally and so construed, it is apparent that respondent/revenue had attacked order of CIT (Appeals) on merits as well. In any case, she submits that rulings 7 TXA 67 2014 in Gurjargravures (supra) and Godze (supra) were clearly attracted to facts and circumstances of present case and CIT (Appeals), erred in ignoring same. For all these reasons Ms. Linhares submitted that substantial questions of law framed in this appeal may be answered against appellant/assessee and in favour of the respondent/revenue. 14. Rival contentions now fall for our determination. 15. As regards factual aspects, same, have been set out to extent necessary for determination of substantial questions of law on which this appeal was admitted, at very outset. There is no doubt that when appellants filed their returns before Assessing Officer there was no claim that amount of Rs.52,14,543/-, which was indicated as business income was to be treated as short term capital gain or for that matter, amount of Rs.5,90,093/- was incorrectly added to business income. These contentions/grounds were raised to in application for rectification under section 154 of said Act, and consequent upon rejection of application under section 154 of said Act before CIT (Appeals), in two separate appeals questioning not only rejection of application under section 154 of said Act but also questioning order dated 12/12/2011 by which 8 TXA 67 2014 Assessing Officer accepted return of appellant under section 143 (3) of said Act. 16. question which therefore arises in this matter is whether CIT (Appeals) had jurisdiction to entertain this additional grounds in appeal instituted by appellant questioning Assessing Officer's order dated 12/12/2011 made under section 143 (3) of said Act, even though such grounds neither flow from any change of circumstances or law nor is it that such grounds were unavailable to appellant/assessee at stage of filing return or during progress of assessment proceedings before Assessing Officer. 17. CIT (Appeals) has held that it had such jurisdiction. In exercise of such jurisdiction, CIT (Appeals) not only permitted appellants to raise these additional grounds but also allowed appeal by accepting such additional grounds. 18. ITAT by impugned judgment and order dated 11/4/2014, by relying mainly on Gurjargravures (supra) and Goetze (supra) has held that CIT (Appeals) exceeded its jurisdiction in entertaining two additional 9 TXA 67 2014 grounds, which had never been raised by appellant before Assessing Officer in course of assessment proceedings. 19. According to us, view taken by ITAT is not consistent with view taken by Division Bench of this Court in case of Pruthvi Brokers (supra), which has considered decisions in Gurjargravures (supra) as well as Goetze (supra) and further read and interpreted same in particular manner. 20. Gurjargravures (supra), is decision of two Judge bench of Hon'ble Apex Court. This was considered by three Judge Bench of Hon'ble Apex Court in case of Jute Corporation of India Ltd. (supra), wherein three Judge Bench, observed that apparently view taken by two Judge bench in Gurujargravures (supra) appears to be in conflict with view taken by three Judge Bench in Kanpur Coal Syndicate (supra) which is again decision of three Judge Bench of Hon'ble Apex Court. Accordingly, it was held that view of Larger bench in Kanpur Coal Syndicate (supra) prevails, in which, it has been categorically held that power of appellate authorities is co- terminus with power of assessing authorities. 10 TXA 67 2014 21. Apart from aforesaid, Division Bench of this Court in Pruthvi Brokers (supra) by reference to portion in Gurujargravures (supra) upon which specific reliance was placed by Ms. Linhares, has held that such portion which was also relied upon by ITAT, does not curtail ambit of jurisdiction of appellate authorities. Such portion does not restrict new/additional grounds that may be taken by assessee before appellate authorities, to those that were not available when return was filed or even when assessment order was made. appellate authorities, have jurisdiction to deal with additional grounds including those which were available when original return was filed. In taking this view, Division Bench also adverted to and relied upon decision of Ahmedabad Electricity Co. Ltd Vs. CIT (193) 199 ITR 351 (Bom), in which Full Bench of this Court has held that appellate authorities have very wide powers while considering appeal which may be filed by assessee. appellate authorities may confirm, reduce, enhance or annul assessment or remand case to Assessing Officer. This is because, unlike ordinary appeal, basic purpose of tax appeal is to ascertain correct tax liability of assessee in accordance with law. 11 TXA 67 2014 22. In Pruthvi Brokers (supra), division Bench, after considering several decisions has held that it is clear that assessee is entitled to raise not merely additional legal submissions before appellate authorities, but is also entitled to raise additional claims before them. appellate authorities have discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider same. They have jurisdiction to entertain new claim. That they may choose not to exercise their jurisdiction in given case is another matter. exercise of discretion is entirely different from existence of jurisdiction. 23. decision in Goetze (supra) upon which reliance is placed by ITAT also makes it clear that issue involved in said case was limited to power of assessing authority and does not impeach on powers of ITAT under section 254 of said Act. This means that in Goetze, Hon'ble Apex Court was not dealing with extent of powers of appellate authorities but observations were in relation to powers of assessing authority. This is distinction drawn by division Bench in Pruthvi Brokers (supra) as well and this is distinction which ITAT failed to note in impugned order. 12 TXA 67 2014 24. Taking into consideration aforesaid rulings, we are satisfied that substantial questions of law as framed are required to be answered in favour of appellant/assessee and against respondent/revenue to extent of holding that CIT (Appeals), in facts and circumstances of present case, did have jurisdiction to entertain two additional grounds raised by appellants in context of payment of amount of Rs.52,14,543/- as short terms capital gain and addition of amount of Rs.5,90,093/- to business income in return filed by appellant. However, in present case ITAT after holding that CIT (Appeals) lacked jurisdiction to entertain two additional grounds has proceeded to observe that even on merits, CIT (Appeals) was wrong in exercising discretion in favour of appellants or accepting case of appellants on merits. 25. Mr. Deshpande submits that there was no challenge to merits on behalf of respondent/revenue which according to him is evident from memo of appeal which is placed on record at pages 128 to 130 of paper Book in present appeal. Ms. Linahres, however, contests this contention. 26. Upon perusal of Memo of Appeal, we agree with Ms. Linhares that same is not required to be construed in some restricted sense, but rather, 13 TXA 67 2014 same is required to to be construed liberally. So construed, it cannot be said that there was no challenge to finding of CIT (Appeals) on merits. That apart, Ms. Linhares, is entitled to draw some sustenance from decision of Full Bench of this Court in Ahmedabad Electricity Co. (supra) in which Full Bench has held that appeal under provisions of said Act is unlike ordinary appeal since, basic purpose of tax appeal is to ascertain correct tax liability of assessee in accordance with law. 27. In present case, we have also perused common order dated 26/9/2013 made by CIT (Appeals) and we find that notwithstanding length of order, on merits of additional grounds urged by appellant/assessee, CIT (Appeals) has only made following observations : I have gone through submission of appellant and documents submitted. On basis of above, I find claim of appellant to be correct. 28. According to us, aforesaid is hardly satisfactory manner for dealing with additional grounds raised by appellant /assessee and contested by respondent/revenue on merits. ITAT (Appeals) in impugned order has correctly observed that issue could not have been decided in such perfunctory manner. issue is highly debatable and requiring assessment of 14 TXA 67 2014 material on record. Accordingly, we are of opinion that after declaring that CIT (Appeals) had jurisdiction to entertain additional grounds raised by appellant, matter will have to be remanded to CIT (Appeals) for determining whether in facts and circumstances of present case, discretion was required to be exercised in favour of appellant/assessee and further, whether on merits appellant/assessee was entitled to benefits as claimed by raising aforesaid additional grounds. 29. two substantial questions of law as framed are answered accordingly by holding that CIT (Appeals) has jurisdiction to entertain two additional grounds/claims raised by appellant before it. However, we have also held that in exercise of such jurisdiction, CIT (Appeals) has not properly dealt with said additional grounds/claims on their merits. Hence necessity of remand to CIT (Appeals) to deal with said two additional grounds/claims on merits. 30. Accordingly, we set aside not only impugned order dated 11/4/2014 made by ITAT but we also set aside order dated 26/9/2013 made by CIT (Appeals), restricted only to Tax Appeal no.18/MRG/2012-13 and restore only said appeal to file of CIT (Appeals) for deciding whether 15 TXA 67 2014 additional grounds/claims raised by appellant deserve to be allowed on 'merits'. CIT (Appeals) in pursuance of this remand, shall, however, not revisit issue of jurisdiction but only examine additional grounds/claims on merits. Further, it is clarified that we have not interfered with order dated 26/9/2013 made by CIT (Appeals) in Tax Appeal no.20/MRG/2012-13 against order dated 29/3/2012 rejecting appellant's application under section 154 of said Act, which, in any case, had not even been challenged by appellant before ITAT. 31. parties to now appear before CIT (Appeals) on 9/3/2020 at 11 a.m. on which date, CIT (Appeals), may indicate to parties date on which Tax Appeal No.18/MRG/2012-13 which is now restored to its file, will be heard and disposed off. We clarify that in so far as issue of exercise of discretion and merits of two additional grounds/claims is concerned, all contentions of parties are left open for determination by CIT (Appeals) in pursuance of present limited remand. 32. appeal is disposed off in aforesaid terms, without making any order as to costs. 16 TXA 67 2014 33. All concerned to act on basis of authenticated copy of this order. SMT. M. S. JAWALKAR, J. M. S. SONAK, J. ap/- Siva Equipment Pvt. Ltd. v. Asst. Commissioner of Income-tax, Circle-2, Margao / Union of India, New Delhi