Sanjay Sawhney v. Principal Commissioner of Income-tax
[Citation -2020-LL-0518-5]

Citation 2020-LL-0518-5
Appellant Name Sanjay Sawhney
Respondent Name Principal Commissioner of Income-tax
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 18/05/2020
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags assumption of jurisdiction • recording of satisfaction • denial of natural justice • incriminating material • limitation prescribed • preliminary objection • adequate opportunity • satisfaction note • filing of appeal • unexplained cash • cross-objection • new ground
Bot Summary: Rama- chandra Iyer J., as he then was, after referring to the provisions of the Act and the Rules framed thereunder, observed thus: The aforesaid rules, including the power to remand, would be governed by the provisions of section 33(4), and the jurisdiction of the Tribunal would be circumscribed by the subject-matter of the appeal the subject-matter of the appeal being that contained in the original grounds of appeal, together with such other grounds as may be raised by the assessee by leave of the Tribunal. A respondent, unless he has filed an appeal himself or filed cross- objections in the appeal filed by his opponent, will not be entitled to challenge that part of the lower court's decree which is against him, and the appellate court will have no power or jurisdiction to permit him to do so ITA 834/2019 Page 16 of 45 It thus follows that the subject-matter of appeal would get confined to the limits of the grounds specifically raised in the memorandum of appeal, the new grounds raised by the appellant with the previous permission of the Tribunal and the grounds urged by the respondent in support of the decree passed in his favour, even though the decision of the court, against which the appeal is filed, is against him. In these circumstances, in further appeal, since the Revenue had not filed any cross appeal or objections, this Court in these peculiar facts rightly held that Revenue could not have raised the plea under Rule 27 before the Tribunal, since the issue as sought to be urged by the Revenue was subject matter of Assessee s appeal before the Tribunal Ref: first ground of the memorandum of appeal, reproduced above. Under Rule 11 of the ITAT Rules, an appellant can, by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, and the Tribunal, in deciding the appeal, would not be confined to the grounds set forth in the memorandum of appeal. If the Respondent wants to assail an independent issue that has been decided against him in the order appealed by the Appellant, which has no bearing on the result of order impugned in appeal before the Tribunal, the appropriate remedy would lie in of filing a cross appeal or cross objection. The question on reference to the High Court was Whether on a proper construction of rule 27 of the Appellate Tribunal Rules, 1946, the assessee-respondent having not appealed against the order of the Appellate Assistant Commissioner was entitled to contend, in the department's appeal before the Tribunal, that the entire profit arising out of the sale of land was not liable to assessment The question was answered in the negative, and it was held that the assessee could contend that the receipts were not profits of a business at all, but for the purpose of showing that the department was not entitled to succeed in the appeal i.e. to an increase in the assessed income and not for the purpose of claiming the relief of quashing of the assessment order. To put the controversy beyond doubt, Rule 27 of the Rules makes it clear that the respondent in appeal before the Tribunal even without filing an appeal can support the order appealed against on any of the grounds decided against him.


* IN HIGH COURT OF DELHI AT NEW DELHI Reserved on: 25.09.2019 Pronounced on: 18.05.2020 + ITA 834/2019 SANJAY SAWHNEY Appellant Through: Mr. S. Krishnan, Advocate. versus PRINCIPAL COMMISSIONER OF INCOME TAX Respondent Through: Mr. Zoheb Hossain, Sr. Standing Counsel. CORAM: HON BLE MR. JUSTICE VIPIN SANGHI HONBLE MR. JUSTICE SANJEEV NARULA JUDGMENT SANJEEV NARULA, J 1. present appeal under Section 260A of Income Tax Act, 1961 ( Act ) is directed against order dated 25.03.2019 passed by Income Tax Appellate Tribunal ( ITAT ), Delhi Bench F allowing Revenue s appeal [ITA No. 4856/2015 for Assessment Year 2008-09] and further remanding matter to file of Assessing Officer ( AO ) for fresh adjudication. Vide aforesaid impugned order, ITAT has inter alia rejected additional jurisdictional grounds urged by Appellant- Assessee under Rule 27 of Income-tax (Appellate Tribunal) Rules, 1963 ( ITAT Rules ) to assail findings of Commissioner of Income Tax (Appeals) [ CIT (A) ]. By way of this appeal, Appellant challenges correctness of reasoning of ITAT for declining to consider pertinent issues that go into root of matter and relate to assumption of jurisdiction and ITA 834/2019 Page 1 of 45 validity of reassessment proceedings undertaken by revenue under Section 153C of Act. Controversy- In brief 2. revenue-initiated search action under Section 132 of Act on Kouton Group on 19.02.2009 and during search proceedings, it inter-alia seized document described as Memorandum of Understanding ( MOU ) relating to transaction of sale and purchase of share capital of M/s S.R. Resorts Private Limited. Consequent upon seizure of aforesaid document, notice was issued to appellant under Section 153C of Act, calling for filing of return of income. Since there was no compliance to said notice, another notice was issued under Section 142(1)(ii) of Act. In response thereto, appellant filed original return of income declaring total income of Rs.8,90,760/- and submitted that same be treated as return in compliance to notice under Section 153C of Act. assessment proceedings culminated in framing of assessment order dated 28.12.2010 whereby return of income of appellant stood assessed at Rs.1,46,15,445/-. In appeal before CIT(A), besides challenging additions made by AO on merits, assessee also raised legal grounds qua validity of reassessment proceedings undertaken by revenue under Section 153C of Act. jurisdictional challenge to reassessment proceedings was principally premised on two fundamental legal grounds, viz. (i) AO failed to record satisfaction note for initiating proceedings under Section 153C of Act and, (ii) there was no nexus between issues in assessment proceedings and incriminating material seized during search. CIT(A) rejected aforesaid pleas and inter-alia held that there was no need for recording satisfaction and ITA 834/2019 Page 2 of 45 that further law postulated no requirement for existence of nexus between assessment framed and incriminating material as precondition for reassessment proceedings. On merits, CIT(A) allowed appeal in favor of assessee and deleted all additions/disallowances made by AO. 3. Revenue contested order passed by CIT(A) by filing appeal under Section 253(2) of Act before ITAT, contending that CIT (A) had erred in deleting additions. In said proceedings, appellant- assessee made oral application under Rule 27 of ITAT Rules and urged additional grounds against findings of CIT(A) pertaining to issue of recording of satisfaction note, and necessary condition of existence of nexus between assessment and incriminating material by contending that these findings were in teeth of law as settled by various courts in respect of said issues. ITAT disagreed with Assessee and on technical ground refused to consider legal issues that were premised on Rule 27 of ITAT Rules. However, at same time, on merit, ITAT overturned decision of CIT(A) and allowed appeal in favour of Revenue and restored issues to file of AO for deciding afresh with further direction to Assessee to produce all necessary documentary evidence in support of its claim. relevant extract of impugned order reads as follows: 5. We have heard parties on issue of additional ground raised by way of referring Rule 27 of ITAT Rules. We find that no application has been filed by assessee under Rule 27 of ITAT Rules for raising legal ground challenging validity of proceedings under section 153C of Act. In our opinion, parties to appeal are required ITA 834/2019 Page 3 of 45 to follow due procedure laid down in this regard under Rule 27 of ITAT rules, which reads as under: Respondent may support order on grounds decided against him. 27.The respondent, though he may not have appealed, may support order appealed against on any of grounds decided against him. 6. Since assessee has not filed any such application, appellant, i.e., revenue cannot be put to surprise by respondent. Accordingly, parties were requested to address on grounds raised in appeal before us. Since, we have not admitted additional grounds raised by assessee, we are not adjudicating issue raised in those additional grounds. 4. operative portion of order directing remand reads as under:- 10.3 We have heard rival submissions and perused relevant material on record. issue in dispute in ground raised is whether land which was sold by assessee, was agricultural land in terms of provisions of Act. assessee was required to prove that land was situated beyond 8 kms, from municipal limit and agricultural activity was carried out by assessee on said land. Before us, assessee has referred pages 43 to 45 of paperbook, which are handwritten certificate issued by Patwari (Land Revenue Authority). We agree with observation of learned DR that handwritten certificate is not bearing any seal or name of Patwari or person who has issued certificate. learned counsel has also not produced original return of income filed for earlier years to establish that agricultural income was offered for rate purpose un those returns. Assessing Officer objected admitting of additional evidences, however, Ld. CIT (A) admitted evidence after giving his reasoning. But Ld. CIT (A) was required to make compliance of Rule 46A(3) of Income Tax Rules,1962 and provide opportunity to Assessing Officer to rebut those evidences as held by Hon'ble Delhi High Court in case of Manish Buildwell Private Limited (supra). In view of above facts and circumstances, ITA 834/2019 Page 4 of 45 we feel it appropriate to restore this issue to file of Assessing Officer deciding afresh; with direction to assessee to produce all necessary documentary evidence in support of its claim. assessee shall be afforded adequate opportunity of being heard. ground of appeal is, accordingly, allowed for statistical purposes. (emphasis supplied) Question of Law 5. Although on merits, controversy is still in balance, appellant- Assessee has approached this court aggrieved with findings of ITAT pertaining to Rule 27. Appeal was admitted vide order dated 16.09.2019 and following question of law was framed: What is scope of Rule 27 of Appellate Tribunal Rules, 1964 in context of Section 253 (4) of Income Tax Act,1995? 6. With consent, we extensively heard arguments of learned counsels for both parties for final disposal of appeal. Mr. S. Krishnan, learned counsel for appellant contended that understanding of ITAT is flawed and contrary to settled legal position. He submitted that assessee had relied upon Rule 27 of ITAT Rules, however, for some strange reasoning, ignoring basic tenet of law on applicability of said provision, ITAT did not accept Appellant s contentions. He argued that ITAT Rules provide for three distinct and coordinate methods whereby respondent before ITAT can raise issue decided against him/her by Commissioner (Appeals). said procedure in his words is interpreted as (i) On receipt of Commissioner s order, appeal can be filed in terms of Rule 6, on issues decided against such party. Form 36 is notified for this purpose; (ii). On receipt of copy of Ground of Appeal from other contesting party, cross-objection can be moved on such issues in ITA 834/2019 Page 5 of 45 terms of Rule 22. Form 36-A is notified for this purpose; (iii). At time of hearing of appeal, Respondent therein may take up issues decided against him/it, and seek to support confirmation of Commissioner s order in this way. Rule 27 of Rule provides for this. 7. He submitted that all three above-stated remedies and mechanisms exist concurrently and demonstrated that all of them are bound by their own due process. Rule 27 of ITAT Rules does not require application to be structured in any particular manner, unlike in case of cross-appeal or cross objection. He also submitted that ITAT has applied new ITAT Rules, 2017 which are yet to be notified and, therefore, have no mandate in law. Therefore, ITAT has erred in mis-reading requirement into rules which does not exist in reality. Mr. Krishnan further argued that by shutting doors on legal defenses that were available to appellant and stood concluded in his favour by several precedents, ITAT has failed to exercise its power and has caused extreme prejudice to appellant. On both legal issues viz. non recording of satisfaction note, as well as absence of nexus between reassessment and material stated to be basis of framing such assessment, law stands settled in favour of assessee. ITAT has grossly erred by remitting issues on merit to file of AO, without giving similar directions in respect of legal grounds raised by appellant by way of application under Rule 27 of ITAT Rules. In support of his submissions, Mr.Krishnan relied upon Tranvancore Chemical & Manufacturing Company Ltd. v. CIT (1997) 226 ITR 429, PCIT, Vadodara-2 v. Sun Pharmaceuticals Industries Ltd. (2017) 86 taxmann.com 148 Guj. Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT (2005) 149 TAXMAN 456 (Guj.), CIT, Meerut v. Jindal Polyester Ltd. ITA 834/2019 Page 6 of 45 (2017) 82 taxmann.com 302 (All.) and PCIT v. M/s Dhara Vegetable Oil and Food Company Ltd. ITA no. 454/2019 (DHC). 8. Mr. Zoheb Hossain, learned senior standing counsel for revenue, on other hand, defended order of ITAT by relying upon several case laws. He urged that since that appellant did not file any cross-appeal or cross-objection under Section 253(4) of Act, he cannot invoke Rule 27 of ITAT Rules to question validity of proceedings under Section 153C of Act. He further submitted that issue qua validity of proceedings under Section 153C had attained finality and because appellant chose not to challenge same in appeal by way of cross- objections before ITAT, Rule 27 cannot be brought into play to reopen same. Permitting appellant to do so would leave revenue worse off in its own appeal. He further argued that Rule 27 cannot be invoked to expand scope of appeal and assail decision on issues which are beyond subject matter of appeal. In support of his submissions, Mr. Hossain relied upon decisions in CIT vs. Divine Infracon Pvt. Ltd. 2015 SCC OnLine Del 10952; CIT vs. Edward Keventor Successive Pvt. Ltd. 1980 123 ITR 200 (Delhi) and CIT vs. Anil Kumar Bhatia 2013 352 ITR 493 (Delhi). 9. In rejoinder, Mr. Krishnan while reiterating his submissions, distinguished and clarified import of judgments relied upon by Revenue and in particular, decisions in case of CIT vs. Divine Infra Pvt. Ltd (supra)and CIT vs. Edward Keventor Successive Pvt. Ltd (supra). ITA 834/2019 Page 7 of 45 Analysis 10. facts of case reveal that Revenue challenged order of CIT (A) dated 20.03.2015 before ITAT on grounds pertaining to deletion of additions on account of unexplained cash credits, unexplained investments, interest paid on cash borrowings, personal expenses, long term capital gains etc. assessee [Respondent before ITAT], admittedly did not file cross appeal or cross objections under section 253(4) of Act and sought to invoke Rule 27 to question validity of proceedings under Section 153C. Thus, in above noted factual background, we have to consider whether approach adopted by ITAT in declining Appellant- assessee [Respondent before ITAT] right to question findings of CIT(A) is correct or not? 11. Tribunal has taken pedantic view on interpretation of Rule 27 by holding that for availing remedy under said provision, application in writing is necessary. In our opinion, this surmise is fallacious and we cannot countenance same. We agree with Mr. Krishnan that Rule 27, as it stands today, does not mandate for application to be made in writing. Revenue has not brought to our notice any particular Form notified for filing such application. Revenue also does not controvert contention of Appellant that draft Appellate Tribunal Rules 2017 proposing to insert proviso to Rule 27, providing for application to be made in writing, have not been notified, as yet. Therefore, reasoning of Tribunal for rejecting Appellant s contentions is palpably wrong. If provision does not specify any defined structure for making application in particular manner, Tribunal ought not to have deprived Appellant of opportunity to raise fundamental question of jurisdiction, taking ITA 834/2019 Page 8 of 45 hyper technical viewpoint. Tribunal has plainly refused to consider additional grounds on erroneous premise which is contrary to statutory scheme of Act, that permits Respondent to urge all grounds in support of order appealed, as provided under Rule 27. appeal deserves to be allowed on this short ground and we would have no hesitation in doing so with consequential direction to ITAT to reconsider matter afresh on additional grounds urged by Appellant. However, that direction would not take controversy to logical conclusion. Mr. Hossain raises more fundamental issue by arguing that in absence of appeal by Petitioner, or cross objections by it, issue of validity had attained finality, and cannot be raked up by taking recourse to said Rule putting them in more disadvantageous position. He persists that irrespective of format of application and regardless of reasons given in impugned order, appellant cannot be permitted to urge jurisdictional objections before ITAT. We feel clarity is required on this vital ground, particularly, since Mr. Hossain has attempted to substantiate his submissions by contending that this court has already taken view that supports his line of arguments. In fact, this prompted learned counsels for both parties to cite plethora of case laws dealing with this jurisdictional question. 12. Before we proceed with our analysis, let us first examine said provision and then consider relevant case laws that deals with interpretation of said provision. Rule 27 of ITAT Rules reads as under: Respondent may support order on grounds decided against him. ITA 834/2019 Page 9 of 45 27. respondent, though he may not have appealed, may support order appealed against on any of grounds decided against him. There are certain other provisions which are also germane to question of law framed in present appeal viz Rule 6 which provides for filing of appeal, Rule 22 which provides for numbering of cross objections and sub Section 4 of Section 253 of Act. said provisions read as under:- Rule 6. Procedure for filing appeals. (1) memorandum of appeal to Tribunal shall be presented by appellant in person or by agent to Registrar at headquarters of Tribunal at Bombay, or to officer authorised in this behalf by Registrar, or sent by registered post addressed to Registrar or to such officer. (2) memorandum of appeal sent by post under sub-rule (1) shall be deemed to have been presented to Registrar or to officer authorised by Registrar, on day on which it is received in office of Tribunal at Bombay, or, as case may be, in office of such officer. Rule 22.Cross-objections. memorandum of cross-objections filed under sub-section (4) of section 253 shall be registered and numbered as appeal and all rules, so far as may be, shall apply to such appeal. Section 253. Appeals to Appellate Tribunal. (1) xxxx (2) xxxx (3) xxxx (4) Assessing Officer or assessee, as case may be, on receipt of notice that appeal against order of Commissioner (Appeals), has been preferred under sub-section (1) or sub-section (2) by other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of receipt of notice, file memorandum of cross-objections, verified in prescribed manner, against any part of order of Commissioner ITA 834/2019 Page 10 of 45 (Appeals), and such memorandum shall be disposed of by Appellate Tribunal as if it were appeal presented within time specified in sub-section (3). 13. Rule 27, has been subject matter of interpretation of several decisions of various High Courts and many of those have been relied upon by both counsels. We do not perceive need to elaborately advert to each and every case cited before us by respective counsels. In-depth analysis is necessary of only those decisions that are strongly relied upon by Revenue to support impugned order of ITAT on proposition of law encapsulated in foregoing paras. Let s first dwell on seminal decision rendered by Madras High Court quite some time back in Commissioner of Income Tax, Madras vs. Sundaram & Co. Pvt. Ltd. (1964) 52 ITR 763 (Madras), which is also relied upon by Appellant. law expounded in this judgment forms bedrock for several other decisions on subject. Indeed, majority of recent judgments also refer to this decision, as law therein has been elucidated in lucid and unequivocal terms and is still on mark. In said case, High Court dealt with Rule 27 of ITAT Rules, 1946 provision pari materia with instant Rule 27 of ITAT Rules, and authoritatively held that although assessee may not have preferred independent appeal before ITAT against order of Appellate Assistant Commission (AAC), it could still invoke said provision to support order on any of grounds decided against him. court interpreted Rule and held that its invocation is not restricted to grounds decided favorably but would also include grounds held against him by authority whose decision is subject matter of challenge. relevant portion of said judgment read as under: ITA 834/2019 Page 11 of 45 11. appellant has no right to urge any ground not set forth in memorandum of appeal. But it would be open to Tribunal to grant him leave to raise additional grounds. So far as Tribunal is concerned, it would not be fettered in its decision by confining to grounds set forth in memorandum of appeal or even to those taken by appellant with leave of Tribunal. So long as principles of natural justice are not violated and affected person is afforded opportunity to be heard Tribunal can dispose of appeal in its own light. But of course Tribunal should not act arbitrarily or capriciously but should adopt judicial standards. For example, questions of fact which had not been mooted or discussed or investigated by Income-tax Officer or by Appellate Assistant Commissioner should not be gone into at stage of appeal before Tribunal, It would of course be open to Tribunal to remand proceedings for fresh ascertainment of facts. substance of rule 12 is this. appellant can only urge grounds either set forth in memorandum of appeal or subsequently taken with leave of Tribunal, but Tribunal's powers to decide appeal are not subject to any such restrictions. Turning to rule 27 which permits respondent before Tribunal to support order of Appellate Assistant Commissioner on any of grounds decided against him, it seems to be clear that this is right conferred upon him. Tribunal has no discretion to deprive respondent of benefit of this rule. It is enabling provision which respondent can avail himself of in order to retain benefit which has accrued to him from order appealed against. 12. rule that respondent before court or Tribunal can justify and support decision in his favor not merely on grounds favourably decided but also on other grounds held against held against him by authority whose decision is challenged on appeal is nothing peculiar to procedure before Income-tax Appellate Tribunal. similar provision is found in Civil Procedure Code. Order XLI, rule 22, Civil Procedure Code, states: (I) Any respondent, though he may not have appealed from any part of decree, may not only support decree on any of ITA 834/2019 Page 12 of 45 grounds decided against him in court below, but take any cross-objection to decree which he could have taken by way of appeal..... 13. reason for such rule is obvious. If final outcome of decision is favourable to person it would not matter to him how and by what reasoning decision is arrived at so long as it is not challenged by his adversary. But, if it is attacked he must be in position to support it on every ground he urged before deciding authority whether or not it found favour. If he were not given that amount of freedom he would be victim of wrong reasons. This would be unjust in extreme. If rule 27 had not been enacted there would still have been scope for invoking principle underlying that rule in name of natural justice. true rule is that appeal is continuation of original proceeding and that rights of parties cannot be defeated by form of order but by actual decision. (emphasis supplied) 14. It emerges that Rule 27 ought not to be applied narrowly and therefore we cannot agree with Mr. Hossain, that by permitting Appellant- Assessee (respondent before Tribunal) to invoke Rule 27 before Tribunal, to challenge ground decided against him, scope of subject matter of appeal would get expanded. We must also bear in mind that jurisdictional issue sought to be urged by appellant under Rule 27 is interlinked with other grounds of appeal, and its adjudication would have direct impact on outcome of appeal. validity of proceedings goes into root of matter and for this reason, assessee should not be precluded from raising challenge to that part of order which was decided against him by CIT(A). In this regard, it would be profitable to refer following extract from judgment of Sundaram & ITA 834/2019 Page 13 of 45 Co.(supra),where court had also examined as to what constituted subject-matter of appeal and held as follows: 14. Learned counsel for department contends that it would not be open to respondent to travel outside scope of subject-matter of appeal under guise of invoking rule 27. This contention is unexceptionable and we do not think that learned counsel for assessee disputed it. But then, what is subject-matter of appeal? answer is simple. subject-matter is that which Tribunal or appellate court is called upon to decide and to adjudicate. subject-matter cannot be identified with grounds raised either by appellant or bythe respondent. In present case subject- matter of appeal before Tribunal was reduction of tax rebate in respect of Rs. 3,54,716. It is impossible to contend that subject-matter of appeal lay within narrower limit and that it was question whether Appellate Assistant Commissioner was right in not allowing reduction of rebate on ground mentioned by him. assessee had obtained relief before Appellate Assistant Commissioner to particular extent. And this was objected to by department in appeal before Tribunal. applicability of section 34 of Act was general question raised by assessee even before Appellate Assistant Commissioner. It cannot be said that it became debarred from raising question over again before Tribunal because of fact that it did not choose to file appeal against other portions of order of Assistant Commissioner which was unfavourable to it. scope of section 34 was ground which was decided against assessee before Appellate Assistant Commissioner and we do not see how assessee is precluded from relying upon rule 27 and urging that ground before Tribunal with view to support only that portion of Appellate Assistant Commissioner's order which was favourable to it. 15. decision of this court in V. Ramaswamy Iyengar v. Commissioner of Income-tax [[1960] 40 I.T.R. 377, 395.] is relied upon by learned counsel for department in support of contention that subject-matter of appeal is ITA 834/2019 Page 14 of 45 confined only to grounds of appeal raised on behalf of appellant. We have no doubt that this decision is not authority for position contended. decision in that case was that where appeal was only against part of order appellate authority would have no jurisdiction to interfere with other part which does not form subject of appeal. Rama- chandra Iyer J., as he then was, after referring to provisions of Act and Rules framed thereunder, observed thus: aforesaid rules, including power to remand, would be governed by provisions of section 33(4), and, therefore, jurisdiction of Tribunal would be circumscribed by subject-matter of appeal subject-matter of appeal being that contained in original grounds of appeal, together with such other grounds as may be raised by assessee by leave of Tribunal. As right of respondent is only to support order of Appellate Assistant Commissioner on other grounds, it would follow that Tribunal would have no jurisdiction to pass order, so as to permit ground to be raised by respondent which, if allowed, would make position of appellant worse than what it was before. 16. principle underlying this decision is that Tribunal has no power to enlarge scope of appeal before it by permitting either appellant or respondent to urge grounds which would have effect of destroying finality of that portion of order of original authority which had not been appealed against by either of parties. But this does not mean that respondent should be denied opportunity of supporting decision in his favour which has come up on appeal on ground decided against him by authority whose decision is challenged. ITA 834/2019 Page 15 of 45 17. We would like to refer to two decisions of Bombay High Court on this question of scope of appellate power of Tribunal and right of respondent to support decision on grounds decided against him. In J.B. Greaves v. Commissioner of Income-tax [[1963] 49 I.T.R. 107.] Bombay High Court held, following two decisions of that court, New India Life Assurance Co. Ltd. v. Commissioner of Income-tax [[1957] 31 I.T.R. 844.] and Commissioner of Income-tax v. Hazarimal Nagji & Co. [[1962] 46 I.T.R. 1168.] , that subject-matter of appeal is confined to grounds specifically raised in memorandum of appeal, new grounds raised by appellant with previous permission of Tribunal and grounds urged by respondent in support of decree passed in his favour, even though decision of court, against which appeal is filed, is against him. learned judges of Bombay High Court observed that this is general rule and that position of Appellate Tribunal is same as court of appeal under Civil Procedure Code and that its powers are identical with powers enjoyed by appellate court under Code. At page 124 it is observed as follows: Now, respondent in appeal is undoubtedly entitled to support decree which is in his favour on any grounds which are available to him, even though decision of lower court in his favour may not have been based on those grounds. respondent, unless he has filed appeal himself or filed cross- objections in appeal filed by his opponent, will not be entitled to challenge that part of lower court's decree which is against him, and appellate court will have no power or jurisdiction to permit him to do so ITA 834/2019 Page 16 of 45 It thus follows that subject-matter of appeal would get confined to limits of grounds specifically raised in memorandum of appeal, new grounds raised by appellant with previous permission of Tribunal and grounds urged by respondent in support of decree passed in his favour, even though decision of court, against which appeal is filed, is against him. 18. In Pokhraj Hirachand v. Commissioner of Income- tax [[1963] 49 I.T.R. 293.] same principle is reiterated. 19. We would like to disentangle subject-matter of appeal from grounds upon which appeal is raised or upon which respondent would like to rely. As stated already subject of appeal is item of dispute or controversy between department and assessee in regard to particular question. Properly speaking, subject of tax appeal is relief sought by assessee and objected to by department. grounds are only missiles employed by combatants to achieve their respective desired ends. It would not be possible to circumscribe subject of appeal by taking into account rival contentions or reasons or grounds which are put forward either by department or by assessee. We have no doubt that in light of principles laid down by this court in V. Ramaswamy Iyengar v. Commissioner of Income-tax [[1960] 40 I.T.R. 377.] and also of principle of Bombay decision referred to above and on principles which we have ourselves set forth, Tribunal acted rightly in permitting assessee to raise question of applicability of section 34 before it. Questions Nos. 1 and 2 raised in this reference will, therefore, be answered against department and in favour of assessee. (emphasis supplied) 15. Now, we shall deliberate on judgement of this Court in Commissioner of Income Tax Central II v Divine Infracon Pvt. Ltd, ITA 834/2019 Page 17 of 45 2015 64 taxman.com 472 (Delhi) which has been strongly relied upon Mr. Hossain to suggest that court has taken different view on Rule 27 that is in consonance with his contentions. Let s first briefly refer to facts of said case. Here, assessee filed appeal before CIT (A) against order of AO challenging additions made under section 68 of Act, on merits, as well as on ground that same were beyond scope of section 153A as share application money was duly disclosed in its return and addition was unrelated to any incriminating material found in search. CIT(A) decided that addition was beyond scope of 153A, however at same time, he upheld conclusion of AO regarding share application money and sustained additions made by AO. Assessee then filed appeal before ITAT. In this appeal, Revenue sought to assail finding of CIT (A) which held that additions were outside scope of section 153A. Although Tribunal permitted revenue to raise contentions, it however, finally upheld conclusion of CIT (A). Thereafter, appeals were preferred before this Court by both, Asssesee as well as Revenue. During proceedings, Assessee contented that since Revenue has not appealed against order of CIT (A), it could not raise issue before Tribunal and scope of subject matter of appeal was limited to finding of CIT(A) with respect to merits of addition and Tribunal could not have gone beyond subject matter. In this context, this court held as under:- 5. He submitted that scope of subject matter of Appeal was limited to finding of CIT (A) with regard to merits of addition made; issue whether same was beyond scope of Section 153A of Act was not subject matter before Tribunal and, thus, Tribunal could not have entertained any plea in that regard. ITA 834/2019 Page 18 of 45 6. learned counsel for Assessee also referred to decision of Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. v. Jt. CIT [2007] 293 ITR 226/163 Taxman 355. In that case, Tribunal had decided to reopen appeal decided earlier and permitted Assessee to urge ground, which had not been considered by Tribunal while deciding appeal. decision of Tribunal to reopen matter was not appealed against by Revenue but, Revenue successfully assailed final order passed by Tribunal before High Court, inter alia, on ground that matter could not be reopened by Tribunal. In this context, Supreme Court held that, "We have already noticed that order passed by Tribunal to reopen matter for further hearing as regards ground No. 7 has attained its finality. In circumstances, High Court could not have interfered with final order passed by Income-tax Appellate Tribunal." 7. We find considerable merit in contention advanced on behalf of Assessee. Concededly, issue whether additions made by AO were beyond scope of Section 153A had been decided by CIT (A) in favour of Assessee and decision on said issue had attained finality as revenue had not preferred any appeal with regard to CIT (A)'s order. 8. It is also relevant to note that by virtue of Section 253(2) of Act, Principal Commissioner or Commissioner may, if he objects to order passed by CIT (A) under Section 250 of Act, direct AO to prefer appeal to Tribunal. It is not disputed that no such directions to file appeal against CIT (A)'s order dated 21st January, 2014 were issued by concerned Income Tax Authority. 9. In circumstances, there could be no dispute that CIT (A)'s order in so far as it relates to issue regarding assessment being beyond scope of Section 153A of Act had attained finality, and thus, could not have been disturbed by Tribunal. xxx xxx xxx ITA 834/2019 Page 19 of 45 12. Indisputably, Revenue could also not take recourse to Rule 27 of Income Tax (Appellate Tribunal) Rules, 1963. By virtue of said Rule, respondent before Tribunal can support decision appealed against not only on grounds decided in favour of respondent but also on grounds decided against it. However, Rule 27 of said Rules would not extend to permitting respondent to expand scope of appeal and assail decision on issues, which are not subject matter of appeal. In CIT v. Edward Keventer (Successors) Pvt. Ltd. (supra), this court had reiterated that it would not be open to respondent to travel outside scope of subject matter of appeal under guise of invoking r 27. 13. learned counsel for Revenue has referred to decision of Supreme Court in National Thermal Power Corpn Ltd. v. CIT [1998] 229 ITR 383 (SC)in support of contention that it is open for Tribunal to consider all questions of law where no investigation into facts are necessary. We find that aforesaid decision is wholly inapplicable to facts of present case. It is trite law that Tribunal may, under Section 254(1) of Act, pass such orders as it thinks fit; nonetheless, decision must be in respect of subject matter of dispute. Indisputably, Tribunal can examine all questions which relate to subject matter of appeal but, once issue has attained finality and is not subject matter of dispute before Tribunal, it would not be open for Tribunal to reopen issue on pretext of examining question of law. (emphasis supplied) 16. On strength of above reasoning, Mr. Hossain argues that in present case as well, since Appellant has not preferred any cross appeal or objections, it cannot now be permitted to urge jurisdictional grounds. We do not agree. factual situation in Divine Infracon (supra) is entirely distinguishable from what we have in hand. We had, in fact, summoned judicial record of said case in order to understand context in which ITA 834/2019 Page 20 of 45 aforenoted observations were rendered by court. In said case, assessment was framed under section 153A of Act making addition in respect of share application money amounting to Rs. 20,25,000/-. CIT (A) took into consideration detailed submissions as to validity of proceedings under section 153A, as is evident from grounds raised therein, as well as on substantive issues. On former, CIT (A) held that there was considerable merit in contentions, but at same time, additions under section 68 of Act were confirmed, partly allowing appeal. Assessee then impugned action of CIT(A) specifically on point of contradictory findings i.e having found merit on legal issue viz. section 153A, additions could not have been sustained. This is evident from ground urged before Tribunal to effect That Learned CIT (Appeals) has grossly erred in law and on facts in sustaining addition made by Assessing Officer under sec.68 of Act amounting to Rs.20,25,00,000 particularly having regard to fact that very assumption of jurisdiction to bring to tax aforesaid sum was beyond scope of Learned CIT(Appeals) in impugned order. Revenue then filed application under Rule 27 before Tribunal which was admitted and duly adjudicated in favour of assessee. In these circumstances, in further appeal, since Revenue had not filed any cross appeal or objections, this Court in these peculiar facts rightly held that Revenue could not have raised plea under Rule 27 before Tribunal, since issue as sought to be urged by Revenue was subject matter of Assessee s appeal before Tribunal [Ref: first ground of memorandum of appeal, reproduced above]. Thus, aforesaid observations made by court cannot be construed to restrict Appellant herein from invoking Rule 27 in context of present case. We cannot also read aforesaid judgment as ITA 834/2019 Page 21 of 45 view contrary to law expounded in Sundaram & Co.(supra), as contended by Revenue. 17. Further, Mr. Hossain has placed reliance on judgment of this court in CIT, New Delhi (Central) v Edward Keventer (Successors) Pvt. Ltd, (1980) 123 ITR 200, decision also noticed in Divine Infracon (supra).First, factual controversy in this case is required to be explained. In this case, assessee had filed return showing loss which it had incurred via purchase and subsequent sale of shares and payment of interest which had accrued due to loan taken for purpose of making investments in aforesaid shares. Income Tax Officer (in short ITO ) found that losses out of share transactions undertaken by assessee were fictitious and that claim of deductions for interest on loans relatable to alleged purchase of shares as unjustified and accordingly disallowed same. On appeal by assessee, AAC found that loss claimed by assessee in transactions of shares was done with collusive intent, when in fact profits were earned by assessee and that interest liability was anything but artificial. Finally, AAC held transactions to ine but enhanced income of assessee, while partially allowing deduction on claim of interest with regard to loans. Aggrieved by findings of AAC, assessee went in appeal before Tribunal, seeking deletion of entire gross addition, while department as respondent, relying on Rule 27 of 1946 Rules, contended that in case appeal was allowed whole of addition should not be deleted but only part of it to extent disallowed by AAC. Tribunal while rejecting department s contention under rule 27, set aside whole enhancement as it found that AAC made enhancement based on no material evidence. Thus, ITA 834/2019 Page 22 of 45 reference was made from said decision to High court under section 66(2) of old act. High Court firstly examined as to what constituted subject matter of appeal. Furthermore, High Court held that appellant would not be left in worse off position than where it was before filing of appeal, if said ground raised by respondent under Rule 27 was examined and allowed by tribunal, as AAC had decided in favour of respondent-assessee on merits. relevant portion of aforenoted judgment is extracted hereunder: 16. How then is subject-matter of appeal to be determined? This is easy, for appeal comes up before Tribunal because one of parties before AAC assessee or ITO is aggrieved by order of AAC. He comes to Tribunal to have his grievance redressed and subject-matter of his grievance is set out in grounds of appeal filed by him. To start with, therefore, subject-matter of appeal is constituted by grounds of appeal filed by him which will clearly identify question in dispute in appeal. Rule 12 of Tribunal Rules, as they stood at relevant time, laid down general rule that appellant shall not urge or be heard in support of any ground of objection, not set forth in grounds of appeal. But this rule has also exception for very rule impliedly confers power on Tribunal to grant leave to appellant to urge additional grounds not set forth in memorandum of appeal. Normally speaking such additional grounds can be urged only in relation to subject-matter already appealed against and in regard to such grounds Tribunal has discretion to grant or refuse permission and grant of permission may also be express or implied. But, where appellant seeks to bring in new items which had nothing to do with subject-matter of appeal as originally filed, it will be as if appeal in this regard has been filed belatedly and Tribunal can entertain them only after considering whether there are grounds to excuse delay in filing appeal (See Panchura Estate Ltd. v. Government of Madras, [1973] 87 ITR 698 (Mad)). Where, however, permission is granted by Tribunal, scope of original appeal will stand expanded or ITA 834/2019 Page 23 of 45 enlarged so as to cover matters raised in original grounds as well as those raised in additional grounds. Thus, subject-matter of appeal is constituted by original grounds of appeal and such additional grounds as may be raised by leave of Tribunal. So much regarding appellant. 17. Now, adverting to rights of respondent in appeal, we start with basic idea that, if party appeals, he is party who comes before Appellate Tribunal to redress grievance alleged by him. If other side has grievance, he has right to file cross-appeal (and under Civil Procedure Code and I.T. Act of 1961, memorandum of objections). But, if no such thing is done, he is deemed to be satisfied with decision. He is, therefore, entitled to support judgment of first officer on any ground but he is not entitled to raise ground which will work adversely to appellant. In fact such ground may be totally new ground, if it is purely one of law, and does not necessitate regarding of any evidence, even though nature of objection may be such that it is not only defence to appeal itself but goes further and may affect validity of entire proceedings. But entertainment of such ground would be subject to restriction that even if it is accepted, it should be given effect to only for purpose of sustaining order in appeal and dismissing appeal and cannot be made use of, to disturb or to set aside, order in favour of appellant (See Bamasi v. CIT, [1972] 83 ITR 223 (Bom)). This liberty to respondent is reserved by r. 27 of Tribunal Rules. xxx xxx xxx 23. Of course, as pointed out by Bombay High Court in Bamasi v. CIT, [1972] 83 ITR 223, earlier referred to, assessee could use this argument only to sustain order of AAC but not to get further relief and have reassessment itself annulled and thus adversely affect appellant and place it in worse position than if it had not appealed at all. This decision illustrates principle that subject-matter of appeal should be Understood not in narrow and unrealistic manner but should be so comprehended as to encompass ITA 834/2019 Page 24 of 45 entire controversy between parties which is sought to be got adjudicated upon by Tribunal. xxx xxx xxx 26. Suppose assessee prefers appeal to Appellate Tribunal, against AAC's order, contending that determination of sale consideration is excessive and Tribunal is inclined to accept figure of Rs. 2 lakhs shown by assessee. We think it would be fair to say that subject- matter of appeal is not merely question of what should be sale consideration but as to what should be capital gain. If department was satisfied with determination of capital gain at Rs. 1 lakh it could not be expected to file appeal and it would not be correct to deprive department of opportunity to maintain AAC's order by construing subject-matter of appeal in narrow manner as restricted to question of sale consideration; We think, therefore, that department would be entitled to support order of AAC, under r. 27, on basis that market value as on January 1, 1954, was Rs. 1 lakh as determined by AAC and not Rs. 1 lakhs as decided by AAC, rejecting ITO's contention. Therefore on same analogy that in case where certain grounds concerning same matter are interlinked, they should be considered together and scope of subject- matter before Tribunal should be construed accordingly. position might be different where different grounds of appeal are dealt with by AAC, which have no real inter-connection with each other though naturally they all bear upon particular assessment and though they may all broadly relate to computation of income from same head of source. But in case where there are inter-connected grounds of appeal and they have impact on same subject-matter, scope of appeal should be broadly considered in correct perspective, While appellant should not be made to suffer and be deprived of benefit given to him by lower authority where other side has not appealed, equally procedural rules should not be interpreted or applied so as to confer on appellant relief to which he cannot be entitled if points decided in his favour on same matter by lower court are also considered as ITA 834/2019 Page 25 of 45 requested by respondent. It seems to us that position in present case is somewhat similar. ITO had treated certain transactions as sham and collusive, disallowed losses claimed and consequently disallowed interest admitted by assessee to relate to these transactions. On appeal, AAC treated transactions as genuine but considered prices to be inflated. He, therefore, computed profit and as logical corollary, allowed interest substantially (except to extent of inflation found by him). When, on appeal, Tribunal decides to restore ITO's finding that transactions were bogus then logical consequence will be reversal of AAC's allowance of interest also. For reasons discussed above, we are unable to construe subject-matter of appeal as restricted to ground raised, viz., deletion of Rs. 9,28,000. We think subject-matter of appeal was genuineness or otherwise of share transactions and profit assessable in respect thereof. On this, AAC had given two findings, one against assessee and other against department. In view of former being substantially beneficial to it, department could not be aggrieved by consequential finding on latter. Unlike in Sundaram's case, [1964] 52 ITR 763 (Mad), where at least it could be said that assessee could have filed appeal in regard to applicability of s. 34 as that was separate and independent ground decided against it, here, however, as mentioned earlier, department could not have filed appeal on this point as it was consequential, according to it, on finding of AAC on first point which was to its benefit. It could not have assailed latter in appeal without attacking finding on first also. To say, in such circumstances, that department cannot seek to uphold AAC's order on this subject-matter would virtually amount to denial of natural justice to it which, as pointed out in Sundaram's case, [1964] 52 ITR 763 (Mad), is not object of relevant statutory provisions. Moreover, even if department's ground ultimately succeeds on merits, assessee will not be adversely affected and will not be in worse position than if it had preferred no appeal at all. (emphasis supplied) ITA 834/2019 Page 26 of 45 18. Mr. Hossain, relying on Edward Keventer(supra) argued, if additional grounds raised by assessee under Rule 27 were examined and allowed by ITAT, revenue would be left in worse off position than it was before filing of appeal. He submits that since assessee had not assailed order of CIT(A), it has attained finality qua him. Now, assessee cannot be permitted to take away benefit that accrued in favour of Revenue, except by way of appeal or cross objections. He submits that order adverse to interest of revenue, by recourse to Rule 27 is impermissible as held in aforesaid judgment. 19. We are of view that Mr. Hossain s reading of aforementioned Judgment is flawed. He is misconstruing language employed in Section 254 (1) of Act (corresponding to section 33(4) of Indian Income-tax Act 1922). word thereon used in section 254 (1) of Act, gives power to Appellate Tribunal to pass such orders thereon as it thinks fit, implies that tribunal would confine itself to subject matter of appeal only. Under Rule 11 of ITAT Rules, appellant can, by leave of Tribunal, urge or be heard in support of any ground not set forth in memorandum of appeal, and Tribunal, in deciding appeal, would not be confined to grounds set forth in memorandum of appeal. This, however, does not mean that Respondent is prevented from supporting judgment on grounds decided in his favor, or by assailing aspect decided against him. Accepting Mr. Hossain s submission would mean that subject matter of appeal is circumscribed and is confined only to grounds urged by Appellant. Firstly, subject matter of appeal is not be construed narrowly, as already observed above. Subject matter is comprehended as to encompass entire controversy between parties ITA 834/2019 Page 27 of 45 which is sought to be got adjudicated upon by Tribunal . Secondly, if jurisdictional objection under Rule 27 is gone into by Tribunal, albeit raised by resort to Rule 27, it cannot be said that subject matter is expanded under guise of said provision. It cannot be said that Respondent is taking away benefit that could be said to have accrued in favour of Appellant before Tribunal. jurisdictional question is not independent issue that can be reversed only by way of appeal or cross objection. We do not find any merit in submission of Mr. Hossain. 20. Having analyzed judgments relied upon by Revenue and not finding same to be of any assistance to Revenue, we now proceed to examine legal position that emerges from plain reading of provision in question. In fact, we feel controversy sought to be raked up by Revenue to deprive Appellant [ Respondent before ITAT] option to raise jurisdictionalgrounds ofobjection is completely misplaced. If we refer to Rule 27 of ITAT Rules, 1963, bare reading thereof manifest that Respondent has right to support impugned order, without having filed any cross appeal or cross objection. This understanding emerges from language of said provision which begins with words Respondent, though he may not have appealed, . This means that provision is to enable Respondent to effectively defend order appealed before Appellate forum. expression though he may not have appealed also indicates that provision is to be resorted to in situation where Respondent may otherwise have right to file appeal or cross objections, but has chosen not to avail of this remedy. Thus, party who has not availed of option of filing appeal, in given situation, if arrayed as Respondent before Appellate Tribunal, can rely upon Rule 27, to ITA 834/2019 Page 28 of 45 support order under appeal. aforesaid expression also suggests that recourse to Rule 27 would only be available in case remedy of appeal is otherwise available with Respondent, and he has elected not to avail same. In other words, in case Respondent would not have such right [of filing cross appeal or cross objection], then he would not have option to invoke said provision. This brings us to more fundamental question regarding scope of aforesaid rule at instance of Respondent who is invoking same. scope and ambit of aforesaid provision can be gathered from remaining part of said rule to effect may support order appealed against on any of grounds decided against him . plain reading of aforesaid expression indicates that Respondent can support impugned order on any of grounds which were decided against him. Now, if weapply aforesaid provision to situation before us, we can easily discern that Appellant-assessee- on basis of Rule 27, was urging before ITAT that initiation of reassessment may be declared as invalid. Therefore, by invoking Rule 27, assessee sought to support final order of CIT(A) in his favour, by assailing that part of said order, wherein CIT(A) upheld initiation of reassessment under Section 153C of Act. We are, therefore, of view that invocation of Rule 27 for challenging decision of CIT (A) on legal ground was well within scope of Rule 27. Appellant assessee, as respondent before Tribunal was within its right to support order under appeal before Tribunal by attacking grounds decided against him. It should nevertheless be borne in mind that Rule 27 cannot be invoked by Respondent on issue which is independently decided against him in order appealed by Appellant. In other words, if there is issue, which is separately decided against Respondent [in appeal], and ITA 834/2019 Page 29 of 45 decision on said issue has no bearing on final decision of CIT (A), then invocation of Rule 27 to challenge correctness of same cannot be sustained. Rule 27 and provisions dealing with cross objections operate in separate fields, although there is certain overlap between them. Evidently, if cross objection is not filed, Respondent would run risk of being faced with situation that it cannot succeed in getting anything over and above order in appeal being confirmed. If Respondent wants to assail independent issue that has been decided against him in order appealed by Appellant, which has no bearing on result of order impugned in appeal before Tribunal, appropriate remedy would lie in of filing cross appeal or cross objection. In that event, as explained above, Rule 27 cannot be pressed into service to have same upset or overturned. 21. Therefore, arguably Rule 27 has limited sphere of operation, but this cannot be whittled or narrowed down to extent, Revenue would like us to hold. We cannot read Rule 27 in restrictive manner to hold that said provision can only be invoked to support order in appeal and while doing so, subject matter of appeal before ITAT should be confined only to extent of grounds urged by Appellant. To read Rule 27 in this manner would render said rule redundant as respondent before Tribunal would, even otherwise be entitled to oppose appeal and raise submissions in answer to grounds raised in appeal that are pressed at hearing of appeal. With this clarity, we do not find any merit in submissions of Revenue that assessee had accepted order of CIT (A), or that issue of maintainability had attained finality. We also do not find that by such interpretation, scope of ITA 834/2019 Page 30 of 45 Rule 27 is expanded or that it would be contrary to Section 253 (4), or that it would render provision relating to cross objections redundant and otiose. In Sundaram &Co. (supra),the High Court observed that reason for such rule [Rule 27] was that when decision is favorable to person and comes to be challenged by his adversary, person must be in position to support decision on every ground urged before deciding authority whether or not it found favor, else such person would be victim of wrong reasons if no such freedom was given. In fact, court has further held that even if Rule 27 as under 1946 Rules had not been enacted, scope for invocation of principle underlying rule would still be possible based on principles of natural justice. This is essence of proceedings in appeal before ITAT which unfortunately has been completely ignored and, instead, Tribunal has engaged itself in totally irrelevant issue of form and structure of application. 22. Therefore, position of law that materialises on reading of aforesaid decisions is that appellant herein, (Respondent before ITAT) could have invoked Rule 27 to assail those grounds that were decided against him if those grounds/issues had bearing on final decision of CIT(A). Revenue was certainly not taken by surprise as appeal is considered to be continuation of original proceedings. ITAT had no discretion to deprive appellant benefit of enabling Rule provision to defend order of CIT(A). question of jurisdiction -which is sought to be urged by Respondent while supporting order in appeal, had bearing on final order passed by CIT(A), because if said issues were to be decided in favour of appellant herein assessee, that ITA 834/2019 Page 31 of 45 would have been additional reason to delete additions made by A.O. 23. We shall now also note some other decisions, where similar issue has been considered. decision in Kanpur Industrial Works v. Commissioner of Income-Tax, 1965 SCC OnLine All 480: (1966) 59 ITR 407 is worth mentioning. In this case, certain land of assessee was acquired by State Government for Rs. 10,000/- and immediately he was given part of land on lease for 999 years on nominal rent. He was permitted to sell land to anybody as freehold property. Accordingly, he sold major part of it during accounting year for Rs. 1,26,870/-. During his assessment, two questions arose, one, whether net receipts from sale of land amounted to profits of business, example, adventure in nature of trade or commerce liable to tax, and other being quantum of net receipts. Income Tax Officer (ITO) held that receipts were profits and fixed amount at Rs. 1,16,870/-,by deducting Rs. 10,000/- paid aspremium, from sale proceeds of Rs. 1,26,870/-. assessee appealed before Appellate Assistant Commissioner (AAC), who confirmed Income Tax Officer s finding that receipts from sale were profits but disagreed with finding that amount of Rs. 1,16,870/- was quantum of profits. AAC was of opinion that market price of land should be cost to assessee. Accordingly, on basis of report from ITO, he determined market price of land was Rs. 1,12,056/- and on that basis determined net receipts at Rs. 14,814/- and decided appeal accordingly. department preferred appeal before Tribunal. In appeal, assessee invoked Rule 27 of Income Tax Appellate Tribunal Rules, 1946 to support order on ground that ITA 834/2019 Page 32 of 45 transaction was not adventure in nature of trade, ground having been decided against Respondent. Tribunal took prayer to be of fundamental nature, destroying and not supporting order of AAC and disallowed it. Tribunal held that price paid by assessee for purchasing land in dispute should be taken to be cost price and remanded case for determining it and then arriving at amount of net receipts. assessee applied to Tribunal for referring case to High Court under Section 66 (1) of Act. question on reference to High Court was Whether on proper construction of rule 27 of Appellate Tribunal Rules, 1946, assessee-respondent having not appealed against order of Appellate Assistant Commissioner was entitled to contend, in department's appeal before Tribunal, that entire profit arising out of sale of land was not liable to assessment? question was answered in negative, and it was held that assessee could contend that receipts were not profits of business at all, but for purpose of showing that department was not entitled to succeed in appeal i.e. to increase in assessed income and not for purpose of claiming relief of quashing of assessment order. It was held that so long as it did not ask for quashing of assessment order, its plea that receipts were not profits ought to have been entertained. It was thus held that answer to question referred depends upon what assessee prayed for before Appellant Assistant Commissioner. If it prayed that assessment order be quashed, it was not entitled to be heard, whereas if it simply prayed that Department s appeal be dismissed, it was entitled to be heard. This judgment thus brings out this fine distinction with respect to interplay of Rule 27, which is pari materia provision under rules ITA 834/2019 Page 33 of 45 in operation. observations of Court, bring out scope of Rule 27, reads as under: 7. provision in rule 27, with which we are concerned, is to be distinguished from that in Order 41, rule 22(1). While rule 22(1) gives two rights to respondent, one in respect of part of claim decreed in his favour, and other in respect of part disallowed, rule 27 deals with order of lower court, viz., Appellate Assistant Commissioner in its entirety. It does not contemplate splitting of Appellate Assistant Commissioner's order into two parts for simple reason that assessment order is incapable of being treated as order partly allowing something and partly disallowing other thing. While in respect of claim of plaintiff it can be said that part of it is allowed and part disallowed same cannot be said in respect of assessment order and it cannot be said to involve two orders partly assessing something and partly disallowing assessment of another thing. When person is assessed he is assessed on all income found assessable. There are no two parties before Income-tax Officer or Appellate Assistant Commissioner and there is no claim by one party to be met by other; so analogy of suit, part of which may be decreed and part rejected, does not apply to assessment proceeding. dispute may arise in assessment proceeding about certain receipts being income or not income or assessees being entitled to certain deduction or being not entitled to it and assessment order is passed after deciding this dispute. dispute may be decided partly in favour of assessee and partly against him. But since assessability is indivisible order assessing income is treated as one indivisible order and facts on account of which various receipts are held to be assessable income are treated as various grounds of attack and various facts on account of which deductions or exemptions are allowed or receipts are not treated as assessable income are treated as grounds of defence. So assessment order is based upon allowing and disallowing grounds of attack and of defence. appeal to Tribunal whether by department or by assessee is like appeal by defendant or plaintiff from decree accepting or rejecting entire claim of plaintiff. There is no scope for any cross-objection and ITA 834/2019 Page 34 of 45 consequently no scope for respondent's, e.g., assessee's or department's urging for reduction in assessed income or increase in assessed income, as case may be. If appellant before Tribunal is department claiming increase in assessed income all that assessee can urge is that there should be no increase; that is only subject-matter of appeal. If assessee desires reduction in assessed amount he himself must file appeal; he has not been given right to file cross-objection. only right given to him is of urging that there should be no increase, not only for ground of defence accepted by Appellate Assistant Commissioner but also for other ground of defence rejected by him. This is only right given to him by rule 27. There is only one order of Appellate Assistant Commissioner that assessing income at certain figure, and right given to him is of urging another ground, though rejected by Appellate Assistant Commissioner, in support of it; he must support order, i.e. must not ask for any variation (in his favour) in order. In other words, he must not ask for any reduction in assessed income. Asking for any reduction in assessed income is not supporting order assessing it. 8. As I said earlier order is one assessing income after accepting and rejecting various grounds of attack and defence. Grounds of attack and defence may be grounds of law or of fact. ground of law may affect assessability of assessee or inclusion of whole of receipt or part of receipt in his assessable income. If assessee is not liable to be assessed at all no part of his income can be assessed; if whole of receipt is not income no part of it can be included in his assessable income and if part of receipt is not income that part cannot be included in his assessable income. If assessee is not assessable at all but is still assessed he and department both can be aggrieved by assessment order; he, on ground that he was not liable to be assessed at all and other grounds, if any, and department, on ground that something more should have been included in his assessed income. So either of them can file appeal. If he files appeal, department can urge in support of assessed income any ground of attack that might have been rejected by ITA 834/2019 Page 35 of 45 Appellate Assistant Commissioner but it cannot ask for increase in assessed income; it can ask for increase only by appealing. If department files appeal, which must be for increase in assessed income, subject-matter of appeal is increase claimed by department and assessee can urge any ground of defence, even though it might have been rejected by Appellate Assistant Commissioner, for showing that there should be no increase. That he is not liable to be assessed is ground for showing that there should be no further assessment. Whole includes part and if no receipt is assessable particular receipt claimed by department to be assessable also is not assessable and department's appeal can be resisted on this ground. Appellate Assistant Commissioner rejected this ground of defence and holding him assessable assessed his income. But since non-liability to assessment on any income includes non-liability to assessment on particular receipt he can object to inclusion of receipt in his assessable income on ground that he is not liable to be assessed on any receipt. This is supporting, and not demolishing, assessment order passed against him, provided he does not ask for cancellation of assessment order. He could have filed appeal against his being assessed but was not bound to do so even though he believed that he was not liable to be assessed at all. If he did not mind paying tax on assessed amount nothing compelled him to file appeal. But this fact that he did not file appeal does not estop him from contending in department's appeal for increase in assessed amount that there should be no increase. He is not barred either by rule of estoppel or by rule of res judicata on account of fact that on that ground he should not have been assessed at all and that he has submitted to his being assessed. His submission to assessment order does not amount to his submission to assessability. If assessment order becomes final it may be said that he is barred by estoppel or res judicata from contending in subsequent proceeding that he was not liable to be assessed at all. In appeal against assessment order itself there is no question of his being barred by estoppel or res judicata. appeal being from assessment order there is no question of its being final or operating as res judicata. There is no other doctrine which can be relied upon for ITA 834/2019 Page 36 of 45 barring his contention that he was not assessable at all. It is irrelevant to consider that on ground on which he urges that there should be no increase he should not have been assessed at all; there is no law that in absence of estoppel or res judicata ground applicable to whole cannot be urged in respect of part if it is not urged, or is urged but rejected, in respect of other part. No incongruity results from applying it to part even though it is not applied to other part nor any shock to conscience. There is no incongruity in maintaining assessment order passed on assessee and refusing to increase it on ground that he was not liable to be assessed at all. What is irksome is incongruity in two orders and not incongruity in respect of reasons for two orders. Two orders should not be incompatiable with each other, so that one can be enforced and other cannot be, but if two orders can both be enforced it is immaterial that they are based upon contradictory reasons. Two orders not mutually exclusive have been maintained even though they are based on mutually exclusive reasons: vide Dunn v. United States [76 L.Ed. 356 : 284 U.S. 390.], Bartkus v. Illinois [3 L.Ed. 2d. 684 : 359 U.S. 121.], Hoag v. New Jersey [2 L.Ed. 2d. 913 : 356 U.S. 464.] and In re William Barron [10 Criminal Appeal Reports 81.] . It is also irrelevant to consider what relief could have been allowed to assessee if this ground of defence is allowed to be urged by him in department's appeal if appellant does not ask for it. No relief can be given to assessee unless he asks for it and is entitled in law to get it; Tribunal has no jurisdiction to give him any relief though he may be entitled to it, if he does not ask for it in appeal. power conferred upon it by section 33(4) is certainly very wide but is so wide only within subject-matter of appeal. However wide it may be, it is limited by scope of appeal. It cannot travel outside its scope and pass any order even though it thinks it fit order. It has to pass order on appeal, i.e., in respect of subject-matter of appeal. order that it thinks fit must be in respect of subject-matter of appeal and so long as it is in respect of it it can be passed regardless of its nature or contents. I respectfully agree with observation of Sir Leonard Stone C.J. and Kania J. in Motor Union Insurance Co. Ltd. v. Commissioner of Income-tax [[1945] 13 I.T.R. 272.] ITA 834/2019 Page 37 of 45 at page 283, of Chagla C.J. and Tendolkar J. in Puranmal Radhakishan v. Commissioner of Income-tax [[1957] 31 I.T.R. 294.] at page 304 and in New India Life Assurance Co. Ltd. v. Commissioner of Income-tax [[1957] 31 I.T.R. 844.] and of Jagadisan and Srinivasan JJ. in Commissioner of Income- tax v. Sundaram & Company Private Ltd. [[1964] 52 I.T.R. 763.] at pages 759 and 770, that word thereon used in section 33(4) only means on appeal , which must mean on grounds raised in appeal. In last case learned judges observed that subject-matter of appeal . is that which Tribunal or appellate court is called upon to decide and to adjudicate and that subject-matter cannot be identified with grounds raised either by appellant or by respondent. By its order appellate court can dispose of appeal and not something not included within its scope. In department's appeal for increase in assessable income only question for its consideration is whether increase or part of it should be allowed or not. Whether amount already assessed was wrongly assessed or not or whether assessee is liable to be assessed at all or not is question quite outside scope of appeal and any decision on it cannot be said to be order on appeal. Consequently it cannot be said that Tribunal would have power to annul assessment even without any prayer by assessee to that effect, if it accepts his ground of defence that he was not liable to be assessed at all. On that ground being accepted it can only refuse to increase assessed income; only that would be order on appeal by department. Any other order such as annulling assessment would be outside scope of appeal. Therefore, it would be erroneous to say that effect of accepting ground of defence of assessee would be annulment of assessment order and that this would be quite reverse of supporting it by ground of defence. xxx xxx xxx 13. In result I hold that assessee could contend that recepits were not profits of business at all, but for purpose of showing that department was not entitled to succeed in appeal, i.e., to increase in assessed income and not for purpose of claiming relief of quashing of ITA 834/2019 Page 38 of 45 assessment order. In other words, so long as it did not ask for quashing of assessment order its plea that receipts were not profits ought to have been entertained. (emphasis supplied) 24. Similar is view taken in case of Principal Commission of Income Tax, Vadodara II v. Sun Pharmaceuticals Industries Ltd. 2017 86 taxmann.com 148 (Gujarat). brief facts of said case are that Respondent assessee, company registered under Companies Act was engaged in various businesses including manufacturing pharmaceuticals. For relevant assessment years, assessee had filed returns of income computing same in terms of Section 115 JB. AO issued notices for reopening of assessments and ultimately framed reassessment by making various additions. In appeal, assessee contested reopening of assessments and also addition made by AO. Commissioner (Appeals) allowed appeals on additions made by AO, however on question of validity of reopening of assessments, he held against assessee. Revenue preferred appeal before Tribunal, where assessee Respondent without filing appeal, relied upon Rule 27 of ITAT Rules and raised legal issue of validity of assessments before Tribunal. Despite objections from Revenue, Tribunal permitted assessee to raise such contentions and ultimately held that notice for reopening of assessment was bad in law. When matter travelled to High Court, question arose as to whether Tribunal was right in law by allowing Respondent assessee to raise question of validity of notices for reopening of assessments taking recourse of Rule 27 of ITAT Rules without assessee having filed cross appeal or cross objection before Tribunal against order of Commissioner (Appeals). Examining this ITA 834/2019 Page 39 of 45 question, High Court,relying upon decision of Gujarat High Court in Dahod Sahakari Kharid Vechan Sangh Ltd. v. Commissioner of Income Tax, 2005 149 Taxman 456 (Gujarat), held as under: 9. This Rule thus provides that respondent, though he may not have appealed, may support order appealed against on any of grounds decided against him. This rule embodies fundamental principle that person, who may not have been aggrieved by order of lower authority or Court and has therefore not filed any appeal against such order, is free to defend order before Appellate Forum on all grounds including ground, which may have been held against him by lower authority or Court, whose order is otherwise in his favour. xxx xxx xxx 11. To put controversy beyond doubt, Rule 27 of Rules makes it clear that respondent in appeal before Tribunal even without filing appeal can support order appealed against on any of grounds decided against him. It can be easily appreciated that all prayers in appeal may be allowed by Commissioner (Appeals), however, some of contentions of appellant may not have appealed to Commissioner. When such order of Commissioner is at large before Tribunal, respondent before Tribunal would be entitled to defend order of Commissioner on all grounds including on grounds held against him by Commissioner without filing independent appeal or cross- objection. 12. Rule 27 of Rules is akin to Rule 22 Order XLI of Civil Procedure Code. Sub-rule (1) provides that any respondent, though he may not have appealed from any part of decree, may not only support decree but may also state that finding against him in Court below in respect of any issue ought to have been decided in his favour; and may also take any cross-objection to decree which he could have taken by way of appeal. In case of Virdhachalam Pillai v. Chaldean Syrian Bank Ltd.AIR 1964 SC 1425 in context of said Rule Supreme Court observed as under: ITA 834/2019 Page 40 of 45 "32. Learned Counsel for appellant raised short preliminary objection that learned Judges of High Court having categorically found that there was antecedent debt which was discharged by suit- mortgage loan only to extent of Rs. 59,000/- and odd and there being no appeal by Bank against finding that balance of Rs. 80,000/- had not gone in discharge of antecedent debt, respondent was precluded from putting forward contention that entire sum of Rs. 80,000/- covered by Exs. and B went for discharge of antecedent debts. We do not see any substance in this objection, because respondent is entitled to canvass correctness of findings against it in order to support decree that has been passed against appellant. 13. Likewise, in case of S. Nazeer Ahmed v. State Bank of Mysore AIR 2007 SCW 766 it was held and observed as under: "7. High Court, in our view, was clearly in error in holding that appellant not having filed memorandum of cross-objections in terms of Order XLI Rule 22 of Code, could not challenge finding of trial court that suit was not barred by Order II Rule 2 of Code. respondent in appeal is entitled to support decree of trial court even by challenging any of findings that might have been rendered by trial court against himself. For supporting decree passed by trial court, it is not necessary for respondent in appeal, to file memorandum of cross-objections challenging particular finding that is rendered by trial court against him when ultimate decree itself is in his favour. memorandum of cross-objections is needed only if respondent claims any relief which had been negatived to him by trial court and in addition to what he has already been given by decree under challenge. We have therefore no hesitation in accepting submission of learned counsel for appellant that High Court was in error in proceeding on basis that appellant not ITA 834/2019 Page 41 of 45 having filed memorandum of cross-objections, was not entitled to canvass correctness of finding on bar of Order II Rule 2 rendered by trial court." 14. Similar issue came-up before Division Bench of this Court in case of Dahod Sahakari Kharid Vechan Sangh Ltd. v. CIT [2006] 282 ITR 321/[2005] 149 Taxman 456 (Guj.) in which Court observed as under: "17. Taking up second issue first, Tribunal has committed error in law in holding that assessee having not filed cross-objection against findings adverse to assessee in order of Commissioner (Appeals), said findings had become final and remained unchallenged. Tribunal apparently lost sight of fact that assessee had succeeded before Commissioner (Appeals). appeal had been allowed and penalty levied by assessing officer deleted in entirety. In fact, there was no occasion for assessee to feel aggrieved and hence, it was not necessary for assessee to prefer appeal. position in law is well settled that cross objection, for all intents and purposes, would amount to appeal and cross objector would have same rights which appellant has before Tribunal. 18. Section 253 of Act provides for appeal to Tribunal. Under sub-section (1), assessee is granted right to file appeal; under sub-section (2), Commissioner is granted right to file appeal by issuing necessary direction to assessing officer; sub-section (3) prescribes period of limitation within which appeal could be preferred. Section 253(4) of Act lays down that either assessing officer or assessee, on receipt of notice that appeal against order of Commissioner (Appeals) has been preferred under sub-section (1) or subsection (2) by other party, may, notwithstanding that no appeal had been filed against such order or any part thereof, within 30 days of notice, file memorandum of cross objections verified in prescribed manner and such memorandum shall be ITA 834/2019 Page 42 of 45 disposed of by Tribunal as if it were appeal presented within period of limitation prescribed under sub-section (3). Therefore, on plain reading of provision, it transpires that party has been granted option or discretion to file cross objection. 19. In case party having succeeded before Commissioner (Appeals) opts not to file cross objection even when appeal has been preferred by other party, from that it is not possible to infer that said party has accepted order or part thereof which was against respondent. Tribunal has, in present case, unfortunately drawn such inference which is not supported by plain language employed by provision. 20. If inference drawn by Tribunal is accepted as correct proposition, it would render Rule 27 of Tribunal Rules redundant and nugatory. It is not possible to interpret provision in such manner. Any interpretation placed on provision has to be in harmony with other provisions under Act or connected Rules and interpretation which makes other connected provisions otiose has to be to avoided. Rule 27 of Tribunal Rules is clear and unambiguous. right granted to respondent by said Rule cannot be taken away by Tribunal by referring to provisions of Section 253(4) of Act. Tribunal was, therefore, in error in holding that finding recorded by Commissioner (Appeals) remained unchallenged since assessee had not filed cross objections." 15. first question is, therefore, answered against Revenue and in favour of assessee." (emphasis supplied) 25. Similar views have been expressed in, Commissioner of Income Tax v. M/s India Cements Ltd., Chennai in Tax Appeal Case No.117/2009 ITA 834/2019 Page 43 of 45 (Madras High Court), Sir Syed Educational and Social Welfare Society, Bhopal v. Assistant Commissioner of Income Tax-I, Bhopal in ITA Nos. 102-108/2019 (MP High Court ) and Principal Commissioner of Income Tax-6 v. M/s Dhara Vegetable Oil and Foods Company Ltd. in ITA 454/2019 (Delhi High Court). 26. upshot of above discussion is that Rule 27 embodies fundamental principal that Respondent who may not have been aggrieved by final order of Lower Authority or Court, and therefore, has not filed appeal against same, is entitled to defend such order before Appellate forum on all grounds, including ground which has been held against him by Lower Authority, though final order is in its favour. In instant case, Assessee was not aggrieved party, as he had succeeded before CIT (A) in ultimate analysis. Not having filed cross objection, even when appeal was preferred by Revenue, it does not mean that inference can be drawn that Respondent assessee had accepted findings in part of final order, that was decided against him. Therefore, when Revenue filed appeal before ITAT, Appellant herein (Respondent before Tribunal) was entitled under law to defend same and support order in appeal on any of grounds decided against it. Respondent assessee had taken ground of maintainability before Commissioner (Appeals) and, therefore, in appeal filed by Revenue, it could rely upon Rule 27 and advance his arguments, even though it had not filed cross objections against findings which were against him. ITAT, therefore, committed mistake by not permitting assessee to support final order of CIT (A), by assailing findings of CIT(A) on issues that had been decided against him. ITA 834/2019 Page 44 of 45 Appellant - assessee, as Respondent before ITAT was entitled to agitate jurisdictional issue relating to validity of reassessment proceedings. We are, therefore, of considered opinion that impugned order passed by ITAT suffers from perversity in so far as it refused to allow Appellant assessee (Respondent before Tribunal) to urge grounds by way of oral application under Rule 27. question of law as framed is answered in favour of Appellant assessee and resultantly impugned order is set aside. matter is remanded back before ITAT with direction to hear matter afresh by allowing Appellant- assessee to raise additional grounds, under Rule 27 of ITAT Rules, pertaining to issues relating to assumption of jurisdiction and validity of reassessment proceedings under Section 153C of Act. 27. appeal is allowed in above terms. SANJEEV NARULA, J VIPIN SANGHI, J MAY 18, 2020 v/nk ITA 834/2019 Page 45 of 45 Sanjay Sawhney v. Principal Commissioner of Income-tax
Report Error