Old and Gold Rule of Law reiterated by Calcutta High Court in Sheo Kumar Mishra [2016] 70 taxmann.com 375 (Calcutta) FEBRUARY 26, 2016 that In the absence of an appeal or cross-objections by the department against the order in dispute, the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Under Section 251, CIT A has power to enhance the assessment but u/s 253 Tribunal does not have the power to enhance the enhancement. it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant
Facts and Decision
The AO had treated excess claim of certain transportation expense amounting to Rs2.02 crores as undisclosed Income of the assesse. He also opined that the assessee had shown bogus expenditures and bogus creditors, the peak credit whereof was Rs. 1.59 crores. He, however, did not treat said amount as undisclosed income on ground that said amount was less than the amount of excess claim of transportation charges and, therefore, no separate addition was made on this account. CIT A upheld order of AO
The Tribunal reversed addition of Rs. 2.02 crores on ground that said charges were already accounted for by the assessee in its account books and, therefore, could not be taxed. The Tribunal, however, confirmed addition of Rs. 1.59 crores on account of bogus expenditures
| Held by High Court that :It was not open to the Tribunal to confirm the addition of the sum of Rs. 1.59 crores because no such addition was made. In the absence of any such addition, there was no basis for the Tribunal to confirm the same. This addition was made by the Tribunal for the first time which the Tribunal could not have done. |
The assessee did not raise the issue before the Tribunal of any addition of a sum of Rs. 1.59 crores because there was no addition of the sum of Rs. 1.59 crores or any part thereof. The assessee attempted to demonstrate the fallacy in the finding arrived at by the Assessing Officer by holding at one place that there was an undisclosed income of Rs. 2.02 crores and at another place by holding that there was an undisclosed income of Rs. 1.59 crores. When the Assessing Officer had not made the addition of Rs. 1.59 crores, the assessee had no occasion to challenge the same. When the assessee carried the matter to the Commissioner (Appeals), the latter, without anything more, could have enhanced the addition. But the Commissioner (Appeals) did not do so. He merely confirmed the order of the Assessing Officer. Therefore, the subject matter of challenge before the Tribunal was the addition of Rs. 2.02 crores. The Tribunal could either have upheld the same or could have set aside the same. The Tribunal chose to set aside that addition. The matter should therefore have come to an end in the absence of any cross objection by the revenue.
References:
- State of Kerala v. Vijaya Stores [1979] 116 ITR 15 (SC)
- Motor Union Insurance Co. Ltd. v. CIT [1945] 13 ITR 272,(Bom)
- New India Life Assurance Co. Ltd. v. CIT [1957] 31 ITR 844 (Bom)
Division Bench judgment of the Bombay High Court in the case of Motor Union Insurance Co. Ltd. v. CIT [1945] 13 ITR 272, wherein the following views were expressed:
‘Apart from statute, it is elementary that if a party appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has any grievance, he has a right to file a cross-appeal or cross-objections. But if no such thing is done, the other party, in law, is deemed to be satisfied with the decision. He is, of course, entitled to support the judgment of the first Officer on any ground open to him, but he is not entitled to raise a ground so as to work adversely to the appellant and in his favour. Apart from that, the section, in our opinion, does not permit the course adopted by the Tribunal in this case. Under S. 31, when the Legislature thought of giving power to the Appellate Assistant Commissioner to enhance the assessment, it has in terms enacted that. In our opinion, that fact is against the contention that the words of S. 33(4) are wide enough to include a power of enhancement, without an appeal by the Commissioner. The, word “thereon” used in S. 33(4) only means “on the appeal,” which must mean on the grounds raised in the appeal. Read in that way, the sub-section only gives power to the Appellate Tribunal to give its decision and pass orders in respect of all grounds urged (which must be on behalf of the appellant) in respect of the decision, appealed against. In deciding those grounds it can pass appropriate orders. But, in our opinion, it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will work adversely to the appellant.’
The judicial principle pressed into service by the Division Bench of the Bombay High Court was later followed by another Division Bench of the Bombay High Court in the case of New India Life Assurance Co. Ltd. v. CIT [1957] 31 ITR 844, and the same view was also endorsed by the Apex Court in the case of State of Kerala v. Vijaya Stores [1979] 116 ITR 15. Their Lordships were considering the question in connection with the powers of the Sales Tax Appellate Tribunal which was similar to the provisions of section 33 of the Income Tax Act of 1922 and this is what Their Lordships observed:
‘The normal rule that a party not appealing from a decision must be deemed to be satisfied with the decision, must be taken to have acquiesced therein and be bound by it, and, therefore, cannot seek relief against a rival party in an appeal preferred by the latter, has not been deviated from in sub-s. (4)(a)(i) above. In other words, in the absence of an appeal or cross-objections by the department against the AAC’s order the Appellate Tribunal will have no jurisdiction or power to enhance the assessment. Further, to accept the construction placed by the counsel for the appellant on sub-s. (4)(a)(i) would be really rendering sub-s. (2) of s. 39 otiose, for if in an appeal preferred by the assessee against the AAC’s order, the Tribunal would have the power to enhance the assessment, a provision for cross-objections by the department was really unnecessary. Having regard to the entire scheme of s. 39, therefore, it is clear that on a true and proper construction of sub-s. (4)(a)(i) of s. 39 the Tribunal has no jurisdiction or power to enhance the assessment in the absence of an appeal or cross-objections by the department. It is true that the two Bombay decisions reported in[1945] 13 ITR 272 and [1957] 31 ITR 844, on which the High Court has relied, have been rendered in relation to s.33(4)of the Indian I.T. Act, 1922, but, in our View, the said provision of I.T. Act is in pari malaria with the provision of s. 39(4) of the Kerala General Sales Tax Act, 1963. Moreover, the Bombay High Court has pointed out in those decisions that s. 33(4) merely enacted what was the elementary principle to be found in the Civil Procedure Code that the respondent who has neither preferred his own appeal nor filed cross-objections in the appeal preferred by the appellant, must be deemed to be satisfied with the decision of the lower authority and he will not be entitled to seek relief against a rival party in an appeal preferred by the latter. In the first mentioned case, the elementary principle is stated at page 282 of the report thus:
“Apart from statute, it is elementary that if a party appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has any grievance, he has a right to file a cross-appeal or cross-objections. But, if no such thing is done, the other party, in law, is deemed to be satisfied with the decision. He is, of course, entitled to support the judgment of the first officer on any ground open to him, but he is not entitled to raise a ground so as to work adversely to the appellant and in his favour.”‘