- (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1973-74 ; "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of the Appellate Assistant Commissioner and directing him to entertain the additional ground raised by the assessee ?"
(2.) BRIEFLY stated, the facts of the case are that an application under Section 154 of the Income-tax Act, 1961, was moved by the assessee praying therein for relief under Section 80J on the ground that the value of the asset has been taken at a lesser figure. It was found by the Income-tax Officer that the value of the asset has been taken at a figure of Rs. 5,33,215 instead of Rs. 5,45,892 and, accordingly, the mistake was rectified. The Income-tax Officer further found that, while computing the relief under Section 80J, the pre-paid expenses and expenditure not written off was wrongly taken as an asset. A notice under Section 154 was issued for withdrawing the excess deduction allowed under Section 80J and, after considering the reply of the assessee, the computation was revised. An appeal was preferred against this order to the Appellate Assistant Commissioner wherein it was contended that the Income-tax Officer has erred in deducting the liability of Rs. 89,740, while computing the capital employed and this should not have been deducted. The Appellate Assistant Commissioner has rejected this contention on the ground that this ground was not taken originally in the grounds of appeal and, therefore, it cannot be entertained. The matter was challenged by the assessee before the Income-tax Appellate Tribunal and it was submitted that the Appellate Assistant Commissioner has erred in not considering the ground raised before him. The Income-tax Appellate Tribunal came to the conclusion that the grounds moved by the assessee by the petition dated February 16, 1978, do not involve any investigation of facts and was purely a question of law which ought to have been entertained and considered on the merits by the Appellate Assistant Commissioner without summarily rejecting the same. The matter was restored to the file of the Appellate Assistant Commissioner with a direction to consider the additional ground moved by the assessee and decide the same on the merits of the case and the order of the Appellate Assistant Commissioner was set aside. Under Section 250(5), the Appellate Assistant Commissioner may, at the time of hearing of appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal if he is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. It has been held in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC) that, if the claim for exemption was not made before the Income-tax Officer and there is no material on record to support such claim, then the same cannot be raised before the Appellate Assistant Commissioner. The above judgment was considered in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) and it was held that the observations in the case of Gurjargravures' case [1978] 111 ITR 1 (SC) do not make out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at the stage when the return was filed or when the assessment order was made or if the ground became available on account of change of circumstances or law. There may be several factors justifying the raising of such a plea in an appeal and each case has to be considered on its own facts. It was further observed that, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and then he must be satisfied that the ground raised was bona fide and the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principle or any hard and fast rule can be laid down for this purpose.
(3.) FROM a perusal of the judgment of the apex court, it is evident that what was required to be seen by the Appellate Assistant Commissioner in respect of the new ground which was raised before him was as to whether he was satisfied that the omission of the ground from the appeal was wilful or unreasonable. No such finding has been given in this regard. If it is a pure question of law, then it could be allowed to be raised. The Income-tax Appellate Tribunal has proceeded merely on the basis that it was a pure question of law. If it was a pure question of law, then the Income-tax Appellate Tribunal could have directed the Appellate Assistant Commissioner to take into consideration the said ground and decide it on the merits. The position would also differ in a case where the matter pertains to an appeal against an assessment order and where the matter is only with regard to an appeal against the order passed in rectification proceedings. If an order, as in the present case, has been passed in proceedings under Section 154, then the jurisdiction to decide the appeal would be limited only with regard to the questions decided by the Income-tax Officer by rectifying or refusing to rectify the assessment order and any question which has not been decided or refused to be decided by an express order would be deemed to have become final. An assessee is not entitled to reopen those issues which have become final and against which no appeal has been preferred. The jurisdiction under Section 154 on the application of the assessee or by the Income-tax Officer suo motu is very limited and, therefore, it has to be seen whether the question which is allowed to be taken arises out of the order passed by the Income-tax Officer or was raised before him or considered before him. If the matter was not the subject-matter of dispute before the Income-tax Officer, then it would be deemed that the assessee was satisfied with the original order of assessment and the doctrine of finality of judgment will be applicable. The order has become final and such question cannot be allowed to be raised even in appeals which are not the subject-matter of dispute in the rectification proceedings. This view finds support in the decision of the apex court in the case of CIT v. Sun Engineering Works P. Ltd. [1992] 198 ITR 297. Another point which has to be taken into consideration because of the subsequent amendment in the Act itself is that borrowed capital has to be excluded and the provisions of Rule 19A and Sub-section (1A) of Section 80J which have been brought into force with effect from April 1, 1972, have been upheld by the apex court in Lohia Machines Ltd. v. Union of India [1985] 152 ITR 508. According to the said decision, borrowed capital is to be excluded while computing the relief under Section 80J. Since no finding was given by the Appellate Assistant Commissioner in terms of Section 250(5), the Income-tax Appellate Tribunal was not justified in setting aside the order of the Appellate Assistant Commissioner and directing him to entertain the additional ground raised by the assessee. The Income-tax Appellate Tribunal has also not decided the issue in terms of the provisions of Section 250(5) and unless a finding is recorded that the omission to take the ground in the form of appeal was not wilful or unreasonable, no directions could have been given to entertain the said additional ground. The matter is, accordingly, sent back to the Tribunal to record a finding in terms of Section 250(5) of the Act or to direct the Appellate Assistant Commissioner to act in terms of the provisions of the said Section and observations made above and then to proceed in accordance with law. ;