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* IN THE HIGH COURT OF DELHI AT NEW DELHI
6
+ ITA 771/2014
COMMISSIONER OF INCOME TAX CENTRAL-II ..... Appellant
Through : Suruchi Aggarwal, Senior Standing
Counsel with Ms Lakshmi Gurung, Junior
Standing Counsel.
versus
DIVINE INFRACON PVT. LTD. ..... Respondent
Through Mr Salil Aggarwal and Mr Ravi Pratap
Mall, Advocates.
AND
7.
+ ITA 185/2015
DIVINE INFRACON PVT LTD ..... Appellant
Through Mr Salil Aggarwal and Mr Ravi Pratap
Mall, Advocates.
versus
COMMISSIONER OF INCOME TAX,
CENTRAL II ..... Respondent
Through Suruchi Aggarwal, Senior Standing
Counsel with Ms Lakshmi Gurung, Junior
Standing Counsel.
CORAM:
HON'BLE DR. JUSTICE S.MURALIDHAR
ITA 771/2014 & ITA 185/2015 Page 1 of 12
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 13.08.2015
Vibhu Bakhru, J.
1. These appeals have been preferred against an order dated 12th June, 2014
passed by the Income Tax Appellate Tribunal (`ITAT') (hereafter referred to
as `Tribunal') in ITA No.2393/Del/2014, being the Assessee's appeal
against the decision of the Commissioner Income Tax (Appeals) [hereafter
`CIT(A)' ] sustaining the addition of a sum of Rs. 20,25,00,000/- on account
of unexplained credit under Section 68 of the Act, on merits. The Revenue
has filed the present appeal ( ITA 771/2014) being aggrieved by the decision
of the Tribunal insofar as it has upheld the CIT(A)'s view that the aforesaid
addition made by the Assessing Officer (hereafter `AO') was beyond the
scope of assessment under Section 153A of the Act. The Assessee states that
it has filed the present appeal (ITA 185/2015) only for the reason that the
Revenue has preferred an appeal against the order of the Tribunal.
2. The principal controversy involved in the present appeals relates to the
issue whether the Revenue could assail the finding returned by the CIT(A)
in favour of the Assessee in an appeal preferred by the Assessee before the
ITA 771/2014 & ITA 185/2015 Page 2 of 12
Tribunal, limited to the issue decided by the CIT(A) against the Assessee.
Admittedly, the Revenue did not appeal against the decision of CIT(A)
holding that the addition made was beyond the scope of the assessment
under Section 153A of the Act. Yet, the Counsel for the Revenue sought to
assail the said finding in the appeal preferred by the Assessee. The Tribunal
permitted the Counsel for the Revenue to agitate the issue but finally
decided the same against the Revenue. It is contended by the Assessee that it
was not permissible for the Tribunal to permit the Revenue to challenge the
decision of the CIT(A) in an Appeal preferred by the Assessee.
3. The aforesaid controversy arises in the backdrop of the following facts:
3.1 The Assessee filed a return for the Assessment year 2008-09 declaring a
total income of Rs.3,84,027/- on 30th September, 2009. Thereafter, on 14th
September, 2010 search and seizure operations were conducted at the
registered office of the Assessee Company. Subsequent thereto, a notice
under Section 153A of the Act was issued against the Assessee on 26 th
September, 2012. Pursuant to the notice issued under Section 153A, the AO
passed an order dated 28th March, 2013 assessing the total income of the
ITA 771/2014 & ITA 185/2015 Page 3 of 12
Assessee for the Assessment Year 2008-09 at Rs.20,28,84,027/-. The AO
made an addition of Rs.20,25,00,000/- under Section 68 of the Act as the
AO was of the view that the share application money received by the
Assessee Company was unexplained.
3.2 The Assessee preferred an appeal against the Assessment Order before
the CIT(A), being Appeal No. 320/2013-14, inter alia challenging the
addition on merits as well as on the ground that the addition was beyond the
scope of Section 153A of the Act. According to the Assessee, the share
application money was duly disclosed in its return and the addition was
unrelated to any incriminating material found during the search and, thus,
was beyond the scope of assessment under Section 153A of the Act.
3.3 The CIT(A) disposed of the Appeal by an order dated 24th January 2014.
The CIT(A) found merit in the Assessee's contention that the addition made
was beyond the scope of Section 153A of the Act as the addition was not
based on any incriminating material found during the search. However, the
CIT(A) upheld the conclusion of the AO that the share application money
reflected in the books of the Assessee was unexplained.
ITA 771/2014 & ITA 185/2015 Page 4 of 12
3.4 The Revenue accepted the aforesaid order passed by the CIT(A) and did
not prefer any appeal before the Tribunal. The Assessee, on the other hand,
impugned the order of CIT(A), inter alia, on the following ground :-
"That the learned CIT (Appeals) has grossly erred in law
and on facts in sustaining the addition made by assessing
officer under section 68 of the Act amounting to
Rs.20,25,00,000/- particularly having regard to the fact
that very assumption of jurisdiction to bring to tax the
aforesaid sum was beyond the scope of provisions of
section 153A of the Act, as was held by learned
Commissioner of Income Tax (Appeals) in the impugned
order."
3.5 During the course of the proceedings before the Tribunal, the
representative of the Revenue sought to assail the finding of the CIT(A) that
the additions made were outside the scope of Section 153A of the Act. The
Tribunal entertained the aforesaid plea and permitted the representative of
the Revenue to raise contentions in that regard, but finally the conclusions of
the CIT(A) were sustained.
3.6. The Revenue has now preferred an appeal impugning the decision of the
ITA 771/2014 & ITA 185/2015 Page 5 of 12
ITAT insofar as the Tribunal sustained the finding of the CIT(A) that the
addition made in respect of the share application money was beyond the
scope of Section 153A of the Act.
4. The learned counsel for the Assessee submitted that the Tribunal erred in
permitting the Revenue to challenge the finding of the CIT(A) with regard to
the scope of Section 153A of the Act. He submitted that since the Revenue
had not appealed against the decision of the CIT(A), it could not raise the
issue before the Tribunal. He referred to the decision of this Court in CIT vs.
Edward Keventer (Successors) Pvt. Ltd.: (1980) 123 ITR 200(Del), in
support of his contention that it would not be open for the respondent to
travel outside the scope of the subject matter of the Appeal.
5. He submitted that the scope of the subject matter of the Appeal was
limited to the finding of the CIT(A) with regard to the merits of the addition
made; the issue whether the same was beyond the scope of Section 153A of
the Act was not the subject matter before the Tribunal and, thus, the
Tribunal could not have entertained any plea in that regard.
ITA 771/2014 & ITA 185/2015 Page 6 of 12
6. The learned counsel for the Assessee also referred to the decision of the
Supreme Court in Hindustan Coca Cola Beverages P.Ltd v. Joint
Commissioner of Income Tax: (2007) 293 ITR 226. In that case, the
Tribunal had decided to reopen an appeal decided earlier and permitted the
Assessee to urge a ground, which had not been considered by the Tribunal
while deciding the appeal. The decision of the Tribunal to reopen the matter
was not appealed against by the Revenue but, the Revenue successfully
assailed the final order passed by the Tribunal before the High Court, inter
alia, on the ground that the matter could not be reopened by the Tribunal. In
this context, the Supreme Court held that, "We have already noticed that the
order passed by the Tribunal to reopen the matter for further hearing as
regards ground No. 7 has attained its finality. In the circumstances, the High
Court could not have interfered with the final order passed by the Income-
tax Appellate Tribunal."
7. We find considerable merit in the contention advanced on behalf of the
Assessee. Concededly, the issue whether the additions made by the AO were
beyond the scope of Section 153A had been decided by the CIT(A) in favour
of the Assessee and the decision on the said issue had attained finality as the
ITA 771/2014 & ITA 185/2015 Page 7 of 12
Revenue had not preferred any appeal with regard to the CIT(A)'s order.
8. It is also relevant to note that by virtue of Section 253(2) of the Act,
the Principal Commissioner or Commissioner may, if he objects to an order
passed by the CIT(A) under Section 250 of the Act, direct the AO to prefer
an appeal to the Tribunal. It is not disputed that no such directions to file an
appeal against the CIT(A)'s order dated 21st January, 2014 were issued by
the concerned Income Tax Authority.
9. In the circumstances, there could be no dispute that the CIT(A)'s order in
so far as it relates to the issue regarding the assessment being beyond the
scope of Section 153A of the Act had attained finality, and thus, could not
have been disturbed by the Tribunal.
10. It is also relevant to refer to the decision of the Mysore High Court in
Pathikonda Balasubba Setty v. CIT: (1967) 65 ITR 252 wherein the court
observed as under:
"The effect of these provisions is that the Appellate Tribunal's
powers are limited to passing such orders as they may think fit
on the appeal. The expression 'on the appeal', clearly and
indubitably points to the conclusion that the powers of the
ITA 771/2014 & ITA 185/2015 Page 8 of 12
appellate authority, the Tribunal, are limited to the, subject-
matter of the appeal.
This is necessarily so because every point dealt with by the
lower appellate court, the Appellate Assistant Commissioner,
need not be the subject of attack before the Appellate Tribunal.
The interests of the revenue are sufficiently protected by the
extensive powers given to the first appellate authority, the
Appellate Assistant Commissioner. At that stage, the only
appellant would be the assessee, not the department although it
is entitled to be represented by an officer of the department in
support of the order of the original court. A mistake, if an
committed by, the original authority, which is adverse to the
interests of the assessee, will be canvassed by the assessee
before the Appellate Assistant Commissioner. A mistake, if any,
committed by the original assessing authority which is
detrimental to the interests of the revenue is capable of being
corrected by the Appellate Assistant Commissioner even
without an appeal having been presented by the department. At
the next stage of second appeal to the Appellate Tribunal, the
liberty is given to both the sides to go up in appeal to the
Appellate Tribunal and when the Appellate Tribunal comes to
deal with the matter, the law regards it sufficient to leave it to
the parties going up as appellants before the Tribunal to limit
their attack on the order of the first appellate authority and to
seek the intervention of the Tribunal only to the extent
necessary to correct the errors in the order of the Appellate
Assistant Commissioner according to the case of the appellant.
It should be noted that in comparison to the sections describing
the power of the Appellate Assistant Commissioner, the
sections which describe the appellate powers of the Tribunal do
not make any reference to a power to enhance the assessment or
to enhance the tax in the same way as the Appellate Assistant
Commissioner is empowered to do while dealing with an appeal
against the order of the assessing authority.
As the appellate power is a power which is conferred by statute,
both its existence as well as its extent has to be gathered from
ITA 771/2014 & ITA 185/2015 Page 9 of 12
the relevant statutory provision. The fundamental idea is that an
appellant seeks a relief from an appellate court, and not
determinate to himself. Even under the general provisions of the
law of procedure, the worst determinate which an appellate
court may visit on an appellant is to dismiss the appeal with a
direction in an appropriate case to pay costs to the opposite side.
An order adverse to the interests of the appellant-adverse in the
sense that it takes away from him a benefit which he has already
acquired under the order appealed from-is possible only by
means of an order made either upon a cross-appeal filed by the
other side or on the basis of a memorandum of cross-objections
presented by him wherever the law permits him to do so."
11. The aforesaid passages were referred to by a Division bench of this
Court in CIT vs. Edward Keventer (Successors) Pvt. Ltd (supra) and the
Court further reiterated the principle that a party who has not appealed
cannot be permitted to raise a ground, which will work adversely to the
appellant.
12. Indisputably, the Revenue could also not take recourse to Rule 27 of
the Income Tax (Appellate Tribunal) Rules, 1963. By virtue of the said
Rule, a respondent before the Tribunal can support the decision appealed
against not only on the grounds decided in favour of the respondent but also
on grounds decided against it. However, Rule 27 of the said Rules would not
extend to permitting the respondent to expand the scope of an appeal and
ITA 771/2014 & ITA 185/2015 Page 10 of 12
assail the decision on issues, which are not subject matter of the appeal. In
CIT vs. Edward Keventer (Successors) Pvt. Ltd (supra), this court had
reiterated that "it would not be open to a respondent to travel outside the
scope of the subject matter of the appeal under the guise of invoking r 27"
13. The learned counsel for the Revenue has referred to the decision of
the Supreme Court in National Thermal Power Corporation Ltd. vs.
Commissioner of Income Tax: 229 ITR 383 (SC) in support of the
contention that it is open for the Tribunal to consider all questions of law
where no investigation into facts are necessary. We find that the aforesaid
decision is wholly inapplicable to the facts of the present case. It is trite law
that the Tribunal may, under Section 254(1) of the Act, pass such orders as it
thinks fit; nonetheless, the decision must be in respect of the subject matter
of the dispute. Indisputably, the Tribunal can examine all questions which
relate to the subject matter of an appeal but, once an issue has attained
finality and is not a subject matter of the dispute before the Tribunal, it
would not be open for the Tribunal to reopen the issue on the pretext of
examining a question of law.
ITA 771/2014 & ITA 185/2015 Page 11 of 12
14. In view of the aforesaid, the Appeal preferred by the Revenue (being
ITA No. 771/2014) is rejected. As indicated above, the Appeal preferred by
the Assessee (ITA No. 185/2015) is only consequential to the Appeal filed
by the Revenue and is, accordingly, also disposed of.
15. It is clarified that the question whether an assessment could be framed
under Section 153A of the Act, even where no incriminating documents
have been found during the search is left open.
VIBHU BAKHRU, J
S.MURALIDHAR, J
AUGUST 13, 2015
pkv
ITA 771/2014 & ITA 185/2015 Page 12 of 12
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