Rule 31: Tribunal’s Power to Ensure Substantive Justice in GST Appeals

Rule 31 of GSTAT(Procedure) Rules, 2025 “The appellant shall not, except by leave of the Appellate Tribunal, urge or be heard in support of any grounds not set forth in the Form of appeal, but the Appellate Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the Form of appeal or those taken by leave of the Appellate Tribunal under these rules:

Provided that the Appellate Tribunal shall not rest its decision on any other grounds unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.”

This GSTAT Rule has given wider powers to Tribunals as far as it’s judgement on the Grounds of appeal (“GoA”) by appellant. As we know in every appeal GoA is one of the critical part akin to heart in our body hence has to be framed with utmost care. An appeal filed will become totally infructuous, if all the relevant/important GoA’s has not been properly dealt with at the time of filing an appeal.

From the reading of the above Rule, we can safely conclude that primarily the Appellant can argue only on the GoA’s as set forth in Form of Appeal. However, GSTAT is vested with the powers to admit additional GoA’s at the Appellant’s request or on its own, but before doing so GSTAT is bound to allow opportunity of being heard to the affected party.

Hon’ble Supreme Court observed that the principles of natural justice (i.e. nemo judex in causa sua– no person should be a judge in their own cause and audi alteram partem– a person affected by administrative, judicial or quasi-judicial action must be heard before a decision is taken) act as a guarantee against arbitrary action, both in terms of procedure and substance.

Thus the crucial factor for admitting additional grounds of appeal is to see that it is based on question of law arose from the facts which were already on records of the assessment proceedings and that the new grounds of appeal would only help in determining correct tax liability. If conditions complies, GSTAT is bound to accept such additional grounds of appeal by affording reasonable opportunity of being heard to affected party.

Further, the Rule under GSTAT (Procedure) Rule, 2025 and Rule 11 of Income-tax (Appellate Tribunal) Rules, 1963 seems to be similarly worded, therefore for better understanding I am reproducing the Rule 11 which are as under :-

Rule 11 :- Grounds which may be taken in appeal – The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule:

Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.

As both the laws contains identical Rule therefore we can refer various judgements under Income Tax Act, for better understanding Rule 31 of GSTAT (Procedure) Rule, 2025. The most relevant and important judgement of Apex Court in the case of   National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC).

Under what circumstances additional ground can be raised before

It is well established that the Tribunal has power to admit additional grounds, but at the same time, the entire assessment is not before the Tribunal, as it is before the first appellate authority. Additional Ground should ordinarily relate to issues arising out of the order of the first appellate authority. But the Courts have held that even grounds, which have not been raised before the A.O. or first appellate authority could be raised, if they are based on facts on record.

This principle was reiterated in Ooppootil Kurien and Co. Pvt. Ltd. v. CIT [2004] 266 ITR 409 (Ker.) and Allahabad Bank v. DCIT [2018] 90 taxmann.com 328 (Kolkata – Trib.). In this case, the assessee sought to raise objection against the inference that a transaction was sham one without having contested the same in the first appeal, which related to another issue. The Tribunal declined to entertain the same. The assessee had taken up the matter to the High Court, which allowed the plea in the light of the decision of the Supreme Court in National Thermal Power Co. Ltd. v. CIT 229 ITR 383 (SC). In this decision Hon’ble SC held that :

Under section 254 of the Income Tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non- taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.

The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide e.g., CIT v. Anand Prasad (Delhi), CIT v. Karamchand Premchand (P) Ltd. and CIT v. Cellulose Products of India Ltd. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.

The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits.”

We may also refer recent judgement of Punjab and Haryana Court in the case of VMT Spinning Co. Ltd. remanded the matter to the Tribunal with the liberty to remand the matter further, if it so deem feet with direction to the tribunal to accept additional ground even if raised by way of oral request.

Karnataka High Court has held that the CIT(A) or ITAT can permit assessee to claim deduction not claimed before AO when relevant materials are on record – CIT v. Motor Industries Co. Ltd. 229 ITR 137 (Kar.). Similarly,

Kolkata Bench of ITAT in the case of Kandi Industrial (P) Ltd. v. DCIT [2006] 100 ITD 462 (ITAT-Kol) held that if assessee is entitled to certain relief, deduction or benefit, assessee should not be denied or deprived of it, even if claim pertaining to the same is made for first time before Tribunal during pendency of appeal before it. Also refer CIT v. B G Shirke Construction Technology (P) Limited [2017] 79 taxmann.com 306 (Bombay)/[2017] 246 Taxman 300 (Bombay); CIT v. Britannia Industries Ltd. 2017| 83 taxmann.com 365 (Calcutta), Principal CIT, Bengaluru v. Karnataka State Cooperative Federation Ltd [2021] 128 taxmann.com 1 (Karnataka).

Full Bench decision of the Bombay High Court in Ahmedabad Electricity Co. Ltd./Godavari Sugar Mills Ltd. v. CIT (1993) 199 ITR 351, wherein it was held as under —

“In view of the above decisions, it is quite clear that the Appellate Tribunal has jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of the Appellant Assistant Commissioner, so long as these grounds are in respect of the subject-matter of the entire tax proceedings.”

Full Bench of the Bombay High Court in Godavari Sugar Mills Ltd.’s case dealing with rule 11 observed as under :-

“In our view rule 11 in fact supports the assessee and not the department. Rule 11 in fact confers wide powers on the Tribunal, although it requires a party to seek the leave of the Tribunal. It does not require the same to be in writing. In a fit case it is always open to the Tribunal to permit an appellant to raise an additional ground not set forth in the memorandum of appeal. The safeguard is in the proviso to rule 11 itself. The proviso has had a sufficient opportunity of being heard on that ground. Thus even if it is a pure question of law, the Tribunal cannot consider an additional ground without affording the other side an opportunity of being heard. We venture to state that even in the absence of the proviso it would be incumbent upon the Tribunal to afford a party an opportunity of meeting an additional point raised before it.

Moreover, even though rule 11 requires an appellant to seek the leave of the Tribunal, the Tribunal can decide the appeal on a ground neither taken in the memorandum of appeal nor by its leave. The only requirement is that the Tribunal cannot rest its decision on any other ground unless the party who may be affected has had sufficient opportunity of being heard on that ground.

Thus it can be well concluded that first of all we should take utmost care while drafting GoA’s for GSTAT appeal so that all relevant Grounds must be incorporated. In case later on,  we found certain Grounds has been left to be incorporated then we have to analyse the following three factors authentication :-

1.Whether the grounds are question of law, and based on question of law arose from the facts,

2. The facts were already on records of the assessment proceedings, and

3. That the new grounds of appeal would only help in determining correct tax liability.

Then your success is sure when you proceed with urge before ITAT for acceptance of  additional grounds of appeal which also should be urged before conclusion of proceedings.