ITAT Cannot be Precluded from handling any point which appertains to assessment even if it is raised for the first time

CA Prarthana Jalan

Hon’ble ITAT Mumbai in the case of Pradeep G. Vora v/s ITO has dealt in depth about the power of the tribunal to admit new additional ground and has held that tribunal Cannot be Precluded from handling any point (facts or law) which pertains to the assessment even if it is raised for the first time before it and was not raised before the authorithies below by observing as under:-

“3.2.Certain principles regarding raising and admission of an AG by the Tribunal; culled out from the above discussion and various other decisions of the Hon’ble Courts; can be summarised as under:

i).Normally, an assessee; who has not put forward a particular claim or ground before the AO or the FAA; cannot seek to urge the same before the Tribunal except with its permission.

ii).Tribunal cannot refuse to entertain an AG arbitrarily, but has to consider the reasons given by the appellant for not urging the new ground before the initial authorities. An order to admit or not to admit an AG has to be a reasoned or speaking order.

In the matter of Maruti Udyog Ltd. a request was made to the Tribunal for admission of AG.s. The Tribunal admitted the AG.s, but instead of recording reasons for admitting the AG.s. , observed that the reasons could be incorporated in the order to be passed in the appeals. A writ petition was filed before the Hon’ble Delhi High Court to quash the order. Hon’ble Court held that requirement to record reasons was inherent in the proviso to Rule 11 of the Rules, hat the Tribunal had to exercise such discretion judicially and not arbitrarily, that it had discretion in appropriate cases to allow any party to the appeal to raise a new ground before it, that powers of the Tribunal referable to rule 11 were judicial in nature and could not be exercised in an arbitrary manner at the pleasure of the Tribunal, that whether the permission could be given or not depended basically on the facts of each case, that the reasons were required to be recorded. Accordingly, the Tribunal was directed to record reasons.(244ITR 303).

iii).If the Tribunal comes to the conclusion, that the reasons given for not urging the points at an earlier stage are not germane or are unreasonable, it will be well within its discretion in refusing to entertain the new grounds.

iv).An AG can be filed any time before the hearing is appeal is taken up. There is time limit in the Act for filing appeals and the appellants are supposed to adhere to that limit. But, if AG.s are filed, even after the prescribed time-limit for filing of appeal, same are to be adjudicated upon.

v).Rule 11 of the Rules speaks only of leave to raise an AG and the leave may be sought for either in writing or by an oral prayer.

vi).AG should relate to point of law and should go to root of assessment and should not involve further investigation into facts. It is said that there cannot be any estoppel against law. So, it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party.

vii).The question of entertaining an AG by the Tribunal is not a mere question of discretion, but it involves a question of jurisdiction also. If an assessee files an application for permission to raise additional grounds of appeal in relation to the subject-matter which is already before the Tribunal by way of an appeal, the matter will merely rest on the discretion of the Tribunal. But, where an assessee seeks to bring in new items which had not been questioned by him before the assessing and appellate authorities and which had nothing to do with the subject-matter of the appeal before the Tribunal as originally filed by way of additional grounds of appeal, the question will arise as to whether the Tribunal will have jurisdiction to entertain the additional grounds without excusing the delay in filing the appeal and hence the Tribunal will be justified in refusing to excuse the delay in filing such additional grounds of appeal dealing with a new subject-matter.

viii).An assessee is entitled to the claim for further depreciation on the enhanced value of the assets or other deduction or exemption or relief, as a result of the appeal effect of the decision of the Supreme Court, in form of an AG.

ix).AG must, relate to the subject-matter of the appeal and in the guise of raising an AG a new item or subject-matter cannot be allowed to be introduced under rule11.Rules,do not permit an appellant before the Tribunal to introduce an altogether new subject-matter of appeal, in respect of which the decision was accepted. In the matter of Calcutta Discount Company Ltd., Hon’ble Calcutta High Court found that the Tribunal had rejected the application and AG mentioned therein, as it was of the opinion same remained outside the purview of the subject-matter of the appeal. Dismissing the appeal filed by the assessee, Hon’ble Court held that since the additional grounds did not form part of the subject – matter of the appeal, so, no reference to the High Court against that order was permissible.(82 ITR 941).

x).If an AG is raised by an assessee/AO and is admitted the other side should be provided sufficient opportunity of being heard with regard to such ground.

xi).Tribunal cannot give a finding in respect of the assessment of an year which is not the subject – matter of the appeal before it. It can give a finding that the deduction/income does not belong to the relevant assessment year/years, but though it may incidentally find that the deduction/income relates to another AY., it cannot give a finding that the deduction/income belongs to another specified year. The exception is where an AG has been raised with the leave of the Tribunal.(328 ITR 306).

xii).Hon’ble Bombay High Court in the matter of Pruthvi Brokers and Shareholders P. Ltd., has laid down that Tribunal has jurisdiction to deal not merely with AG.s., which are available on account of change of circumstances or law, but with AG.s. which are available when the return was filed. The words could not have been raised must be construed liberally and not strictly. There may be several factors justifying the raising of a new plea in an appeal and each case must be considered on its own facts, that in other words, grounds which are not in existence when the return is filed or when the assessment order is made fall within the second category, viz., ‘where the ground became available on account of change of circumstances or law’.(349 ITR 336).

3.3. We would like to sum up the discussion by holding that both on principle and on precedent, there is no reason why the Tribunal must be precluded from handling a point, whether of law or fact which relate to an assessment, which appertains to the assessee’s assessment merely because nobody else had handled it before or because it had not occurred either to the assessee or to the Department to raise and urge that point at earlier stages of the proceedings. In the matter under appeal it is not the case of the DR that necessary facts for deciding the controversy involved in the additional plea are not available on record. It is also not a case where facts are to be investigated rather it is a pure legal issue that has been raised before us. So, in our opinion, merely because the plea in the AG was not taken by the assessee before the FAA, it could not be a ground to refuse the application for permission to raise an AG. So, AG raised by the assessee, is admitted”.