Case Summary: Jute Corporation of India Ltd. v. CIT (1991) 187 ITR 688/(1990) 53 Taxman 85/88 CTR 66 (SC)
An appeal is being brought before the Honorable Supreme Court by a government corporation that is involved in the jute business. The Appellant had a good faith belief that it was exempt from having to pay purchase tax when it filed its return for the assessment year 1974-1975. As a result, the Appellant did not claim any deduction on its liability to pay purchase tax following the provisions of the Bengal Raw Jute Taxation Act, 1941. This is because the Appellant believed that it was exempt from having to pay purchase tax.
On the other hand, the AO assessed the purchase tax as they were passing the assessment order. The Appellant, who was unhappy with the assessment ruling, filed a complaint with the Administrative Appeals Commission. At the time that the appeal was being processed, the appellant presented a new argument in which they demanded a deduction of a particular amount to account for their responsibility to pay purchase tax. After hearing the AO’s argument, the AAC accepted the assessee’s claim and granted the assessee’s request for the claim to be approved. The AAC gave the assessee permission to raise the additional basis.
An appeal was submitted to the Appellate Tribunal by the department that was found to be at fault. The Tribunal concluded that the AAC did not have the authority to consider the new issue or to award the assessee relief based on a matter that had not been brought up in front of the AO. The application for reference made by the assessee following section 256 of the Income Tax Act was subsequently denied by the Tribunal (1). In response to an application made according to subsection (2) of section 256 of the Income Tax Act, the High Court did not ask for a description of the case.
The Appellant, who was dissatisfied with the ruling of the High Court, submitted the following SLP to the Honorable Supreme Court.
- Section 256 of the Income Tax Act
- Section 251 of the Income Tax Act
Regarding a claim that was not brought up throughout the assessment processes, the Honorable Supreme Court was presented with the question of whether or not new reasons might be brought up in front of the Appellate Authority.
No provision in the Act places limits on the right of the assessee to raise an additional cause in appeal, and hence there are no constraints on this power. In addition, no provision in the Act places restrictions on the ability of the appellate body to consider a new basis for the appeal. This is because the Act does not include such a provision. In the absence of any legislative provision, the general concept that the amplitude of the appellate authority’s power should be co-terminus with that of AO should typically be used. This principle states that the power of AO should not be exceeded by the power of appellate authority. If the tax liability of the assessee is admitted, and if the AO is afforded the opportunity of hearing by the appellate authority in allowing the assessee’s claim for deduction on the settled view of the law, then it would appear that there is no good reason to curtail the powers of the appellate authority as outlined in section 251(1)(a) of the Income Tax Act. This is because the tax liability of the assessee has already been admitted.
The Honorable Supreme Court overturned the order of the High Court and held that there may be several factors justifying the raising of additional ground in appeal and that each case needs to be considered based on its facts. The High Court’s order had been that an additional ground in the appeal could not be raised. If the AAC is content, then he would be operating within his authority if he were to address the matter that was brought up in all of its facets. Although allowing the assessee to challenge the assessment on additional grounds, the AAC should use its discretion in a way that is consistent with both the law and common sense. He must be convinced that the basis that was raised was legitimate and that the same ground could not have been established earlier for valid reasons. The facts and circumstances of each situation are what determine whether or not the AAC is satisfied, and there is no one set of rigorous rules or one universally applicable norm that can be established for this purpose.
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Judgement Reviewed by Jay Kumar Gupta