Can Additional Grounds in be taken during Income Tax Appeal???
By Adv. Narayan Jain & CA Dilip Loyalka
In appeal many a times the assessee needs to agitate Additional Ground in filing appeal. We are dealing with some Frequently asked questions with the help of relevant decisions on these issues.
1. Whether the assessee can take additional ground not specified in the grounds of appeal in Form No. 35 filed before CIT(A)?
Section 250(5) specifically empowers the CIT(A) or Joint Commissioner (Appeals) to allow an appellant at the hearing of the appeal to go into any ground of appeal not specified in the Memorandum of Appeal. This power to allow a new or additional ground of appeal to be raised at the hearing is subject to the CIT(A)’s being satisfied that the omission of that ground from the form of appeal was not willful or unreasonable as also held in the case of Ramgopal Ganpatrai & Sons Ltd. v. Commissioner of Excess Profits Tax 24 ITR 362 (Bom).
If the CIT(A) has exercised his discretion arbitrarily and not judicially in refusing to entertain additional ground(s), the discretion would be open to correction by a higher authority – Manjushree Plantation Ltd. v. CIT 131 ITR 307 (Mad.). The Supreme Court has dismissed the SLP filed by Department in [1983] 144 ITR (St.) 50.
2. Whether a deduction or exemption may be claimed before CIT(A) or ITAT which was not claimed before A.O.? Whether powers of CIT (A) or ITAT are co- terminus with that of the A.O.?
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 Co-operative Federation Ltd [2021] 128 taxmann.com 1 (Karnataka).
3. Power of CIT (A) is coterminous: In this context the following decisions are relevant-
In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225(SC) it was held that the AAC has plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the ITO. He can do what the ITO can do.
In Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688(SC) it has been held that the declaration of law is clear that the powers of the AAC is coterminous with that of the ITO and if that is so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the ITO. In CIT v. Nirbheram Daluram [1997] 224 ITR 610(SC) also the same views have been reiterated.
Also refer: Income-tax Officer, TDS v. Tata Teleservices Ltd. [2022] 134 taxmann.com 323 (Delhi – Trib.).
4. Under what circumstances additional ground can be raised before ITAT?
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).
As per section 254 read with Rule 11 of Income-tax (Appellate Tribunal) Rules, 1963, the appellant with the leave of the Tribunal may 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.
However, the Tribunal shall not rest its decision on any other ground unless the party who may be effected thereby had a sufficient opportunity of being heard on that ground.
Narayan Jain and Dilip Loyalka are authors of famous books “How to Hanadle Income Tax Problems” and “Income Tax Pleading & Practice”. Email npjainadv@gmail.com
(Adv. Narayan Jain is National President of All India Federation of Tax Practitioners)
