Appellate authorities should grant relief on new grounds raised before them

Homi P Ranina

Homi P Ranina, Advocate, Supreme Court

Under section 254 of the Income-tax Act, 1961, the income-tax appellate tribunal has the jurisdiction to allow any new question to be raised for the first time in appeal before it {Hukumchand Mills Ltd v CIT (63 ITR 232)}, and should allow such a question to be raised if it is a question which can be decided on the facts already on record {Beharilal Ramcharan Cotton Mills Ltd v CIT (62 ITR 212)}.

The tribunal may and in appropriate cases should {LH Sugar Factories & Oil Mills Ltd v CIT (116 ITR 937)} grant relief on a ground different from that urged before the lower authorities; it may allow a new plea (after or without taking fresh evidence) that the entire amount on which depreciation and development rebate were refused by the lower authorities should be allowed as revenue expenditure {CIT v Mahalakshmi Textile Mills Ltd (66 ITR 710)}.

The tribunal cannot be said to exercise its discretion arbitrarily if it refuses to permit a party to raise an entirely new point involving additional evidence or investigation into fresh facts, which point was within the knowledge of the party and could have been raised at an earlier state {Motiram v CIT (34 ITR 646)}.

Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 provides that 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.

Thus, the tribunal is competent to allow the appellant to raise at the hearing of the appeal an additional ground even without a formal amendment of the memorandum of appeal {CIT v Nelliappan (66 ITR 722)}. If the tribunal has exercised its discretion arbitrarily and not judicially in refusing to entertain additional grounds, the court would be entitled to interfere {Byramji & Co v CIT (11 ITR 286)}.

The tribunal may uphold the assessment on a ground different from the ground on which the assessment was based {Rajkumar Mills Ltd v ITT (33 ITR 750)}. However, the decision of the tribunal resting on a ground which was not at any time urged by the appellant may, in an appropriate case, be set aside if it amounts to making out a new case for the appellant {CIT v Chennabasappa (35 ITR 261)}.

Recently, the Delhi High Court in the case of Maruti Udyog Ltd v ITAT (2001 117 Taxman 122) held that an appeal posists the existence of a superior forum with competence to deal with the subject matter of appeal. A remedy by way of appeal is a statutory bounty. The modality of exercise of the right is conditioned by the provision, which confers that right. The appeal may have very many defects or disabilities and some of them may even be fatal. The difficulties and disabilities do not obliterate the factual existence of the appeal.

Whether the appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to determine and this determination is possible only after the appeal is heard, but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent.

An appeal in legal parlance is held to mean the removal of a cause from an inferior or subordinate forum in order to test and scrutinise the correctness of the impugned decision. It amounts in essence and pith to a complaint to a higher forum that the decision of the subordinate forum is erroneous and, therefore, liable to be rectified or set right. An appeal strictly so-called is one in which the question is whether the order of the forum from which the appeal is brought was right on the materials which that forum had before it.

Normally, grounds are to be set out in the memorandum of appeal before the tribunal. The parties are not prohibited from taking additional grounds at the time of hearing, subject of course by having leave of the tribunal to do so.

Merely because the tribunal has permitted additional grounds, it does not automatically follow that it has the effect of enhancing the assessment. Acceptability of a ground urged originally or permitted to be urged by way of additional grounds is a matter for determination by the tribunal at the time of final hearing. Merely accepting the prayer to urge additional grounds does not mean that the stand contained in the ground(s) has been accepted to be correct.

The court rightly concluded that the argument of the petitioner that additional ground(s) had the automatic effect of enhancement of assessment or reversal of basis of assessment was thoroughly misconceived and without legal foundation.

Therefore, the raising of additional grounds only enables a new point to be argued by both sides and is not conclusive of the merit of the additional ground, which would be decided by the tribunal in the final hearing.