Income-tax---

----Appellate Tribunal---Powers of---Revenue raising preliminary point that I.T.O. committed an error in making assessment---Tribunal accepting preliminary objection, allowing appeal and remanding matter to I.T.O. for assessment afresh---Point not raised in grounds of appeal before Tribunal and raised for first time at the time of hearing appeal--- Order of assessment might result in enhancement of tax payable by assessee---Remand for assessment afresh whether within competence of Tribunal--- Question left open but assessee granted liberty, in case it felt aggrieved by assessment, to seek remedies provided by law wherein he could raise such questions-- Indian Income Tax Act, 1961, S.254.

Against the orders of assessment for the assessment years 1969-70 and 1970-71, the assessee filed appeals claiming certain deductions which were disallowed by the Income-tax Officer. The Appellate Assistant Commissioner allowed those deductions. On further appeal to the Tribunal, the Revenue raised a preliminary point to the effect that the Income-tax Officer while computing the income of the assessee-company had erroneously brought to tax income from agriculture and had correspondingly allowed certain expenses in connection with the agricultural operations and that the assessee had earned income from agriculture which was not subject to tax and that by allowing expenses which were connected with the agricultural activities, the Income-tax Officer committed an error in making an assessment. The Tribunal accepted the preliminary objection of the Revenue, allowed the appeals and remanded the matter to the Income-tax Officer for assessment afresh. The assessee filed an application under section 256(1) of the Income Tax Act, 1961, for referring the questions whether the Tribunal was justified in entertaining the preliminary objection and remanding the matter, which was declined by the Tribunal. The High Court also rejected the application of the assessee under section 256(2) of the Act for directing the Tribunal to refer the questions of law. On appeal to the Supreme Court, the assessee contended that the point which had been accepted by the Tribunal and the matter remanded was not open to the Revenue in the said appeal and should not have been allowed to be raised, that the said ground was not even raised in the grounds of appeal before the Tribunal and was raised for the first time at the time of hearing of the appeal, that the order of assessment might well result in enhancement of the tax payable by the assessee and that such a course was not open to the Tribunal. The Revenue relied upon rule 11 of the Income-tax Appellate Tribunal Rules, 1963:

Held, dismissing the appeal, that the Supreme Court was not inclined to go into the question at this stage. Since the matter had been remanded, the Income-tax Officer should make the assessment. If the assessee felt aggrieved with the assessment, he could adopt the remedies provided by law wherein he could raise the present questions as well. Therefore, it was not necessary to examine the question of the power of the Tribunal in this matter.

CIT v. Assam Travels Shipping Service (1993) 199 ITR 1(SC) ref.

P. H. Parekh, E. R. Kumar and S. Fazl, Advocates for the Assessee

J. Ramamurthy, Senior Advocate (R. Sathish and Ms. A Subbashini, Advocates with him) for 'the Commissioner.

ORDER

These appeals are preferred against an order of the Gujarat High Court declining to direct the Tribunal to state the questions of law as suggested by the assessee. The questions of law suggested by the assessee are:

"(1) Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 254, the Tribunal was competent and justified in entertaining and deciding the preliminary point raised by the Revenue

(2)Whether, on the facts and in the circumstances of the case and on a proper interpretation of section 254, the Tribunal was competent and justified in setting aside the assessment and restoring the matter to the Income-tax Officer in the manner in which it has done. "

Against the order of the assessment for the assessment years 1969-70 and 1970-71, the assessee filed an appeal claiming certain deductions which were disallowed by the Income-tax Officer. The Appellate Assistant Commissioner allowed those deductions. The older of the Appellate Assistant Commissioner was challenged by the Revenue by way of an appeal before the Tribunal. When the matter came up before the Tribunal for final hearing, the Revenue raised, what is termed, a "preliminary point" to the effect that the Income-tax Officer while computing the income of the assessee-company had erroneously brought to tax income from agriculture and had also correspondingly allowed certain expenses in connection with the agricultural operations. It was argued that the assessee had earned income from agriculture which was not subject to tax and that by allowing expenses which were connected with the agricultural activities, the Income-tax Officer committed an error in making the assessment. The Tribunal accepted the said preliminary objection, allowed the appeal and remanded the matter to the Income-tax Officer for making a fresh assessment. The Tribunal observed:

"Allowance or otherwise of the claim for various expenses made before us, in our opinion, would depend entirely on the question whether the impugned expenses are closely related to the agricultural activities of the assessee or not. We also feel that it will be unfair to deal only with the aspect regarding agricultural expenses without taking into consideration the fact that the assessee has also large scale income from agriculture. It is, therefore, necessary, in our opinion that the income relating to the agricultural activities of the assessee-company must be segregated and only non- agricultural income should be brought to tax. Since this aspect of the matter has been overlooked by the Income-tax Officer, we think that in the interest of justice, we must set aside these assessments and restore the matter to the file of the Income-tax Officer so that he may remake the assessments in accordance with law, in the light of our above observation. "

The assessee filed an application under section 256(1) asking the Tribunal to refer the above questions, which, on being delined, it went to the High Court, which also declined the assessee's request. Mr. P.H. Parekh, learned counsel for the assessee, contended that the point which has been accepted by the Tribunal and the matter remanded was not open to the Revenue in the said appeal and should not have been allowed tai be raised. He submitted that the said ground was not even raised in the grounds of appeal before the Tribunal and was raised for the first time at the tine of hearing of the appeal. Learned counsel submitted that the order of- assessment may well-result in enhancement of the tax payable by the assessee and that such a course is not open to the Tribunal, though it can be done by the Appellate Assistant Commissioner. Learned counsel submitted that there is a sharp difference of opinion among the High Court on the powers of the Tribunal to take orders which have the effect of enhancing the assessable income of the assessee. These submissions are met by Mr. J. Ramamurthy, learned counsel for the Revenue, relying principally upon the decision of this Court in CIT v. Assam Travels Shipping Service (1993) 199 ITR 1. Mr. Ramamurthy relies upon rule 11 of the Income-tax (Appellate Tribunal) Rules which empowers the Tribunal not only to permit a party to raise fresh grounds of appeals but also to raise such questions suo motu if it thinks appropriate in the circumstances of the case.

We are, however, not inclined to go into this question at this stage. The matter has been remanded. Let the Income-tax Officer make an assessment. If the assessee feels aggrieved with the assessment, he can adopt the remedies provided by law wherein the can raise, inter alia, the present questions as well. In this view of the matter, we do not think it necessary to examine the question of power of Tribunal in this matter.

The appeals are accordingly dismissed with the aforesaid observations. No costs.

M.B.A./1852/FCAppeals dismissed