Andhra Pradesh H.C : Tribunal could not refuse to address assessee’s plea merely by stating that it was raised for first time before Tribunal

High Court Of Andhra Pradesh

Smt. Kamalabai Loya Vs. CIT

Section 254, 154

L. Narasimha Reddy And Challa Kodanda Ram, JJ.

I.T.T.A. No. 21 Of 2002

July 22, 2014

JUDGMENT

L. Narasimha Reddy, J. – The appellant is an assessee under the Income Tax Act, 1961 (for short the Act). The returns, filed by her for the assessment year 1993-94, were processed by the Assistant Commissioner of Income Tax, Circle-II, Hyderabad, and an order was passed on 30.12.1994. However, he proposed to rectify the said order, by incorporating some more items. Therefore, he issued a show cause notice, dated 26.02.1996, to the appellant to explain as to why Income from House Property, being Rs.17,600/-, be not added. Stating that in spite of receiving show cause notice, dated 26.02.1996, the appellant did not submit any explanation, the Income Tax Officer passed an order, dated 03.09.1996 under Section 154 of the Act. An additional amount of Rs.25,415/- was also levied. Aggrieved by that, the appellant approached the Commissioner of Income Tax (Appeals). The appeal was dismissed, through order, dated 19.02.1997. Thereupon, the appellant filed I.T.A.No.1393/Hyd/1997 before the Hyderabad Bench A of the Income Tax Appellate Tribunal.

2. One of the contentions urged by the appellant was that though the explanation to the show cause notice was submitted, on 02.04.1996, the Income Tax Officer did not take the same into account. The Tribunal, however, refused to accept the contention that it was raised for the first time before it. On merits also, it opined that the explanation cannot be accepted. Hence, this appeal under Section 260-A of the Act.

3. Heard learned counsel for the appellant and learned Senior Standing Counsel for the Department.

4. The entire proceedings are referable to an exercise initiated by the Income Tax Officer under Section 154 of the Act. The ITO processed the returns submitted by the appellant and passed an order of assessment, on 30.12.1994. Thereafter, he issued a show cause notice under Section 154 of the Act, on 26.02.1996, stating that an arithmetical error had crept into the order of assessment, and in that, Income from House Property, being Rs.17,600/-, was not added inadvertently. By observing that the appellant did not file any explanation at all, he passed an order, on 03.09.1996, under Section 154 of the Act. Additional liability of Rs.25,415/- was fastened. The case of the appellant is that the explanation was submitted, on 02.04.1996. We do not have the benefit of perusing the memorandum of grounds filed before the Appellate Commissioner. However, the order, dated 19.02.1997, passed by him discloses that the discussion was undertaken on merits. Nowhere in the order, the question pertaining to the submission of explanation by the appellant, was dealt with. Equally, the order does not indicate that the appellant failed to submit the explanation.

5. In an appeal preferred before the Tribunal, a specific contention was urged by the appellant to the effect that the explanation submitted by her was not taken into account. In addition to that, a miscellaneous petition under Section 254(2) of the Act, was filed in relation to the said reply. The Tribunal was not sure as to whether the reply was submitted by the appellant, as a matter of fact. In our view, it has virtually glossed over the issue by making certain superficial observations. They read:

6. In the course of hearing, it is contended that the assessee can take up this ground at any stage inclusive of the proceedings before the Tribunal. A legal ground can be taken before the Tribunal, even if not taken earlier, only if it does not entail enquiry into fresh facts. The question whether the so-called reply dated 02.04.1996 was actually filed before the assessing officer is a matter, which according to us, entails a fresh enquiry. It requires verification of the registers of the Department and verification of signature of the concerned clerk who acknowledged it. So, we are of the view that the assessee is not entitled to take this ground for the first time before the Tribunal. Even otherwise, we find that the explanation requires consideration of the case on merits, which cannot be urged in a proceeding under S.154. As rightly observed by the CIT(A), the assessee should have agitated such matter in an appeal against the original assessment order, dated 30.12.1994, which laws not done. Having missed the bus then, assessee cannot agitate it now. What the assessing officer has done in the impugned order under S.154 is correction of a simple totalling mistake. It is a mistake apparent from record, and so, to our mind, it falls within the scope of S.154. We see no reason to interfere with the order of the CIT(A) on this aspect.

7. From this, it is clear that the Tribunal refused to address the question pertaining to the submission of reply on 02.04.1996, on the ground that it was raised for the first time before it. The said observation cannot be sustained in law, since the Tribunal happens to be the final forum on facts, in the system of adjudication under the Act. The Tribunal ought to have addressed two aspects in this regard. The first is to verify as to whether the explanation, dated 02.04.1996, was filed at all by the appellant before the ITO. This could have been done simply by requiring the departmental representative to verify or to produce the record. The second is that if there is no serious doubt expressed by the Department as to the submission of the explanation, it could have addressed by itself, particularly when a separate application was filed, in this behalf. There was no basis for it to refuse to deal with the question at all on the specious plea that the question was not raised before the Appellate Commissioner. We have already observed that the Appellate Commissioner did not record any finding to the effect that the appellant did not file any explanation. The very fact that the Commissioner has dealt with the matter on merits, discloses that the contention advanced by the appellant was taken into account.

8. The second major fallacy committed by the Tribunal was that, even while refusing to look into the explanation submitted by the appellant, it has pronounced on merits and observed that the plea taken in the explanation cannot be urged in the proceedings under Section 154 of the Act. When a specific show cause notice was issued under Section 154 of the Act, it is just un-understandable as to how a plea raised in the explanation cannot be accepted.

9. We would not have made so much of endeavour, but for the fact that in the order passed under Section 154 of the Act, the ITO has not only added the income from house being Rs.17,600/- and levied tax upon it, but also proceeded to levy the interest under Section 234-A, B & C of the Act, which is indeed phenomenal compared to the entire assessment.

10. We, therefore, allow the appeal and remand the matter to the Income Tax Officer for fresh consideration and disposal. He shall verify as to whether the explanation, dated 02.04.1996, was submitted. If the record discloses that it was submitted, he shall pass fresh orders after giving opportunity to both the parties. We make it clear that he shall not be entitled to levy interest under Section 234-A, B and C of the Act, since there was no delay on the part of the appellant in filing the returns or paying the advance tax. There shall be no order as to costs.

11. The miscellaneous petition filed in this writ appeal shall also stand disposed of.

[Citation : 367 ITR 429]

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