Jammu & Kashmir H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was right in contending that the CIT(A) should have treated the requirements to have been met when certificates in Form Nos. 10C and 10D had been filed before him instead of the same having been filed along with the return as required in sub-s. (5) of s. 80HH of the Act ?

Counsel Appeared

D.S. Thakur, for the Revenue : Subash Dutt, for the Assessee

JUDGMENT

ARUN KUMAR GOEL, J. :

The Tribunal, Amritsar Bench, Amritsar, has stated the case under s. 256(1) of the IT Act, 1961 (‘the Act’), for opinion of this Court. The question on which opinion is sought for, is as under : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was right in contending that the CIT(A) should have treated the requirements to have been met when certificates in Form Nos. 10C and 10D had been filed before him instead of the same having been filed along with the return as required in sub-s. (5) of s. 80HH of the Act ?”

2. With a view to properly understand the whole gamut of this case, it is necessary to notice the legal provisions applicable to this case as well as the facts thereof. Under s. 80HH of the IT Act, certain deductions in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas are allowed. The extent of such deductions while computing the total income of the assessee, from such profits and gains, is an amount equal to 25 per cent thereof which is allowed to such assessee. With a view to avail such deduction from the profits and gains, the assessee is required to file certificates in Form No. 10C of the IT Act. For readyreference sub-s. (5) of s. 80HH is reproduced hereinbelow : “(5) Where the assessee is a person other than a company or a co-operative society, the deduction under sub-s. (1) shall not be admissible unless the accounts of the industrial undertaking or the business of the hotel for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-s. (2) of s. 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant.”

The respondent-firm during the asst. yr. 1976-77 appears to have claimed benefit under ss. 80J and 80HH which were denied on two counts : (i) for the reasons detailed in the asst. yr. 1975-76, and (ii) as no certificate in Form No. 10C of the IT Rules was furnished. On this basis, the AO, i.e., the ITO ‘C’ Ward, Jammu, vide his order dt. 21st March, 1979 framed the assessment for the relevant asst. yr. 1976-77 against the respondent-firm. Feeling dissatisfied with this order of the assessing authority, the respondent filed an appeal before the CIT(A). Amritsar Range, Amritsar. This came to be registered as Appeal No. 1/CW(JWU) of 1979-80. Vide order dt. 31st Jan., 1981, this appeal was disposed of. The matter relating to the case stated by the Tribunal for opinion of this Court under s. 256(1) is dealt within para. 4 of the CIT(A)’s order. While partly allowing the appeal, the contention raised with reference to ss. 80J and 80HH on behalf of the respondent-firm was rejected and the assessment framed by the ITO was upheld on this aspect of the case. This order was passed by the CIT(A) in exercise of the powers vested in it under s. 250 of the IT Act. Feeling aggrieved and dissatisfied with the order of the CIT(A), the respondent preferred an appeal under s. 253 of the said Act before the Tribunal, Amritsar, which has reversed the decision of the CIT(A) and has ordered the restoration of the issue to his file for further disposal after dealing with the ITO’s second objection. Circumstances of the case reveal that the necessary certificate from the Chartered Accountant in Form No. 10C was not furnished by the assessee during the course of the assessment proceedings. Here it may also be observed that during the course of appeal before the CIT(A), Shri A.K. Anand, Chartered Accountant, had filed his affidavit. His stand in para. 2 was that Form Nos. 10C and 10D under the IT Act were also filed during the assessment proceedings before the ITO, carbon copy whereof was attached with the said affidavit. Thus, it is obvious that during the course of the proceedings in appeal before the CIT(A), copies of such certificates were available on the file even if it be accepted that those had not been filed during the course of assessment proceedings before the ITO.

In the aforesaid back ground, this case is to be examined keeping in view the powers of the appellate authority under s. 251 of the IT Act and to see whether it was within its power to have accepted the same or in the absence of requisite certificate having been furnished along with return of income, the appellate authority was powerless and helpless. In this behalf, provisions of s. 251 needs to be noted : “251. Power of the Commissioner(Appeals)— (1) In disposing of an appeal, the CIT(A) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; or he may set aside the assessment and refer the case back to the AO for making a fresh assessment in accordance with the directions given by the CIT(A) and after making such further inquiry as may be necessary, and the AO shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such freshassessment; (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order or vary it so as either to enhance or to reduce the penalty; (c) in any other case, he may pass such orders in the appeal as he thinks fit. (2) The CIT(A) shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Explanation.—In disposing of an appeal, the CIT(A) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the CIT(A) by the appellant.” A perusal of this section clearly indicates that while hearing an appeal against an assessment order, the CIT(A) has virtually all the powers which are vested with the officer framing the assessment. In fact, it is in the nature of a plenary power authorising the CIT to confirm, reduce, enhance or annul the assessment. He is also competent to set aside the assessment and refer back the case to the AO for fresh assessment as per the direction.

An examination of the powers conferred upon the CIT(A) under s. 251(1)(a) clearly shows that those are in the nature of reassessment. While confirming, reducing, or enhancing, it is implicit that in either of these situations, he will have to examine the case and it is only thereafter that one of such eventualities may arise. It may also be worthwhile to notice here that taxation appeals cannot be put at par with civil appeals under the CPC. There it is the adjudication of claims of two parties which is known as adversary system. This is not the situation in the tax appeals because in such appeals, the Revenue authority concerned is not an adversary or opponent in the sense of the term like in civil cases. The whole purpose of the Revenue authority being arrayed as an opponent is one to ensure that the assessment is made as per the requirements of law irrespective of its outcome. Once we have come to the conclusion that the CIT(A) has the authority of reassessment on construction of s. 251(1)(a), we are of the view, that no exception can be taken to the decision of the Tribunal in IT Appeal No. 227(Asr). of 1981 in the present case. Even if it be assumed for the sake of argument that the necessary certificates in Form Nos. 10C and 10D were not attached along with his return of income, still what would be done by the ITO and being within the competence of the CIT(A), he ought to have gone into ignoring the affidavit of Chartered Accountant, referred to hereinabove and then frame assessment or remit the case back to the ITO to proceed in accordance with law in the face of such certificates. In CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) : TC 6R.197, while dealing with a case of appeal under s. 31 of the Indian IT Act, 1922, it was observed as under : “……If an appeal lies, s. 31 of the Act describes the powers of the AAC in such an appeal. Under s. 31(3)(a) in disposing of such an appeal, the AAC may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment, under cl. (b) thereof he may set aside the assessment and direct the ITO to make afresh assessment. The AAC has,therefore, plenary powers in disposing of an appeal. The scope of his power is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. If the ITO has the option to assess one or other of the entities in the alternative, the AAC can direct him to do what he should have done in thecircumstances of a case……..” In relation to the powers of the appellate authority under the Central ST Act to entertain ‘C’ Form, which was required to be furnished at the time of assessment by the assessing authority on sufficient cause being shown, the Supreme Court took almost identical view in the case of State of Andhra Pradesh vs. Hyderabad Asbestos Cement Production Ltd. (1994) 94 STC 410 (SC).

11. A Full Bench of the Madras High Court in State of Tamil Nadu vs. Arulmurugan & Co. (1982) 51 STC 381 (Mad) observed as under : “…….An appellate authority under the taxing enactments sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the Court of first instance out of which it arises is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer’s ‘opponent’, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral Tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation of causing further investigation to be done. It can do so on its own initiative, without being proved by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer’s appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself………”

To similar effect is the decision of the said Court in CIT vs. Indian Express (Madurai) (P) Ltd. (1983) 33 CTR (Mad) 314 : (1983) 140 ITR 705 (Mad) : TC 8R.945. That under s. 254, the Tribunal after giving both the parties to the appeal an opportunity of being heard, passes such orders thereon as it thinks fit. The amplitude and scope of such powers is sufficiently wide. On this ground also no exception can be taken to the orders passed by it in appeal on 3rd Oct., 1986 as in our view it was the only order it should have and in fact it had, passed which is perfectly legal and justified. Nothing to the contrary was brought to our notice for taking a contrary view of the matter. In view of the aforesaid discussion as well as in view of the legal position, the question referred under s. 256(1) of the IT Act to this Court is answered in favour of the assessee and against the Revenue.

[Citation : 248 ITR 333]