CPT V24P7-Art1 (Content).pmd - Taxmann

Direct Tax Laws
5.10 The ITAT Bench in the case of IAC v.
Panipat Co-operative Sugar Mills Ltd. [1983]
3 ITD 734 (Chd.) - Case that out of four items
of additions made to the income of the assessee,
penalty for concealment under section 271(1)(c)
of the Act was levied at assessment stage.
The Commissioner of Income-tax (Appeals)
deleted the penalty imposed on three items
but sustained the penalty imposed on the
fourth item. In the second appeal by the revenue
contesting the deletions, the assessee, on the
strength of rule 27 of the ITAT Rules, 1963,
raised before the Tribunal for the first time
that a different finding was warranted qua
the penalty sustained.
The Tribunal held as follows-
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“The right granted to the respondent under
rule 27 of the ITAT Rules, 1963 is limited.
All that the respondent can do is to support
the order of the appellate authority as a
respondent, who has neither come in appeal
nor in cross-objection. He cannot ask for
a finding different from that of the first
appellate authority on the basis of rearguing
the grounds rejected by the first
appellate authority. The contentions raised
by the assessee against the levy of penalty
were, therefore, not sustainable.”
5.11 The Delhi High Court in CIT v. Edward
Keventer (Successors) (P.) Ltd. [1980] 123 ITR
200 - Case was that the Assessing Officer had
treated certain share transactions as sham and
collusive and, therefore, disallowed the losses
claimed and, consequently, disallowed the interest
admitted by the assessee relating to these
transactions. The first appellate authority treated
these transactions as genuine but considered
the prices to be inflated. He, therefore, computed
a profit and as a logical corollary, allowed the
interest substantially (except to the extent of
inflation found by him). The assessee filed an
appeal before the Tribunal and urged that the
profit computed by the first appellate authority
was wrong and prayed for its deletion. In
other words the first appellate authority had
given two findings, one against the assessee
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and the other against the department. The
Tribunal deleted the profit estimated by the
first appellate authority and so the Revenue,
invoking rule 27 of the ITAT Rules, 1946 argued
that when the Tribunal had deleted the addition
made by the first appellate authority the assessee
would not be entitled to the benefit of any
deduction by way of interest on loans said to
have been obtained for purchasing the shares.
The Tribunal, however, did not accede to the
contention of the Revenue. It was pointed out
by the Tribunal that all that a respondent in
an appeal could do was to support the decree
on any of the grounds decided against him in
the lower court, but that the respondent could
not make out a case for a decree for the same
amount by attacking the decree in respect on
a right decided against him. Referring to certain
decisions under order 41, rule 22 of the Code
of Civil Procedure, 1908 the Tribunal rejected
the arguments on behalf of the revenue and
declined to maintain the addition to the extent
of the relief granted by the first appellate
authority in assessee’s favour, in the interest
account. The High Court, on reference, held
that “It could not have assailed the latter in
appeal without attacking the findings on the
first also. To say, in such circumstances, that
the department could not seek to uphold the
order of the first appellate authority on this
subject-matter would virtually amount to denial
of natural justice to it which is not the object
of the relevant statutory provisions. Moreover,
even if the department’s grounds ultimately
succeed on merits, the assessee would not be
adversely affected and could not be in a worse
position than if it had preferred no appeal at
all.”
The High Court, ultimately, held that the Tribunal
should have entertained the ground adduced
by the Revenue being an inter-connected one
and then should have disposed of the appeal
in the light of its decision thereon.
5.12 The Allahabad High Court in the case of
Kanpur Industrial Works v. CIT [1966] 59 ITR
407 - The decision in the case succinctly explains
the rights of the assessee to invoke rule 27 of