1980 PLP 426 (PTD)

In our opinion, the Commissioner's finding that only a dealer in securities is entitled to the benefit under section 81 and that a co‑operative society, which has invested its available funds in securities and has received some interest thereon, is not entitled to any exemption in regard to such interest under the section, is clearly wrong. We are also of the opinion that toe Commissioner's finding that 'in no circumstances can the investment and securities be regarded as income from business, is also clearly wrong in view of the decisions cited above ......... The learned standing counsel submitted that all these factors including bye‑laws (4)(h) and 4(d) were taken into consideration by the Commis sioner before he came to his finding that the investments did not represent the petitioner's trading assets. We, however, cannot subscribe to his submission in view of the fact that the Commissioner did come to a clear finding that the interest on securities was relatable to the society's banking business. We also find that the Commissioner's entire approach to the matter was of the basis whether the petitioner was a dealer in securities or not ..On the contrary, we find that the Commissioner accepted the contention of the petitioner that the securities represented his trading assets, but nevertheless he found that since the petitioner was not a dealer in securities, it was not entitled to the exemptions under section 81 of the Act." Having thus observed, inter alia, this Court ordered as follows [See (1978) 112 I T R 87, at page 99]; "In the result, the demand notice issued by the Income‑tax Officer, A Ward, Shillong, on the petitioner in respect of each of the eleven assessment years concerned, which is impugned in these petitions, is set aside, as prayed for by the learned counsel for the petitioner, who, it may be stated, does not seek any other relief." Going through the decision of this Court in Civil Rules No&. 799 to 809 of 1969 Assam Co‑operative Apex Bank Ltd. v. Commissioner of Income‑tax, we find that the Commissioner's order in which the Income‑tax Officer relied in making the assessments in question and also on the basis of which the Appellate Assistant Commissioner rejected the appeals preferred by the assessee and upheld the assessment orders of the Income‑tax Officer, has been set aside by the High Court, and, therefore, it does not exist. That being the position, the very basis of assessment, that is, the Commissioner's order, to tax the interest on securities of the particular assessee for the relevant assessment years, as made by the Income.‑tax Officer, is for all practical purposes removed. So also the basis of the appellate order of the Appellate Assistant Commissioner, by which the assessment orders of the Income‑tax Officer were upheld, has been, in fact removed. It may be mentioned here that original section 81 of the Act has subsequently been amended as section 80‑P of the Act. In paragraph 3 of the Tribunal's order it has been observed as follows: "The Appellate Assistant Commissioner has pointed out that the assessee is a co‑operative society carrying on business of banking. From the Order of the Appellate Assistant Commissioner, it is also evident that the only pout at issue before him was whether the income derived by the assessee from certain Government securities are assessable to tax or not. He has also clearly pointed out that such income amounted to Rs. 3,61,503, for the assessment year 1967‑68, Rs. 4,38,427 for the a38essment year 1968‑69 and Rs. 5,45,382, for the assessment year 1969‑70." Thus, it is quite clear from the order of the Tribunal itself that the aforesaid three amounts of income related to income derived by the assessee from certain Government securities, or in other words, interest on Government securities. These three amounts of income also were under consideration before the Income‑tax Officer, as it is quite clear from the assessment orders for the relevant assessment years. To be more precise, it may be pointed out that in the assessment order for the assessment year 1967‑68, the sum of Rs. 3,61,503, was assessed to tax as interest on securities. In the assessment order for the assessment year 1968‑69, the sum of Rs. 4,38,427 was assessed to tax as interest on securities. Similarly, in the assessment order for the assessment year 1969‑70, the sum of Rs. 5,45,372 was brought to tax as interest on securities. Thus, there is no escape from the conclusion that the aforesaid three amounts represented the incomes of the assessee by way of interest on Government securities and the Income‑tax Officer and the Appellate Assistant Commissioner held that these incomes were taxable because these were not the business income of the assessee, as was held by the Commissioner of Income-tax. The Commissioner s finding has been set aside by the High Court, as mentioned hereinabove, holding that tile Commissioner's finding that these amounts could not be out of business income was wrong. The Tribunal also held: "In view of this ruling it has to be held that the Appellate Assistant Commissioner was not justified in saying that the interest on securities cannot be regarded as income from business." In paragraph 20 of its order the Tribunal has observed as follows: "The Appellate Assistant Commissioners has pointed out that it appears from the balance-sheet of the assessee-Bank that securities from which interest has been shown in the profit and loss account and a part of which has been brought to tax by the Income-tax Officer have been shown under the heading "Investment and that such investments amount to Rs. 82,51,180, for the assessment year 1967-86, Rs. 1,02,17,430, for the assessment year 1968-69 and Rs. 1,21,72,430, for the assessment year 1969-70, and that it is also seen that a major part of these investments, i.e. Rs. 62,29,950, for the assessment year 1967-68, R`, 81,96,200, for the assessment year 1968-69 and Rs. 101,51,200, for the assessment year 1969-70 are in Central and State Government securities shown at book value. The Appellate Assistant Commissioner has also pointed out that there are others securities, some trustee securities, shares in other co-operative institutions, some shares in Industrial Finance Corporation, Assam Financial Corporation, Agricultural Refinance Corporation and Central Warehousing Corporation and that some of these investments are apparently long-term investments. From the above observations of the Tribunal it is found that the Tribunal has accepted the finding of fact of the Appellate Assistant Commissioner that the investments of Rs: 62,29,950 for the assessment year 1967-68, Rs. 81,96,200 for the assessment year 1968-69 and Rs.1,01,51,200 for the assessment year 1969-70 were in Central and State Government securities and, as already observed above, the question before the Income-tax Officer and the Appellate Assistant Commissioner was regarding the tax on Government securities only. So, from the order of the Tribunal itself it is found that the assessee preferred the appeals before the Tribunal on the ground that the income from investment to Government securities was not taxable under section 80-P of the Act. The Income-tax Officer arid the Appellate Assistant Commissioner found these items taxable on the basis of the order of the Commissioner of Income-tax, which has found to be bad is law and has been set aside. The Tribunal has also observed that it could not be doubted that the investment in securities under section 24(2-A) of the Barking Regulation Act, 1949, has to be held to be an investment in securities for the purpose of banking business. Thus, it is found that the Tribunal had no jurisdiction to go to other investments excepting the investments on Government securities which was the subject-matter before the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal has set aside the finding of the Appellate Assistant Commissioner that these interests on Government securities are taxable. Having done so, whether the Tribunal has jurisdiction to remand the appeals to the Appellate Assistant Commissioner with a direction for investigating which amount of the securities were stock-in-trade or circulating capital and which were the capital investments of the assessee-bank? This remand order with the direction aforesaid enlarges the scope of the dispute that was before the Tribunal on appeal by the assessee. By the remand order the Tribunal has directed the Appellate Assistant Commissioner to go into the question which amounts of the securities are stock-in-trade or circulating capital of the assessee-bank and which amounts are capital investments of the assessee-bank. The remand order, on the face of it, enlarges the scope of the appeal before the Tribunal. We have already observed that the Income-tax Officer has held that the assessee, being a co-operative society, its income is exempt from tax except Rs. 3,61.503 being the interest on Government securities for the assessment year 1967-68, Rs. 4,38,427, being the interest on Government securities for the assessment year 1968-69 and Rs. 5,45,372, being the interest on Government securities for the assessment year 1969-70. The assessee preferred appeals before the Appellate Assistant Commissioner against the orders of the income tax Officer and the appeals were rejected by the Appellate Assistant Commissioner. Then the assessee alone preferred appeals against the order of the Appellate Assistant Commissioner before the Tribunal. The Department did not prefer any appeal nor filed any cross-objection. That being so, the Tribunal s order in disposing of the appeals cannot travel beyond the disputed taxable amounts in question. But by the impugned remand order the learned Tribunal has in fact enlarged the scope of the subjects of the appeals, inasmuch as the securities other than the Government securities are also directed to be considered by the Appellate Assistant Commissioner. This, it is submitted on behalf of the assessee, is illegal and without jurisdiction inasmuch as the Tribunal has no power of enhancement of tax as assessed by the Income-tax Officer and affirmed by the Appellate Assistant Commissioner. At this stage, therefore, we are required to consider the scope of the appellate power of the Tribunal. Section 254 of the Act reads as follows: - "

254. Orders of Appellate Tribunal.--(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. (2) The Appellate Tribunal nay, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it subsection (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Income-tax Officer. Provided that tan, amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this subsection unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard. (3) The Appellate Tribunal shall send a copy of any orders passed under this section to the assessee and to the Commissioner. (4) Save as provided in section 256, orders passed by the Appellate Tribunal on appeal shall be final" It would be convenient to quote section 251 of the Act, which deals with the power of the Appellate Assistant Commissioner- Section 251 reads as follows: - "

251. Powers of the Appellate Assistant Commissioner.--(1) In disposing of an appeal, the Appellate Assistant Commissioner 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 Income‑tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further inquiry as may be necessary, and the Income‑tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment;; (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 Appellate Assistant Commissioner 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 enhance ment or reduction. Explanation.‑In disposing of an appeal, the Appellate Assistant Commis sioner may consider and decide any matter arising out of the proceed ings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Appellate Assistant Commissioner by the appellant." Under section 251(1) of the Act Appellate Assistant Commissioner has jurisdiction, inter alia, to enhance the assessment. The power of enhancement is not to be found in so many words in section 254(1) of the Act. Sec tion 254(1) lays down that the Appellate Tribunal may after giving both the parties to the appeal an opportunity of being heard pass such orders thereon as it think tit. The scope of the appellate power of the Tribunal and the word "thereon" in subsection (1) of section 254 came up for consideration before the different High Courts and the Supreme Court. Section 33 of the Indian Income‑tax Act, 1922, deals with appeals against the orders of the Appellate Assistant Commissioner. Section 33(4) of the 1922 Act reads as follows:- "33.‑(4) The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it think fit, and shall communicate any such orders to the assessee and to the Commissioner." It is found that subsections (1) and (3) of section 254 of the 1961 Act are almost in identical terms with subsection (4) of section 33 of the 1922 Act. In Motor Union Insurance Co. Ltd. v. Commissioner of Income‑tax (1945) 13 I T R 272 (Bom.), the rowers of the Appellate Tribunal were considered by the Bombay High Court under the 1922 Act and Kania, J., as he then was, delivering the Court's judgment, observed in that case as follows (pages 282, 283): "In order to appreciate the powers of the Tribunal, it is necessary to take into consideration sections 30, 31 and 33 of the Act. After the Income‑tax Officer has made an order, if the assessee feels aggrieved he can appeal to the Appellate Assistant Commissioner. The powers of the Appellate Assistant Commissioner in such a case are defined in section 31, subsection (3), clause (a), which in terms provides that in disposing of an appeal the Appellate Assistant Commissioner may confirm, reduce, enhance or annul the assessment. He has also power under clause (b) to set aside the assessment and direct the Income‑tax Officer to make a fresh assessment, after making such inquiry as the Income‑tax Officer thinks fit, or the Appellate Assistant Commissioner may direct. The Appellate Assistant Commissioner under section 31(2) is himself authorized to make such further inquiry as he thinks fit, or cause further inquiry to be made by the Income‑tax Officer. It is significant that there is no provision for appeal to the Appellate Assistant Commissioner by the Department against the assessment made by the Income‑tax Officer. Under section 33 a right of appeal to the Appellate Tribunal is given, on the order made by the Appellate Assistant Commissioner. That right is given both to the assessee and to the Commissioner. Under subsection (3) the appeal has to be filed in the prescribed form and verified in the prescribed manner. Under subsection (4) the Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate the orders to the assessee and to the Commissioner ......... On behalf of the Commissioner it is urged that section 33(4) does not circumscribe the powers of the Tribunal, and leaves the Tribunal at large to raise any question it pleases and decide the same. In our opinion, this argument is unsound. Apart from statute, it is elementary that if a party appeals, he is the party who comes before the Appellate Tribunal to redress a grievance alleged by him. If the other side has any grievance, he has a right to file a cross‑appeal or cross -objections. But if no such thing is done, the other party, in law, is deemed to be satisfied with the decision. He is, of course, entitled to support the judgment of the first officer on any ground open to him, but he is not entitled to raise a ground so as to work adversely to the appellant and in his favour. Apart from that, the section, in our opinion, does not permit the course adopted by the Tribunal in this case. Under section 31, when the Legislature thought of giving power to the Appellate Assistant Commissioner to enhance the assessment, it has in terms enacted that. In our opinion, that fact is against the contention that the words of section 33(4) are wide enough to include a power of enhancement, without an appeal by the Commissioner. The word `thereon' used in section 33(4) only means `on the appeal', which must mean on the grounds raised in the appeal. Read in that way, the subsection only gives power to the Appellate Tribunal to give its decision and pass orders in respect of all grounds urged (which must be on behalf of the appellant) in respect of the decision appealed against. In deciding those grounds it can pass appropriate orders. But, in our opinion, it is not open to the Tribunal itself to raise a ground or permit the party, who has not appealed, to raise a ground, which will 'work adversely to the appellant." We have already quoted subsections (1) and (3) of section 254 which are almost in identical terms with subsection (4) of section 33 of the 1922 Act, The reasonings given in Motor Union Insurance Co. Lid, v. Commissioner Income‑tax (1945) 13 I T R 272 (Bom.), on the point, therefore, are equally applicable to the instant case. In Puranmal Radhakishan & Company v. Commissioner of Income-tax (1957) 41 I T R 264 (Bom.), Chagla, C.J., delivering the Court's judgments observed as follows (pages 304): "Now, the Jurisdiction of the Tribunal is to be found in section 33 (4) which is in very wide terms: `The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner.' Wide as the language seems to be, this Court has construed this section and has particularly emphasised the language used by the Legislature, viz., `thereon', and the view taker by the Court, as we will presently point out, is that the orders that the Appellate Tribunal can pass, whatever the nature of the order may be, must be orders on the appeal and the Tribunal cannot travel outside the appeal. This decision is to be found in Motor Union Insurance Co. Ltd. v. Commis sioner of Income‑tax (1945) 13 I T R 272 (Bom.) and Mr. Justice Kania in that case held that the word `thereon' used in section 33(4) must mean on the ground raised in the appeal, and drat section gave power to the Appellate Tribunal to give its decision and pass orders in respect of all grounds urged on behalf of the appellant in respect of the decision appealed against. In deciding those grounds it could pass appropriate orders, but it was not open to the Tribunal itself' to raise a ground or permit the party who has not appealed, to raise a ground which will work adversely to the appellant. The words of the section were not wide enough to include a power of enhancement without an appeal by the Commissioner." In V. Ramaswamy Iyengar v. Commissioner of Income‑tax (1960) 40 I T R 377, (at pages 393. 394) the Madras High Court has held as follows: ‑ "The question that arises is, whether in the absence of an appeal by the Department the Tribunal would have power to make the position of an appellant worse than what it was before he filed the appeal. In other words the question is whether the Tribunal can dispose of an appeal by directing an assessment in such a manner that it would inevitably result in the enhancement of the tax liability, fit is necessary, in this connection to refer briefly to the provisions of the Indian Income‑tax Act. It is fundamental principle that no litigant has an inherent right of appeal against a judicial order, unless such right is given by a statute. It is an equally settled principle that, where the whole or part of an order has not been appealed against, it would be final; and the appellate authority, in case there is an appeal against a part of an order, would have no jurisdiction in the absence of statutory provision to interfere with the other part which does not form the subject of the appeal. Where a statute confers a right to appeal to an appellate authority, its powers and functions are limited by the terms of that statute. Section 30 gives a right of appeal only so the assessee against an order of assessment by the income‑tax Officer; the Department has no right to appeal against the order of the Income‑tax Officer, even if it were prejudicial to the revenue. That presumably is for the reason that the Appellate Assistant Commissioner being an officer of the Department would be vigilant in protecting the interests of the revenue, provided a power is given to hire to enhance the tax in an appeal by the assessee. Section 33‑B enables the Commissioner to suo motu revise an order of assessment which is prejudicial to the revenue. Section 31(3), which enunier4tes the powers of the Appellate Assistant Commissioner, says: 'In disposing of an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment‑ (a) confirm, reduce, enhance or annul the assessment, or (b) set aside the assessment and direct tire Income‑tax Officer to make a fresh assessment after making such further inquiry as the Income tax Officer thinks fit or the Appellate Assistant Commissioner may direct, and the Income‑tax Officer shall thereupon proceed to make such fresh assessment and determine where necessary the amount of tax payable on the basis of such fresh assessment .' Thus, the power of the Appellate Assistant Commissioner is not confined to the subject‑matter of appeal by the assessee. It is much wider. He might examine all matters and dispose of the appeal, even to the prejudice of the assessee by himself enhancing the tax o: remanding the case to the Income‑tax Officer, with a view to increase the tax liability. But, when the matter comes before a judicial tribunal, by way of appeal, the same principle cannot apply. The jurisdiction of the Appellate Tribunal should, in the absence of express words in the statute, be governed by the subject‑matter of the appeal Section 33 declares that there would be aright of appeal against an order of the Appellate Assistant Commissioner both to the assessee as well as to the Department. Section 33(4), which relates too the powers of the Tribunal runs (section 33(4) quoted above). Section 33(4), unlike section 31(3), does not vest any power in the Appellate Tribunal to enhance the tax except when there is an appeal by the Department. Where the decision of the Appellate Assistant Commissioner is detrimental to the revenue, the Department could itself appeal to the Tribunal under section 33(3), In the absence of such appeal, the Appellate Tribunal could only deal with the actual subject‑matter before it, namely, the appeal of the assessee. In Pathikodda Balasubba Setty v. Commissioner of Income‑tax (1967) 65 I T R 252 (at age 258) the Mysore High Court has observed as follows:‑ "It should be noted that in comparison to the sections describing the power of tire Appellate Assistant Commissioner, the sections which describe the appellate powers of the Tribunal do not make any reference to a power to enhance the assessment or to enhance the tax in the same way as clot Appellate Assistant Commissioner is empowered to do while dealing with an appeal against the order of the assessing authority. As the appellate power is a power which is conferred by statute, both its existence as well as its extent has to gathered from the relevant statutory provision. The fundamental idea is that an appellant seeks a relief from an appellate Court, and not detriment to himself. Even under the general provisions of the law of procedure, the worst detriment which an appellate Court may visit on an appellant is to dismiss the appeal with a direction in an appropriate case to pay costs to the opposite side. An order adverse to the interests of the appellant‑adverse in the sense that it takes away from him a benefit which he has already acquired under the order appealed from --is possible only by means of an order made either upon a cross -appeal filed by the other side or on the basis of a memorandum of cross‑objections presented by him wherever the law permits him to do so." In Hukumchand Mills Ltd. v. Commissioner of Income‑tax (1967) 63 I T R 232 (at page 237) the Supreme Court has observed after quoting section 33(4) of the 1922 Act as follows :‑ "The word 'thereon', of course, restricts the jurisdiction of the Tribunal to the subject‑platter of the appeal. The words 'pass such orders as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act." In Commissioner of Income‑tax v. S. Chenniappa Mudaliar (1969) 74 I T R 41 (at page 47) the Supreme Court has observed as follows "The scheme of the provisions of the Act relating to the Appellate Tribunal apparently is that it has to dispose of an appeal by making such orders it thinks fit on the merits. It follows the language of section 33(4) and in particular the use of the word 'thereon' that the Tribunal has to go into the correctness or otherwise of the points decided by the departmental authorities in the light of the submissions made by the appellant. This can only be done by giving a decision on the merits on questions of fact and law and not by merely disposing of the appeal on the ground that the patty concerned has failed to appear. As observed in Hukumchand Mills Ltd. v. Commissioner of Income‑tax (1967) 63 I T R 232 (S C) the word 'there on' in section 33(41 restricts the jurisdiction of the Tribunal to the subject‑matter of the appeal and the words 'pass such orders as the Tribunal thinks fit' include all the powers (except possibly the power of enhancement) which are conferred upon the Appellate Assistant Commissioner by section 31 of the Act." On consideration of the above decisions of the different High Courts and the Supreme Court, the legal position that emerges is as follows: If the Commissioner has not filed any appeal against the order of the Appellate Assistant Commissioner under section 253 or has not field any cross‑objection in an appeal filed by the assessee, the Tribunal in exercise of its appellate power under section 254, cannot pass an order enhancing the tax liability of the appellant‑assesses before it. Again, if the Commissioner has not preferred any appeal and no cross -objection also has been filed, department cannot be allowed to agitate the other matters which were not the subject‑matter of the appeal before the Tribunal, because, in the absence of an appeal or cross‑objection by the Department, the other matters stand finalised and by the remand order the Tribunal cannot direct the Appellate Assistant Commissioner to do some thing which would go adversely to the assessee by way of enhancing the tax liability. In the instant case, the Tribunal has set aside the order of the Appellate Assistant Commissioner and thereafter the Tribunal has remanded the appeals to the Appellate Assistant Commissioner to determine which securities were stock‑in‑trade or circulating capital of the assessee and which securities were capital investments of the assesses‑Bank. As we have already observed, the point at issue before the Income‑tax Officer and the Appellate Assistant Commissioner was regarding the tax liability of the interest on Government securities. In the appeals before the Tribunal also the point that was agitated by the assessee was whether the interest on Government securities was liable to be taxed. The Tribunal has found that the Appellate Assistant Commissioner was not correct in holding that the interest on Government securities was liable to tax in the instant case. We have also noticed that the basis of the orders of the Income‑tax Officer and the Appellate Assistant Commissioner, that is, Commissioner's orders relating to the preceding year, was removed as illegal by the judgment of this Court. That being so, the Tribunal itself having come to the conclusion that the Appellate Assistant Commissioner's order was not sustainable, it could not pass the remand order on the terms it has been passed in the instant case. In the circumstances, we find that the Tribunal was justified in setting aside the consolidated order dated 31st March 1970, of the Appellate Assistant Commissioner of Income‑tax, Shillong Range, Shillong, relating to the assessments for the assessment years 1967‑68, 1968‑69 and 1969‑70: but it was not justified in remanding the case with a direction to give a finding on the point as to what amount out of the securities is the stock‑in‑trade ox circulating capital of the assessee and which amount is the capital investment of the assesses‑Bank. In the result we answer the question of law referred in the negative and in favour of the assesses. The reference is answered accordingly. We snake no order as to costs. D. PATHAK, J.‑‑I agree. Question answered in the negative.