TAX CASES No.50 OF 1998 Statement of case under Section 33(2)(C) of the Bihar Sales Tax Act, 1959 by the Commercial Taxes Tribunal, Bihar Patna in the matter of assessment of Sales Tax of the M/s Janta Khad Bhandar, Dauria, West Champaran for the year 1978-79 in R.A. No. 35(Pat)/96. ---------- COMMISSIONER OF INCOME TAX, BIHAR, PATNA ………Appellant Versus M/S JANTA KHAD BHANDAR ……………… Respondent -------- For the Appellant : ---------------------- Mr. Harshwardhan Pd. Sr. Standing Counsel, Income Tax Mrs. Archna Sinha, Jr. Counsel Income Tax Deptt. For the Respondent : ----------- None P R E S E N T THE HON'BLE MR. JUSTICE CHANDRAMAULI KUMAR PRASAD THE HON'BLE DR. JUSTICE RAVI RANJAN Prasad & Ranjan, JJ: This case has come up for our opinion on a reference being made by the Patna Bench of the Income Tax Tribunal The assessee M/s Janta Khad Bhandar was assessed to the income tax for the assessment year 1978-79 as association of persons by the assessing officer under section 144/148 of the Income Taxt Act, (hereinafter referred to as the Act). The assessment in the case was originally made on 3rd of March 1984 on a taxable income of Rs.7,06,430/-. However, it was reopened on 6.4.1984 under section 146 of the Act on the basis of an application filed by the assessee. Despite several notices, the 2 assessee did not appear before the assessing officer and the case was thereafter fixed for the last time on 12.2.1987 but on the said date also the assessee did not appear. The assessing officer completed the assessment under section 144 of the Act, at the same total income of Rs. 7,06,430/- as originally assessed. The assessee challenged the order of assessment in first appeal filed before the Commissioner of Income Tax (appeal) and took as many as ten grounds to assail the order of assessment. However, there was no challenge to the issue of notice under section 148 read with section 147 of the Act nor any argument was advanced before the Commissioner in the first appeal on the said issue. Resultantly there is no decision by the Commissioner in respect of the issue of reopening under section 147 (a) and notice under Section 148 of the Act. In the second appeal filed before the Income Tax Appellate Tribunal (hereinafter referred to as the tribunal) on 22.9.1990 no ground was taken challenging the issue of reopening and notice. After filing of the appeal it was posted for consideration on several occasions and it was for the first time on 30th August 1995, assessee through its counsel filed letter raising the following three grounds; 3 (1) For that the assessing officer has erred in jurisdiction under section 147 (a) as the condition precedent is absent in the appellant’s case. (2) For that the A.O. has erred in issuing notice under section 148. (3) For that issue of notice under section 148 is without jurisdiction and abinitio void. The tribunal heard the assessee and the revenue on the aforesaid issues and relying on the judgement of this Court in the case of Hindustan Malleables & Forgings Ltd Versus Commissioner of Income Tax (191 ITR 110) came to the conclusion that the assessee is entitled to raise a point, not raised or considered by the lower tax authorities. The tribunal observed that there are divergent views on the issue of entertaining a point for the first time before the tribunal but as the Bench of the tribunal falls within the jurisdiction of this court the decision rendered in the case of Hindustan Malleables & Forgings (Supra) is binding on it. Accordingly it held that the ground urged before the tribunal for the first time, though not raised either before the assessing officer or the Commissioner of appeal, is fit to be entertained for the first time before it. On merit the Tribunal concluded that action of reopening and notice is 4 illegal. While doing so the Tribunal observed that sales tax assessment order does not speak of anything about suppression of turn over by the assessee nor there is any whisper in this regard in the assessment order on the basis of which notice under section 148 read with section 147 (a) could have been issued. The tribunal held that there is no nexus to the material possessed by the assessing officer raising reasonable believe about the nondisclosure of material fact by the assessee in the statement of chargeable income. Accordingly it held that the issue of notice under section 148 read with section 147(a) of the Act is illegal and bad in law. Consequently framing the assessment, pursuant to such illegal notice is wholly illegal and void. On these facts the tribunal has referred the following questions for our opinion: (i) Whether on the facts and circumstances of the case the income tax appellate tribunal was correct in admitting additional ground of appeal raised by the appellant for the first time before it? (ii) Whether the income tax appellate tribunal was justified in holding that the issue of notice under section 148 was illegal and bad in 5 law and consequentially the assumption of jurisdiction by the A.O. for framing assessment pursuant to such illegal notice is wholly illegal and void? Mr. Harshvardhan Prasad appearing on behalf of the Revenue submits that a ground, neither raised before the assessing officer nor in appeal before the Commissioner of Income Tax can not be raised for the first time before the tribunal. He submits that the matter stands concluded by the judgement of Full Bench of this Court in the case of Bihar State Road Transport Corporation V. Commissioner of Income Tax (149 I.T.R. 208). He has drawn our attention to the following passage: “All these cases are a pointer in one direction that on the facts and in the circumstances of the case the assessee was not entitled to raise these new grounds as a question of law for which the foundational facts or, for that matter, any relevant fact were not brought on the record either before the ITO or before the AAC. I, therefore, am constrained to hold that the Tribunal was right in not allowing the additional grounds with regard to the exemption claimed by the assessee under s. 11 of the Act to be raised before it”. 6 Despite service of notice on the assessee, no body has chosen to appear in its behalf. We have considered the submission advanced by Mr. Prasad and we do not find any substance in that and the authority relied on is clearly distinguishable. We are of the opinion that the tribunal has full jurisdiction and it is in its discretion to entertain for the first time new question which can be investigated without taking further evidence. In our opinion it is a matter within the discretion of the tribunal. If in the opinion of the tribunal, a ground though not raised either before the assessing officer or in appeal before the Commissioner is a substantial point touching upon the merit of the case and for its adjudication materials are available, nothing prevents the tribunal to adjudicate and consider a ground raised for the first time. In the case of Bihar State Road Transport Corporation (Supra) the Full Bench of this Court has observed as follows:- “Tribunal has full jurisdiction and it is in its jurisdiction to refuse permission to an appellant to raise for the first time before it a new question 7 of fact which cannot be investigated without taking further evidence”. In the facts of the said case this court held that the tribunal rightly did not allow the additional ground to be raised for the first time before it. The very fact that the Full Bench of this Court had held that discretion exercised by the tribunal in the facts of a given case is correct, necessarily implies that in the facts of a particular case the tribunal posseses power to entertain a ground for the first time before it. Therefore, in our opinion the judgment of this court in the case of Bihar State Road Transport Corporation instead of supporting the contention of the revenue goes against him. In view of the decision of Division Bench of this Court in the case of Hindusthan Malleables and Forgings Ltd. V Commissioner of Income Tax (191 ITR 110) this question need not detain us much. In our opinion in the scheme of the Act there is nothing, which restricts the tribunal to determine all question not raised before the departmental authority . In our opinion whether the points raised before the tribunal for the first time is fit to be entertained or not primarily is within its discretion. It is not a matter of jurisdiction 8 but discretion. We, hasten to add that in case in which the point raised does not need investigation of fact and goes to the root of the matter, the tribunal, in the absence of any compelling reason shall permit raising such point. This will advance the cause of justice. Accordingly our answer to the first question is in the affirmative and it is held that the tribunal was correct in admitting additional grounds of appeal raised before it for the first time. Mr. Prasad, then submits that the tribunal erred in holding that the notice issued under section 148 of the Act is illegal. We do not find any substance in the submission of the learned counsel. The assessing officer has issued notice under section 148 of the Act on the basis of the figure obtained from the sales tax department in the assessment order of the assessee. A perusal of the assessment order does not suggest suppression of turn over by the assessee nor there is any whisper about suppression of turn over in the said order. Thus there was no material before the assessing officer for issuing notice under section 148 of the Act. It is well settled that only such 9 material which has live link and proximate nexus available with the assessing officer, may enable him to form a reasonable believe about the nondisclosure of the material fact by assessee resulting in escapement of chargeable income. We have found no nexus between them. In that view of the matter we have no hesitation in coming to the conclusion that the issuance of notice was illegal. Accordingly our answer to the second question is also in the affirmative and it is held that the tribunal was justified in holding that the issue of notice under section 148 was illegal and consequently the assumption of jurisdiction in pursuance to such illegal notice by assessing officer is illegal and void. Let our opinion be transmitted to the Income Tax Tribunal, Patna. This reference is accordingly disposed off. (Chandrammauli Kr. Prasad, J) (Dr. Ravi Ranjan, J) Patna High Court Dated the 24th of July 2008 Rahman/NAFR