Tribunal not competent to travel beyond the scope of appeal in making the addition It has to confined itself to questions arising or subject matter of appeal – Allahabad High Court
ABCAUS Case Law Citation:
ABCAUS 2005 (2017) (07) HC
The Substantial Question of Law framed for determination:
Whether the Income Tax Appellate Tribunal (ITAT) was justified in adding a sum of Rs.12,20,000/-, alleged to have been received by the appellant-assessee as gift as his income under Section 69-A of the Act after deleting the said addition as made by the Assessing Officer and confirmed by the CIT (Appeals) under Section 68 of the Income Tax Act, 1961 (Act).
Brief Facts of the Case:
The appellant-assessee was a partner in a firm and had inducted capital of Rs.12,20,000/- in the relevant assessment year 2001-02.
The assessment of the said year 2001-02 was completed and proceedings for re-assessment were initiated under Section 148 and a notice was given to the petitioner to explain the source of the above capital as inducted in the partnership.
In reply to the said notice, petitioner submitted that he had received gifts of Rs.5,00,000/- and Rs. 7,20,000/- respectively from two persons.
The gifts had been received through banking channel. In order to prove the aforesaid gift transactions, gift deeds were also produced before the authorities. The statement of the two doners were also recorded under Section 131 of the Act and they proved the factum of the gift.
However, the Assessing Officer (AO) held that the gifts were not genuine as there were held to be unnatural and the aforesaid amount was added as the undisclosed income of the appellant-assessee under Section 68 of the Act.
The CIT-Appeals recorded findings that the documentation in respect of the gifts were complete and the appellant-assessee had established the identity of the doners and their credit worthiness to make gifts of the said amount but again CIT (Appeals) refused to acknowledge the said gift on the ground that they were not found to be genuine.
On appeal, the ITAT held that the addition made by the Assessing Officer under Section 68 of the Act and sustained by the CIT (Appeals) could not be sustained. Thereafter, the Tribunal proceeded to add the aforesaid amount as the income of the appellant-assessee under Section 69-A of the Act.
Aggrieved by such addition under Section 69-A of the Act the appellant-assessee had preferred the present appeal.
Contentions of the Petitioner Assessee:
It was submitted that all through the case of the parties was as to whether the aforesaid amount alleged to have been received by the appellant-assessee is liable to be added under Section 68 of the Act and the question of addition under Section 69-A was never there. Therefore, the Tribunal had erred in making addition under Section 69-A of the Act.
Observations made by the High Court:
The Hon’ble High Court noted the section 254 related to Orders of Appellate Tribunal as under
254(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.”
The Court observed that a plain reading of the aforesaid Section reveals that the Appellate Tribunal has power to pass such orders thereon as it thinks fit.
However, it clarified that the use of the word “thereon” is important and it reflects that the Tribunal has to confined itself to the questions, which are arising or are subject matter in the appeal and it cannot be travelled beyond the same. The power to pass such orders as the Tribunal thinks fit can be exercised only in relation to the matter that arises in the appeal and it is not open to the Tribunal to adjudicate any other question or an issue, which is not in dispute and which is not the subject matter of the dispute in appeal.
The Hon’ble High Court further observed that in the instant case, it was apparent that the subject matter of the dispute all through before the Tribunal in appeal was only with regard to the addition of alleged amount of the gift received by the appellant-assessee as his personal income under Section 68 of the Act and not whether such an addition can be made under Section 69-A of the Act.
The Hon’ble High Court opined that the Tribunal travelled beyond the scope of the appeal in making the addition of the said income under Section 69-A of the Act. It was particularly noted that the Tribunal had recorded a categorical finding that “it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (Appeals) cannot be sustained” meaning thereby that the Tribunal was of the opinion that the Assessing Officer and the CIT (Appeals) committed an error in adding the aforesaid amount in the income of the appellant-assessee under Section 68 of the Act. In view of the above, when the said income could not be added under Section 68 of the Act and the Tribunal was not competent to make the said addition under Section 69-A of the Act, the entire order of the Tribunal stood vitiated in law.
The Hon’ble High Court answered the question of law framed in favour of the appellant-assessee and against the Revenue and held that the Tribunal was not competent to make any addition under Section 69-A of the Act and as the same was subject matter of the appeal before it.