THE COMMISSIONER OF INCOME T vs. M/S.TAMILNADU MARITIME BOARD

These appeals have been filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) challenging the common order dated 22.9.2017 made respectively in ITA.Nos.1557, 1660, 1556 and 1554/Mds/2017 on the file of the Income Tax Appellate Tribunal, Madras ‘B’ Bench (for brevity, the Tribunal) respectively for the assessment years 2012-13, 2012-13, 2011-12 and 2007-08.

The above appeals were admitted on 14.9.2020 on the following substantial questions of law : “i. Whether the Tribunal was correct in holding that the Commissioner of Income Tax (Appeals) cannot enhance the assessment on a reference made by the Assessing Officer especially when the provision of Section 251(1)(a) confers the power to enhance on the CIT(A) and there is no bar in the Assessing Officer from reporting the shortcoming in the order passed for the purpose of 2/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 enhancement ? and ii. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the contribution made towards superannuation fund was to be treated as business expenditure and is to be allowed under Section 37 of the Income Tax Act even though it was an unapproved fund during the year hit by Section 36(1)(iv) read with Section 40A(9) ? And iii. Whether the reasoning and finding of the Tribunal is proper especially when as per Section 36(1)(iv), the employer's contribution towards recognized

In our considered view, the necessity to answer the first substantial question of law does not arise for consideration in these appeals for the reason that the assessee had succeeded on merits before both the Commissioner of Income Tax (Appeals)-2, Chennai-34 [for brevity, the CIT(A)] as well as the Tribunal, which order was confirmed by us by dismissing the appeals filed by the Revenue in TCA.Nos.1030 and 1031 of 2019 dated 09.10.2020 i.e today for the assessment years 2014- 3/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 15 and 2015-16. Further, the exercise to be undertaken to decide the first substantial question of law has become academic in the assessee’s case. We note that the power of the Commissioner of Income Tax (Appeals) to enhance the assessment on a reference made by the Assessing Officer in terms of Section 251(1)(a) of the Act was considered by the Tribunal in the decision in the case of M/s.A.R.Housing Private Limited Vs. ITO, Company Ward [ITA.No.623/Mds/2015 dated 11.9.2015]. We are informed that as against the said order, the Revenue filed TCA.No.502 of 2016 and that the same is pending wherein this substantial question of law has been raised for consideration.

That apart, Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the appellant – Revenue has referred to the decision of the Kerala High Court in the case of Popular Automobiles Vs. CIT [reported in (1991) 187 ITR 86] wherein the question was as to whether the Income Tax Officer was incompetent to make a request before the Commissioner of Income Tax (Appeals) pleading for enhancement of disallowance under Section 37(3A) of the Act. The assessee contended that the Statute did not clothe the Assessing Officer with such a power and the power vested in the Commissioner of Income Tax (Appeals) under Section 251(1)(a) of the Act to enhance the assessment was a suo motu 4/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 discretionary power. The Revenue contended that the power of the Commissioner of Income Tax (Appeals) under Section 251 of the Act is of very wide import, that in disposing of the appeal, his powers are co-equal to that of the Assessing Authority, that the Commissioner of Income-tax (Appeals) was bound to consider the request of the Income-Tax Officer to enhance the assessment and if he failed to do so without any reasonable cause, it is open to the Revenue to file a second appeal before the Tribunal from the order passed by the Commissioner of Income-Tax (Appeals) in appeal. This question was considered and answered in the following terms: “In the light of the above decisions, we hold that it is open to the Income-tax Officer to bring to the notice of the Commissioner of Income-tax (Appeals) any lapse or omission or error in the assessment and invite the appellate authority to exercise the power vested in him to enhance the assessment or take other steps to undo the harm or error. It is idle to contend that though the Commissioner of Income-tax (Appeals) can exercise the power to enhance the assessment even suo motu, such a power cannot be exercised when the occasion for the exercise of such power is on an alert made by the Income-tax Officer or brought to his notice by the Income-tax Officer (assessing authority). The Income-tax Officer 5/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 cannot prefer an appeal against his own assessment. It may be that it is open to him either to rectify the order under Section 154 of the Act or initiate proceedings for reassessment, if it is justified in law, or request the Commissioner of Income-tax to exercise his suo motu power of revision under Section 263 of the Income-tax Act. It is also open to the Income-tax Officer to point out the error or omission and request the Commissioner of Income-tax (Appeals), before whom the appeal filed by the assessee is pending, to take reasonable steps to see that a true and proper assessment is rendered in the case. The powers aforesaid are concurrent. We hold that the Income-tax Officer had locus standi or right to alert the Commissioner of Income-tax (Appeals) and bring to his notice that Section 37(3A) of the Act is applicable in the instant case and that an enhancement in disallowance is called for on that account. The Appellate Tribunal has found that such a motion was made by the Income-tax Officer, by his letter dated February 2, 1983, before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) is exercising a quasi-judicial function. He should have adverted to the request made by the Income-tax Officer in his letter dated February 2, 1983, and 6/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 disposed of the matter fairly and reasonably. It was his statutory duty to do so. On the other hand, he failed in his duty and disposed of the appeal even without adverting to the said request made by the Income-tax Officer. We are of the view that it is a patent jurisdicitional error. The Commissioner of Income-tax (Appeals) has abnegated in discharging the dutyjmposed on him by law. Since the Revenue was prejudiced by the failure of the Commissioner of Income-tax (Appeals) to discharge his statutory duty aforesaid, it is open to the Revenue (Income- tax Officer) to file an appeal from the order passed by the Commissioner of Income-tax (Appeals) and assail the same. Against the order of the Commissioner of Income-tax (Appeals), the appeal filed by the Revenue under Section 253(2) of the Income-tax Act is competent and maintainable. We hold so.”

As observed by us earlier, we do not propose to consider the first substantial question of law framed because the issue has become academic in the assessee’s case. Therefore, we leave the first substantial question of law open for consideration. 7/9 http://www.judis.nic.in TCA.Nos.286, 295, 297 & 299/2020 7. In the result, for the reasons set out in the preceding paragraphs, the above tax case appeals are dismissed on the ground that the assessee succeeded on merits in the dismissal of TCA.Nos.1030 and 1031 of 2019 dated 09.10.2020 i.e today filed by the Revenue and for the other reasons set out in the preceding paragraphs, the first substantial question of law is left open for consideration. 8. With regard to substantial question of law Nos.2 and 3, in the assessee’s own case in TCA.Nos.287 and 288 of 2020, by common judgment dated 08.10.2020, we answered in favour of the assessee. 9. Following the same, substantial question of law Nos.2 and 3 are answered against the Revenue and the appeals are dismissed. No costs.