Facts of the Case

The assessee, Baldeo Prasad, was subjected to assessment proceedings wherein certain additions or disallowances were made by the Assessing Officer. The assessee did not contest some of these issues before the Commissioner (Appeals). Subsequently, during proceedings before the Income Tax Appellate Tribunal, the assessee sought to raise additional grounds challenging the legality and correctness of such disallowances. The controversy arose as to whether such grounds could be entertained at the Tribunal stage despite not being raised earlier.

Issues Involved

  1. Whether the assessee is entitled to raise additional grounds before the Tribunal that were not urged before the lower appellate authority.
  2. Whether the Tribunal has jurisdiction under Section 254(1) to admit and adjudicate such grounds.
  3. Whether disallowances based on legal provisions can be challenged for the first time at the appellate stage.

Petitioner’s Arguments (Assessee’s Contentions)

  • The assessee contended that the issues raised were purely legal in nature and went to the root of the assessment.
  • It was argued that there is no bar on raising additional grounds before the Tribunal if the relevant facts are already on record.
  • The assessee submitted that taxation must be in accordance with law, and an incorrect disallowance cannot be sustained merely because it was not challenged earlier.
  • Reliance was placed on judicial precedents recognizing the Tribunal’s wide appellate powers.

Respondent’s Arguments (Department’s Contentions)

  • The Revenue contended that the assessee had accepted the disallowances by not challenging them before the Commissioner (Appeals).
  • It was argued that allowing new grounds at the Tribunal stage would prejudice the Department and bypass the normal appellate hierarchy.
  • The Department maintained that issues not raised earlier should not ordinarily be entertained.

Court Order / Findings (ITAT Decision)

The Tribunal examined the scope of its powers under Section 254(1) and held that it possesses wide jurisdiction to admit additional grounds, particularly where the issues involve pure questions of law and the necessary facts are already on record.

It was observed that there is no estoppel against statute, and tax liability must be determined strictly in accordance with law. Therefore, an assessee cannot be compelled to suffer an unlawful disallowance merely because it was not contested at an earlier stage.

Accordingly, the Tribunal admitted the additional grounds and directed adjudication on merits, thereby affirming that procedural lapses should not defeat substantive justice in taxation matters. This approach aligns with established jurisprudence permitting such challenges at the Tribunal level.

Important Clarification

  • The ITAT has broad appellate powers and can entertain new legal grounds.
  • Acceptance of an addition at an earlier stage does not bar the assessee from challenging it subsequently.
  • Pure questions of law can be raised at any stage if facts are already on record.
  • The objective is to ensure that tax is levied strictly according to law and not due to procedural omissions.

Link to download the order - https://itat.gov.in/public/files/upload/1610687234-169%20Alld%2018%20Baldeo%20Pd.pdf 

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