In the case of National Thermal Power Co. Ltd vs. CIT(supra) , the Supreme Court held that under s. 254 of the IT Act, the Tribunal may after giving both the parties to the appeal an opportunity of being heard pass such orders as it may deem fit. The power of the Tribunal cannot be restricted only to decide the grounds which arise from the order of the CIT(A). The Tribunal cannot be prevented from considering questions of law arising in assessment proceedings although not raised earlier.

In the case of Jute corporation of India Ltd. vs. CIT & Anr (1990) 88 CTR 66: (1991) 187 ITR 688 (SC), the Supreme Court while dealing with the powers of AAC, held that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any prescribed by the statutory provisions. It observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.

Facts:

On 30th September, 2011 the assessee company (respondent herein) had filed its return of income of Rs. 3,69,39,110 for the asst year. 2011-12 after claiming deduction under Chapter VI-A equivalent to a sum of Rs. 6,19,525. The return filed by the respondent was processed under s. 143 (1) and thereafter was picked up for scrutiny and a notice was issued under s. 143(2) of the Act. After giving due opportunity to respondent, an assessment order was passed under s. 143(3) whereby the income as returned by the respondent was accepted and the claim made by the respondent under s. 80-IB (10) was bypassed by AO. Thereafter an appeal was preferred to CIT(A) wherein it was dismissed on the ground that the claim with respect to deduction under s. 80-IB (10) of the Act did not form the part of the original return filed by the respondent. The view taken was that once a return is filed, which does not advert to a claim, the respondent cannot press for it being allowed. The respondent being dissatisfied preferred an appeal to the Tribunal.

Tribunal Order:

The Tribunal reversed the order of the CIT(A), ruled that both the CIT (A) and itself had the power to consider the revised claim by the respondent, even though no claim  qua the same had been lodged by it in the return as originally filed. Thus considering the given facts and circumstances, the Tribunal remitted the matter to the AO for fresh consideration, based on the documents already filed by the respondent at the time of assessment. The Appellant herein being aggrieved preferred the present appeal before Madras High Court qua the judgment and order passed by the Tribunal wherein the appellant argued that the assessee company could only raise an additional ground and not make a new claim or additional claim.

Madras High Court Verdict:

The High court after relying on the decision of the apex court in National Thermal Power Co. Ltd vs. CIT (supra) held that the power of entertaining the claim vests with the appellate authorities based on the facts and circumstances of the case. It further held that even if the claim made by the assessee does not form part of the original return or even the revised return, it can still be considered, if the relevant material was available on record, either by the appellate authorities by themselves or on remand by the AO. In the instant case the Tribunal on perusal of the record, found that the relevant material qua the claim under s. 80-IB(10) was placed on record by the assessee company during the assessment proceedings and therefore it deemed fit to direct its re-examination by the AO and hence held that the view taken by the Tribunal is unexceptional and therefore does not merit any interference.