Dy. CIT v. Gupta Overseas - Taxpublishers.in

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The Tax Publishers2014 TaxPub(DT) 1048 (Agra-Trib) : (2014) 160 TTJ 0257 : (2014) 099 DTR 0162 : (2014) 030 ITR (Trib) 0738 Dy. CIT v. Gupta Overseas INCOME TAX ACT, 1961 --Appeal [Tribunal]--Invocation of rule 27Scope and effect on adjudication of grounds--Where neither appeal nor cross objection was filed by the Revenue/assessee, it could invoke rule 27 of IT Rules, 1962 after providing opportunity of hearing to other party. The important distinction between the scope of a cross-objection under section 253(4) and an objection under rule 27 is that while former calls into question correctness of a part of the operative order, the latter merely challenges a part of the reasoning adopted in the process of arriving at operating order, i.e., conclusion, even as it does not challenge the conclusion itself. As this Tribunal takes note of this fine distinction, it is also important to bear in mind that the order, in strict legal terms, is confined to what is eventually decided, while, the process of reasoning which leads to this conclusion, is termed as reasons for arriving at the order. Under section 253(4), one can challenge the conclusions. Under rule 27, one cannot challenge the conclusions, even though it can challenge the reasons for arriving at those conclusions, to the limited extent of the pleas which have been decided against the respondent, as it provides that the respondent 'may support the order on any of the grounds decided against him'. In effect thus, under rule 27, those grounds which have been decided against the respondent, even when the assessee does not challenge the same, can be agitated again, and to that extent, reasoning of even a favourable order can be called into question. However, cross-objection under section 253(4) can call into question the conclusions arrived at in the impugned order, and, therefore, cross-objections constitute a remedy against unfavourable portion of the order. It is thus clear that the scope and purpose of cross-objections are distinct and mutually exclusive. No doubt that it is a common practice that the cross-objections are routinely filed to support the orders appealed against by the other party, but a wrong practice, no matter how prevalent, can (sicâ€”not) affect the correct legal position. [Para 8] Therefore, it is not right to suggest, as has been suggested by the Departmental Representative, that when an assessee is not in cross-appeal or cross-objection, it is not permissible for the assessee to challenge correctness of the rejection of any of the grounds, which were rejected in the said order, even if, such grounds having been allowed, would have led to the same conclusion which were ultimately arrived at in the impugned order. All grounds raised by the assessee, if wrongly rejected by the CIT in the impugned order even if he has ultimately held the issue in favour of the assessee, can be pursued by the assessee in his capacity as respondent before the Tribunal. [Para 9] No formal procedure for mechanism of invoking rule 27 has been prescribed under the ITAT Rules or otherwise. However, whether or not such a procedure has been prescribed, it is only elementary that the manner in which rule 27 is invoked should be fair and reasonable. As Departmental Representative rightly states, if these issues are allowed to be raised without any prior intimation to the other party, the other party may not even have an opportunity to prepare on the issue sought to be raised. In any case, proviso to rule 11 which provides that 'provided that the Tribunal shall not rest its decision on any other ground unless the party who is affected thereby has had a sufficient opportunity of being heard on that ground'. It is, therefore, necessary that the affected party is properly put to notice in respect of the issues which are sought to be raised under rule 27. Therefore, while the respondent may indeed raise any of the issues, with regard to the grounds decided against the assessee even though the assessee may not be in appeal or cross-objection, the respondent can do so only by way of a written intimation to that effect duly served on the other party reasonably in advance, and, in a situation in which the other party seeks time for preparing or seeking instructions on that issue, the hearing is to be rescheduled so as to allow the affected party 'sufficient opportunity of being heard on that ground'. [Para 10] In view of the above discussions, and having taken note of the petition under rule 27 filed by the assessee respondent in response to requisition to do so and particularly having taken note of very fair and gracious approach of the Departmental Representative, this Tribunal admits the petition under rule 27 and proceeds to decide the issue so raised on merits. [Para 11] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2014 TaxPub(DT) 1048 (Agra-Trib) : (2014) 160 TTJ 0257 : (2014) 099 DTR 0162 : (2014) 030 ITR (Trib) 0738

Dy. CIT v. Gupta Overseas

INCOME TAX ACT, 1961

--Appeal [Tribunal]--Invocation of rule 27Scope and effect on adjudication of grounds--Where neither appeal nor cross objection was filed by the Revenue/assessee, it could invoke rule 27 of IT Rules, 1962 after providing opportunity of hearing to other party.

The important distinction between the scope of a cross-objection under section 253(4) and an objection under rule 27 is that while former calls into question correctness of a part of the operative order, the latter merely challenges a part of the reasoning adopted in the process of arriving at operating order, i.e., conclusion, even as it does not challenge the conclusion itself. As this Tribunal takes note of this fine distinction, it is also important to bear in mind that the order, in strict legal terms, is confined to what is eventually decided, while, the process of reasoning which leads to this conclusion, is termed as reasons for arriving at the order. Under section 253(4), one can challenge the conclusions. Under rule 27, one cannot challenge the conclusions, even though it can challenge the reasons for arriving at those conclusions, to the limited extent of the pleas which have been decided against the respondent, as it provides that the respondent 'may support the order on any of the grounds decided against him'. In effect thus, under rule 27, those grounds which have been decided against the respondent, even when the assessee does not challenge the same, can be agitated again, and to that extent, reasoning of even a favourable order can be called into question. However, cross-objection under section 253(4) can call into question the conclusions arrived at in the impugned order, and, therefore, cross-objections constitute a remedy against unfavourable portion of the order. It is thus clear that the scope and purpose of cross-objections are distinct and mutually exclusive. No doubt that it is a common practice that the cross-objections are routinely filed to support the orders appealed against by the other party, but a wrong practice, no matter how prevalent, can (sicâ€”not) affect the correct legal position. [Para 8] Therefore, it is not right to suggest, as has been suggested by the Departmental Representative, that when an assessee is not in cross-appeal or cross-objection, it is not permissible for the assessee to challenge correctness of the rejection of any of the grounds, which were rejected in the said order, even if, such grounds having been allowed, would have led to the same conclusion which were ultimately arrived at in the impugned order. All grounds raised by the assessee, if wrongly rejected by the CIT in the impugned order even if he has ultimately held the issue in favour of the assessee, can be pursued by the assessee in his capacity as respondent before the Tribunal. [Para 9] No formal procedure for mechanism of invoking rule 27 has been prescribed under the ITAT Rules or otherwise. However, whether or not such a procedure has been prescribed, it is only elementary that the manner in which rule 27 is invoked should be fair and reasonable. As Departmental Representative rightly states, if these issues are allowed to be raised without any prior intimation to the other party, the other party may not even have an opportunity to prepare on the issue sought to be raised. In any case, proviso to rule 11 which provides that 'provided that the Tribunal shall not rest its decision on any other ground unless the party who is affected thereby has had a sufficient opportunity of being heard on that ground'. It is, therefore, necessary that the affected party is properly put to notice in respect of the issues which are sought to be raised under rule 27. Therefore, while the respondent may indeed raise any of the issues, with regard to the grounds decided against the assessee even though the assessee may not be in appeal or cross-objection, the respondent can do so only by way of a written intimation to that effect duly served on the other party reasonably in advance, and, in a situation in which the other party seeks time for preparing or seeking instructions on that issue, the hearing is to be rescheduled so as to allow the affected party 'sufficient opportunity of being heard on that ground'. [Para 10] In view of the above discussions, and having taken note of the petition under rule 27 filed by the assessee respondent in response to requisition to do so and particularly having taken note of very fair and gracious approach of the Departmental Representative, this Tribunal admits the petition under rule 27 and proceeds to decide the issue so raised on merits. [Para 11]