Tribunal, in deciding an appeal, is not confined to the grounds set forth in the memorandum of appeal or those which the appellant may urge with its leave. It can decide the appeal on any ground provided only that the affected party has an opportunity of being heard on that ground. Tribunal should not be prevented from considering questions of law arising in assessment proceedings although not raised earlier
1. Assessee is engaged in the business of software development and is registered with the Software Technology Park of India („STPI‟) Noida. The Assessee is a hundred percent export oriented unit („EOU‟) having been duly approved as such by the Joint Director, STPI, Ministry of Communication and Information Technology, Government of India
2. Assessee filed its return of income for AYs 2008-09 and 2009-10, declaring nil income and claiming deduction under Section 10B of the Act in respect of the profit derived from export of computer software
3. Assessing Officer („AO‟) in the assessment orders dated 20th December 2010 and 27th December 2011 for the AYs 2008-09 and 2009-10 respectively disallowed the claim on the ground that certification of the Assessee as EOU ought to have been by the statutory Board referred to in the Explanation to Section 10B of the Act and not by the Joint Director
4. The matter was carried by the Assessee in appeal to the Commissioner of Income Tax (Appeals)
5. Meanwhile the ITAT, Delhi Bench in the case of Valiant Communication Ltd. v. DCIT (order dated 23rd April, 2010 in ITA No. 2706/Del/2008), allowed the claim of the Appellant therein under Section 10B by holding that approval by the Joint Director, STPI was sufficient to claim the deduction
6. On the basis of the above decision, the appeals of the Assessee herein were allowed by the CIT (A) vide order dated 26th October 2012. Since the order of the CIT (A) was in its favour, the Assessee had no occasion to go before the ITAT. However, the Revenue filed appeals against the said order before the ITAT
7. While the Revenue's appeals were pending, the order of the ITAT in Valiant Communications Ltd. (supra) was carried in appeal before Delhi High Court by the Revenue
8. The said appeal was considered with a bunch of other similar cases and in CIT v. Regency Creations Ltd.(2013) 353 ITR 326(Del), Delhi High Court held that for the purposes of availing the benefit of Section 10B of the Act, the certification by the Board was mandatory and that such exemption could not be granted on the basis of the certificate issued by the Joint Director
9. The Respondent Assessees in the above cases, including Valiant Communications Ltd. and Regency Creations Ltd. filed applications before Delhi High Court for clarification that even though they may not be entitled to the benefit under Section 10B, they should not be denied the benefit under Section 10A as they satisfied the requirements for availing the benefit under Section 10A
10. Delhi High Court held that the Tribunal shall consider the relevant documents on the basis of the claims and ascertain whether the applicant is entitled to the benefit of Section 10A and the Tribunal shall proceed to pass appropriate orders after hearing both parties
11. On coming to know of the above order, the Appellant Assessee herein filed its cross objection before the ITAT in the two pending appeals of the Revenue against the order of the CIT(A) for AYs 2008-09 and 2009-10
12. ITAT relied on the decision of Delhi High Court in Regency Creations Ltd. (supra) and allowed the Revenue‟s appeals. The ITAT restored the order of the AO disallowing the claim made by the Assessee under Section 10B of the Act
13. While taking up the cross-objections, although the delay in filing was condoned, the ITAT declined to permit the Assessee to maintain the cross objections by following the decision of the Coordinate Bench of the ITAT in ITO v. Neetee Clothing (P)Ltd.  129 TTJ 342 (ITAT [Del]), on the ground that since the Assessee had not urged the plea of being entitled to the benefit under Section 10 A of the Act before the CIT (A), it could not be permitted to urge such plea for the first time before the ITAT
14. Assessee moved to the Delhi High Court and framed following as question of law -
"Whether the ITAT was correct in law in not examining the Assessee's cross objections?”
15. After hearing both the parties Honb. Delhi High Court has decided the issue in favour of the Assessee and held that ITAT was in error in declining to examine the cross objections filed by the Appellant Assessee
Citing CIT v. Edward Keventer (Successors) Pvt. Ltd. (1980) 123 ITR 200 : Rule 12, earlier referred to, also lays down that the Tribunal, in deciding an appeal, is not confined to the grounds set forth in the memorandum of appeal or those which the appellant may urge with its leave. It can decide the appeal on any ground provided only that the affected party has an opportunity of being heard on that ground.
Citing Supreme Court in NTPC v. CIT(1998) 229 ITR 383 : The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
Consequently, the question framed is answered in the negative, i.e. in favour of the Assessee and against the Revenue. The impugned order dated 10th December 2014 of the ITAT to the extent that it declined to examine the Appellant Assessee's cross objections on merits is hereby set aside. The Appellant Assessee‟s cross objections Nos. 125/Del/2013 and 145/Del/2013 for the Assessment Years („AYs‟) 2009-10 and 2008-09 respectively are restored to the file of the ITAT for consideration on merits.
Cases referred to
Valiant Communication Ltd. v. DCIT (order dated 23rd April, 2010 in ITA No. 2706/Del/2008)