Chagla, C.J.

1. The assessee is a dealer in shares and it appears that on the 29th March, 1948, it purchase 5,300 shares of the Edward Textiles Limited. The price it paid for these shares was Rs. 1,100 per share. It also on the same day purchased the managing agency right of the Edward Textiles Limited. The assessment year is 1949 and the relevant previous year of the assessee ended on the 31st March, 1949. On that day the market value of these shares was Rs. 225 per share. In the year of account the assessee had dealt with some of these share and some shares had been given to it as bonus shares, and it claimed a loss in its business on the footing that it had purchased these share at Rs. 1,100 per share and the market value on the 31st March, 1949, was Rs. 225 per share. The Income Tax Officer held that market value on the 29th March, 1948, was only Rs. 715 and not Rs. 1,100 and that the assessee had paid Rs. 1,100 instead of Rs. 715 because it secured the additional advantage of getting the managing agency right, and therefore the Income Tax Officer allowed the assessee loss on the basis of the difference between Rs. 715 and Rs. 225. The assessee also had made some claim with regard to dividends, which claim was disallowed by the Income Tax Officer. The Appellate Assistant Commissioner confirmed the Income Tax Officer with regard to the basis of calculating the loss of the assess during the year of account in respect of these shares, but he gave relief to the assessee on the question of dividends. From this decision of the Appellate Commissioner confirming the Income Tax Officer with regard to the computing of the loss in respect of these of these shares. The Department appealed in respect of the decision of the Appellate Assistant Commissioner with regard to dividends. The Tribunal dismissed both the appeals, but in dismissing the appeal of the assessee it made certain observations and those observation were that the original purchase by the assessee of 5,300 shares should have been treated as a capital investment and not as forming part of the stock-in-trade of the assessee. They further went on to observe that even if this original purchase of shares was treated to have been converted into stock-in-trade, that was only on the 27th August, 1948, when some of these shares were sold for the first time by the assessee and as on that date the price was Rs. 524-6-0, they took the view that, that would be the proper price to consider and not either. The price of Rs. 1,100-0-0 Rs. 715-0-0 and, in view of these observations they stated this was clear case of under-assessment.

2. The assessee made an application to the Tribunal for reference to this Court and the Tribunal has referred two questions of law. One is, "Whether there was evidence before the Tribunal to hold that the purchase of Rs. 5,300 shares of the Edward Textiles Limited was the purchase of a capital investment and lot that of a stock-in-trade " And the second question, which would only arise if the first question is answered in the negative, is : "Whether the purchase price of the shares for the purpose of ascertaining the profits should be taken at Rs. 1,100-0-0 or Rs. 715-0-0 or Rs. 524-6-0 per share " But the real question which the assessee has how taken out a notice of motion, and this question arises under the following circumstances. The case of the assessee is that the Tribunal had not jurisdiction to find as a fact that this was a case of capital investment and not a case of purchasing of shares in the course of business and the shares constituted the stock-in-trade. All along, from the stage of the Income Tax Officer, it was conceded by the Department that when the assessee purchased 5,300 shares on the 29th March, 1948, it purchased them as dealer in shares and they constituted its stock-in-trade. The only dispute between the Department and the assessee was at what price should these shares be valued for the purpose of determining the loss as on the 31st March, 1949. The Income Tax Officer having taken the view that they should be valued at Rs. 715 and the Appellate Assistant Commissioner having confirmed that view, the Department did not prefer any appeal against the finding of the Appellate Assistant Commissioner; in other words, it accepted that finding as correct; and the assessee appealed against the decision of the Appellate Assistant Commissioner claiming that the price should be the higher price of Rs. 1,100. Therefore, the only questions that the Tribunal had to decide was whether the Appellate Assistant Commissioner was right in fixing Rs. 715 as the proper price of the assessee was right in claiming Rs. 1,100. It must be borne in mind that the Tribunal has to jurisdiction to enhance the assessment as the Appellate Assistant Commissioner has, and therefore in substances if the view of the Tribunal could in law be acted upon, the decision of the Tribunal amounted to this that the assessment of the assessee should be enhanced and the amount allowed by the Income Tax Officer and the Appellate Assistant Commissioner for loess in the assessment year should be deleted and no deduction whatsoever should be given to the assessee with regard to the loss in the dealing of these shares.

3. It is said by Mr. Joshi that the substantive order passed by the Tribunal was dismissing the appeal of the Department and therefore the assessee has not grievance. But the curious thing is this, that in the statement of the case the Tribunal admits the position that it has found as a fact that these shares represented capital investment. Not only that, but they also actually refer a question of law arising out of that finding and that question of law is, as pointed put, whether there was evidence before the Tribunal to hold that the purchase of these shares was the purchased of a capital investment and not that of a stock-in-trade, and the second question which their finding that these shares were purchased as a capital investment. Therefore it is no use saying, as Mr. Joshi says, "ignore this finding; what matters is the ultimate decision of the Tribunal, viz., dismissing the appeal of the Department." This finding may have serious consequences as far as the assessee is concerned. We need not go into the question as to what it may entail. Mr. Palkhivala says that it has already entailed a notice under section 34 being issued by the Income Tax Officer. But whatever that may be, before we can answer question 1 and 2 which the Tribunal has raised, we must ask them to refer the more important question which arises in limine, and that question is "whether it was competent to the Tribunal to give a finding that the purchase of 5,300 shares of Edward Textiles Limited represented a capital investment and that this was a clear case of under-assessment when it was not even the Departments case in the grounds of appeal before the Tribunal or even in the hearing of the appeal that the said shares did not constitute the applicants stock-in-trade." If the Tribunal thinks it necessary they will submit a supplemental statement of the case.

4. The Department to pay the costs of the notice of motion.

SUPPLEMENTARY STATEMENT OF CASE.

5. As requisitioned by their Lordships by their order in I. T. Reference No. 51 of 1955, dated 7th March, 1956, we refer the following question of law as directed therein :

"Whether it was competent to the Tribunal to give a finding that the purchase of the 5,300 shares of Edward Textiles Limited represented a capital investment and that this was a clear case of under-assessment when it was not even the Departments case in the grounds of appeal before the Tribunal or even in the hearing of the appeal that the said shares did not constitute the applicants stock-in-trade."

2. It is true that neither before the Appellate Assistant Commissioner nor in the grounds of appeal before the Tribunal the Department took a stand that 5,300 shares of the Edward Textiles Limited were the capital investment of the assessees business. As the time of the hearing before the Tribunal, the Department Representative stated that these shares were capital assets and not stock-in-trade of the assessees share business. In the opinion of the Tribunal the purchase of these shares was in the nature of capital investment and was an investment in the managing agency business. In giving this finding, the Tribunal carefully considered the arrangement of the sale of shares and the transfer of the managing agency of the mills. These shares were purchased at a much higher price than the market price prevailing at the material time. The Tribunal, however, did not dispose of the appeal merely on this issue. The question which was agitated before the lower authorities related to the purchase price of the stock-in-trade. The assessee wanted to take the price which he had paid for these shares, i.e., Rs. 1,100 per share. The Income Tax Officer had taken the market price of the price of the shares at the time of the purchase of the shares, i.e., at Rs. 715 per share. In view of the finding given by the Tribunal that the purchase of the shares was not the purchase of stock-in-trade, the question, therefore, arose what was the point of time at which these shares were transferred to the stock-in-trade. The Tribunal considered the various transaction in share done by the assessee and came to the conclusion that the price of the business could not be taken at higher than Rs. 524-6-0 per share. As the Department had already allowed a higher price of Rs. 715 per share, the appeal of the assessee was dismissed.

3. We think it is open to the Tribunal to go into the facts which are essential for the decision of the points raised in the appeal. Some times it happens that the Income Tax Officer has made a wrong assessment and given the assessee a partial relief. If the Tribunal thinks that no relief was necessary, the appeal will be dismissed without going into the question of the quantum of the relief allowed. Similarly there may be another case where a Departments appeal may be dismissed on similar grounds. Under section 33 (4) the Tribunal has been given the power to pass such order as it thinks fir. As both the assessee and the Department have got the right of appeal to the Tribunal, the Tribunal will not pass an order which may in effect enhance the assessment. In the present case therefore the Tribunal did jot consider if fair to enhance the assessment as the Department had not come in appeal to the Tribunal. If the Income Tax authorities think advisable to take action under section 34 it will be open to the assessee to produce further evidence to show that the purchase of shares was the purchase of a stock-in-trade and not a capital investment. It will also be open to the assessee to raise a ground of appeal as to the validity of the proceedings under section 34.

4. The original statement of the case will indicate that the reference was made with some hesitation. We also admit that we made a mistake in referring the following question in the original statement of the case :

"Whether there was evidence before the tribunal to hold that the purchase of 5,300 shares of the Edward Textiles Limited, was the purchase of a capital investment and not that of a stock-in-trade

We did so under a pressure from the parties.

5. On the date of the hearing of the draft statement of the case on unfortunate controversy arose between the assessee and the Department. The assessees counsel and attorney stated that the Department Representative never took the stand that the 5,300 shares of Edward Textiles Limited were capital asset of the assessee. According to the assessee only a mention to this aspect of the matter was made by the Bench at the time of the hearing. On the other hand, Mr. Hegde, the Departmental Representative, stated affirmatively that his last contention was that the purchase of the shares was the purchase of a capital investment. He however admitted that in the first instance the point had been mentioned by the Bench during the hearing. It is long time since the case was heard. We have no reason to doubt the statement made by the Departmental Representative. The constitution of the Bench which heard the appeal was different. Mr. Malhotra, who was a member of the bench which heard the appeal, believes that the Department Representatives impression are correct.

6. There is not suggestion to place more facts in record.

JUDGMENT

Chagla, C.J.

6. The facts have been set out in our judgment delivered on the 7th March, 1956, when we directed the Tribunal to refer a question of law to us and they need not be reiterated. The question that arise is with regard to the jurisdiction of the Tribunal. It will be noted that the case of the Department both before the Income Tax Officer and the Appellate Assistant Commissioner was that the price of the shares should be taken at Rs. 715 per share which was the market value on the 29th March, 1948, when the share were acquired, and the case of the assessee was that the price of the share should be Rs. 1,100 which was the actual price paid by the assessee for the purchase of the these shares. It was common ground that the price of the shares on the 31st March, 1949, was Rs. 225 per share. It was also common ground that the assessee was entitled to a deduction for loess in the shares business with regard to these shares on the basis of the difference between the purchase price and the price prevailing on the 31st March, 1949. Therefore, the controversy between the Department and the assessee was whether the assessee was entitled to loss on the basis of the difference between Rs. 1,100 and Rs. 225 or Rs. 715 and Rs. 225. The Income Tax Officer and the Appellate Assistant Commissioner held in favour of the Department and the assessee appealed to the Tribunal, his ground of appeal being that he should have been allowed loss on the basis of the difference between Rs. 1,100 and Rs. 225. In this appeal the Tribunal, while dismissing the appeal of the assessee, held (1) that the shares were not stock-in-trade but constituted capital investment, (2) that the price of the shares should be Rs. 524-6-0 as of the 28th August, 1948, when according to the Tribunal these shares were converted into stock-in-trade, (3) that the loss should be calculated on the basis of the difference between Rs. 524-6-0 and Rs. 225, and (4) that this was a clear case of under-assessment. The question is whether the Tribunal had jurisdiction to arrive at these findings.

7. Now, the jurisdiction of the Tribunal is to be found in section 33 (4) which is in very wide terms :

"The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner."

8. Wide as the language seems to be, this Court has construed this section and has particularly emphasised the language used by the Legislature, viz., "thereon", and the view taken by the Court, as we will presently point out, is that the orders that the Appellate Tribunal can pass, whatever the nature of the order may be, must be orders on its appeal and the Tribunal cannot travel outside the appeal. This decision is to be found in Motor Union Insurance Co. Ltd. v. Commissioner of Income Tax, Bombay and Mr. Justice Kania in that case held that the word "thereon" used in section 33 (4) must mean on the grounds raised in the appeal, and that section gave power to the Appellate Tribunal to give its decision and pass order in respect of all grounds urged on behalf of the appellant in respect of the decision appealed against. In deciding those grounds it could pass appropriate orders, but it was not open to the Tribunal itself to raise a ground or permit the party who has not appealed, to raise a ground which will work adversely to the appellant. The words of the section were not wide enough to include a power of enhancement without an appeal by the Commissioner.

9. Applying this decision to the facts of this case, let us see what the position is. The finding of the Tribunal that the price of the share should be Rs. 524-6-0 per share and that it was a clear case of under assessment was definitely a finding adverse to the assessee. The finding was not on any ground of appeal. There was no ground of appeal that the price be less than Rs. 715. Therefore, this finding was out side the grounds which were the subject-matter of the appeal. By reason of this finding the assessee found himself in a worse position than he would have been if he had not appealed. If he had not appealed the result would have been that the decision of the Income Tax Officer and the Appellate Assistant Commissioner that the price should be taken at Rs. 715 would have stood. That decision was accepted by the Department. The assessee came to the Tribunal to improve his position and to get a price fixed by the Tribunal which was higher than Rs. 715. The result was not only that his appeal was dismissed, which it was competent to the Tribunal to do, but the Tribunal gave a finding that the price was Rs. 524-6-0 and it was a clear case of under-assessment, which neither arose out of any ground of appeal and was clearly adverse to the assessee. We wish to make this perfectly clear, as has been pointed out by Mr. Justice Kania, that it was open to the Tribunal to have upheld the decision of the Appellate Assistant Commissioner not only on the ground on which the judgment of the Appellate Assistant Commissioner was based but on any other ground. In this very case it was open the Tribunal to say that it took the view that the shares were capital investment and not stock-in-trade. All that it could have done was to have used this argument to support the finding of the Appellate Assistant Commissioner that the price was Rs. 715 and not Rs. 1,100. But it made use of this finding that the shares were not stock-in-trade not in order to support the decision of the Appellate Assistant Commissioner but to arrive at conclusion which is different from the conclusion arrived at by the Appellate Assistant Commissioner and which conclusion is prejudicial to the assessee, viz., that the price was Rs. 524-6-0 per share. How prejudicial is this finding of the Tribunal is clear from, the fact that by reason of this finding proceedings have already been initiated by the Taxing Department under section 34. It is clear that the Tribunal could not have itself directed the Income Tax Officer to assessee the assessee on the basis of the price of the shares being Rs. 524-6-0 per share. What it could not do directly, equally it could not do indirectly. If it could not give the finding that the price of the shares was Rs. 524-6-0 per shares for the purpose of directing the Income Tax Officer to reassess the assessee on the basis of the price, it could equally not give that finding so as to afford the Commissioner an opportunity of reopening the assessment under section 34.

10. Mr. Palkhivala wanted to raise the large question that it was not open to the Tribunal on its own initiative to decide a question of fact which was not in issue between the parties either before the Income Tax Officer or the Appellate Assistant Commissioner. Mr Palkhivala says that both the Department and the assessee proceeded before the Income Tax Officer and the Appellate Assistant Commissioner on the basis that the shares constituted stock-in-trade and it was not to the Tribunal at the appellate stage to arrive at a finding of fact which was not the case either of the assessee or the Department. We do not wish to decide that larger question on this reference because that question does not arise in view of our opinion on the finding given by the Tribunal with regard to the price of the share and the fact that this was case of under-assessment. We also do not wish to say anything which might suggest that if a finding is given by the Tribunal with Jurisdiction that finding cannot be made the basis of proceedings under section 34. We wish to limit our decision to this point only that on the facts of this case the finding given which did not arise from any question raised in the appeal and therefore it was beyond the competence of the Tribunal to give this finding.

11. On this part of the reference we will amend the question, which we had asked the Tribunal to refer, in order to clearly bring out the controversy between the parties which has now been clarified by reason of the arguments advanced by us, and the amended question will be :

"Whether it was competent to the Tribunal to give a finding that at the relevant date the price of the share was Rs. 524-6-0 per share and that this was a clear case of under-assessment "

12. We will answer the question in the negative.

13. With regard to the main question on the reference, in view of our decision of I. T. Reference No. 30 of 1956, it is clear that on the second question we must hold that the purchase price was Rs. 715 and not Rs. 1,100. With regard to question (1) the Tribunal has now stated that that question was referred to us by mistake, so we need not answer it.

14. The Commissioner to pay three-fourth of the costs of there reference.

15. No order on the notice of motion. No order as to costs.

16. Reference answered in the negative.