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Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of - Assessment year 1975-76 - Assessee claimed deduction under section 80J for first time before Tribunal in second appeal - Whether Tribunal was justified in refusing to entertain said ground of appeal merely on ground that same did not arise out of order of AAC not having been raised in grounds of appeal before AAC - Held, no FACTS The assessee-company preferred an appeal to the AAC against the order of ITO for the assessment year 1975-76. The assessment order was silent about the admissibility of deduction under section 80J and the assessee did not raise this issue before the AAC who thus had no occasion to consider it. On further appeal to the Tribunal a specific ground was taken by the assessee claiming deduction under section 80J. The Tribunal refused to entertain the same for the reason that the assessee had not taken this ground before the AAC and, therefore, it did not arise out of the order of the AAC. On reference: HELD In view of the law laid down by the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd. [1967]66 ITR 710in which it was held that there is nothing in the Act which restricts the Tribunal to the determination of question raised before the departmental authorities and that questions, whether of law or of facts, which relate to the assessment of the assessee, may be raised before the Tribunal. In the instant case, the Tribunal was not correct in refusing to entertain the ground of appeal raised before it relating to deduction under section 80J merely on the ground that the same did not arise out of the order of the AAC as it was not even raised in the grounds of appeal before the AAC. CASES REVIEW CIT v. Mahalakshmi Textile Mills Ltd.[1967] 66 ITR 710 (SC)followed and relied upon. CASES REFERRED TO CIT v. S. Chenniappa Mudaliar [1969] 41 ITR 710 (SC) and CIT v. Mahalakshmi Textile Mills Ltd.[1967] 66 ITR 710 (SC). K.N. Jain and Vikash Jain for the Petitioner. K.K. Vidyarthi and S.K. Sharan for the Respondent. JUDGMENT Bharuka, J.- As required by this Court under section 256(2) of the Income-tax Act, 1961 ('the Act') the Tribunal has referred the following questions…

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