The Madras High Court in State of Tamil Nadu v. Arulmurugan and Co. [1982] 51 STC 381,392 in explaining the difference between a tax appeal and an appeal in civil cases observed that an appellate authority sits in appeal, only in a manner of speaking. What it does, functionally, is only to adjust the assessment of the appellant in accordance with the facts on the record and in accordance with the law laid down by the Legislature. An appeal is a continuation of the process of assessment, and an assessment is but another name for adjustment of the tax liability to accord with the taxable event in the particular taxpayer’s case. There can be no analogy or parallel between a tax appeal and an appeal, say, in civil cases. A civil appeal, like a law suit in the court of first instance out of which it arises, is really and truly an adversary proceeding, that is to say, a controversy or tussle over mutual rights and obligations between contesting litigants ranged against each other as opponents. A tax appeal is quite different. Even as the assessing authority is not the taxpayer’s ‘opponent’, in the strictly procedural sense of the term, so too the appellate authority sitting in appeal over the assessing authority’s order of assessment is not strictly an arbitral Tribunal deciding a contested issue between two litigants ranged on opposite sides. In a tax appeal, the appellate authority is very much committed to the assessment process. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer’s appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attri- butes of the jurisdiction of a tax appellate authority. These attributes underline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself.
Given this established law the authorities under the Income-tax Act, 1961 are under an obligation to act in accordance with law and to collect tax as provided under the Act. If an assessee, under a mistake, misconception or not being properly instructed, is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected.[2017] 394 ITR 684 (Raj)