MANJUSHREE PLANTATION LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following question of law has been referred :

(2.) THE assessee is a public limited company. It is engaged in the manufacture of tea as well as coffee. During the assessment proceedings for the assessment year 1967-68, the ITO doubted the genuineness of certain vouchers for the expenditure incurred. In the course of the enquiry, the director-cum-secretary and the accountant who had filed the income-tax return conceded that some of the items of expenditure debited to the estate account could not be proved by them to the satisfaction of the ITO and that an addition of Rs. 1,20,000 as representing the expenses debited in the accounts but not proved to the satisfaction of the ITO may be made. Accordingly, in the assessment order dated May 15, 1968, the ITO made an addition of Rs. 1,20,000. It appears that during the discussion before the ITO the two officers of the assessee had requested for lenient treatment as regards the penalty proceedings likely to be initiated for concealment on the basis of such an addition. THE ITO referred the case to the IAC for penalty proceedings. On July 15, 1968, an appeal was filed against the assessment order against other items of assessment. THE grounds of appeal were signed by the accountant who is one of the persons who agreed for the addition. Notice under s. 271(1)(c) of the I.T. Act, 1961, was issued by the IAC on February 4, 1970. By this time, there was a change in the management of the company and the secretary and the accountant who appeared before the ITO and who filed the appeal were removed from service and there were also certain investigations relating to the mismanagement of the company by those two persons. THE new management of the assessee-company submitted a reply on February 22, 1970, in which we find the following statements :

(3.) THE next question for consideration is whether by reason of the them officers of the company deliberately omitting to raise this ground the present management is precluded from seeking permission to raise the same as additional ground. THE learned counsel for the revenue contended that the company is estopped from contending that either the concession made by the accountant and the secretary before the ITO is wrong or that the omission to raise the ground was not wilful. We are unable to agree with this contention. For one thing whether there was a concession by said officers and whether such a concession in the light of the facts alleged against them was valid are all matters that will have to be considered at the time of final disposal for the appeal. THEy are not matters relevant for the purpose of considering whether the permission for raising additional grounds has to be given or not. THE AAC, as already seen, gave the only reason for not permitting to raise additional grounds, that the officers of the company had conceded before the ITO for the addition after a discussion and it is for that reason they have not raised any ground relating to the addition. This reasoning of the AAC, therefore, is extraneous and irrelevant for the purpose of considering the permission to raise additional grounds. Under s. 250(5) "the Appellate Assistant Commissioner may, at the hearing of an appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal, if the Appellate Assistant Commissioner is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable." As pointed out in Ramgopal Ganapatrai & Sons v. CEPT [1953] 24 ITR 362 (Bom), which dealt with the corresponding provision in s. 31(2A) of the Indian I.T. Act, 1922, this provision confers a power upon the AAC to permit the appellant to raise a ground not specified in the grounds of appeal at the hearing of the appeal, that this provision must be looked upon as controlling the discretion of the AAC with regard to his right to refuse an appellant to raise a new ground and the Legislature suggests that, ordinarily, the AAC should allow a new ground to be taken unless he is satisfied that the omission on the part of the appellant was wilful or unreasonable. On the facts stated above, certainly, it cannot be stated that the action in omitting to raise the ground by the previous secretary and the accountant can be taken as a wilful omission by the assessee itself. We are not prepared to accede to the argument of the learned counsel for the revenue that the company is estopped from contending that there was no wilful omission. Once the plea is that is was due to the fraudulent action of the then secretary and the accountant, the addition was agreed to and as part of such scheme there was an omission to raise the ground in the appeal, we cannot take it that there was any conscious omission by he company in no raising the ground. We are, therefore, satisfied that, in this case, the Tribunal was not justified in refusing permission to raise the additional ground. Accordingly, we answer the reference in the negative and in favour of the assessee. THE assessee will be entitled to its costs. Counsel's fee Rs. 500.