1. Since these are cross-appeals, they are disposed of by a common order for the sake of convenience.
2. These appeals are filed against the orders of the Commissioner (Appeals) confirming the orders passed by the ITO, levying additional income-tax of 37 per cent under Section 104 of the Income-tax Act, 1961 ('the Act') against the assessee for the assessment years 1978-79 and 1979-80. These orders were passed ,by the ITO for the reason that the assessee did not declare any dividend at all within the period of twelve months immediately following the expiry of the previous years ended on 31-12-1977 and 31-12-1978, respectively, and that, therefore, the assessee-company fell within the mischief of Section 104. The ITO rejected the assessee's reasons for not declaring any dividends and levied the additional tax at the rate of 37 per cent in respect of both the years.
3. When the matter went before the Commissioner (Appeals), he upheld the action of the ITO and dismissed the assessee's appeals. However, it appears that, subsequently, on a rectification application moved by the assessee, the Commissioner (Appeals) directed the ITO to levy the additional tax at the rate of 25 per cent instead of 37 per cent by his orders dated 14-9-1982. Both the assessee and the department felt aggrieved by these orders of the Commissioner (Appeals) and have come up in appeal to the Tribunal. In the assessee's appeals, the objection is to the levy of additional tax under Section 104, while in the revenue's appeals, the objection is to the reduction in the rate of tax from 37 per cent to 25 per cent.
4. At the time of hearing of the appeals, Shri S.E. Dastur, the learned counsel for the assessee, invited our attention to the following additional ground of appeal filed by the assessee on 24-7-1984 for both the years : The learned Income-tax Officer, Companies Circle III(1), Bombay (hereinafter referred to as the ITO) erred in applying the provisions under Section 104 of the Income-tax Act, 1961, to your appellants and thereby levying additional income-tax of Rs. 22,682.
Your appellants submit that the provisions of Section 104 of the Act are not applicable to the facts of their case as they are a company in which the public are substantially interested within the meaning of Section 2(l8)(b)(B) of the Income-tax Act, 1961. Your appellants pray that the ITO's impugned order under Section 104 be quashed.
The additional ground of appeal for the assessment year 1979-80 is also on the same lines except for the variation in the figure of additional income-tax levied, namely, Rs. 23,442.
5. Shri Dastur argued that the additional ground raised by the assessee involved an important legal issue, which affected the jurisdiction of the ITO to take action against the assessee-company under Section 104 for these two years ; that though the assessee had not taken this ground either before the ITO or before the Commissioner (Appeals) or even in the original grounds of appeal filed before us, ground No. 1 in paragraph No. 1 of the grounds of appeal for both the years filed before the Tribunal, was wide enough to cover the point raised by the assessee in this additional ground of appeal and that the assessee has filed this additional ground of appeal in both the years to bring out the real controversy by way of an additional argument. Shri Dastur submitted that the assessee is a company in which the public are substantially interested within the meaning of Section 2(18)(b)(B) of the Act, and that, consequently, the assessee would be entitled to the benefit of Section 108 of the Act, against the action taken by the ITO under Section 104. The learned counsel pointed out that the assessee-company is a subsidiary of Cadbury India Ltd., which is now known as Hindustan Cocoa Products Ltd. ; that the said Cadbury India Ltd. held 4,999 shares out of the total of 5,000 shares of Rs. 100 each in the assessee-company, the remaining one share being held by the chairman of the assessee-company, who is also a director in Cadbury India Ltd. ; and that is only in July 1977, Cadbury India Ltd. became a company in which the public are substantially interested, as its shares were quoted on the stock exchange from that time as contemplated by Section 2(18)(b)(A) and that, consequently, the assessee satisfied the requirements of Section 2(18)(b)(B)(i)(c). Shri Dastur submitted that the facts relevant to the shareholding for Cadbury India Ltd. in the assessee-company and other relevant facts were mentioned in the assessee's letter dated 8-9-1981 addressed to the ITO in the course of the assessment proceedings, though the present plea that the assessee is a company in which the public are substantially interested within the meaning of Section 2(18)(b)(B) was not taken up by the assessee in the present form either in the course of the assessment proceedings or in the course of the proceedings under Section 104. Shri Dastur fairly stated that this point was lost sight of by the assessee due to inadvertence, as it involves the application of the principles contained in Section 2(18)(b)(B) to the facts of the present case, which involves a complicated process of legal reasoning. In this connection, he pointed out that the assessments for both the years had been completed against the assessee-company in the status of 'a company in which the public are not substantially interested' and that the same had become final. He submitted that since t he issue raised by the assessee in the additional ground of appeal goes to the root of the matter affecting the jurisdiction of the ITO to take proceedings under Section 104 and levy additional income-tax against the assessee, the same should be admitted and disposed of in accordance with law, after giving an opportunity to the revenue. Shri Dastur further submitted that the assessments of the assessee-company and of Cadbury India Ltd. were dealt with by the same ITO and, therefore, there would be no difficulty in ascertaining the facts with reference to the records of both the companies in the possession of the department.
6. Shri Vohra, the learned departmental representative, opposed the admission of the additional ground by pointing out that the assessee has not made out a case for raising the additional ground at this late stage. He argued that since the |assessments made on the assessee-company for these two years in the status of a company in which the public are not substantially interested have become final, it would not be open to the assesses to take a contrary stand in the present proceedings against the levy of additional tax under Section 104. In this connection, Shri Vohra pointed out that this was an entirely new case that was being set up for the first time before the Tribunal which requires investigation into fresh facts and examination of evidence for ascertaining the correctness or otherwise of the assessee's claim. He, therefore, submitted that it was not open to the assessee to take the said inconsistent ground at this late stage of the proceedings and that we should not permit the assessee to take up such a plea. In support of his submissions, Shri Vohra relied on the decision in WTO v. Shiva Prasad Bagaria  2 ITD 449 (Cal.), the Bombay High Court decision in the case of Ugar Sugar Works Ltd. v. CIT  141 ITR 326 and the decision of the Supreme Court in the case of Addl. CIT v. Gurjargravures (P.) Ltd.  111 ITR 1.
7. Shri Dastur, in his reply, submitted that the point involved in the additional ground of appeal was not a simple one, but a complicated legal issue, that it was only one aspect or facet of the assessee's contention against the order passed by the ITO under Section 104, which was being challenged in the appeals before the Tribunal and that, as explained by him, this point was lost sight of by the assessee both in the course of the original assessment proceedings and also in the course of the proceedings under Section 104, till the matter has reached the Tribunal's stage. In support of his submissions, Shri Dastur relied on the decision of the Supreme Court in CIT v.Mahalakshmi Textile Mills Ltd.  66 ITR 710 and also on the decision of the . Bombay High Court in the case of Ugar Sugar Works Ltd. (supra) relied on by the department.
8. On a careful consideration of the submissions urged on both sides, we are of the view that the assessee is entitled to raise this additional ground for both the years. As rightly contended for the assessee, the subject-matter of appeal before the Tribunal is the orders levying additional tax under Section 104, which is under challenge. The additional ground raises one more objection to the action taken by the ITO under Section 104. It can hardly be disputed that this objection, if found to be correct and true on the facts, as stated by the assessee's learned counsel, then the assessee would be entitled to the benefit of Section 108, as no action under Section 104 would be permissible. The objection raised by the assessee in the additional ground goes to the root of the matter and affects the initial jurisdiction of the ITO to make the order under Section 104. In Ugar Sugar Works Ltd.'s case (supra), the Bombay High Court held as follows : A comparison of the aforesaid provisions concerning the jurisdiction and powers of the Tribunal with those of the AAC in Section 251, with particular reference to the Explanation thereto, would make it distinctly clear that the jurisdiction of the AAC, while dealing with the assessee's appeal against the ITO's order before him, extends to all matters arising in the proceedings, though not raised before him by the assessee, while the Tribunal's jurisdiction in an appeal before it is restricted only to passing orders on the subject-matter of the appeal. However, within the four corners of that jurisdiction, the Tribunal has been clothed with almost the same powers as those of the AAC except that of enhancement. (p. 333) Again, their Lordships of the Bombay High Court discussed their earlier decisions in CIT v. N.A. Narielwalla  126 ITR 344 and in Jamnadas v. OFT  56 ITR 648 and held finally as follows : ...Even otherwise also, the question as to the initial jurisdiction in making the order would stand on a different footing, as in such cases the question of jurisdiction of the ITO would always be present as a part of the subject-matter of the appeal to all stages of the appeal, either before the AAC or the Tribunal, as such jurisdiction is always presumed to be existing in an authority before passing the order....
In our view, this decision of the Bombay High Court fully supports the case of the assessee for admission of this additional ground raised for the first time before the Tribunal. In fact, in this case, their Lordships of the Bombay High Court have reviewed all the decisions, including the decisions of the Supreme Court in Mahalakshmi Textile Mills Ltd.'s case (supra) and in the case of Gurjargravures (P.) Ltd. (supra) relied on by both sides. It is not, therefore, necessary for us to examine those decisions in detail. In our view, this decision of the Bombay High Court supports the case of the assessee rather than the case of the department for the admission of the additional ground.
9. The decision in Shiva Prasad Bagaria's case (supra) relied on by the revenue turned on entirely different facts and is of no relevance to the point at issue in the present appeal. In the said case, the revenue sought to raise by means of additional grounds the new issues altogether different from what had been made the subject-matter of appeal through the original grounds of appeal. It was on these facts that the Tribunal upheld the assessee's objections to the admission of the additional grounds filed by the revenue. But in the present case, the objection raised in the additional ground of appeal pertains to the subject matter of appeal, namely, the legal validity and correctness of the orders passed by the ITO under Section 104 for both the years.
Therefore, this decision relied on by the revenue is inapplicable to the facts of the present case.
10. We, therefore, accept the contentions of the learned counsel for the assessee and admit the additional ground of appeal quoted above.
11. As stated already, this additional ground of appeal admitted by us requires to be examined by the departmental authorities, who had no opportunity to examine the same in the light of the relevant facts and materials and the provisions of Section 2(18)(b)(B). In order to afford such an opportunity to the revenue, we consider it just and proper to set aside the orders of the authorities below and restore the matter to the file of the ITO for fresh disposal in accordance with law, after giving a reasonable opportunity to the assessee to substantiate its case. In this connection, we may also mention that the assessee brought to our notice an earlier order of the Tribunal in Appeal No. 27 (Bom.) of 1983 dated 17-12-1983, wherein the revenue's appeal against the reduction in the rate of additional tax from 37 per cent to 25 per cent was dismissed. In our view, this objection raised by the revenue may have to be examined only after the objection of the assessee to the initial jurisdiction of the ITO raised in the additional ground of appeal quoted above is disposed of. We have no doubt that the ITO will certainly take into account this order of the Tribunal in the event of his coming to the conclusion in the fresh proceedings that the assessee would be liable to the levy of additional income-tax under Section 104.
12. In the result, all the four appeals shall be treated as allowed for statistical purposes.