FALSHAW C.J. - Under the direction of this court made under section 66 (2) of the Income-tax Act, the following question has been referred to us by the Income-tax Appellate Tribunal :
'Where the Appellate Tribunal in appeal finds that the petition of the assessee under section 26A was invalid, whether the Tribunal had jurisdiction to dismiss the assessees application on this ground when it had not been raised before the Income-tax Officer of the Appellate Assistant Commissioner or in the grounds of appeal filed in the Appellate Tribunal ?'
The case arises out of an application filed under section 26A in connection with the assessment year 1950-51 for registration of a partnership under the little Messrs. Ice Suppliers Corporation, Patiala, the partners being named as the Modi Ginning & Oil Mills, Patiala, the Patiala Ice & Genera; Mills, the Jain Ice Factory and the Malwa Ice Factory, Patiala. The first of these was owned by a single proprietor, but the others all had a number of partners. By his order dated the 20th November, 1950, the Income-tax Officer rejected the application on the ground that partnership firms comprising a number of partners could not be partners in a firm registered under the Income-tax Act.
The assessee appealed to the Appellate Assistant Commissioner who accepted the appeal and allowed registration, holding that the real persons who constituted the firm were the individual partners of the three firms and the individual proprietors of the fourth. The matter was then taken in appeal to the Tribunal by the Income-tax Officer. The appeal was accepted by the Tribunal by the Income-tax Officer. The appeal was accepted by the Tribunal on a ground not raised at either of the earlier stages and not even taken the application for registration of the firm under section 26A had only been signed by the sole proprietor of one of the firms, and by a single partner of each of the other three firms, whereas the law required that such an application had to be signed by each of the partners. A request made at the hearing to remedy this defect by obtaining the signatures of all the partners of the firm was refused because the learned Members of the Appellate Tribunal were not prepared, and doubted whether they had the power to permit rectification of this kind at that stage.
There is no doubt from the decision of the Supreme Court in Textile Supply Co. v. Commissioner of Income-tax that the ground on which the Appellate Tribunal set aside the registration was a good ground, but we are not concerned with that matter in the present case, the only question being whether the decision could be based on a point not previously raised at any stage or even in the grounds of appeal.
Prima facie, rule 12 of the Income-tax Appellate Tribunal Rules indicates that a point not taken in the grounds of appeal can be raised before the Tribunal. Rule 12 reads :
'The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal; but in the Tribunal, in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule :
Provided that the Tribunal shall not rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground.'
It is not suggested that the assessee had no opportunity of being heard on the ground which the Tribunal clearly allowed to be raised, and indeed, once the point was a raised, there could be no answer to it, since the Appellate Assistant Commissioner had allowed registration on the ground that the real partners of the firm involved, and it was a clear requirement of the law that an application for registration must be signed by all the partners. Apart from this, the decision in New India Life Assurance Co. Ltd. v. Commissioner of Income-tax Excess Profits Tax has been cited, In that case the Appellate Tribunal had based its decision on a ground not raised in the memorandum of appeal and it was held by Chagla C.J. and Tendolkar J. that the Appellate Tribunal had power to give leave to the appellant to raise the question of apportionment and must be presumed to have given such leave in the circumstances of the case and it was competent to the Tribunal to reverse the decision of the Appellate Assistant Commissioner on the ground that the question of liability to tax should to determined after the question of apportionment had been decided. I am, therefore, of the opinion that the question referred to us must be answered in the affirmative and would allow the Commissioner his costs from the assessee, Counsels fee Rs. 250.
H. R. KHANNA J. - I agree.
Question answered in the affirmative.