B.S. Dhillon, J.
1. The previous year relevant to the assessment year 1969-70 ended on December 31, 1968. The assessee is a 'public limited company' and manufactures and sells cycles on a large scale. The assessee had received advances amounting to Rs. 3,155 from suppliers which were forfeited. The assessee claimed that this amount was not income. The ITO came to the conclusion that the forfeiture of the said amount arose entirely in the course of carrying on the assessee's business and was, therefore, taxable as income. This finding was confirmed by the AAC. A similar point having been decided by the Tribunal (Delhi Bench 'D') earlier,pertaining to the assessment year 1968-69 and agreeing with the reasons stated therein, the Tribunal held that these amounts represented the income of the assessee.
2. The assessee had further forfeited the following amounts:
(i) Security deposits ofemployees forfeited
(ii) Liquidated damages forbreach of contract recovered from ex-employees
3. The claim of the assessee that the two items did not represent its income was negatived by the ITO. The amount of Rs. 16,303 represented the security deposits of certain employees and certain amounts outstanding to their credit at the time of their prematurely leaving the assessee's service. The assessee had provided training to these members of the staff and they had agreed to serve the company for a particular period. In the event of their prematurely leaving the service of the assessee, these persons had agreed to the forfeiture of their deposits. The assessee's claim for exemption was based on the fact that these amounts did not relate to the business of the assessee. The appeal filed by the assessee was dismissed by the AAC and also by the Tribunal.
4. The assessee had instituted a scheme for giving awards and prizes to its dealers by way of a special 'Monsoon Gift Scheme' to push up its sales. The method of accounting followed by the assessee is mercantile and though Rs. 47,539 was expenditure incurred under the head 'Monsoon Gift Scheme' during the accounting year 1968, relevant to the assessment year 1969-70, this expenditure was not claimed at the time of assessment though this expenditure was claimed in the subsequent assessment year, i.e., 1970-71. The claim of the assessee in the subsequent assessment year, to the extent of the amount mentioned above, was disallowed by the AAC on the ground that this amount should have been claimed in the assessment year 1969-70, as the assessee was having the mercantile system of accounting. The second appeal filed by the assessee, pertaining to the assessment year 1969-70, was still pending before the Tribunal when the AAC allowed the expenditure in this regard, incurred during the assessment year 1970-71, and disallowed a sum of Rs. 47,539 as the said expenditure pertained to the assessment year 1969-70. The assessee, as per application dated March 5, 1974, sought permission to raise the following ground of appeal:
'That the expenditure of Rs. 47,539, being an expenditure incurred under the head 'Monsoon Gift Scheme', is an expenditure incurred whollyand exclusively for the purposes of the assessee's business and the same should be directed to be allowed.........'
5. The assessee pointed out that the necessity of raising this ground arose after the AAC's order dated January 2, 1974. It was pleaded that the omission to raise the aforesaid ground was neither wilful nor intentional. The Tribunal, however, did not admit the additional ground of appeal as, according to the Tribunal, it did not arise out of the AAC's order for this year. It was observed that the AAC's order for another year was not relevant to these proceedings.
6. On these facts, the following questions of law have been referred to this court for its opinion at the instance of the assessee :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 3,155 representing security deposits of the suppliers/purchasers forfeited by the assessee-company constituted revenue receipts to be included in its total income ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sum of Rs. 22,823 forfeited on account of security deposits of the employees constituted a receipt of a revenue nature ?
(3) Whether, on the facts and in the circumstances of the case, the Tribunal had exercised its discretion judicially in not admitting the additional ground of appeal in respect of the sum of Rs. 47,539 incurred in connection with the 'Monsoon Gift Scheme' ?'
7. It has been conceded by the learned counsel for the assessee that in view of the decision of this court in Income-tax Reference Nos. 39 and 40 of 1975 and 44 and 45 of 1977, (Atlas Cycle Industries Ltd. v. CIT, decided on March 4, 1980--since reported in , question No. 2 has to be answered in the affirmative, that is, against the assessee and in favour of the revenue. We order accordingly.
8. As regards question No. 1, it has been contended by the learned counsel for the assessee that a sum of Rs. 3,155 representing security deposits of the suppliers/purchasers, could not be included in the income of the assessee. We are unable to agree with this contention. The contracts in pursuance of which the suppliers/purchasers deposited the security deposits were admittedly in connection with the business of the assessee. The said transactions arose out of the business dealings of the assessee with the suppliers/purchasers. In view of the terms of the contracts, if the suppliers/purchasers forfeited the security deposits, the said amount had to be included in the total income of the assessee. On the same reasoning as given in I.T. Ref. Nos. 39 & 40 of 1975, Atlas Cycle Industries Ltd. v. CIT, decided by this court on March 4, 1980 , question No. 1has also to be answered in the affirmative, i.e., against the assessee and in favour of the revenue.
9. As regards question No. 3, we are of the opinion that the same has to be answered in the negative, i.e., in favour of the assessee and against the revenue. The appellate power of the Tribunal has been denned in Section 254 of the I.T. Act, 1961, where the Tribunal has been given power to pass such orders on appeals as it may deem fit. Rule 11 of the I.T. (Appellate Tribunal) Rules, 1963 (hereinafter referred to as the Rules) provides that 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 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 the 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. Under r. 29 of the Rules, a right has been given to the parties to the appeal to produce additional evidence, either oral or documentary, before the Tribunal, and the allowance or disallowance of such evidence has to be decided by the Tribunal by passing an order giving reasons. Their Lordships of the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd. : 66ITR710(SC) , while elaborating the appellate powers of the Tribunal under Section 33(4) of the Indian I.T. Act, 1922, held as follows (headnote):
'Under Section 33(4) the Appellate Tribunal is competent to pass such orders on appeal 'as it thinks fit'. There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions, whether of law or of fact, which relate to the assessment of the assessee, may be raised before the Tribunal. If for reasons recorded by the departmental authorities in respect of a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief. The right of the assessee to relief is not restricted to the plea raised by Mm.'
10. On facts, it is not disputed that an expenditure of Rs. 47,539 was incurred by the assessee in connection with the 'Monsoon Gift Scheme' during the assessment year 1969-70. This amount was claimed by the assessee in the proceedings for the subsequent assessment year and the AAC recorded a categorical finding that this amount could not be exempted during that assessment year as the same was spent during the assessment year 1969-70, specially when the assessee was maintaining accounts on the mercantile system. It is no doubt true that this plea was not raised before the ITO in the proceedings for the assessment year 1969-70, and consequently before theAAC, but the fact remains that the appeal of the assessee for the assessment year 1969-70, was pending before the Tribunal, when a finding had been recorded by the AAC in the proceedings for the assessment year 1970-71, that the expenditure of Rs. 47,539 incurred in connection with the 'Monsoon Gift Scheme' should have been claimed during the proceedings for the assessment year 1969-70. The power of the Tribunal to allow the additional plea and consequently additional evidence being taken, has been given to do substantial justice between the parties. The Tribunal has to allow or disallow the additional plea and additional evidence after applying its judicial mind. The assessee pleaded that the omission to raise the aforesaid ground before the authorities below was neither wilful nor intentional. The Tribunal did not record any finding that the plea sought to be raised in the additional ground was either wilful or intentional. If the assessee had been allowed the additional ground, the assessee could legitimately plead for allowing the additional evidence by way of a certified copy of the order of the AAC, passed in the proceedings for the assessment year 1970-71, to be placed on record. It cannot be disputed that the certified copy of the order of the AAC passed during the assessment proceedings of the subsequent year, is relevant as evidence and could be looked into by the Tribunal. Merely because this plea was not taken by the assessee before the AAC, it could not be a ground to refuse the application. Except this, the Tribunal has not given any reason in rejecting the application for permission to raise the additional ground. As already observed, the powers of the Tribunal in appeal are wide enough so as to do substantial justice between the parties. The finding of the AAC during the proceedings for the assessment year 1970-71 came to be recorded after the appeal of the assessee for the assessment year 1969-70 had been decided by the AAC and when the second appeal of the assessee was pending before the Tribunal. It is no doubt true that it was an omission on the partof the assessee to have not claimed the expenditure earlier, but the omission was neither held to be wilful nor intentional. It was brought to our notice by the learned counsel for the assessee that the assessee's application for rectification was dismissed as it was found that there was no error apparent on the face of the record. The observation of the Tribunal that the Tribunal was told at the time of hearing that the assessee was seeking another remedy, is, therefore, not of much consequence.
11. The learned counsel for the revenue has placed reliance on a decision of their Lordships of the Supreme Court in Addl. CIT v. Gurjargravures P. Ltd. : 111ITR1(SC) , to contend that if the question was not raised by the assessee before the ITO and the AAC, the Tribunal had no jurisdiction to allow an additional plea being raised in appeal. This authority, in our considered opinion, is not helpful to the revenue in view of the peculiarfacts and circumstances of that case. Their Lordships in Gurjargravures P. Ltd.'s case : 111ITR1(SC) recorded a categorical finding that the High Court was in error in assuming that a portion of the profit in the relevant assessment year was exempt from tax under Section 84. Their Lordships further found that the statement of the case drawn up by the Tribunal did not mention that there was any material on the record to sustain the claim for exemption which was made for the first time before the AAC. Their Lordships further observed as follows (p. 5):
'We are not here called upon to consider a case where the assessee failed to make a claim though there was evidence on record to support it, or a case where a claim was made but no evidence or insufficient evidence was adduced in support. In the present case neither any claim was made before the Income-tax Officer, nor was there any material on record supporting such a claim. We, therefore, hold that, on the facts of this case, the question referred to the High Court should have been answered in the negative.'
12. The above-mentioned observations of their Lordships clearly go to show that Gurjargravures P. Ltd. : 111ITR1(SC) was a case where on facts the material was not available and an assumption was drawn by the High Court without there being anything on the record in that regard. The above-mentioned observations clearly take out the present case from the ratio of the said decision, as it is not disputed that the assessee had incurred an expenditure of Rs. 47,539 during the assessment year 1969-70, exclusively in connection with the business of the assessee and it was entitled to the exemption. The only technical plea taken is that this point was not raised before the authorities below. The power of the Tribunal to allow additional pleas being taken and for taking additional evidence has been precisely enacted with a view to do substantial justice between the parties, In the present case, if this plea is not allowed to be raised, the net result would be that even though the assessee is entitled to the claim made by it, yet it will be denied the same as it did not pointedly take up the point before the ITO and the AAC.
13. For the reasons recorded above, question No. 3 is answered in favour of the assessee and against the revenue, with costs.