1. At the instance of the assessee, the following question of law has been referred :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in refusing permission to raise the additional grounds filed before the Appellate Assistanta Commissioner ?'
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 :
'For the assessment year 1967-68, a sum of Rs. 1,20,000 had been added by the officer on the ground that the estate expenditure debited and claimed could not be proved to the satisfaction of the Income-tax Officer. The said addition was made on a concession made by the then accountant and the then secretary of the company. The background of facts of the relevant previous year leading up to the concession made by the officers of the company are extraordinary. It would appear that the affairs of the company in the hands of the then management were open to question and certain proceedings had been taken by the Central Bureau of Investigation leading the suspicion that there had been mismanagement. The investigations are still pending. The Central Bureau of Investigation has seized all the records of the company and the return of the document including vouchers for the several expenditure has been refused. The company had been recently permitted by the order of the police court, Poonamallee, to have inspection of the records at Delhi. Under the above circumstances, the purported concession made by the officers of the company is unable to be ascertained by us.';
and finally they end by saying that 'the purported concession made by the accountant and the secretary appear to be contrary to their own representation to their auditors and their statutory duty'. The IAC made an order of penalty against which the assessee preferred an appeal to the Tribunal. It appears that during the pendency of the appeal before the Tribunal in the penalty proceedings there were certain discussions about this Rs. 1,20,000, which was added by the ITO and the circumstances under which it was added. Finding that the amount will have to be questioned in the regular appeal against the original assessment order, and that has not been done by the then secretary and the accountant who filed the appeal, the new management of the assessee-company filed an application on September 29, 1970, seeking permission to raise the following three grounds relating to the said sum of Rs. 1,20,000.
'(1) The Income-tax Officer erred in adding back a sum of Rs. 1,20,000 in computing the total income of the appellant.
(2) The Income-tax Officer erred in relying upon the alleged admission on the part of the secretary ad accountant of the company. (3) The officer ought to have appreciated that in the case of a public limited company addition is not called for merely because a particular officer for his own purpose had requested for an addition.'
3. The reasons for not raising the grounds in the original grounds of appeal as stated in the petition to raise the additional grounds were as follows :
'The appellant has filed an appeal on July 2, 1968, against the order of the Income-tax Officer for the assessment year 1967-68. In the said appeal by oversight the appellant has omitted to raise a ground against the addition of Rs. 1,20,000 made by the Income-tax Officer. The fact and significance of the omission was not noticed till recently and the same was brought to the notice till recently and the same was brought to the notice of the appellant when the Income-tax Appellate Tribunal elicited information relating to the quantum of assessment. The appellant submits that the omission to raise the ground earlier was not wilful but bona fide. There had been a change in the management of the company with the result that this aspect was overlooked.'
4. The AAC rejected this application for raising additional grounds on the ground that the addition of Rs. 1,20,000 was made after a detailed discussion and that thought the addition was already there at the time when the appeal petition was presented on July 2, 1968, it was not disputed in the grounds of appeal. After noting that the additional grounds have been raised after more than two years from the date of filing of the appeal, the AAC observed :
'Not raising objection to the addition of Rs. 1,20,000 was not at all an omission in the grounds of appeal filed along with the appeal-petition on July 2, 1968, because the said addition of Rs. 1,20,000 was made in the assessment after due discussion with the assessee's representative and as agreed to in writing on May 9, 1968, by the secretary and the accountant of the appellant-company. It is because of this reason, viz., the addition of Rs. 1,20,000 was made at the instance of the appellant-company only, the appellant-company did not object to such addition in the appeal petition.'
5. The assessee preferred an appeal before the Tribunal. Before the Tribunal it was argued on behalf of the assessee that the two officers of the assessee-company who gave the concession misused the trust reposed in them, that they along with others were parties to a conspiracy to swindle the funds of the company and that is why in order to hide their mischief they agreed to the addition. For the same reason they also contended that they did not dispute it in the grounds of appeal when one of them signed the grounds of appeal. The ground committed by the secretary and the accountant was detected only long later and that was the reason for the delayed action in questioning the addition. Though the Tribunal was prepared to accept this as justifiable ground for permission to raise additional grounds, it was of the view that this is a new cases not set up either in the petition before the AAC, or in the explanation dated February 22, 1970, filed before the IAC, in connection with the penalty proceedings. It was also of the view that it is inconsistent with the original stand taken before the AAC. According to the Tribunal before the AAC, they had only pleaded that by oversight this ground was not raised. We are of the view that this understanding of the Tribunal of the case of the petitioner before the AAC was no correct. We have extracted the relevant passages from the explanation dated February 22, 1970, in the penalty proceedings as also the statement in the petition for permission to raise the additional grounds. In the statement in the petition to raise the additional grounds, we find the following sentence :
'The fact and significance of the omission was not noticed till recently and the same was brought to the notice of the appellant when the Income-tax Appellate Tribunal elicited information relating to the quantum of assessment.'
6. The fact referred to here is the fact that is mentioned in the explanation dated February 22, 1970, wherein it was stated that the background of facts leading to the concession made by the officers of the company are extraordinary, that is, the officers have by fraudulent practice raised certain vouchers which they could not prove, that there was an investigation by the CBI relating to the misconduct by those officers, that the statement made before the ITO agreeing to the addition was contrary to their own representation to their auditors and their statutory duty. The significance of the omission referred in the statement related to the anxiety of, and the need by, the accountant and the secretary to suppress the real facts and extricate themselves from the penal action for their fraudulent activity and with that view agreeing for the addition. These facts and the significance of their agreeing to pay a sum of Rs. 1,20,000 was brought to the notice of the appellant only during the course of the discussion before the Appellate Tribunal in the penalty proceedings. Therefore, reference to the inability to ascertain the correct facts relating to the purported concession in the original letter dated February 22, 1970, cannot be interpreted as meaning that the management had no specific case about the alleged irregularity or concession as stated in the order of the Tribunal; nor can we agree with the view of the Tribunal that the case of the assessee before the AAC for raising additional grounds was merely an oversight. It is true, there is a statement to the effect that in the appeal, by oversight, the appellant had omitted to raise the grounds against the addition. But it should be read in the light of the next statement relating to the fact and the significance of the omission which came to light later. Therefore, the specific case was that deliberately, fraudulently and as a part of the scheme of fraud the accountant and the secretary had failed to raise these grounds in the original grounds of appeal. Therefore, there is no inconsistency in the plea before the AAC and the before the Tribunal.
7. 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 : 24ITR362(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.