Income-tax---

----Appeal to Appellate Tribunal---Power to admit additional grounds---If factual premises already on record legal grounds can be raised---No application for condonation of delay is required---Indian Income Tax (Appellate Tribunal) Rules, 1963, R.11.

The assessee-company filed an appeal for the assessment year 1981-82 before the Tribunal on February 2, 1985, against an order dated December 19, 1984, of the Commissioner of Income-tax (Appeals) served upon the assessee on January 7, 1985. Later on, the assessee filed on December 22, 1988, application for permission to raise additional grounds. A letter, dated February 8, 1989, stating reasons for filing them was also filed. The additional ground claimed that in spite of the income assessed being a loss figure, the investment allowance allowable had to be ascertained in the year and carried forward and set off in future years. The Tribunal negatived the contention holding that there was no justification shown for raising additional grounds after a lapse of time. On a reference:

Held, that rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, provides that the appellant shall not raise additional grounds except by leave of the Tribunal. That does not mean that the Tribunal had no jurisdiction to permit the additional grounds to be raised. If the factual premises are already on record and legal grounds are alone urged, no application for condonation of delay is required. All that is required is permission to raise additional grounds and proper notice to the other side. The Tribunal had treated it as if an appeal was sought to be filed and there was no justification to have denied this additional ground.

B. L. Nema for the Assessee.

V.K. Tankha for the Commissioner.

JUDGMENT

This is a reference under section 256(1) of the Income Tax Act, 1961, at the instance of the assessee and the following questions of law have been referred by -the Tribunal for answer of this Court, which read as under:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in not entertaining the additional ground raised by the applicant before the hearing of the appeal?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no adequate ground was brought but to condone the delay in filing the additional grounds?"

The year of the assessment involved is 1981-82. The assessee filed an appeal before the Tribunal against the order, dated December 19, 1984, of the Commissioner of Income-tax (Appeals). The said order was served upon the assessee on January 7, 1985, and appeal was filed on February 2, 1985. Later on, the assessee filed an application on December 22, 1988, for admission for raising the additional grounds in-the memo. of appeal. The following grounds were sought to be urged, which read as under:

"The learned Commissioner of Income-tax (Appeals) erred in not allowing deduction of investment allowance claimed at Rs.16,70,582 for the reason that the assessment for this year has resulted in negative income and no investment allowance reserve was created. It is submitted that as per section 32-A(4), investment allowance reserve is required to be created in the year in which the said deduction is actually allowed, against the taxable income. It is, therefore, prayed that in spite of income assessed being a loss figure, the investment allowance allowable requires to be ascertained in this year which is to be carried forward and set off against the taxable income in future years."

The assessee filed a letter, dated February 8, 1989, stating reasons for filing additional ground. The additional ground was raised because the assessee claimed investment allowance of Rs.16,70,582 which was negatived by the Income-tax Officer on the ground that the total income on which the assessment was finalised, resulted in negative income and no investment allowance reserve was created. The assessee went in appeal before the Commissioner of Income-tax (Appeals) against the said disallowance. The Commissioner of Income-tax (Appeals) confirmed the finding of the Income-tax Officer. Thereafter, the assessee preferred an appeal before the Tribunal. Though this ground was not specifically raised in the memo. of appeal, therefore, an application was made seeking permission of the Tribunal to raise this ground and in that connection, a reference was made to rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. The Tribunal after considering the matter, negatived the contention and held by the reference to various decisions of the Supreme Court as well as the High Courts that the ground cannot be permitted to be raised. It was further held that there was no justification shown for raising additional grounds after lapse of time.

We have heard learned counsel for the parties and perused the record. It is true that rule 11 of the Rules of 1963, provides that the appellant shall not raise additional ground except by leave of the Tribunal. That does not mean that the Tribunal has no jurisdiction to permit the additional ground to be raised. It is true that the additional ground should not be of such nature, which runs beyond the subject-matter in issue. But, if it is necessary that the factual premises is already on record and certain legal grounds are only urged, then the grounds can be raised with the permission of the Tribunal. It is not necessary that the application for condonation of delay is required to be made. All that is required is that a permission to raise additional ground and a proper notice to other side so that it should know that what challenge it has to meet. But, in the present case, the Tribunal has treated this additional ground as an additional appeal and entertained an application for condonation of delay as if an additional appeal is filed. It was held that there is no sufficient ground for condoning the delay for approaching the Tribunal and it is absolutely erroneous. In the present case, the question was the benefit of the investment allowance whether it is admissible to the assessee or not under section 32-A(4) of the Income-tax Act. This argument was raised before the Income-tax Officer and it was also, urged by the assessee before the appellate authority. It is by sheer accident that this ground in the memo of appeal could not be urged; therefore, only permission was sought to raise the ground. But, unfortunately, the Tribunal has treated it as if an appeal is sought to be filed and it is to be entertained within time, all this exercise is in futility. The additional ground raised by the applicant/assessee did arise from the facts which were on record and there was no justification for the Tribunal to have denied this additional ground which did arise in the matter. Hence, we are of the opinion that the view taken by the Tribunal is absolutely erroneous.

In the result, we answer both the aforesaid questions in favour of the assessee and against the Revenue. The Tribunal shall consider the grounds and decide the matter in accordance with law.

M.B.A./1635/FC Order accordingly.