Banerji, J.:— This is a reference under Section 66 of the sub-s. (1), Income-tax Act by the Income-tax Appellate Tribunal. The question referred for our decision is as under:
“Whether in the exercise of its discretion under R. 12, the Tribunal was justified in not admitting the additional ground raised by the assessee at the stage of final hearing of the appeal?”
2. Rule 12 of the Appellate Tribunal Rules reads as follows:
“12. 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 this rule.”
3. The proviso to this rule is not necessary for the decision of the matter concerned. The facts giving rise to the reference are as follows: The assessee is a Hindu undivided family and the assessment year is 1945-1946. The accounting year of the assessee maintained for the purposes of his business accounts is the Diwali year 2001 Sambat corresponding to from 28-10-1943 to 16-10-1944. It may be mentioned in this connection that the corresponding financial year for the year of assessment is from 1-4-1944, to 31-3-1945.
4. From 21-1-1944, to 28-2-1944, upon examination of the account books of the assessee, a number of cash credits, aggregating to a sum of Rs. 1,00,000/-, were detected. The Income-tax Officer treated this amount as income from some secret source, which was not disclosed, and, therefore, added the sum to the income shown. The assessee then appealed to the Assistant Commissioner who gave relief to the assessee to the extent of Rs. 40,000/-, but disallowed the cash credits of Rs. 60,000/-.
5. The assessee then filed an appeal before the Income-tax Appellate Tribunal against the inclusion of Rs. 60,000/-, while the Department appealed against the exclusion of Rs. 40,000/-. On 22-2-1952, the Appellate Tribunal remanded the case for further investigation into the matter, and the Income-tax Officer submitted his report on 28-3-1953. Both the appeals were finally heard by the Appellate Tribunal on 12-8-1953.
6. At the time of final hearing before the Appellate Tribunal, the assessee urged an additional ground of law stating that the entire cash credits amounting to Rs. 1,00,000/- occurred prior to 31-3-1944, and, as the same was treated as excreted profits, there could be no previous year respect of an undisclosed source other than he financial year next preceding the assessment year under Section 2(11)(c) of the Income-tax Act.
7. The assessee prayed before the Tribunal that on this legal ground, which went to the root of the assessment, the assessee was not liable to be taxed in the assessment year 1945-1946. The Appellate Tribunal, however, disallowed the prayer of the assessee to add this ground as an additional one to his memorandum of appeal, remarking as follows:
“At the time of hearing, an additional ground was sought to be urged, but as no valid excuse was pleaded for not having raised it earlier, we rejected it.”
8. It was argued on behalf of the assessee that this important point of law was not urged earlier as it was ignorant of the view expressed by the Tribunal on the point, but that, in any case, the point being an important one, which went to the root of the assessment and being entirely based on law, the Tribunal should have exercised its discretion judicially and entertained it. Thereafter, the question of law was stated by the Tribunal and sent to this Court for decision.
9. There is no controversy about the question being an important one, substantially resting on a point of law, which, if answered favorably for the assessee, would go to the root of the assessment.
10. A case on similar facts was decided by a Bench of this Court recently, see — ‘Commr. of Income-tax v. P. Darolia & Sons’, 1955 Pat 478 (AIR V 42) (A), in which it was held, on the facts of that case, that in absence of any system of accounting adopted by the assessee and in absence of any option on his part, the only course open to the Income-tax authorities was to take the financial year as the previous year for the income from undisclosed sources and the amount could not be included in the assessee's income for the assessment year.
11. In arriving at this conclusion, their Lordships observed there is no presumption that the cash receipt is income of the same business for which the assessee has kept regular accounts it may be income from the same business or from a different source and that the question is really a question of fact to be decided upon materials furnished in each particular case.
12. It was found in that case that the amount included as secret profits from undisclosed sources, as in the present case, was not from the business of the assessee, but from a separate source and no account was maintained by the assessee in respect of the amount, nor had it exercised any option as regards the previous year with respect to that source. The Appellate Tribunal, admittedly, has not applied its mind whether the cash credits, which represented secret profits of the assessee, were from the same source of business or from a separate one.
13. It appears that these sources have not been disclosed by the assessee who has, apparently not maintained any account regarding the same. The Tribunal, therefore, should have considered the question in the light of the decision mentioned above and then arrived at its conclusion whether the cash receipts were of an income nature and, therefore, liable to be taxed.
14. Reference has also been made in this connection on behalf of the assessee to two other unreported decisions, namely, Misc. Judl. Case No. 46 of 1953 D/- 11-11-1954 (Pat) (B), and Misc. Judl. Case No. 18 of 1953, D/- 8-12-1954 (Pat) (C). It is not necessary to discuss these two decisions as the principle involved is the same.
15. It has next to be decided whether the Appellate Tribunal, in refusing addition of this ground, has acted judicially. It was entirely in the discretion of the Tribunal either to allow the assessee to add the new ground or to reject it. Rule 12, Appellate Tribunal Rules, ‘mutatis mutandis’, is the same as R. 2 of O. 41 of the CPC. This rule refers to grounds which may be taken in appeal, and reads thus:
“The appellant shall not, except by leave of the Court, urge or be heard in support of any-ground of objection not set forth in the memorandum of appeal; but the Appellate Court, in deciding the appeal, shall not be confined to the grounds of objection set forth in the memorandum of appeal or taken by leave of the Court under this rule.”
16. It has been held in numerous cases that in an appeal a party must not be permitted to make out a new case or a case different from and inconsistent with the case set up in the lower Court. In such an event, the doctrine of estoppel owing to the conduct of the litigant applies. The present case, however, cannot be said to be one inconsistent with that set up before by the assessee. It was a matter which according to the assessee, was unknown to him and which had received the consideration of the Appellate Tribunal in several cases irrespective-of whether such a ground was pressed or not. In — ‘Balaram v. Mangta Dass’, 34 Cal 941 (FB) (D), Special Bench of the Calcutta High Court held as follows:
“Though an objection upon the question of limitation was not raised in the memorandum of appeal, leave should yet be given to argue it as the point arose on the face of the plaint, and no question of fact had to be enquired into to enable the Court to dispose of it, and that when the point was thus taken the Court was bound to give effect to it, the provisions of Section 4 of the Limitation Act being mandatory.”
17. The same principle was adopted in — ‘Kanta Prasad v. Jag Sah*’, 1925 Pat 57 (AIR V 12) (E). In — ‘Byramji & Co. v. Commr. of Income-tax C.P and U.P’, 1943 Nag 229 (AIR V 30) (P), the Tribunal had conceded that the point urged by the assessee by way of an additional ground was a pure question of law. Yet the Tribunal rejected the prayer to add an additional ground.
18. The Tribunal had further conceded that the contention raised was such as would go to the root of the matter and result in the reassessment being set aside altogether. It was held, in the circumstances, that the Tribunal should have exercised its discretion in favour of the assessee and that, in rejecting the prayer, it had not exercised its discretion judicially.
19. Accordingly, the order of the Tribunal was set aside on the decision that the Tribunal had not exercised its discretion properly in not permitting the assessee to take the additional ground. There is no necessity to discuss the other cases on the point involved. The Tribunal, in this case has passed a rather cryptic order while jettisoning the prayer of the assessee. It is difficult to understand the reasons and the grounds which led the Tribunal to reject the prayer of the assessee.
20. In these circumstances, regard being had to the nature of the ground urged by the assessee, it is difficult to hold that the Tribunal had acted either judicially or properly. Accordingly, the question referred to the High Court is answered in favour of the assessee and against the Income-tax Department. The case should now go back to the Appellate Tribunal which should consider the point raised in the additional ground in the light of the decision given by a Bench of this Court in 1955 Pat 478 (AIR V 42) (A).
21. The assessee is entitled to the costs of this reference; hearing fee Rs. 75/-. The reference is answered accordingly.
Choudhary, J.:— I agree.
V.R.B
22. Answer accordingly.
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