Panchura Estate Ltd. vs Government of Madras

Ramanujam, J.—The above two tax cases filed by the same assessees relate to the assessment years 1962-63 and 1963-64 respectively,

and as there are common questions involved, they are dealt with together.

In respect of the assessment year 1962-63 the assessees had claimed deduction of a sum of Rs. 2,375 on the ground that it represented bad

debts and that it is an allowable expenditure u/s 5(e) of the Madras Agricultural Income Tax Act, 1955. But, that claim has been disallowed by the

assessing authority, the appellate authority and the Tribunal. The assessees contend before us that the said sum of Rs. 2,375 represents advances

made to the labourers to be adjusted later as against their wages, and as the labourers did not turn up for work as expected nor returned the

amount advanced the amounts have become bad debts. According to the assessees such amounts which have been expended for the purpose of

the plantation have to be allowed as a deduction u/s 5(e) of the Act. The learned counsel refers to the decision in The Commissioner of Income

Tax Vs. The Mysore Sugar Co., Ltd., where the Supreme Court held that advances made by a sugar mill to the producers of sugarcane to be

adjusted towards sales price of the sugarcane to be supplied by them later, which have become irrecoverable, are allowable deductions as bad

debts u/s 10(2)(xv) of the Indian Income Tax Act, 1922. In this case we find that the assessees have not established the truth of the advances

alleged to have been made and the factum of its having become irrecoverable. As a matter of fact the assessing authority has specifically given the

reason for disallowing the said sum as bad debt "" as details of names of persons not furnished; rejected as the claim could not be verified "". That

shows that the rejection of the claim was for the reason that the assessees have not proved the genuineness of the expenditure said to have been

made and not that it is not allowable deduction. It is not in dispute that the assessees have not established the truth of the expenditure by producing

the necessary details as to the persons to whom the amounts have been advanced and as to the steps taken to recover them, either before the

Appellate Assistant Commissioner or before the Tribunal. In the circumstances of this case, it is not necessary for us to go into the legal contention

put forward by the assessees that the advances made to workers towards their wages which have become irrecoverable are allowable deductions

u/s 5(e), as we hold that the assessees had not established the truth of the expenditure and the factum of those amounts having become

irrecoverable from the workers to whom the amounts are said to have been advanced. We have to, therefore, uphold the view taken by the

authorities below on this question.

There is a common question that arises in respect of both the years. The assessee have cut shade trees from their plantation which have become

useless and realised a sum of Rs. 13,880 in the first year and Rs. 20,342 in the second year by way of sale of the trees so cut. The assessees

included these amounts in their return as revenue receipt and the assessment was made on that basis. The assessees did not question the

assessment on the said two sums before the Appellate Assistant Commissioner though they filed appeals in respect of other items. After the

disposal of the appeals by the Appellate Assistant Commissioner they also filed appeals before the Tribunal but those appeals also did not involve

the question of the assessability or otherwise of the said two sums representing the sale proceeds of the shade trees. While the appeals were

pending before the Tribunal as regards other items the Supreme Court rendered the decision in State of Kerala Vs. Karimtharuvi Tea Estate Ltd.,

holding that the sale proceeds of the shade trees which have become useless were capital receipts and not revenue receipts. As soon as the

assessees became aware of the said decision of the Supreme Court, they filed two applications before the Tribunal for permission to raise

additional grounds of appeal questioning the assessability of the two amounts as revenue receipts. Though the said two applications have been filed

as applications for excusing the delay in filing the grounds of appeal, they practically amount to applications for excusing the delay in filing the

appeals in respect of a new item not objected to by the assessees originally. As already stated, the subject-matter of the appeals before the

Tribunal as originally filed did not comprehend the question of assessability of these two sums. The assessees did not challenge the assessments so

far as they related to these two amounts before the Appellate Assistant Commissioner, nor did they challenge the same in the appeals originally

filed before the Tribunal, and it is only by way of additional grounds of appeal the question of assessability of these two amounts as revenue

receipts came to be canvassed by the assessees. The Tribunal held that raising additional grounds involving a subject-matter which was not

challenged in the original appeal filed before them by the assessees, should be treated as filing fresh appeals, and that the same having been filed

after considerable delay, they could not be entertained. It is this view of the Tribunal which is challenged by the assessees before us.

According to the assessees the Tribunal has got ample powers to excuse the delay in filing additional grounds of appeal, that it is a matter of

discretion which has to be exercised by the Tribunal in a judicious manner, and that dismissal of the assessees'' applications to excuse the delay in

filing the grounds of appeal by the Tribunal is quite arbitrary. We are of the view that the question does not involve a mere question of discretion. It

is also a question relating to jurisdiction of the Tribunal. If the assessees have filed an application for permission to file additional grounds of appeal

in relation to the subject-matter which is already before the Tribunal by way of an appeal, the matter will merely rest on the discretion of the

Tribunal. But, where the assessees seek to bring in new items which had not been questioned by them before the assessing and appellate

authorities and which had nothing to do with the subject-matter of the appeal before the Tribunal as originally filed, by way of additional grounds of

appeal, the question will arise whether the Tribunal will have jurisdiction to entertain the additional grounds without excusing the delay in filing the

appeal. It may be that the Tribunal has a discretion in the matter of excusing the delay in filing the appeal. But, the question is whether the Tribunal

can deal with a new subject-matter raised in the additional ground''s of appeal, when the same has not been canvassed either before the assessing

authority or before the Appellate Assistant Commissioner. This is the reason for our saying that the matter involves not a mere question of

discretion but also the jurisdiction of the Tribunal to entertain and deal with the two amounts in question.

The learned counsel for the assessees relies on the decision in PHOOL CHAND GAJANAND Vs. COMMISSIONER OF Income Tax, U.

P., and Commissioner of Income Tax, Madras Vs. S. Nelliappan, as supporting his stand that the Tribunal has ample discretion to excuse the

delay in filing the grounds of appeal and to deal with the same along with the other items involved in the original grounds of appeal. In Phool Chand

Gajanand v. Commissioner of Income Tax additional grounds of appeal related to the same subject-matter of the appeal, and the case does not

deal with a situation as the one arising in this case where the assessees want the question of assessability of a new item of income to be considered

in the appeal by raising additional grounds. Therefore, that decision cannot apply to the facts of this case. Commissioner of Income Tax v.

Nelliappan was a case of best judgment assessment and it was held that the Tribunal in deciding the appeal is not restricted to the grounds set forth

in the memorandum of appeal or taken by leave of the Tribunal, and that the Tribunal was competent to allow the assessee to raise the contentions

relating to the cash credits which was not made the subject-matter of a ground in the memorandum of appeal, so long as the Tribunal did not make

a new case inconsistent with the assessee''s own plea. This decision also has no application to the facts of the present case.

Commissioner of Income Tax, Gujarat I Vs. Karamchand Premchand Private Ltd., directly dealt with a situation as the one arising in this case

with reference to the provisions of the Income Tax Act. There in an appeal to the Appellate Assistant Commissioner by the assessee against an

order of assessment, he did not question the decision of the officer on a point decided against him, and the Appellate Assistant Commissioner had

not in his order considered that point; the assessee, however, wanted to question the decision of the officer on that point in an appeal to the

Tribunal against the order of the Appellate Assistant Commissioner. It was held that the Tribunal was not entitled to allow the assessee to agitate

the question under the guise of granting leave under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. In that decision, if we may say so

with respect, all the earlier decisions on the point including the decisions in Phool Chand Gajanand v. Commissioner of Income Tax and

Commissioner of Income Tax v. S. Nelliappan has been considered, and we are in entire agreement with the view expressed by the learned judge

in that case. It is significant to point out that there is no rule in the Madras Agricultural Income Tax Rules similar to the one in Rule 11 of the

Income Tax (Appellate Tribunal) Rules, 1963. B.R. Bamasi Vs. Commissioner of Income Tax, Bombay City II, also takes the same view. In R.M.

Nitya Thevar v. State of Madras, [1969] 24 S.T.C. 520, Easun Engineering Co. Ltd. v. Joint Commercial Tax Officer, [1970] 26 S.T.C. 486 and

Central Camera Co. (P.) Ltd. v. Government of Madras, [1971] 27 S.T.C. 112, a question similar to the one arising in this case came up for

consideration with reference to the jurisdiction of the Sales Tax Appellate Tribunal, and this court had expressed the view in all those cases that the

Tribunal cannot deal with a subject-matter which has been considered by the assessing authority but not challenged before the Appellate Assistant

Commissioner by the assessee, in an appeal before the Tribunal in relation to other items of dispute. It will be a fortiori a case where an assessee

did not seek to challenge a particular item before the Appellate Assistant Commissioner or before the Tribunal at the original stage but seeks to

challenge the same at a later stage by way of additional grounds. We, therefore, hold that the Tribunal is justified in refusing to excuse the delay in

filing the additional grounds of appeal dealing with a new subject- matter.

The result is both the tax cases are dismissed with costs. Counsel''s fee Rs. 150 in each case.