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Proper exercise of discretion by the Bench in not allowing additional grounds in appeal. Analysis: The case involved a reference under Section 66(1) of the Indian Income-tax Act, 1922, by the Income-tax Tribunal regarding the proper use of discretion in allowing additional grounds in appeal. The initial assessment for the charge year 1939-40 was made based on old tax rates, but later, a fresh assessment was done at the rates prescribed by the Finance Act of 1939. The applicants sought to raise an additional ground related to the legality of the reassessment, which was not included in the original appeal memorandum. The Tribunal refused to permit this additional ground, citing lack of proper amendment to the memorandum of appeal. The Tribunal acknowledged that the additional ground was a pure question of law that could impact the entire reassessment if accepted. However, it emphasized the need for a proper amendment to the appeal memorandum. The Tribunal highlighted the absence of stamping or verification on the application for the additional ground, but this was not a valid reason for refusal as per the provisions of the Act and rules. The Tribunal's decision was based on the belief that the other side did not have a reasonable opportunity to address the new ground, despite the applicants submitting written arguments including the additional ground well in advance of the hearing date. The Tribunal's decision was challenged on the grounds that the discretion to allow additional grounds should have been exercised in favor of the assessee, especially since the new ground was a significant legal issue that could impact the entire reassessment. The rules of the Tribunal, particularly Rules 17 to 21, were analyzed to determine the requirements for raising additional grounds in appeal. Rule 21, akin to Order 41, rule 2 of the Civil Procedure Code, only necessitates permission from the Tribunal to introduce additional grounds, without mandating an amendment to the appeal memorandum. The Tribunal's reliance on Rule 22 and Section 33 was deemed irrelevant to the situation at hand. It was emphasized that the discretion to grant leave for additional grounds should be exercised judiciously and not arbitrarily. The Tribunal's refusal to permit the additional ground was considered arbitrary, especially since the Income-tax Department did not object to it and had sufficient notice of the new ground before the hearing. The Tribunal's reasoning, including the lack of stamping or verification, was found to be unfounded, leading to the conclusion that the Bench did not properly exercise its discretion in disallowing the additional grounds. Consequently, the Income-tax Commissioner was directed to pay the costs of the assessees and refund the deposited amount.
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