The main legal point established in the judgment is that the Appellate Assistant Commissioner should exercise discretion in allowing additional grounds of appeal and should consider the additional grounds raised by the assessee on their merits.

1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question of law under section 256(1) of the Income Tax Act, 1961, for the assessment year 1973-74 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the order of the Appellate Assistant Commissioner and directing him to entertain the additional ground raised by the assessee ? "

2. Briefly stated, the facts of the case are that an application under section 154 of the Income Tax Act, 1961, was moved by the assessee praying therein for relief under section 80J on the ground that the value of the asset has been taken at a lesser figure. It was found by the Income-tax Officer that the value of the asset has been taken at a figure of Rs. 5,33,215 instead of Rs. 5,45,892 and, accordingly, the mistake was rectified. The Income-tax Officer further found that, while computing the relief under section 80J, the pre-paid expenses and expenditure not written off was wrongly taken as an asset. A notice under section 154 was issued for withdrawing the excess deduction allowed under section 80J and, after considering the reply of the assessee, the computation was revised.

3. An appeal was preferred against this order to the Appellate Assistant Commissioner wherein it was contended that the Income-tax Officer has erred in deducting the liability of Rs. 89,740, while computing the capital employed and this should not have been deducted. The Appellate Assistant Commissioner has rejected this contention on the ground that this ground was not taken originally in the grounds of appeal and, therefore, it cannot be entertained.

4. The matter was challenged by the assessee before the Income-tax Appellate Tribunal and it was submitted that the Appellate Assistant Commissioner has erred in not considering the ground raised before him. The Income-tax Appellate Tribunal came to the conclusion that the grounds moved by the assessee by the petition dated February 16, 1978, do not involve any investigation of facts and was purely a question of law which ought to have been entertained and considered on the merits by the Appellate Assistant Commissioner without summarily rejecting the same. The matter was restored to the file of the Appellate Assistant Commissioner with a direction to consider the additional ground moved by the assessee and decide the same on the merits of the case and the order of the Appellate Assistant Commissioner was set aside.

5. Under section 250(5), the Appellate Assistant Commissioner may, at the time of hearing of appeal, allow the appellant to go into any ground of appeal not specified in the grounds of appeal if he is satisfied that the omission of that ground from the form of appeal was not wilful or unreasonable. It has been held in Addl. CIT v. Gurjargravures P. Ltd. [1978] 111 ITR 1 (SC) that, if the claim for exemption was not made before the Income-tax Officer and there is no material on record to support such claim, then the same cannot be raised before the Appellate Assistant Commissioner.

6. The above judgment was considered in Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688 (SC) and it was held that the observations in the case of Gurjargravures' case [1978] 111 ITR 1 (SC) do not make out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not have been raised at the stage when the return was filed or when the assessment order was made or if the ground became available on account of change of circumstances or law. There may be several factors justifying the raising of such a plea in an appeal and each case has to be considered on its own facts. It was further observed that, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and then he must be satisfied that the ground raised was bona fide and the same c