K.S. Paripoornan, J.
1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Cochin Bench, has referred the following two questions of law for the decision of this court under Section 256(2) of the Income-tax Act, 1961 :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal is right--(i) in cancelling the order of the Income-tax Officer levying interest under Section 216 ; (ii) in holding that (a) the assessee has taken reasonable care in preparing the basis for estimate and the basis so prepared is a well informed guess work ; (b) it is a bona fide estimate and it cannot be called an underestimate prepared deliberately ?
2. Whether, on the facts and in the circumstances of the case and also in view of the finding by the Income-tax Officer that the assessee had deliberately underestimated their liability to advance tax at 'nil', should not the Tribunal have sustained the order of the officer or remitted the case to the officer for de novo consideration ?'
The respondent is a public limited company. We are concerned with the assessment year 1977-78. The accounting period ended on December 31, 1976. The controversy in this case is whether the assessee underestimated the advance tax payable by it which resulted in non-payment of the first two instalments, on June 15, 1976, and September 15, 1976. During the relevant accounting year, advance tax was payable under Section 211(1) of the Income-tax Act, 1961, as it stood then. The latest assessed year of the assessee was 1973-74. Based on the latest assessed year (1973-74), the Income-tax Officer served a notice on the assessee on May 28, 1976, and directed the assessee-company to remit the advance tax of Rs. 48,11,980 in three instalments-on June 15, 1976, September 15, 1976, and December 15, 1976. The assessee-company filed an estimate on June 15, 1976. It stated that its liability is 'nil'. No advance tax was remitted. On September 15, 1976 (the second instalment date), the assessee remitted a sum of Rs. 8,00,000. It did not submit an estimate. However, on December 14, 1976, the assessee-company filed a second estimate showing that the advance tax payable is Rs. 35,20,000. On the same date, the assessee sent a cheque to the assessing authority towards the liability in a sum of Rs. 25,20,000. The assessment for the year 1977-78 was completed on September 22, 1980. We are told that there was an appeal from the assessment order and the appellate order was given effect to by the officer by an order dated March 16, 1981. Either in the original assessment order or in the revised assessment order giving effect to the appellate order, no interest was charged under Section 216 of the Income-tax Act, 1961. On July 7, 1981, the Income-tax Officer served a notice on the assessee to show cause as to why interest under Section 216 should not be charged. It is seen that the assessee filed its objection thereto on July 20, 1981. The plea of the assessee was that it has remitted more than the tax that will be due for the year if certain rectifications were carried out. Repelling the plea of the assessee, the Income-tax Officer held that the assessee has deliberately underestimated its liability and levied interest of Rs. 98,560 under Section 216 of the Income-tax Act, 1961. For non-payment of advance tax due on June 15, 1976, an amount of Rs, 61,600 as interest was levied. For non-payment of advance tax and surcharge due on September 15, 1976, interest of Rs. 36,960 was levied. The above sums totalled to Rs. 98,560.
2. In the appeal before the Appellate Assistant Commissioner, the assessee seems to have shown a manuscript calculation from its file, wherein the assessee estimated the profit for the half year and also contended that the company had some expansion programme during the year and a newplant went into production and that they anticipated some 'teething trouble' and it prepared a working sheet on June 14, 1976. The Commissioner of Income-tax (Appeals) declined to accept the above plea and held that the assessee had no reason for filing a low estimate and avoiding payment of tax payable on June 15, 1976, and September 15, 1976, by way of advance tax. The order passed by the Commissioner of Income-tax (Appeals) is annexure B dated October 12, 1982. The order passed by the Income-tax Officer, dated July 27, 1981 (annexure A), was affirmed. The assessee took up the matter in appeal before the Income-tax Appellate Tribunal, Cochin Bench. By order dated December 31, 1984, the Income-tax Appellate Tribunal held that the assessee has taken reasonable care in preparing the basis for the estimate and the basis so prepared is a well-informed guess work. 'The Tribunal also held that 'the estimate prepared cannot be called an underestimate or done deliberately' and in this view, the order passed by the Income-tax Officer levying interest under Section 216 was cancelled. It is thereafter at the instance of the Revenue and as directed by this court in Original Petition No. 1152 of 1986, that the Income-tax Appellate Tribunal has referred the two questions of law, formulated hereinabove, for the decision of this court.
3. We heard counsel for the Revenue, Mr. P.K.R. Menon, and also counsel for the respondent-assessee, Mr. P.R. Raman.
4. The arguments advanced before us covered a wide range. Suffice it to say that the way in which the Tribunal has disposed of the appeal is most unsatisfactory. As to whether the assessee has made a bona fide estimate and it cannot be called an underestimate prepared deliberately is a finding of fact. It is true that the Income-tax Appellate Tribunal, as a final fact-finding authority, is competent to enter such a finding of fact. But it should be done fairly and in accordance with law. We are of the view that the argument of counsel for the Revenue that different explanations were given at different stages by the assessee is well fortified on the basis of the records before us.
5. The Income-tax Officer served a notice on the assessee on July 7, 1981. The assessee filed its objections thereto on July 20, 1981. Both these documents do not form part of the paper book. So, we have to proceed regarding the contents of the notice and the reply thereto filed by the assessee, as narrated in annexure A order passed by the Income-tax Officer dated July 27, 1981. The only plea of the assessee was that the entire tax was paid before December 15, 1976. Before the first appellate authority, a new plea was put forward by the assessee. It was stated that the assessee expected increase in the production capacity. They had an expansion programme and a new plant went into production. The assessee anticipated some 'teething trouble' for the new factory and no profit was expected for that year. This was the reason for showing 'nil' in the estimate prepared on June 14, 1976. It is also seen that the assessee had shown a manuscript calculation regarding the profit before the Commissioner of Income-tax. The said manuscript calculation also does not form part of the paper book. The grounds of appeal preferred before the Commissioner of Income-tax also do not form part of the paper book. In second appeal before the Tribunal, the assessee had a different explanation. It is seen from paragraph 4 of the order of the Tribunal that the assessee filed copies of the assessment order dated September 22, 1980, the revised assessment order dated March 16, 1981, the order passed by the Commissioner of Income-tax (Appeals) dated July 27, 1981, and photostat copies of the working of the estimate of advance tax payable for the assessment year 1977-78 prepared on June 14, 1976, and September 13, 1976. The plea made was that the estimate of advance tax was filed on June 15, 1976, based on the assessee's working results for five months up to May 31, 1976, and taking into account the unabsorbed depreciation and development rebate for the assessment years 1974-75, 1975-76 and 1976-77 available for set off and a bona fide estimate was made. The Tribunal considered the working sheet prepared on June 14, 1976. It does not appear that these documents were tendered before the Tribunal as additional evidence in accordance with Rule 29 of the Appellate Tribunal Rules, 1963. No reason is stated for acceptance of these additional documents by the Tribunal. There is nothing on record to show whether these documents were produced before the assessing authority or before the first appellate authority at all. Be that as it may, the explanation offered before the Tribunal that the estimate was filed on June 15, 1976, on a bona fide working made on June 14, 1976, was a new plea. It does not appear to have been taken either before the assessing authority or before the first appellate authority. The first appellate authority, no doubt, referred to a manuscript calculation that was filed in paragraph 5 of its order. But, it is not clear whether the manuscript calculation is the one that is referred to by the Tribunal. We are stressing these aspects only to show that the plea put forward by the assessee before the Tribunal was a new one, based on fresh documents filed before the Tribunal for the first time. It is by relying on the abovesaid documents that the Tribunal accepted the plea of the assessee and held that the estimate made by the assessee was a bona fide one and that it cannot be called an underestimate prepared deliberately. For arriving at the said finding of fact, the Tribunal adverted to a plea which was taken before it for the first time. It was so done on the basis of the documents which were not before it in accordance with law. There is no material to show that the above documents were admitted as additional evidence in the appeal. No reason has been stated for receiving those documents at that stage. We do not find any one of the documents included in the paper book filed in this court. In this state of affairs, it is difficult to say whether the finding arrived at by the Tribunal is valid, based on any material or in accordance with law. We may at once say that though the finding of the Tribunal that the underestimate was one made bona fide is a finding of fact, such a finding can be made only in accordance with law. However wide the powers of the Appellate Tribunal may be as a final fact-finding authority, it has to discharge its functions only in accordance with law. If the finding of fact is arrived at in a wrong way, it will be unfair and unreasonable. It is trite law that doing what is right may still result in unfairness if it is done in the wrong way.
6. We are of the view, on the basis of the materials placed before us, that it is not possible for this court to answer the questions referred to this court satisfactorily and properly. The documents on the basis of which the Income-tax Officer passed the order are not before us. The material that seems to have been placed before the first appellate authority is not before us. The materials placed before the Appellate Tribunal and relied on by it are also not before us. In short, the basic documents on the basis of which all the three authorities have entered their findings do not form part of the paper book. In this case, the explanation given by the assessee seems to be different at different stages. Only a short summary of the same is found in the orders. We do not know the details, if any, in the explanations tendered. In these circumstances, we are not in a position to answer the questions referred to us as required by law, in a satisfactory manner. Therefore, we decline to answer the questions referred to this court by the Income-tax Appellate Tribunal.
7. We have already stated that the Appellate Tribunal has disposed of the appeal, relying on a plea which was put forward before it for the first time and on the basis of the documents produced before it for the first time. It is not stated that the documents were admitted as additional evidence in the appeal. We are of the view that the Tribunal committed a serious error in adverting to and relying upon the documents which were tendered before it for the first time, without admitting them as additional evidence in accordance with law. The procedure adopted by the Appellate Tribunal by relying upon fresh documents, without admitting them as additional evidence and without giving reasons, is grossly unfair and illegal. Based on those documents, the Tribunal has entered a finding that the underestimate made by the assessee is a bona fide one. We are of the view that the casual way in which the Tribunal has disposed of the appeal is illegal and unfair. The order of the Tribunal is infirm and not in accordance with law. While declining to answer the questions referred to this court, we direct the Income-tax Appellate Tribunal to restore the appeal--Income-tax Application No, 756 of 1982--to its file and dispose of the same afresh, in accordance with law. Ordinarily, the Tribunal should dispose of the appeal only on the basis of materials on record and available before it and about which parties to the appeal-the assessee and the Revenue--had notice or knowledge. This is an important aspect to be borne in mind, since any other approach will be unfair or arbitrary and also unreasonable. It is competent to the Tribunal to admit additional or new evidence in the appeal in accordance with law and for reasons stated. But the parties to the appeal should have fair and proper notice and opportunity in relation thereto. 'Ad hocism' in that regard cannot be countenanced in law. We make this position clear.
8. A copy of this judgment, under the signature of the Registrar and the seal of this court, shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench, forthwith.