Court directs Tribunal to consider alternative plea in appeal, review 'on-money' figures for assessment years.

The court allowed the writ petition, set aside the Tribunal's order, and directed the Tribunal to consider the alternative plea raised by the assessee. The Tribunal must now decide the appeal on merits, considering the normative 'on-money' figures for the relevant assessment years.

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Issues Involved:
1. Scope of an appeal before the Income Tax Appellate Tribunal (Tribunal) and the Tribunal’s powers to pass orders.
2. Assessment of 'on-money' income and the method of accounting for the same.
3. Whether the Tribunal is duty-bound to grant relief based on the case found by it even if no specific ground of appeal was raised.

Detailed Analysis:

Issue 1: Scope of an appeal before the Tribunal and the Tribunal’s powers to pass orders.
The judgment addresses the Tribunal’s powers under Section 254(1) of the Income Tax Act, emphasizing that the Tribunal can pass orders on all questions arising from an assessment, including incidental or consequential questions. The Tribunal must confine itself to the subject matter of the appeal but can consider questions incidental to its determination. The Tribunal’s refusal to consider the alternative plea raised by the assessee was deemed erroneous, as it should have granted relief if it followed as a legal incident.

Issue 2: Assessment of 'on-money' income and the method of accounting for the same.
The assessee, engaged in the construction and sale of buildings, disclosed Rs. 66 Lakhs as 'on-money' for the assessment years 1987-88 and 1988-89, following the project completion method. The Assessing Officer rejected this method, assessing 'on-money' annually at 25% of the aggregate agreement value plus 'on-money,' resulting in a total 'on-money' of Rs. 1,25,78,000 spread over eight years. The Tribunal upheld this method and quantum, rejecting the project completion method. However, the Tribunal failed to adjust the 'on-money' figures for the last two years (1987-88 and 1988-89) to the normative figures of Rs. 8,16,000 and Rs. 2,02,000, respectively, leading to an unintended total 'on-money' of Rs. 1,81,60,000.

Issue 3: Whether the Tribunal is duty-bound to grant relief based on the case found by it even if no specific ground of appeal was raised.
The Tribunal denied relief to the assessee on the grounds that the assessee did not raise this specific ground in its appeal and did not object to its own returns. The court found these reasons non-germane, stating that the Tribunal should have granted relief suo motu if it followed as a legal incident. The Tribunal’s refusal to consider the alternative plea was incorrect, as the relief was a direct consequence of the Tribunal’s findings.

Conclusion:
The court allowed the writ petition, set aside the impugned order of the Tribunal, and directed the Tribunal to consider the alternative plea raised by the assessee. The Tribunal must now decide the appeal on merits, considering the normative 'on-money' figures for the assessment years 1987-88 and 1988-89. The reference was returned unanswered, and no order as to costs was made.

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