Appellate Tribunal powers and cash credit inferences: additional grounds may be heard, while factual findings remain non-referable.

The Appellate Tribunal may entertain additional grounds not raised in the memorandum of appeal and may adjust the assessee's tax liability on the basis of its findings. A contention that cash credits represent suppressed business income can be considered within the Tribunal's appellate powers, and the resulting assessment may be modified accordingly. The inference whether cash credits are linked to business income is ordinarily a question of fact drawn from the material before the Tribunal, not a referable question of law. On that basis, the proposed reference failed and the remaining issue became academic.

---

---

Issues: (i) Whether the Appellate Tribunal could entertain and decide a contention not taken in the memorandum of appeal and adjust the assessee's tax liability accordingly; (ii) whether the question sought to be referred arising from the Tribunal's treatment of cash credits was a question of law or merely a question of fact.

Issue (i): Whether the Appellate Tribunal could entertain and decide a contention not taken in the memorandum of appeal and adjust the assessee's tax liability accordingly.

Analysis: The Tribunal's appellate powers were not confined to the grounds set out in the memorandum of appeal. It could permit the assessee to urge additional grounds and could determine the appeal on that basis. If the Tribunal, on its findings, treated cash credits as income from the business and adjusted the assessment accordingly, it did not make out a new case inconsistent with the assessee's plea. The Tribunal was also competent to modify the tax liability in the light of its findings.

Conclusion: The Tribunal was competent to entertain the contention and to adjust the assessment; the challenge failed.

Issue (ii): Whether the question sought to be referred arising from the Tribunal's treatment of cash credits was a question of law or merely a question of fact.

Analysis: The existence of a connection between the cash credits and suppressed business income depended on the Tribunal's inference from the materials before it. Even if direct evidence was absent, the inference drawn was not speculative. A matter turning on such inference was one of fact and not a referable question of law. Since the main challenge was factual, the remaining question had become academic.

Conclusion: The proposed reference raised no referable question of law and the remaining question was academic.

Final Conclusion: The appeals were dismissed, and the Revenue succeeded on the substantive issues relating to the Tribunal's jurisdiction to entertain the contention and the non-referability of the factual question.

Ratio Decidendi: The Appellate Tribunal may entertain additional grounds and adjust the assessment on the basis of its findings, but an inference as to the source and character of cash credits is ordinarily a question of fact and not a referable question of law under section 66.

---