Cash credit evidence and reference jurisdiction: a factual finding cannot be displaced merely because another inference is possible.

A cash credit in an assessee-company's books was treated as a question of fact, and the Tribunal's finding that it was not the company's undisclosed income could not be displaced in reference jurisdiction by reappraising evidence. The High Court held that, under section 66, it could not upset a factual conclusion merely because another inference was possible, and a challenge that the finding was unsupported or perverse could not be raised indirectly at the hearing when not taken in the reference application. Rejection of the assessee's explanation did not automatically justify treating the amount as income from undisclosed sources, so the addition was not sustained.

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Issues: Whether, on the facts and circumstances, the sum of Rs. 1,35,000 credited in the books of the assessee-company could be treated as its income from undisclosed sources, and whether the challenge to the Tribunal's finding raised any question of law in reference jurisdiction.

Analysis: The Tribunal had examined the account, the surrounding circumstances, and the remand evidence, and reached a factual conclusion that the amount could not be attributed to the assessee-company as its undisclosed income. The High Court held that, in a reference under section 66, it could not reappraise the evidence or upset a finding of fact merely because another inference was possible. A contention that the finding was unsupported by evidence or perverse had not been raised in the application under section 66(1), and therefore could not be indirectly pressed at the hearing. Mere rejection of the assessee's explanation did not make it obligatory to treat the cash credit as the assessee's income.

Conclusion: The question was one of fact and not a referable question of law. The addition of Rs. 1,35,000 was not sustained, and the answer was against the Revenue.

Ratio Decidendi: In a reference under section 66 of the Indian Income-tax Act, 1922, the High Court cannot reappraise evidence to displace a Tribunal's finding of fact, and a cash credit is not automatically taxable as the assessee's income merely because its explanation is rejected.

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