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Issues involved: The judgment pertains to the desirability of considering intangible additions from previous years to cover cash credits in the assessment year 1966-67.
Issue 1 - Additional Ground for Undisclosed Sources: The Income-tax Appellate Tribunal referred two questions regarding the addition of Rs.5,11,000 as income from undisclosed sources and the relevance of intangible additions from earlier years. The Tribunal questioned the validity of entertaining the additional ground for the first time before the Appellate Assistant Commissioner and the Tribunal. The Appellate Assistant Commissioner did not consider the plea of intangible additions as it was not raised earlier at any stage of the assessment process. The Tribunal upheld the views of the Income-tax Officer and the Appellate Assistant Commissioner, emphasizing that a fresh plea cannot be entertained after a significant period, especially when it was not raised before. The court highlighted the necessity for establishing a link between intangible additions from previous years and the cash credit in question. It was noted that offering alternative explanations is not permissible, and any connection between unexplained cash credits and intangible additions must be clearly proven with factual evidence. Issue 2 - Benefit of Intangible Additions: The second question raised whether the Tribunal was justified in depriving the appellant of the benefit of intangible additions from earlier years to cover the alleged income from undisclosed sources. The court emphasized that the second question did not directly arise from the Tribunal's order, making the first question of academic interest. The court declined to answer the questions referred, stating that no material was presented to substantiate the plea regarding the connection between intangible additions and the cash credit. It was reiterated that the allowance of credit for intangible additions must be supported by clear reasons and factual evidence. The determination of whether a cash credit can be covered by intangible additions is a factual inquiry within the purview of the taxing authorities, contingent upon the submission of relevant materials. In conclusion, the reference was disposed of without providing a direct answer to the questions raised, emphasizing the importance of establishing a factual link between intangible additions from previous years and the cash credits under scrutiny.
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