T.L Viswanatha Iyer, J.:— The Income-tax Appellate Tribunal, Cochin Bench, has referred the following questions of law for the opinion of this court under section 256(2) of the Income-tax Act, 1961 (“the Act”), at the instance of the Revenue consequent on the directions issued by this court in O.P No. 5694 of 1983:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the sum is not assessable for the assessment year 1976–77?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that ‘no benefit’ can be said to have arisen to the assessee under the agreement?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal is right in not considering the question also under section 28(iv) of the Income-tax Act?”

2. The assessee, Khairunnissa Ebrahim, is the proprietrix of Ama Sea Foods, engaged in the processing of sea foods which are exported. She owed a sum of Rs. 10,17,371 to the Indian Tobacco Company Ltd. with whom she had certain business transactions. This sum represents the advances made by the said company to her from year to year against supplies made and to be made of processed fish products. The assessee was not able to liquidate this liability by making good the supplies of the goods. On March 1, 1976, an agreement was entered into between the assessee and the company which provided as follows:

“It is agreed between the parties that, in consideration of this settlement, mutual claims, if any, between the first and second party in relation to Ama Sea Foods and/or any other transactions is relinquished.”

3. As per this agreement, the assessee was to give possession of the canning plant and accessories which belonged to her to the company which appeared to have a value of Rs. 1,36,000 as per the books of the assessee and the company was to remain in possession of the same for a period of five years from the date of the agreement with an option to renew and keep possession for a further period of two years. In consideration of this settlement, mutual claims, if any, between the parties were relinquished. In completing the assessment for the assessment year 1976–77 (accounting year ending March 31, 1976), the Income-tax Officer considered that the amount of Rs. 10,17,371 was assessable in the hands of the assessee under section 41(1) of the Act. According to him, there was a remission of this amount by the Indian Tobacco Company which had been allowed to the assessee in its trading activities in the previous years. This amount therefore represented statutory income liable to assessment under section 41(1) of the Act. He completed the assessment accordingly.

4. On appeal, the Commissioner of Income-tax (Appeals) accepted the contention of the assessee that the requirements of section 41(1) were not satisfied in this case. Firstly, he held that the requirement of the section that an allowance or reduction should have been made in the assessments for some earlier years towards loss, expenditure or trading liability was not satisfied in this case. Secondly in any event, he held that the allowance should have been in respect of such loss or expenditure, to attract which the Income-tax Officer had to show that certain specific, explicit, unmistakably identifiable loss, deduction or allowance had been made in the past. This requirement was not satisfied in this case. The Commissioner also held that, even assuming that there was some relinquishment, it was not without consideration nor was it unilateral or unqualified. For all these reasons, he allowed the appeal and deleted the addition.

5. The Revenue appealed to the Tribunal, where they raised an additional ground that even assuming that section 41(1) was not attracted, the amount becomes includible in the total income by virtue of section 28(iv) as a benefit which had arisen to the assessee from the business. The assessee objected to this additional ground stating that it had not been raised before either of the authorities below and that, in any event, in the absence of any material to show that the consideration for this relinquishment was inadequate, it cannot be said that any amount was assessable under section 28(iv). The Tribunal held that the Department could not be allowed to raise the question regarding the applicability of section 28(iv) as it involved enquiry into further evidentiary material to decide whether the consideration for the relinquishment was adequate or not. Secondly, it was held, that in the absence of any evidence for the Revenue to show that the consideration under the agreement of March 1, 1976, was not adequate for the waiver of the liability of Rs. 10,17,371, they had to uphold the claim of the assessee that no benefit can be stated to have arisen under the agreement. Evidently, this was a finding rendered under section 28(iv) though the Tribunal subsequently held that they were not in a position to entertain the additional ground raised in the appeal. The three questions have been referred as arising out of this order of the Tribunal.

6. The assessee is not represented before us. Though notice was taken out to the assessee at the address given in the income-tax proceedings, all of them were returned unserved. This court ordered substituted service of the notice by affixing the notice in the front door of the last known place of her residence and on the notice board of this court. On the satisfaction of these conditions, this court declared on September 3, 1991, that there was sufficient notice of this reference to the assessee.

7. We have heard counsel for the Revenue. He pleads before us that the Tribunal went wrong in omitting to consider the case of the Revenue under section 41(1) of the Act. He also finds fault with the Tribunal for not permitting the contention under section 28(iv) to be raised. He relies on the decision of this court in Commissioner Of Income-Tax v. Kerala State Co-Operative Marketing Federation Ltd., [1992] 193 ITR 624 to contend that the Tribunal has the power to entertain additional grounds.

8. Out of the three questions referred, question No. 3 relates to the entertainability or otherwise of the question raised by the Revenue under section 28(iv) of the Act. We have already mentioned that the Tribunal refused to entertain this contention for the reason that it had not been raised before the authorities below and that it will involve going into further evidentiary material.

9. In Commissioner Of Income-Tax v. Kerala State Co-Operative Marketing Federation Ltd., [1992] 193 ITR 624, a Division Bench of this court considered the powers of the appellate authorities functioning under the Act. After referring to various decisions of the Supreme Court, particularly those in Hukumchand Mills Ltd. v. CIT, [1967] 63 ITR 232 and CIT v. Mahalakshmi Textile Mills Ltd., [1967] 66 ITR 710 and of the Madras High Court in CED v. R. Brahadeeswaran, [1987] 163 ITR 680, this court observed (at page 638):

“Following the decisions of the Supreme Court cited above and agreeing with the view expressed by the Madras High Court in Brahadeeswaran's case, [1987] 163 ITR 680, we hold that an appellant before the Tribunal could raise any new or additional point for the first time in appeal before the Tribunal even though it had not been raised in any form either before the assessing authority or before the Commissioner of Income-tax (Appeals). We further hold that when once any such new or additional ground is raised before the Tribunal, they are duty-bound to entertain that ground and render a decision thereon either themselves or by remanding the matter if further investigation into the facts is necessitated.”

10. In the light of this decision, the reasons given by the Tribunal for refusing to entertain the ground under section 28(iv) are not correct. The Tribunal was bound to entertain the ground despite the fact that it may require a further enquiry into materials to decide the question of adequacy or otherwise of the consideration for the waiver of the amount. The Tribunal was duty-bound to entertain this ground and render a decision thereon even if it required a remand for further investigation into the facts, as stated in the decision of this court. Question No. 3 has, therefore, to be answered in the negative, that is, in favour of the Revenue and against the assessee. The Tribunal should have entertained that question and dealt with it.

11. The Revenue had relied on section 41(1) primarily before the Tribunal. It was only in the alternative that they relied on section 28(iv). The Income-tax Officer had, for his own reasons, held that there was an allowance or a deduction of an expenditure or a trading liability in the previous years and that the assessee had, during the instant assessment year, obtained the amount of Rs. 10,17,371 in respect of the said expenditure or trading liability by way of remission or cessation thereof and, therefore, the amount was assessable to tax during the year. The Commissioner (Appeals) took a different view. It was that matter which was in dispute before the Tribunal. But then the Tribunal did not consider the matter in the light of the findings rendered either by the Income-tax Officer or by the Commissioner. On the other hand, and despite stating in the latter part of the order that the question of the adequacy or otherwise of the consideration required a further probe and consideration of further evidentiary material, the Tribunal upheld the claim of the assessee that no benefit could be said to have arisen to her under the agreement. We do not find in the order any proper consideration of the questions arising under section 41(1) or of the requirements of section 28(iv). We are, therefore, satisfied that there has been no proper consideration of the matter either under section 41(1) or under section 28(iv). No definite finding has been rendered under either of these provisions. There has been no adequate consideration of the ingredients of the two sections or as to whether those ingredients have been satisfied justifying the Income-tax Officer's action in bringing the amount of Rs. 10,17,371 into the net of taxation. In the absence of any clear finding on these aspects under section 41(1) or under section 28(iv), we are not in a position to answer questions Nos. 1 and 2 and leave the matter to be dealt with by the Appellate Tribunal afresh. We, therefore, decline to answer questions Nos. 1 and 2. We answer question No. 3 in the negative, that is, in favour of the Revenue and against the assessee. The Tribunal shall deal with the matter afresh in the light of the observations contained hereinabove.

12. A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.