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Application under section 256(2) of the Income-tax Act, 1961 seeking direction to the Income-tax Appellate Tribunal to state the case and refer the question of law arising out of its order dated July 15, 1993, for the assessment year 1986-87. Analysis: The judgment pertains to an application under section 256(2) of the Income-tax Act, 1961, requesting the Income-tax Appellate Tribunal to refer a question of law to the High Court. The assessee, a registered firm, procured a ginning and pressing factory on lease from a charitable trust. The Assessing Officer disallowed a portion of the rent payment under section 40A(3) of the Income-tax Act, 1961, for not being made by crossed cheque or bank draft. The Commissioner of Income-tax (Appeals) partially allowed the appeal, while the Tribunal completely deleted the addition, citing the trust's identifiability and verifiability of payments. The Tribunal found the payments were made under exceptional circumstances and relied on precedents to support its decision. The High Court noted that the Tribunal's finding was based on factual appreciation and did not give rise to a question of law, hence rejecting the application under section 256(2). The judgment delves into the interpretation of section 40A(3) of the Income-tax Act, emphasizing the importance of genuine transactions and proper assessment of taxable income. It discusses the purpose behind the provision, which aims to prevent dealing with unaccounted money and ensure authenticity through cross-cheque or bank draft payments. The High Court highlighted the presence of a proviso to mitigate hardships and noted that in the case at hand, the payer and payee were identifiable, and the purpose of payments was clear. The Tribunal's decision to accept the genuineness of payments made under exceptional circumstances was deemed logical and legal by the High Court. Furthermore, the judgment reflects on the role of courts in resolving legislative ambiguities and mitigating hardships. It quotes Judge Learned Hand to underscore the importance of understanding the purpose of statutes to interpret them correctly. The High Court emphasized that the Tribunal's application of the proviso to section 40A(3) was in line with mitigating hardships and aligning with the legislative intent. The Court rejected the application under section 256(2) as the Tribunal's factual findings did not raise any legal question, affirming the correctness of the Tribunal's view. In conclusion, the High Court upheld the Tribunal's decision, stating that the finding was based on factual appreciation and did not warrant a question of law. The application under section 256(2) was rejected without costs, affirming the Tribunal's decision to delete the addition of rent payments disallowed by the Assessing Officer.
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