1995 (1) TMI 52 - HC - Income Tax

Application To Direct Reference Finding Of Fact Income From Undisclosed Sources Question Of Law

Summary

Issues:
- Interpretation of section 256 of the Income-tax Act for reference of questions of law to the High Court.
- Conditions for seeking reference under section 256.
- Discretion of the High Court in requiring the Tribunal to make a reference.
- Application of settled legal principles in determining the necessity of reference.
- Distinction between questions of law and questions of fact in seeking reference.

Analysis:
The judgment concerns a writ petition filed by the Revenue seeking direction to the Income-tax Appellate Tribunal to refer a case to the High Court under section 256 of the Income-tax Act, 1961. The Tribunal had set aside an assessment order, prompting the Revenue to argue that questions of law necessitating reference to the High Court were present. The High Court clarified that its jurisdiction under section 256 is advisory and not appellate or revisional. It emphasized that the High Court does not sit in appeal over the Tribunal's findings and is only concerned with unresolved legal issues. The court cited precedents to establish that a reference can be sought when a pure question of law arises, or when the Tribunal's findings are based on incorrect legal principles or unsupported by evidence.

Regarding the discretion of the High Court in requiring the Tribunal to make a reference, the judgment highlighted that the word "may" in sub-section (2) of section 256 grants wide discretion to the High Court. The court can reject a reference if the question of law is not substantial or well-settled. It was noted that the Act's provisions are not punitive and should be applied rationally. The court cautioned against routine applications without proper legal basis, as they may burden the assessee unjustly. The judgment underscored the importance of ensuring that references are made only in cases where all conditions are strictly met.

The judgment also addressed the distinction between questions of law and questions of fact. It cited a Supreme Court ruling to emphasize that findings can be challenged if they are perverse or not supported by evidence. In the present case, the High Court found that the alleged questions of law were, in fact, questions of fact, and the Tribunal's conclusions were not perverse or contrary to the evidence. The court dismissed the petition, stating that seeking a reference based on the mere possibility of a different conclusion on facts is not sufficient under section 256. The judgment thus reaffirmed the principles governing the reference of questions of law to the High Court under the Income-tax Act.