Tribunal's refusal to admit additional evidence in tax appeal, with s.256(2) reference bid dismissed as no legal question

The dominant issue was whether the Tribunal's refusal to permit additional evidence and its consequent rejection of a reference application raised any question of law under the Income-tax Act, 1961. The HC held that production of additional evidence at the appellate stage is discretionary, not a litigant's right, and becomes a question of law only if the discretion is exercised by ignoring settled legal principles or in a grossly arbitrary manner. Since the applicant pleaded only "interest of justice" without showing cause, and the Tribunal's factual conclusions on existing material were otherwise unimpeachable, no referable question of law arose. The application under s. 256(2) was rejected.

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Issues: Whether the allowance or refusal to admit additional evidence by the Income-tax Appellate Tribunal is a question of law which can be referred to the High Court under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal's power to admit additional evidence is governed by rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, which circumscribes admission to cases where the Tribunal requires the evidence to enable it to pronounce judgment or for any other substantial cause. Judicial authority interpreting analogous provisions (Order 41, rule 27 CPC) establishes that the true test is whether the appellate court can pronounce a satisfactory judgment on the materials before it without the additional evidence; admission is discretionary and not a matter of right. Where the Tribunal examines the record and concludes it can pronounce a judgment satisfactorily, refusal to admit further evidence involves exercise of appellate discretion based on appreciation of materials and does not ordinarily raise a question of law. The settled principles and authorities show that interference by the High Court is permissible only if the Tribunal acted on a wrong legal principle or exercised discretion so arbitrarily as to be outside judicial bounds. Applying these principles to the present facts, the Tribunal reviewed the available material, declined to admit additional evidence as not required to pronounce judgment, and reached factual conclusions on appreciation of evidence.

Conclusion: The refusal to admit additional evidence by the Tribunal in the present case does not raise a question of law for reference under section 256(2) and the application for reference is rejected; decision is in favour of the assessee.

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