Unexplained investments in sons' names raised a referable legal question, while DVO-based house valuation remained factual.

A reference was held maintainable on the legal question whether investments made in the names of the assessee's major sons could be treated as the assessee's unexplained investments under section 69 of the Income-tax Act, because that issue involved the legal assessability of such investments and not merely facts. The proposed reference concerning addition for purchase of a residential house on the basis of the District Valuation Officer's valuation was declined, because it turned only on factual appreciation of valuation material and raised no independent question of law. The result was that reference was directed only on the first issue.

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Issues: (i) Whether the question whether investments made by the assessee's major sons could be treated as unexplained investments of the assessee under section 69 of the Income-tax Act, 1961 was a referable question of law. (ii) Whether the question relating to addition of Rs. 1 lakh towards purchase of a residential house on the basis of the District Valuation Officer's valuation involved a question of law fit for reference.

Issue (i): Whether the question whether investments made by the assessee's major sons could be treated as unexplained investments of the assessee under section 69 of the Income-tax Act, 1961 was a referable question of law.

Analysis: The proposed reference concerned the legal character of additions made by treating investments in the names of major sons as the assessee's unexplained investments. That controversy was not confined to a pure finding of fact, but raised a legal issue as to whether such investments could be assessed in the assessee's hands under section 69.

Conclusion: Yes. The question was a question of law and had to be referred.

Issue (ii): Whether the question relating to addition of Rs. 1 lakh towards purchase of a residential house on the basis of the District Valuation Officer's valuation involved a question of law fit for reference.

Analysis: The addition rested on valuation of the property and the factual appreciation of material before the Tribunal. The dispute did not raise any independent legal question beyond factual assessment.

Conclusion: No. The question was purely factual and was not referable.

Final Conclusion: The petitions succeeded only to the extent of directing a reference on the first question concerning the sons' investments, while the valuation-based question was declined.

Ratio Decidendi: A proposed reference is maintainable where the issue raises a legal question on the assessability of unexplained investments, but not where the dispute turns solely on factual valuation.

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