Perverse factual findings in income-tax cases can raise a question of law when material evidence is ignored.

A factual finding in income-tax proceedings can still raise a question of law where it is unsupported by evidence, perverse, or reached without considering relevant material. The Supreme Court noted that the Tribunal had not independently explained why Rs. 1,38,000 was treated as income from undisclosed sources, and had omitted material withdrawals from the assessee's businesses. On that prima facie basis, the finding appeared to rest on conjecture and surmise, so the questions framed by the assessee arose from the Tribunal's order and a reference should have been directed.

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Issues: Whether the Tribunal's finding that Rs. 1,38,000 represented income from undisclosed sources gave rise to questions of law for reference under section 66 of the Income-tax Act, 1922.

Analysis: A finding of fact may be challenged in law if it is unsupported by evidence, is perverse, or has been reached without due consideration of relevant material. The record disclosed several circumstances relied upon by the assessing authorities, but the Tribunal had not independently explained the basis for distinguishing Rs. 1,38,000 from the balance of the encashed high denomination notes, and material withdrawals from the appellant's businesses were not considered. On a prima facie view, the finding appeared to rest on conjecture and surmise and to omit crucial facts bearing on the source of the cash.

Conclusion: The questions framed by the appellant did arise out of the Tribunal's order, and the High Court was wrong in refusing to direct a reference.

Ratio Decidendi: A factual finding in income-tax proceedings gives rise to a question of law when it is perverse, based on no evidence, or reached without considering relevant material evidence.

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