Income-tax reference on block-period income and deletion of addition was treated as raising questions of law fit for reference.

Income-tax reference under section 256(2) turned on whether the proposed questions raised arguable questions of law. The Court held that the issue on treatment of income within the block period under section 158BA(2), including whether income below the taxable limit for a previous year could be excluded from undisclosed income, involved a legal question fit for reference. The Court also found that the question concerning deletion of the addition for assessment year 1994-95 likewise raised a referable question of law. The Tribunal was directed to refer both identified questions for opinion, and the Revenue's application was partly allowed.

---

---

Issues: Whether the proposed questions relating to assessment years 1986-87 and 1994-95 raised questions of law warranting reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The Court found that the question concerning treatment of income within the block period under section 158BA(2) involved a legal issue as to whether income below the taxable limit for a previous year could be excluded from undisclosed income. The Court also found that the question relating to deletion of the addition for assessment year 1994-95 similarly raised a question of law fit for reference.

Conclusion: The Tribunal was directed to refer the identified questions for opinion, and the Revenue's application was partly allowed.

---