Factual findings on suppressed sales and pledged stock did not raise a referable question of law under tax reference provisions.

Findings on suppressed sales and stock pledged with a bank were treated as questions of fact, not referable questions of law under section 256(2) of the Income-tax Act, 1961. The Tribunal had upheld deletion of the addition for suppressed sales on the basis that the material on record did not sustain the addition and that lime production was not low; the Court found no demonstrated perversity or legal error in those factual findings. On the pledged stock issue, the Tribunal's acceptance that part of the stock belonged to a third party likewise turned on appreciation of evidence. The Revenue's reference application therefore failed.

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Issues: (i) Whether the Tribunal's finding upholding deletion of the addition made on account of suppressed sales gave rise to any referable question of law under section 256(2) of the Income-tax Act, 1961. (ii) Whether the Tribunal's acceptance of the assessee's explanation regarding the stock pledged with the bank gave rise to any referable question of law under section 256(2) of the Income-tax Act, 1961.

Issue (i): Whether the Tribunal's finding upholding deletion of the addition made on account of suppressed sales gave rise to any referable question of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal's conclusion on suppressed sales rested on findings that the additions could not be sustained on the material on record and that the assessee's production of lime was not low. The Court treated the adequacy of production and the sustainability of the addition on the existing material as matters of fact. No material was shown to establish that those findings were vitiated.

Conclusion: No referable question of law arose on the deletion of the addition relating to suppressed sales.

Issue (ii): Whether the Tribunal's acceptance of the assessee's explanation regarding the stock pledged with the bank gave rise to any referable question of law under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal accepted the assessee's explanation that part of the stock pledged with the bank belonged to a third party. This depended upon the Tribunal's appreciation of the evidence and acceptance of the assessee's version, which was a factual determination.

Conclusion: No referable question of law arose on the deletion of the addition relating to stock pledged with the bank.

Final Conclusion: The Revenue's application under section 256(2) failed because the Tribunal's findings on both additions were findings of fact and did not warrant a reference.

Ratio Decidendi: Findings based on appreciation of evidence and on the adequacy of production or ownership of stock are questions of fact and do not, without demonstrated perversity or legal error, give rise to a referable question of law under section 256(2) of the Income-tax Act, 1961.

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