Reassessment permits redetermination of assessee status, while section 256(2) reference is confined to questions of law on found facts.

In reassessment, the assessee's share income could be redetermined with the status issue, because the original assessment became non est and the assessing authority could examine all matters relevant to the reassessment, including whether income was assessable as individual or HUF income. The Court also held that a reference under section 256(2) lies only on a question of law arising from facts already found; the character of the capital introduced in the firm, whether self-acquired or ancestral, was a factual issue not raised or decided by the Tribunal and could not be examined in reference. The question was answered against the Department and in favour of the assessee.

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Issues: Whether, in a reassessment proceeding, the assessee's share income from a partnership firm could be assessed in his hands as individual income or as income of a Hindu undivided family, and whether that question could be examined on a reference under section 256(2).

Analysis: The contention based on section 8 of the Hindu Succession Act was rejected because the nature of the capital introduced in the firm, whether self-acquired or ancestral, was a pure question of fact that had neither been raised nor adjudicated before the Tribunal. A reference under section 256(2) can proceed only on a question of law arising from the facts found. The Court further held that in reassessment proceedings the original assessment becomes non est, and the authorities are entitled to redetermine all issues relating to the assessment, including the assessee's status.

Conclusion: The question was answered in the affirmative against the Department and in favour of the assessee.

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