Reference jurisdiction on taxability of land-sale receipts and factual findings on agricultural income decided the scope of High Court reference.

Under section 256(2) of the Income-tax Act, only referable questions of law can be sent to the High Court, so the Tribunal was required to state a case on the land-sale tax treatment as business income or capital gains because those questions were already treated as referable in a connected matter. By contrast, the challenge concerning undisclosed sources and chillies production figures depended on appreciation of facts and evidence, and no legal question arose. The reference application therefore succeeded only on the land-tax questions and was rejected on the factual questions.

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Issues: (i) Whether the Tribunal was required to state a case and refer the questions relating to taxability of the land-sale receipt as business income and as capital gains. (ii) Whether the questions relating to the disallowance of income from undisclosed sources and the production figures of chillies disclosed any question of law so as to warrant reference.

Issue (i): Whether the Tribunal was required to state a case and refer the questions relating to taxability of the land-sale receipt as business income and as capital gains.

Analysis: The questions concerning the receipt of Rs. 66,782 arose on the tax treatment of the land transaction. In the connected matter involving the assessee's wife, a reference on the same land-sale issue had already been directed. The court treated the first two questions as raising referable issues for consideration under the reference jurisdiction.

Conclusion: The first two questions were directed to be referred to the High Court.

Issue (ii): Whether the questions relating to the disallowance of income from undisclosed sources and the production figures of chillies disclosed any question of law so as to warrant reference.

Analysis: The addition of Rs. 1,02,717 turned on the assessee's claim of agricultural income from chillies and the acceptance or rejection of the production figures. The court treated this as a finding based on appreciation of facts and evidence, and held that no legal question arose from the Tribunal's view on those facts.

Conclusion: Questions (c) and (d) were held to be pure questions of fact and were not referred.

Final Conclusion: The reference application succeeded only in part, with reference directed on the land-tax questions and declined on the remaining factual questions.

Ratio Decidendi: Under section 256(2) of the Income-tax Act, 1961, only questions involving a referable question of law can be sent to the High Court, while findings resting purely on facts and appreciation of evidence do not warrant reference.

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