Perverse finding on firm genuineness can raise a question of law fit for reference under income-tax law.

A question of law arises for reference under section 256(2) of the Income-tax Act, 1961 where the Tribunal's finding that an assessee-firm is not genuine is alleged to be unsupported by material and perverse. The High Court treated the proposed issue as a legal question emerging from the Tribunal's order and held that it warranted consideration. It therefore directed the Tribunal to state the case and refer the formulated question of law for the High Court's opinion, and held the reference application maintainable.

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Issues: Whether, on the facts and in the circumstances of the case, a question of law arose from the Tribunal's order so as to justify reference under section 256(2) of the Income-tax Act, 1961, particularly on the issue whether the finding that the assessee-firm was not a genuine firm was perverse.

Analysis: The applications sought a reference on the ground that the Tribunal's conclusion regarding the genuineness of the assessee-firm was unsupported by material and suffered from perversity. The Court found that the question proposed was a legal question arising from the Tribunal's order and that it warranted consideration by the High Court.

Conclusion: The Court directed the Tribunal to state the case and refer the formulated question of law for opinion, holding that the reference application was maintainable and that the question arose from the Tribunal's order.

Final Conclusion: Reference was ordered on the legality of the Tribunal's finding regarding the genuineness of the assessee-firm, and the matter was sent for opinion of the High Court.

Ratio Decidendi: Where the Tribunal's finding on the genuineness of a firm is alleged to be unsupported by material and perverse, a question of law arises for reference under section 256(2) of the Income-tax Act, 1961.

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