Reference under income-tax law fails where rejection is time-barred and no question of law arises from factual findings.

Section 256(2) of the Income-tax Act, 1961 lies only when the Tribunal refuses to state a case on the ground that no question of law arises; it does not cover rejection of a reference application as time-barred, and the applications were therefore not maintainable. Where the Tribunal's decision on the assessment year 1978-79 turned on factual findings drawn from appraisal of evidence, no referable question of law arose, so the reference application was liable to be dismissed. The commentary also notes the distinction from section 66 of the 1922 Act, which contained a separate time-bar provision, unlike the 1961 Act.

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Issues: (i) Whether an application under section 256(2) of the Income-tax Act, 1961 lies where the Tribunal has rejected the reference application under section 256(1) as barred by limitation. (ii) Whether a question of law arose from the Tribunal's order for the assessment year 1978-79 when the Tribunal's dismissal rested on findings of fact based on appraisal of evidence.

Issue (i): Whether an application under section 256(2) of the Income-tax Act, 1961 lies where the Tribunal has rejected the reference application under section 256(1) as barred by limitation.

Analysis: Section 256(2) contemplates recourse to the High Court only where the Tribunal has refused to state the case on the ground that no question of law arises. A rejection of the reference application as time-barred does not amount to such a refusal. The distinction from section 66 of the Indian Income-tax Act, 1922 was noted, under which a separate provision existed for time-barred applications, but no corresponding provision was enacted in section 256 of the 1961 Act.

Conclusion: The applications arising out of the time-barred reference applications were not maintainable under section 256(2) and were rightly rejected.

Issue (ii): Whether a question of law arose from the Tribunal's order for the assessment year 1978-79 when the Tribunal's dismissal rested on findings of fact based on appraisal of evidence.

Analysis: The Tribunal had decided the reference application on merits after condoning delay, but the dismissal rested on findings essentially of fact drawn from the evidence. On that footing, no question of law could be said to arise from the appellate order.

Conclusion: No referable question of law arose in relation to the assessment year 1978-79, and the application was liable to be dismissed.

Final Conclusion: The assessee's applications failed in entirety, as the statutory conditions for invoking section 256(2) were not satisfied and no referable question of law emerged from the Tribunal's order.

Ratio Decidendi: An application under section 256(2) of the Income-tax Act, 1961 lies only where the Tribunal has refused to state the case on the ground that no question of law arises, and not where the reference application was rejected as time-barred; further, no reference lies where the Tribunal's decision is based on findings of fact and appraisal of evidence.

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