Presumption of good faith and concealment in income cases may raise a referable question of law.

The legal effect of proved facts is treated as a question of law, and an adverse inference of concealment cannot be drawn unless the Revenue first displaces the normal presumption of good faith in the assessee's favour. An entry is initially to be regarded as made in the ordinary course and without intent to conceal income. Where the Commissioner's reasoning may reflect misappreciation of facts or misapplication of law, the soundness of the legal conclusions drawn from those facts remains open to judicial scrutiny. On that basis, a question of law arises that can justify a reference to the High Court.

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Issues: Whether the inference of concealment could be drawn from the proved facts, whether the burden lay on the Revenue to displace the presumption of good faith, and whether the case raised a question of law warranting a reference to the High Court.

Analysis: The proper legal effect of proved facts was held to be a question of law. The normal presumption operates in favour of good faith and not bad faith on the part of the assessee, so the Revenue had to begin with the presumption that the relevant entry was made in the ordinary course and without intent to conceal income. The Commissioner's approach was found to be open to challenge for possible misappreciation of facts and misapplication of law, and the soundness of the legal conclusions drawn from the proved facts could be tested by the Court.

Conclusion: A question of law arose on which the Commissioner could be compelled to make a reference to the High Court, and the application succeeded.

Final Conclusion: The assessee obtained an order directing reference on the legal question arising from the finding of concealment, with costs awarded in his favour.

Ratio Decidendi: The legal effect of proved facts and the inference of concealment from them are questions of law, and the Revenue must rebut the presumption of good faith before an adverse inference of concealment can be sustained.

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