Reference under section 256(2) fails where proposed questions are factual, and block additions require incriminating search material.

A reference under section 256(2) was held not maintainable because the proposed questions were not referable questions of law. The HC found that most issues arose from appreciation of evidence and factual findings on unexplained investments, stock surrender, land character, valuation additions and related matters, with no material ignored or finding recorded without the record. The question on undeclared payments was likewise resolved on circumstantial facts, while telescoping was treated as governed by settled law. For block assessment, estimated household-expense additions were stated to depend on incriminating material found in search, reinforcing that Chapter XIV-B additions must rest on such material.

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Issues: Whether the Revenue's application for reference under section 256(2) of the Income-tax Act, 1961 was liable to be allowed on the ground that the proposed questions raised substantial questions of law rather than questions of fact.

Analysis: The reference application concerned twelve proposed questions arising from the Tribunal's order in block assessment proceedings. The Court found that the first, second, third, fourth, fifth, sixth, eighth, ninth and tenth questions turned on appreciation of evidence and factual findings, including unexplained investments, surrender of stock, location and character of land, and valuation-related additions. It held that no material had been ignored and no finding had been recorded without consideration of the record. As to the seventh question, the addition based on alleged undeclared payments was deleted by the Tribunal on circumstantial appreciation of facts. The eleventh question on telescoping was treated as governed by settled law. The twelfth question, relating to estimated addition of household expenses in block assessment, was held to be governed by the principle that additions under Chapter XIV-B must rest on incriminating material found in search.

Conclusion: The proposed questions did not give rise to referable questions of law warranting reference under section 256(2), and the Revenue's application was not maintainable.

Ratio Decidendi: A reference under section 256(2) cannot be compelled where the proposed questions are concluded by factual appreciation and no material-ignoring or perverse finding is shown; in block assessment, additions must rest on incriminating material found during search.

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