Reference under Income-tax law fails where disputed additions on bogus purchases and sales raise factual issues, not a question of law.

A reference under section 256(2) of the Income-tax Act was held unwarranted where the proposed question concerned deletion of additions for alleged bogus purchases and unaccounted sales, because the matter turned on the facts and did not disclose any real question of law. The Tribunal had refused reference on that basis, and the High Court erred by directing reference without identifying a definite legal issue. The direction to make a reference was therefore unsustainable and the High Court's order was liable to be set aside.

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Issues: Whether the High Court was right in directing reference under section 256(2) of the Income-tax Act, 1961 on the question proposed by the Revenue.

Analysis: The proposed reference concerned deletion of additions relating to alleged bogus purchases and unaccounted sales. The Tribunal had refused reference on the view that no question of law arose. The High Court held that a definite point of law was involved, but did not identify any such point. On reading the proposed question, the matter was found to turn on the facts of the case and not to raise any question of law warranting a reference.

Conclusion: The direction to make a reference was unsustainable and the High Court's order was liable to be set aside.

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