Commissioner of Income Tax vs New Kishan Chand Ganesh Dass and Co.

B.A. Khan, J.—All these applications filed u/s 256(2) of the income tax Act, 1961 ('the Act') arise out of IT Appeal Nos. 86,966 and 1104

of 1988, 304 of 1989 and 168 of 1990 and are proposed to be dealt with by a common order. It is all about the quantum of the rival loss of

timber suffered by the assessee. It transpires that the Assessing Officer allowed the rival loss to the extent of 12 per cent. This position was

maintained and upheld in subsequent appeals by the Commissioner (Appeals) and the Tribunal. The revenue felt aggrieved and filed an application

u/s 256(1) of the Act before the Tribunal requesting it to draw up the statement of the cases and to refer the following questions of law to this

Court for determination :

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing the rival loss to be allowed on estimate

basis ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in considering the rival loss over the lease period and

not in respect of the particular assessment year ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in directing to allow abnormal rival loss of 7670

scants during the year under consideration ?

The Tribunal declined to draw up the statement of the case and make a reference and, hence, these applications by the revenue u/s 256(2) seeking

a direction to the Tribunal to state the case to the High Court on the aforesaid questions of law.

The case of the revenue is that the Tribunal had passed a perverse order inasmuch as it had allowed the rival loss on estimate basis and for the

whole period of the lease in the face of the specific loss claimed by the assessee for only some accounting years. In support it is projected that the

assessee had claimed loss only for some years and not for the whole lease period and that the rival loss was not determinable at the end of the

lease.

A perusal and examination of the orders passed by the forums below shows that the pleas taken by the revenue in this regard were noticed and

considered but overruled on a reasoning. Therefore, the sole question that arises is : Whether the findings returned by the fact-finding forums below

could be said to be based on a perverse appreciation so as to warrant a direction to the Tribunal to refer the case to this Court for determination of

the questions of law raised ?

The principles governing the reference u/s 256(2) are well- settled. At the cost of repetition it requires to be reiterated that u/s 256(1) and (2),

the ITAT is obliged to draw the statement of the case and refer only the questions of law arising out of the order passed by it. Where the question

agitated is of fact and not of law, it would be within its powers to reject the request for reference. It is also no more res integra that where the

appreciation of facts is shown to have been made perversely by the Tribunal, it would give rise to a question of law warranting a reference to the

High Court. In such a case the appreciation should be such as no reasonable person could have made in the given facts and circumstances. It is

also settled that a reference would lie where any finding of fact returned by the Tribunal is unsupported by evidence or is based on irrelevant

material or evidence or ignores the relevant material.

Viewed thus, we find that all the fact-finding bodies below had determined the rival loss of the assessee at the rate of 12 per cent on the estimate

basis and for the whole lease period in the facts and circumstances of each case and on consideration of the stand taken by the revenue. Whether

this loss was determined correctly or not involves the appreciation of the rival positions based on facts. Even though it is sought to be projected by

the revenue that such appreciation had been made perversely, nothing was placed before us to show so. Nor was it indicated that the

determination of loss at 12 per cent by the forums below was unsupported by any evidence or lacked in any material basis. Therefore, we do not

see any perversity in the appreciation of facts by the Tribunal.

The scope of reference u/s 256(2) is limited in nature and a heavy onus is cast on the applicant to assail the correctness of the decision of the

Tribunal declining the reference on the ground that no question of law arises. The applicant, in other words, has to establish and satisfy the court

that the Tribunal had fallen in error in evaluating and determining the questions of law.

Mr. Gupta, the learned counsel for the assessee, has relied upon CIT v. Karam Chand Thapar & Bros. (P.) Ltd. AIR 1989 SC 1045 and

Commissioner of Income Tax, Orissa Vs. Orissa Corporation P. Ltd., to show that the quantum of loss was only a question of fact and was for the

fact-finding bodies to be determined. Going a step further even if it was to be examined, an added burden is cast on the applicant to show that

such determination was unsupported by evidence and lacked in basis. We see no such eventuality in the present case and feel that the Tribunal had

correctly declined the reference to this Court. These applications are, accordingly, rejected.