Law:

Section:

Section 256 of the Income-tax Act, 1961 [Corresponding to section 66 of the Indian Income-tax Act, 1922] - High Court - Reference to - Assessment years 1943-44 and 1944-45 - Whether when Tribunal acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent its mind was affected by irrelevant material used by it in arriving at its finding, and such a finding is vitiated because of use of inadmissible material and thereby an issue of law arises - Held, yes - In instant case, Tribunal relied upon suspicions and surmises not supported by any evidence on record or upon partly inadmissible material - Whether matter was to be remanded to High Court for directing Tribunal to state a case and refer to question as to whether finding of Tribunal was not vitiated by reason of its having relied upon said material - Held, yes FACTS The assessee-HUF, after the death of its karta who was carrying on business separately in the firm's name, got certain shares from the firm towards payment of its liability to the HUF as part of inheritance of deceased karta. The assessee having obtained the shares, sold some in the financial year 1943-44 and made a profit of Rs. 1,42,025 in the assessment year 1944-45. The ITO included the profit made by sale of shares in the assessment of the assessee holding that the HUF had converted the inheritance into stock-in-trade and had also been purchasing other shares. On appeal, it was contended that the family was not doing any business in stocks and shares but was only unloading the shares which had come to it on the death of the karta and was trying to convert them into cash, and whatever shares were purchased were purchased by way of investment. The AAC accepted this contention. On revenue's appeal, the Tribunal restored the order of the ITO. The Tribunal disallowed the assessee's application under section 66(1), on the ground that the question whether or not the Hindu undivided family carried on business in respect of the shares transferred to it by the firm and in the shares purchased by it, was a question of fact and that no question of law arose out of the findings of the Tribunal and that from the very…

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