Law:

Section:

Section 256(2) of the income-tax act, 1961-Reference-General principles-Whether high court has power to decline to answer a question referred by tribunal in pursuance of erroneous directions issued by high court, if subsequently high court finds that question referred does not arise from tribunal's order-held, yes Section 256(2) of the income-tax act, 1961 Reference-Tribunal's finding of fact-Assessee doing business of ginning cotton, disclosed yield of cotton for relevant assessment year at 33.4 per cent-tribunal having found that in next assessment years assessee showed yield at 34.77 per cent and 35 per cent, respectively, determined yield at 34.75 per cent and sustained addition to assessee's income accordingly-Whether tribunal's finding was capricious and based on guess work and hence was not justified- Held, on facts, no Facts During the course of the assessment proceedings for the year 1966-67, the ITO found that the assessee, who carried on business in cotton, had showed the yield at 33.4 per cent. Holding that the yield of cotton could not be less than 35 per cent, the ITO made an addition to the taxable income of the assessee. On appeal, the AAC reduced the addition. On second appeal, the Tribunal, having found that in the assessment years 1968-69 and 1969-70 the yield of cotton in the case of the assessee was 34.77 per cent and 35 per cent, respectively, held that the percentage of yield was to be taken at 34.75 per cent for the assessment year 1966-67. On an application under section 256(2), the High Court directed the Tribunal to state, firstly, the following question of law : "Whether, on the facts and in the circumstances of the case, when the account books have not been rejected and no defects therein have been pointed out, the ITO was in law justified in making any addition in the ginned cotton account on the ground of alleged low yield of cotton." The second question referred was whether the Tribunal was justified in determining the yield of cotton at 34.7 per cent. On reference, the revenue contended that the first question referred by the Tribunal under section 256(2) did not arise out of the order of the Tribunal, since the same was not…

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