Law: Income Tax Act, 1961

Section: 256,256(1),256(2)

SECTION 256 OF THE INCOME-TAX ACT, 1961 - REFERENCE - QUESTION OF FACT - WHETHER NO NEW QUESTION CAN BE RAISED BY ASSESSEE AT THE STAGE OF APPLICATION UNDER SECTION 256(2) AND CASE IS TO BE CONFINED TO SAME QUESTIONS THAT WERE AGITATED BEFORE TRIBUNAL AT THE STAGE OF APPLICATION UNDER SECTION 256(1) - HELD, YES - WHETHER QUESTION WHETHER ASSESSEE-FIRM WAS GENUINE OR NOT IS PURELY ONE OF FACT - HELD, YES Facts The assessee, a partnership-firm, was constituted under a partnership deed dated 30-3-1972 with five partners, namely, one 'C and four other persons, to set up a hotel at a certain place. The property which was situated at that place belonged to the aforesaid four other partners, but was thereafter to be treated as the partnership property. No permission was ever obtained for building the hotel nor were any steps taken in that regard except to write some letters and to consult some persons. The partnership was soon dissolved on 6-6-1972 and as a result of the dissolution, the aforesaid partnership property, which formerly belonged to the aforesaid four partners, became the property of C and no business had been carried on. The assessee-firm applied for grant of registration for the assessment year 1973-74, but the ITO rejected the assessee's application for registration on the ground that there was no genuine partnership and the appellate authorities confirmed the order of the ITO. The Tribunal upheld the ITO's order, holding that, in fact, the only effect of the partnership was to transfer the property from one set of persons to the other. The assessee's application under section 256(1), wherein as many as 18 questions had been raised, was also rejected by the Tribunal. The assessee filed an application under section 256(2) claiming a reference of four questions, which were not the ones mentioned in the application under section 256(1). The revenue raised a preliminary objection that since these questions were not the ones mentioned in the application under section 256(1), the application should be rejected. Held There seems to be little doubt that no new question can be raised by the assessee at the stage of an application under section 256(2) and the…

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