Law: Income Tax Act, 1961

Section: 256(1),256(2)

(a) Income-tax--Reference---Question of law--Trust--Finding of Income-tax Appellate Tribunal that investments made by trust with assessee were from Trusts own funds--Fact as to from whom donations were received by Trust not considered by Tribunal--Question arising out of Tribunals finding, held, was question of law. The cash credits appearing in the books of accounts of the assessee individual in the name of Trust were treated by the Income-tax Officer as moneys coming out of the undisclosed sources of the assessee and were accordingly assessed as assessees income from undisclosed sources on ground that no Trust really exited and even if it existed, it had no funds of its own and that the name of the Trust was used by the assessee as a camouflage to put through his unaccounted money. The Tribunal on appeal held that the investments made by the Trust in the assessees group of industries or with the assessee were from its own resources and funds and such investments were guided by business expediency and prudence, and directed the deletion of addition made by the I.T.O. There was, however, no evidence as to who were the persons from whom the money was collected for the Trust, how was the money received and how was the money invested? Particulars of the persons from whom donations were collected were not supplied nor examined nor were they produced to prove the genuineness of their donations, their capacity to make the donations. Held: Ignoring of the fact as to whose money was donated to the Trust and by whom was ignorance of a vital fact influencing the decision. Therefore, the questions, which arose on this aspect were questions of law. (b) Income-tax-- ---Reference--Question of law--Question whether assessee was real owner of certain shares ostensibly standing in name of others-¬Income-tax Appellate Tribunal giving its finding on question without consideration of financial capacity of shareholders, held, would give rise to a question of law. JUDGMENT SABYASACHI MUKHARJ1, J.--Whether, question of law referable to the High Court, arises out of the order of the Appellate Income-tax Tribunal in this case, is, the question that arises in these appeals by special…

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