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Section 256, read with section 37( 1), of the Income-tax Act, 1961 - Reference - Question of fact - Whether a question of law arose from Tribunal's order holding that firm to which assessee claimed to have made payments was bogus and, therefore, such payments were not allowable - Held, no FACTS The assessee-firm claimed to have made certain payments to firm mostly in cash, some by way of bearer cheques and one payment by crossed cheque. The ITO felt a doubt as to the genuineness of the said concern and called upon the assessee to establish its identity and genuineness. It was found by the ITO that even one crossed cheque issued in the name of the said concern was really encashed by a partner of the assessee-firm. The ITO held that the entity was not genuine and, accordingly, disallowed the said payment. On appeal, the AAC agreed with the ITO. On further appeal, the Tribunal allowed the assessee to adduce additional evidence. The Tribunal dealt with each and every circumstance appearing for and against the assessee and concluded that the payee concern was neither genuine nor its identity was established. It held that the payee firm was a convenient facade and upheld the disallowance of the payments made to the said firm. On application for reference under section 256(2): HELD It was contended by the assessee that where a payment is made by crossed cheque, it is itself a proof positive of the genuineness and identity of the recipient. One could not accept or recognise any such rule of law. Whether a particular entity or concern was a genuine and existing entity concern or merely a bogus name, is a question of fact and cannot be reduced to a question of law. In the instant case also the three authorities had held against the assessee and there was no reason to disturb the said finding of fact. Accordingly, no referable question arose from the Tribunal's order. JUDGMENT Reddy, CJ. - In this application filed by the assessee under section 256(2) of the Income-tax Act, 1961 ('the Act') the following questions of law are sought to be raised: "1. Whether the finding of the Income-tax Appellate Tribunal that the applicant had singularly failed to establish the…

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