Law:

Section:

Section 254, read with section 256 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of - Tribunal treated certain loan amounts as assessee's income from undisclosed sources - In application for rectification under section 254 assessee for first time contended that even if impugned amounts were to be taken as income from undisclosed source, it was to be taxed in hands of an association of persons - Tribunal directed Assessing Officer to examine assessee's claim - Whether instant issue involved interpretation and scope of section 254 and, therefore, question whether Tribunal had jurisdiction to issue aforesaid direction, was a question of law requiring reference to High Court - Held, yes FACTS The Assessing Officer disbelieving the respondent-assessee's contention that certain amounts shown in books of account as loan taken were genuine, treated the same as the assessee's undisclosed income. On appeal, however, the Commissioner (Appeals) deleted addition but the Tribunal upheld the order of the Assessing Officer. The assessee filed application for rectification of order under section 254, contending that even if the amount was considered as an income from undisclosed source, it was taxable in the hands of an association of persons because there was a joint venture entered into by the assessee with two other persons and, therefore, the same would have to be deleted from income of the assessee. The Tribunal remanded the matter back to the file of the ITO for examining the assessee's claim. On the revenue's application under section 256(2) : HELD The question involved was not a pure question of fact. The question involved the interpretation and scope of section 254. Therefore, the Tribunal was directed to state the case and refer the question of law to the High Court - "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was a mistake apparent on the record which required rectification in terms of section 254 and whether it was correct in holding that the subsequent order in favour of the assessee did not amount to a review of the earlier order. CASE REVIEW CIT v. K.L. Bhatia[1990] 182 ITR 361…

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