1. This order shall also govern the disposal of M.C.Cs. Nos. 231 to 235 and 258, all of 1976.
2. These are applications under Section 256(2) of the Income-tax Act, 1961, hereinafter called the Act.
3. The material facts giving rise to these applications briefly are as follows: The assessee is an HUF deriving income from money-lending and other sources. In the course of assessment proceedings, certain payments made by the assessee by way of interest were allowed by the ITO. Subsequently, in the course of assessment proceedings for the assessment year 1960-61, the ITO enquired into the genuineness of the payment of interest made by the assessee to Smt. Kamlabai, Smt. Indramani, Smt. Padmabai and Smt. Savitribai, to whom gifts were alleged to have been made by the assessee but as the moneys remained in deposit with the assessee, interest was being paid to them. The ITO held that these gifts were sham transactions and disallowed the payment of interest made thereon. On the basis of this finding, assessments for the earlier years were reopened and a notice under Section 148 of the Act was issued to the assessee, which filed the returns under protest. The ITO held that the gifts were sham and that the payment of interest, alleged to have been made to the ladies, was disallowed. The orders passed by the ITO were affirmed by the AAC on appeal. On further appeal to the Tribunal, the Tribunal upheld the contention of the assessee with regard to the gift made in favour of Smt. Savitribai, but as regards other gifts, the Tribunal held that at the material time when the gifts were alleged to have been made, the property of the HUF was looked after by the guardians who were appointed under the orders of the then High Court of Jaora and who had no authority to make any gift to any person on behalf of the family.The Tribunal held that in the absence of any specific authority from the High Court of Jaora, the gifts in favour of those ladies could not be held to be valid. The Tribunal also held that the gifts were not genuine. Aggrieved by this order of the Tribunal, the assessee submitted an application under Section 256(1) of the Act. The Tribunal held that no question of law arose out of the order of the Tribunal and hence the application was rejected. The assessee has, therefore, filed these applications before this court.
4. Having heard learned counsel for the parties, we have come to the conclusion that questions of law do arise in this case. The questions as to whether the gifts made by the guardians appointed by the High Court of Jaora were void and whether the subsequent ratification by Bankatlal had any impact on the question of validity of the gifts are undoubtedly questions of law. Similarly, the question as to whether there was material before the Tribunal for coming to the conclusion that the gifts in question were not genuine is also a question of law.
5. In our opinion, therefore, this is a fit case where the Tribunal should be directed to state the case and refer the following questions of law to this court for its opinion :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the gifts made by the guardians were void
(2) Whether, on the facts and in the circumstances of the case, there was material before the Tribunal for coming to the conclusion that the gifts in question were not genuine '
6. These applications are, therefore, allowed and the Tribunal is directed to state the case and refer the aforesaid questions of law to this court for its opinion. Parties shall bear their own costs of these applications.