Holding

In a reference under Section 60, the High Court may decide only questions of law and cannot disturb factual findings unless they are perverse, unsupported by evidence, or contrary to the record.

Summary

The Commissioner of Agricultural Income Tax appealed against a Kerala High Court order that set aside the findings of the Assessing Officer and the Agricultural Income Tax Appellate Tribunal, which had estimated income from 60.79 acres of coffee. The High Court had decided, on a reference under Section 60 of the Kerala Agricultural Income Tax Act, 1952, that the Tribunal’s finding was not supported by material, thereby favoring the assessee. The Supreme Court held that a reference under Section 60 can only address questions of law; factual findings of the lower authorities cannot be interfered with unless they are perverse or lack any basis. Since the High Court had not identified any legal question and had not explained why the factual findings were unsustainable, its decision was beyond its jurisdiction. Consequently, the Supreme Court set aside the High Court order and remitted the matter for fresh consideration, disposing of the appeal.

Issues considered

Whether the question referred to the High Court under Section 60 of the Kerala Agricultural Income Tax Act, 1952, is a question of law or a question of fact.
Whether the High Court can interfere with the factual findings of the Assessing Officer and the Appellate Tribunal in such a reference.

Subjects

agricultural income taxreference under Section 60question of law vs facthigh court jurisdictionfactual findingsKerala Agricultural Income Tax Act

Judgment

-4

- COMMISSIONER OF AGRICULTURAL INCOME TAX
v.
M.N.MONI
A

MAY 18,2007

[DR. ARIJIT PASAYAT, P.K. BALASUBRAMANYAN AND D.K. JAIN, JJ.] B

.~.
'j Kera/a Agricultural Income Tax Act, 1952:

s.60-Reference to High Court-Jn a reference only a question of laws
can be answered-Where determination ofan issue depends upon appreciation c
of evidence or material resulting in ascertainment of basic facts without
application of laws, the issue raises a mere question of fact-It is open to
High Court not to answer the reference if no question of law is involved-
On facts, Assessing Authority and Appellate Authority had recorded findings
of facts and High Court has not indicated any reason for upsetting those D
findings-Matter remitted to High Court for consideration afresh.
+
,~

The returns filed by the assessee under the Kerala Agricultural Income
Tax Act, 1952, in the opinion of the Assessing Officer, did not reflect correct
and complete and he included the income of Coffee from 60.79 acres in the
taxable income. The Deputy Commissioner (Appeals) confirmed the findings E
of the Assessing Officer. In the record appeals preferred by the assessee, the
Kerala Income Tax Appellate Tribunal confirmed the estimate of income from
the said 60.79 acres of land. On an application for reference in terms of
Section 60 of the Act, the Tribunal referred to the High Court the question
as to whether the findings of the Tribunal that income from 60. 79 acres of
land was not included in the accounts of the assessee was supported by any F
material or evidence. The High Court held that the order of the Tribunal was
not correct and decided the question in favour of the assessee. Aggrieved, the
Revenue filed the instant appeal.

Disposing of the appeal and remitting the matter to the High Court, the
G
Court

HELD: 1.1. In a reference there is no scope for interference with the
' -t' factual findings, unless the findings are per se without reason or basis,

257 H
258 SUPREME COURT REPORTS (2007) 7 S.C.R.

A perverse and/or contrary to materials on record. Merely because different
view on facts may be available to be drawn, that cannot be a ground to interfere
with the findings of fact recorded by the authorities. In the instant case,
findings of facts were recorded by the Assessing Authority and the appellate
authority. The High Court has not even indicated as to why it considered the
B conclusions of the Assessing Authority and the Appellate Authority to be
unsustainable. (Para 12 and 15) (261-A-B; E-F]

1.2. In cases of reference, only a question of law can be answered. Where
the determination of an issue depends upon the appreciation of evidence or
materials resulting in ascertainment of basic facts without application of law,
C the issue raises a mere question of fact. An interference from certain facts
is also a question of fact A conclusion based on appreciation of facts does not
give rise to any question oflaw. If a finding of fact is arrived at by the Tribunal
after improperly rejecting evidence, a question of law arises. Where the
Tribunal acts on materials partly relevant and partly irrelevant, a question of
law arises because it is impossible to say to what extent the mind of the
D Tribunal was affected by the irrelevant material used by it in arriving at the
finding. A question of fact becomes a question of law if the finding is either
without any evidence or material. It is to be noted that even after the reference
is made by the Tribunal directly or on the basis of a direction given by the
High Court, it is open to the High Court not to answer the reference if no
E question of law is involved. [Para 13, 14 and 15) (261-C-F)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2716 of2007.

From the Final Judgment and Order dated I 5. I 0.2004 of the High Court
Kerala at Ernaukulam in ITR No. 143 and 144of1999.

F G. Prakash, Beena Prakash and Ramesh Babu M.R. for the Appellant

C.N. Sree Kumar for the Respondent.

The Judgment of the Court was delivered by

G DR. ARIJIT PASA YAT, J. 1. Leave granted.

2. Challenge in this appeal is. to the order passed by a Division Bench
of the Kerala High Court answering the reference made to it under the Kerala
Agricultural Income Tax Act, 1952 {in short the 'Act') in favour of the ',-

H
COMMNR.OF AGRICULTURALINCOMETAXv. M.N. MONI [PASAYAT,J.] 259

- respondent (hereinafter referred to as the "assessee").

3. Background facts in a nutshell are as follows:
A

4. For the assessment years 1982-83 and 1983-84, Mis. E.K. Vijayan and
others, Kozhikode was an assessee under the Act. Shri M.N. Moni was the
executor of the estates of the assessee. The assessee owned an estate, B
namely, "Woodland Estate". Assessee derived agricultural income from coffee,
pepper, arecanut, coconut, cardamom and coco. For the assessment years i.e.
--'.
'I
1982-83 and 1983-84 the assessee filed returns disclosing agricultural income
ofRs.1,22,520/- and Rs.2,88,996/- respectively. The Assessing Officer was of
the view that the returns· filed did not reflect the correct and complete picture
as the assessee had not disclosed the income from coffee during 1982-83 c
season and income disclosed of pepper was low and, in fact no income was
disclosed from orange, arecanuts, coconuts, cardamom, and coco and many
inadmissible expenses were claimed as deductions. Notices were issued on
2.3.1987 and 17.10.1987 proposing to make best judgment assessments.
Assessee filed its reply to the notices. After consideration of the objections D
filed, the Inspecting Assistant Commissioner of Agricultural Income Tax
'~ completed the assessments determining the income at Rs.7,97,380/- and
Rs.5,06,641/- respectively for the two assessment years. It was noted that the
E.B. 2 register in respect of 60.79 acres of new registered area was not
produced. The production details of the said area were also not disclosed.
Accordingly, the income of coffee from 60. 79 acres was estimated and included E
in the taxable income. Appeals were preferred by the assessee before the
Deputy Comm,issioner (Appeals), who confirmed the findings of the Assessing
Officer on the issue relating to 60.79 acres of new registered area and the
income therefrom. However, the Appellate Authority directed that the cultivation
expenses were to be allowed @ Rs.2,000/- per acre. Assessee preferred the F
Second Appeals before the Kerala Agricultural Income Tax Appellate Tribunal,
Additional Bench, Kozhikode (in short 'Tribunal'). The Tribunal found that
the accounts produced by the assessee were only in respect of the 218 acres
of land and the activities relating to 60.79 acres of land were not disclosed.
Accordingly, the Tribunal confirmed the estimate of income from the aforesaid
60.79 acres of land. G
5. An application for reference in terms of Section 60 of the Act was
filed. It was rejected by the Tribunal. Original petitions were filed before the
-r High Court which by order dated April 1, 1996, directed the Tribunal to refer
one of the questions formulated by the assessee and to refer the question
H
260 SUPREME COURT REPORTS [2007] 7 S.C.R.

A no. I along with the statement of facts:
6. Accordingly, the reference was made which was disposed of by the
impugned order.

7. The question that was referred reads as follows:
B
"Whether on the facts and circumstances of the case, is the finding
of the Tribunal that income from 60.79 acres of unregistered coffee
area is not included in the accounts of the assessee supported by any
material or evidence?"

C 8. By the impugned order, the High Court held that the orders of the
Tribunal were not correct and the question was to be decided in favour of
the assessee.

9. In support of the appeal, learned counsel for the appellant submitted
that the Original Authority and the Appellate Authority considered the factual
D position in detail and recorded findings of fact that in relation to 60.79 acres
of land incomes were not disclosed. The High Court without discussing the
factual position, in a summary manner, set aside the findings recorded by the 1-
auth<Jrities. The order of the High Court, it was therefore submitted, cannot
be maintained.

E 10. Per contra, learned counsel for the assessee submitted that the
High Court has taken note of relevant factors and, therefore, no interference
is called for.

I I. We find that after making a brief reference to the controversy, the
F High Court disposed of the reference with the following observations:

'!The contention of the assessee was that so far as they are concerned,
they have returned the entire agricultural income from the property.
Further, it w!ls submitted that with regard to coffee, they cannot sell
coffee to outsider, but it can be sold through Mis. Pierce Leslie. In
the above view of the ·fact, the contention of the assessee is that
G
conclusion by the authorities is not correct. The Tribunal, after
considering the case, came into the conclusion that the assessee had
not shown the return from 60.79 acres. According to us, this view is
not correct. In so far as the coffee can be sold only through MIS.
Pierce Leslie, there is no basis for the Department to state that the
·H entire income has not been returned."
COMMNR.OFAGRICULTURALINCOMETAXl·.M.N.MONl[PASAYAT,J.] 261
12. No reason which weighed with the High Court to upset the orders A
_. of the Assessing Authority and the Appellate Authorities is discernible.
Findings of facts were recorded by the said authorities. In a reference there
is no scope for interference with the factual findings, unless the findings are
per se without reason or basis, perverse and/or contrary to materials on
record. Merely because different view on facts may be available to be drawn, B
that cannot be a ground to interfere with the findings of fact recorded by the
authorities. ·

l3. In cases of reference, only a question of law can be answered.
Where the determination of an issue depends upon the appreciation of
evidence or materials resulting in ascertainment of basic facts without C
application of law, the issue raises a mere question of fact. An inference from
certain facts is also a question of fact. A conclusion based on appreciation
of facts does not give rise to any question of law. If a finding of fact is arrived
at by the Tribunal after improperly rejecting evidence, a question of law
arises. Where the Tribunal acts on materials partly relevant and partly irrelevant,
a question of law arises because it is impossible to say to what extent the D
mind of the Tribunal was affected by the irrelevant material used by it in
arriving at the finding.

14. A question of fact becomes a question of law ifthe finding is either
without any evidence or material.
E
15. In the instant case, the High Court has not even indicated as to why
it considered the conclusions of the Assessing Authority and the Appellate
Authority to be unsustainable. It is to be noted that even after the reference
is made by the Tribunal directly or on the basis of a direction given by the
High Court, it is open to the High Court not to answer the reference if no
question of law is involved. F
16. Therefore, without expressing any opinion on the merits, we set
aside the order of the High Court and remit the matter to it for fresh
consideration. The appeal is accordingly disposed of. No costs.

RP. Appeal disposed of.