Hegde, J. - (1.) This is an appeal by special leave against the judgment of the High Court of Kerala in a Reference under S. 66 (2) of the Indian Income Tax Act, 1922 (to be hereinafter referred to as the Act.)
(2.) The material facts of the case as could be gathered from the statement of the case may now be stated:One Sankunni belonging to the Ezhava community of South Malabar had five sons by name Kannan Kunhi, Chathunni, Velayudhan, Pappu and Ramakrishan. Kannan Kunhi is the eldest son. He was a permanent resident of Ceylon. He had a business in toddy in Ceylon in partnership with others. On August 17, 1950, a business in toddy was started in Kerala. The licence for this business was in the name of Kannan Kunhi. On the same day there was a credit entry in the books of account for the toddy business for a sum of Rs. 46,563/-. This business was managed by Chathunni. The assessee was a H.U.F. The assessee purchased an item of property on May 19, 1950 for a sum of Rupees 14,250/- and another item of property for Rs. 3,000/- on February 16, 1951. The Income-tax Officer brought these amounts namely Rs. 46,563/-, Rupees 14,250/- and Rs. 3,000/- to tax as income from undisclosed sources during the assessment year 1951-52, the relevant accounting year ending on March 31, 1951. The assessee's case was that the initial capital of Rs. 46,563/- for the toddy business was supplied partly by the remittances made by Kannan Kunhi from Ceylon and partly from the income of the agricultural property owned by H.UF. The case for the assessee was that it owned immovable property which was yielding a yearly income of about Rs. 6,000/-. The I.T.O. rejected the explanation offered by the assessee by saying that the explanation furnished is not at all satisfactory. The Appellate Assistant Commissioner affirmed the decision of the I.T.O. excepting as regards the price paid for the acquisition of the property on February 16, 1951. The further appeal taken to the Income-tax Appellate Tribunal was unsuccessful. Thereafter the assessee moved the Tribunal under S. 66 (1) of the Act to submit certain questions of law arising from the order of the Tribunal to the High Court for ascertaining its opinion. That application was rejected by the Tribunal. Subsequently the assessee moved the High Court under Section 66 (2) of the Act and the High Court was pleased to direct the Tribunal to state a case and submit the question "whether on the facts and in the circumstances of the case, the addition of Rupees 60,813/- or any portion thereof as the income of the assessee family from undisclosed sources during the previous year ended 31-3-951, relevant for the assessment year 1951-52 is valid and justified in law." The Tribunal accordingly stated the case and submitted the aforementioned question to the High Court. The High Court has answered that question in the negative and in favour of the assessee. Aggrieved by that decision, the Commissioner of Income-tax Kerala has brought this appeal.
(3.) Mr. B. Sen, learned Counsel for the Department formulated before us three questions of law for decision. They are: (1) The question of law ordered to be referred by the High Court did not arise from the order of the Tribunal; (2) The question as framed did not give jurisdiction to the High Court to go into the findings of fact and (3) The High Court has not correctly applied the principles of law in arriving at its conclusion.;