Maharaj Sinha, J. - (1.) In this reference under Section 256(2) of the Income-tax Act, 1961, two questions have come up for answer by us at the instance of the assessee for the assessment year 1987-88. The assessee, however, had framed four questions in its reference application under Section 256(1) of the Act. The learned Tribunal, however, rejected the reference application on the ground that no question of law, in fact, arose and the findings of the learned Tribunal were based on findings of facts only.
(2.) On the application of the assessee under Section 256(2), this court by an order dated November 11, 1997, directed reference observing that the first and the second questions, in fact, covered the case of the assessee.
(3.) The said two questions are as follows : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that payments in sums exceeding Rs. 2,500 amounting to Rs. 4,83,000 made to Hanuman Sugar and Industries Ltd., made in respect of delivery of cotton yarn are hit by the provisions of Sub-section (3) of Section 40A of the Income-tax Act, and that, therefore, such payments should be added to the total income in terms of the aforesaid section ? 2. Whether, on the facts and in the circumstances of the case and on a proper interpretation of rule 6DD of the Income-tax Rules, 1962, read with Circular No. 220 dated 31 May, 1997 (see [1977] 108 ITR (St.) 8), issued by the Central Board of Direct Taxes, the Tribunal was justified in upholding the disallowance of Rs. 4,83,000, in terms of Sub-section (3) of Section 40A of the Income-tax Act, 1961 ?";