CHAPTER XX — APPEALS AND REVISION | C.—Reference to High Court
CHAPTER XX — APPEALS AND REVISION | C.—Reference to High Court
Section 256 — Statement of Case to the High Court
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Largely spent. The reference jurisdiction operates only for applications under section 256(1) made against orders under section 254 passed before 1-10-1998; for later orders the remedy is a direct appeal under section 260A.
Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch section 256.
Nature / mechanism: The old 'case-stated' reference: the Tribunal draws up a statement of the case and refers a question of law to the High Court; on refusal, the applicant may apply to the High Court to direct a reference.
Litigation profile: Vast legacy jurisprudence (now of mainly historical and transitional relevance) on what is a 'question of law' that 'arises out of' the Tribunal's order.
A. COMMENTARY
The reference scheme and its sunset
Under section 256 the assessee or the Commissioner could, within 60 days of the Tribunal's order, require the Tribunal to refer a question of law arising out of that order to the High Court; if the Tribunal refused, section 256(2) allowed an application to the High Court to compel a reference. The Finance (No. 2) Act, 1998 replaced this advisory mechanism with a direct appeal to the High Court (section 260A) for Tribunal orders passed on or after 1-10-1998. Section 256 therefore survives only for the dwindling tail of pre-1998 matters.
'A question of law arising out of the order'
The defining limitation, settled in Scindia Steam Navigation, is that only a question of law that was raised before or decided by the Tribunal — and thus 'arises out of' its order — can be referred; a question not so arising cannot be introduced at the reference stage. This principle migrated, in substance, into the 'substantial question of law' threshold of section 260A.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no change to this section. Inline numerals in square brackets are the bare Act's amendment-footnote markers.
Statement of case to the High Court.
256. (1) The assessee or the Principal Commissioner or Commissioner may, within sixty days of the date upon which he is served with notice of an order passed before the 1st day of October, 1998, under section 254, by application in the prescribed form, accompanied where the application is made by the assessee by a fee of two hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court :
Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days.
(2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Principal Commissioner or Commissioner, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.
(2A) The High Court may admit an application after the expiry of the period of six months referred to in sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.
(3) Where in the exercise of its powers under sub-section (2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of such refusal, withdraw his application, and, if he does so, the fee paid shall be refunded.
C. AUTHORITIES
The leading authority defines the reference threshold; it remains instructive for section 260A.
Cluster 1 — 'Question of law arising out of the order'
Holding Only a question of law that was raised before or dealt with by the Tribunal, or arises on its order, can be referred to the High Court; a new question not arising out of the order cannot be agitated on reference.
Relevance The cornerstone of the reference jurisdiction and the conceptual parent of the section 260A threshold.
CHAPTER XX — APPEALS AND REVISION | C.—Reference to High Court
Section 256 — Statement of Case to the High Court
Case Laws & Commentary — Income-tax Act, 1961 (as amended by the Finance Act, 2026) — bharattax.co Treatise
Status: Largely spent. The reference jurisdiction operates only for applications under section 256(1) made against orders under section 254 passed before 1-10-1998; for later orders the remedy is a direct appeal under section 260A.
Finance Act, 2026: No amendment. The Finance Act, 2026 does not touch section 256.
Nature / mechanism: The old 'case-stated' reference: the Tribunal draws up a statement of the case and refers a question of law to the High Court; on refusal, the applicant may apply to the High Court to direct a reference.
Litigation profile: Vast legacy jurisprudence (now of mainly historical and transitional relevance) on what is a 'question of law' that 'arises out of' the Tribunal's order.
A. COMMENTARY
The reference scheme and its sunset
Under section 256 the assessee or the Commissioner could, within 60 days of the Tribunal's order, require the Tribunal to refer a question of law arising out of that order to the High Court; if the Tribunal refused, section 256(2) allowed an application to the High Court to compel a reference. The Finance (No. 2) Act, 1998 replaced this advisory mechanism with a direct appeal to the High Court (section 260A) for Tribunal orders passed on or after 1-10-1998. Section 256 therefore survives only for the dwindling tail of pre-1998 matters.
'A question of law arising out of the order'
The defining limitation, settled in Scindia Steam Navigation, is that only a question of law that was raised before or decided by the Tribunal — and thus 'arises out of' its order — can be referred; a question not so arising cannot be introduced at the reference stage. This principle migrated, in substance, into the 'substantial question of law' threshold of section 260A.
B. STATUTORY TEXT (verbatim)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no change to this section. Inline numerals in square brackets are the bare Act's amendment-footnote markers.
Statement of case to the High Court.
256. (1) The assessee or the Principal Commissioner or Commissioner may, within sixty days of the date upon which he is served with notice of an order passed before the 1st day of October, 1998, under section 254, by application in the prescribed form, accompanied where the application is made by the assessee by a fee of two hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court :
Provided that the Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period hereinbefore specified, allow it to be presented within a further period not exceeding thirty days.
(2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no question of law arises, the assessee or the Principal Commissioner or Commissioner, as the case may be, may, within six months from the date on which he is served with notice of such refusal, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.
(2A) The High Court may admit an application after the expiry of the period of six months referred to in sub-section (2), if it is satisfied that there was sufficient cause for not filing the same within that period.
(3) Where in the exercise of its powers under sub-section (2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of such refusal, withdraw his application, and, if he does so, the fee paid shall be refunded.
C. AUTHORITIES
The leading authority defines the reference threshold; it remains instructive for section 260A.
Cluster 1 — 'Question of law arising out of the order'
CIT v. Scindia Steam Navigation Co. Ltd., (1961) 42 ITR 589 (SC)
Holding Only a question of law that was raised before or dealt with by the Tribunal, or arises on its order, can be referred to the High Court; a new question not arising out of the order cannot be agitated on reference.
Relevance The cornerstone of the reference jurisdiction and the conceptual parent of the section 260A threshold.
CIT v. Mahalakshmi Textile Mills Ltd., (1967) 66 ITR 710 (SC)
Holding A question of law arising on the subject-matter dealt with by the Tribunal can be referred even if not framed exactly as raised.
Relevance Illustrates a liberal reading of 'arising out of' within the subject-matter.