Referable question of law on concealment penalty held to arise where Tribunal's finding required legal scrutiny.

An application under section 256(2) of the Income-tax Act raised a referable question of law where the assessee challenged the Tribunal's finding of concealment and the sustainability of penalty under section 271(1)(c). The Court held that the dispute was not confined to a pure question of fact because the issue was whether the Tribunal's finding was supported by relevant evidence and was legally sustainable. It therefore concluded that a question of law arose on the penalty order and directed the Tribunal to state the case and refer the formulated question to the High Court.

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Issues: Whether, in an application under section 256(2) of the Income-tax Act, 1961, a question of law arose from the Tribunal's finding that the assessee concealed income and whether a reference should be directed on the sustainability of the penalty under section 271(1)(c).

Analysis: The application sought a direction to the Tribunal to state a case on questions arising from its order affirming penalty for concealment. The Court accepted that the controversy was not confined to a pure question of fact, because the challenge was whether the Tribunal's finding of concealment was supported by relevant evidence and was legally sustainable. On that basis, the matter was held to give rise to a referable question of law under section 256(2).

Outcome: The Tribunal was directed to state the case and refer the formulated question to the High Court.

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