Judicial notice limits under the Evidence Act made the penalty question referable as a question of law.

Judicial notice under sections 56 and 57 of the Evidence Act is confined to facts and matters courts must notice by law; the peculiar features of the lottery-ticket business did not fall within that category. The Tribunal's cancellation of penalty under section 271(1)(c) on the basis that income had to be estimated and mens rea could not be inferred from differing estimates was therefore examined as a legal issue. The court held that the question whether the Tribunal was justified in cancelling the penalty was a referable question of law, and directed the Tribunal to state a case and refer the question.

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Issues: Whether the Tribunal was justified in cancelling the penalty under section 271(1)(c) of the Income-tax Act, 1961, and whether the question sought to be referred arose as a referable question of law.

Analysis: The Tribunal had cancelled the penalty by taking judicial notice of the peculiar features of the business of sale of lottery tickets and by holding that estimation of income was inevitable in that line of trade, so that mens rea could not be attributed merely because the estimate varied at different stages. The Court held that sections 56 and 57 of the Indian Evidence Act, 1872, limit judicial notice to facts and matters of which courts must take notice, and that the peculiar features of the lottery-ticket business did not fall within that statutory category.

Conclusion: The question of law was held to be referable, and the Tribunal was directed to state a case and refer the question to the High Court.

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