Discretionary penalty under income tax law requires conscious concealment; no referable question of law arose for reference.

Penalty under section 271(1)(c) was treated as discretionary, and the Tribunal held that penalty could not follow automatically merely because unexplained investment was sustained in quantum proceedings. On that basis, it found no conscious concealment and deleted the penalty. The High Court held that no referable question of law arose for a statement of case under section 256(2), so the reference application was rejected.

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Issues: Whether a question of law arose for calling for a statement of case under section 256(2) of the Income-tax Act, 1961, in relation to deletion of penalty under section 271(1)(c) after confirmation of unexplained investment in quantum proceedings.

Analysis: The penalty under section 271(1)(c) was treated as a discretionary order. The Tribunal had set aside the penalty on the basis that there was no conscious concealment and that levy of penalty cannot follow as a matter of course. In the circumstances, no referable question of law was found to arise from the Tribunal's order.

Conclusion: No question of law arose for reference, and the application under section 256(2) was rejected.

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