Factual dispute on taxable year and penalty yields no referable question of law under income tax reference procedure.

Factual appreciation of the year of taxable income and the propriety of penalty did not give rise to a referable question of law under the Income-tax Act, 1961. The court accepted that the disputed amount was not recovered from the assessee in the search, that the assessee could declare the income within the relevant period, and that the Tribunal was justified in treating the amount as income of the current year and setting aside the penalty. The ancillary issue concerning the Rs. 25,000 amount was also held to be factual. The reference application was dismissed.

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Issues: Whether any referable question of law arose from the Tribunal's order setting aside the penalty and treating the disputed amount as income of the current year, and whether the ancillary question regarding the Rs. 25,000 amount was also a question of law.

Analysis: The application under section 256(2) of the Income-tax Act, 1961 sought reference on the premise that the Tribunal erred in interfering with the penalty. The Court held that the amount had not been recovered from the assessee himself in the search, that the assessee was entitled to declare the income within the relevant period, and that the Tribunal was justified in accepting the amount for the current year and in setting aside the penalty. It further held that the question relating to penalty was one of fact, and the issue concerning the Rs. 25,000 amount was likewise factual.

Conclusion: No question of law arose for reference. The application was dismissed.

Final Conclusion: The Tribunal's view on the penalty and the year of income was left undisturbed, and the reference application failed.

Ratio Decidendi: Where the controversy turns on factual appreciation, including the year of taxable income and the propriety of penalty, no referable question of law arises under section 256(2) of the Income-tax Act, 1961.

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