Reference of questions of law upheld in penalty cancellation dispute under the Income-tax Act

In proceedings under section 256(2) of the Income-tax Act, 1961, the Kerala HC considered whether the Tribunal's order cancelling penalty under section 271(1)(c) gave rise to referable questions of law. The Court held that the Revenue's proposed questions required reference to the High Court. The Tribunal was directed to state the case and refer the specified questions, so the legal issue on the penalty cancellation could be examined judicially.

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Issues: Whether, in proceedings under section 256(2) of the Income-tax Act, 1961, the Tribunal's order cancelling the penalty levied under section 271(1)(c) gave rise to questions of law requiring reference to the High Court.

Outcome: The Revenue's request for reference was allowed and the Tribunal was directed to state the case and refer the specified questions to the High Court.

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