No referable question of law arose on penalty cancellation where no tax was payable on the returned income.

No referable question of law arose from the Tribunal's order cancelling penalty under section 271(1)(a), because penalty could not be imposed where no tax was payable on the returned income. The Tribunal had therefore rightly refused to state a case under section 256(1), and the High Court saw no reason to depart from binding precedent of the same court. The application under section 256(2) was dismissed as no legal issue warranting reference was made out.

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Issues: Whether any referable question of law arose from the Tribunal's order upholding cancellation of penalty under section 271(1)(a) so as to justify a reference under section 256(2) of the Income-tax Act, 1961.

Analysis: The Tribunal had declined to refer the question under section 256(1) on the ground that no referable question of law arose, since penalty under section 271(1)(a) could not be imposed where no tax was payable on the returned income. The Tribunal also treated the matter as covered by binding precedent of the same court. The court found no reason to differ from that view.

Conclusion: No referable question of law arose. The application under section 256(2) was rightly dismissed.

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