Reasonable cause for audit delay and hearing on additional material were factual findings, so no referable question of law arose.

A Tribunal's finding that delay in obtaining the audit report was supported by reasonable cause was a factual determination, so deletion of penalty under section 271B did not by itself give rise to a referable question of law under section 256(1). Consideration of additional material also did not create a legal issue where the Revenue was heard and the matter was decided on both sides' submissions. No referable question of law arose on either ground, and the request for reference failed.

---

---

Issues: (i) Whether the deletion of penalty under section 271B on the basis of reasonable cause gave rise to a referable question of law under section 256(1) of the Income-tax Act, 1961. (ii) Whether consideration of the additional material by the Tribunal without affording a separate opportunity to the Revenue disclosed a question of law warranting reference.

Issue (i): Whether the deletion of penalty under section 271B on the basis of reasonable cause gave rise to a referable question of law under section 256(1) of the Income-tax Act, 1961.

Analysis: The Tribunal's satisfaction on whether the assessee had shown reasonable cause for delay in obtaining the audit report was a matter within its factual domain. Once the Tribunal accepted the explanation and cancelled the penalty, the determination rested on appreciation of facts and did not raise a legal question fit for reference.

Conclusion: The issue was one of fact and no question of law arose.

Issue (ii): Whether consideration of the additional material by the Tribunal without affording a separate opportunity to the Revenue disclosed a question of law warranting reference.

Analysis: The record showed that the Revenue was represented when the material explaining the delay was considered and the matter was decided after hearing both sides. In these circumstances, no case of admission of evidence behind the back of the Revenue was made out, and the complaint again depended on factual inquiry rather than a legal issue.

Conclusion: No referable question of law arose on this ground either.

Final Conclusion: The Tribunal rightly refused to make a reference, and the Revenue's application failed.

Ratio Decidendi: A Tribunal's finding that delay was supported by reasonable cause, and that the parties were heard on the material considered, is primarily factual and does not by itself generate a referable question of law under section 256(1).

---