Penalty under section 271(1)(c) needs independent concealment analysis; settlement admission alone can still raise a referable legal question.

A referable question of law arose on whether minimum penalty under section 271(1)(c) could be upheld solely because the assessee admitted the addition and agreed to penalty in a settlement letter during reassessment, or whether independent proof of concealment was still required. The High Court treated the proposed questions as overlapping, reframed them into one consolidated issue, and held that the penalty question arose from the Tribunal's order and merited reference under section 256(2). The Tribunal was directed to state the question for the High Court's opinion, with parties left to bear their own costs.

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Issues: Whether a question of law arose for reference on the validity of imposing minimum penalty under section 271(1)(c) merely on the basis of the assessee's admission in a settlement letter during reassessment proceedings, and whether the Tribunal ought to be directed to refer that question.

Analysis: The applications under section 256(2) arose from the Tribunal's refusal to refer one of the proposed questions concerning penalty for concealment. On the admitted facts, the controversy was not merely factual: it turned on whether penalty under section 271(1)(c) could be sustained solely because the assessee had agreed during reassessment proceedings to the addition of income and to the levy of minimum penalty, or whether independent proof of concealment was still required. The Court found that questions Nos. 2 and 3 proposed by the assessee overlapped and that the real issue could be more clearly framed as whether the Tribunal was justified in upholding minimum penalty merely on the basis of the settlement admission. Since that issue arose out of the Tribunal's order, it warranted reference.

Conclusion: A referable question of law existed, and the Tribunal was directed to refer the consolidated question to the High Court for opinion.

Final Conclusion: The applications were allowed in part by directing a consolidated reference on the penalty issue, while the parties were left to bear their own costs.

Ratio Decidendi: In proceedings under section 256(2), a question of law arises where penalty under section 271(1)(c) is sustained merely on the basis of an assessee's admission in settlement proceedings without independent consideration of the legal basis for concealment.

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