Penalty under section 273(2)(a) turned on factual findings of honest belief, so no question of law arose.

Penalty under section 273(2)(a) of the Income-tax Act was held to depend on the Tribunal's factual finding that the assessee's estimate was made on an honest belief, based on the law as understood at the relevant time. On those facts, the mere fact that the returned estimated income for advance-tax purposes was lower than the eventual income did not by itself attract the penalty provision. Because the issue turned on fact rather than a question of law, the refusal to call for a reference was justified and the penalty question was not reopened.

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Issues: Whether the Tribunal and the High Court were right in refusing to refer the question relating to levy of penalty under section 273(2)(a) of the Income-tax Act, 1961, on the ground that the matter arose purely from factual findings and did not give rise to a question of law.

Analysis: The Tribunal had found that the estimate submitted by the assessee was made on an honest belief, based on the position of law as understood at the relevant time. On those factual conclusions, the estimated income returned for advance tax purposes being less than the eventual income did not by itself attract the penalty provision. The finding was one of fact, and the refusal to call for a reference was therefore justified.

Conclusion: The refusal to refer the question was upheld and the penalty question was not reopened.

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