Bona fide accounting treatment and factual findings barred a reference on concealment penalty under the Income-tax Act

Penalty cancellation for concealment was upheld on factual findings that the assessee's treatment of interest from partners and related adjustments was disclosed on an explained basis, followed earlier years, and was not contumacious. The Tribunal's conclusion that there was no mala fide concealment rested on appreciation of the record and inferences drawn from the facts. On that basis, no referable question of law arose under section 256(1), because a mere possibility of taking a different view of the facts did not convert the matter into a legal issue. The reference applications were dismissed.

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Issues: Whether a question of law arose from the Tribunal's order cancelling penalty for concealment under the Income-tax Act, 1961.

Analysis: The only controversy was whether the assessee's treatment of interest received from partners and other adjustments in the return disclosed concealment or a bona fide accounting method. The Tribunal held that the returns had been filed on an explained basis, that the treatment followed earlier years, and that the conduct was not contumacious. The finding that there was no mala fide or concealment was based on appreciation of facts and inferences drawn from the record. Such a conclusion did not give rise to a referable question of law for the purposes of section 256(1).

Conclusion: No question of law arose from the Tribunal's order; the reference applications were dismissed.

Final Conclusion: The Tribunal's cancellation of penalty was treated as resting on factual findings, and the attempt to obtain a reference on that basis failed.

Ratio Decidendi: Where cancellation of penalty is founded on a factual finding that the assessee's conduct was not contumacious and the claim was bona fide, no referable question of law arises merely because a different view of the facts is possible.

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