- (1.) This appeal, by special leave, by the Commissioner of Income-tax, Madras, is against the Judgment and Order dated October 3, 1966 of the High Court of Mysore, rejecting the appellant's application filed under Section 66 (2) of the Income-tax Act, 1922 (hereinafter to be referred as the Act) for directing the Income-tax Appellate Tribunal, Madras Bench to refer the question of law to the High Court.
(2.) The question of law, which the appellant wanted to be referred was: "Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in canceling the penalty of Rupees 35,000/- levied under Section 28 (1) (c) of the Indian Income-tax Act, 1922."
(3.) The respondent was a firm carrying on business of manufacturing silk, carbon papers, type-writer ribbons, liquor, spirituous drugs and chemicals etc. In respect of the assessment year 1955-56, the respondent has sent a return showing Rupees 51,214/- as taxable income. On looking into the accounts and other records, the Income-tax Officer made several additions to the amount shown in the return and ultimately fixed the total assessable income in the sum of Rupees 3,30,474/-. On appeal, the amount was reduced and the taxable income was fixed in the sum of Rupees 2,09,575/-. In the further appeal by the assessee to the Appellate Tribunal, there was no alteration in this figure. Only two items which were added to the income and which have been accepted by all the authorities require to be noticed. They are: Pharmaceuticals, section Rs. 77,518.00 Chemicals section Rs. 9,900.00 ;