SATISH CHANDRA J. - (1.) FOR the assessment year 1964 -65, the assessee returned an income of Rs. 3,282. The Income -tax officer rejected the books of account and estimated the assessees income by applying a flat rate, at Rs. 39,344. He also disallowed certain expenses and took into account a cash credit which was surrendered by the assessee.
(2.) ON appeal, the Appellate Assistant Commissioner reduced the assessable income to Rs. 35,917. Subsequently, penalty proceedings were drawn up and ultimately the Inspecting Assistant Commissioner imposed a penalty of Rs. 6,700. On appeal, the Tribunal quashed the penalty order. It was found that on facts the Explanation to section 271(1) was not attracted.
(3.) AT the instance of the Commissioner, the Tribunal has referred the following question of law of the opinion of this court : 'Whether, on the facts and in the circumstances of the case, the Income -tax Appellate Tribunal was right in law in canceling the order of penalty made by the Inspecting Assistant Commissioner against the assessee for the assessment year 1964 -65 ?' ;