- (1.) IN this petition under Section 256 (2) of the I. T. Act, 1961 (hereinafter referred to as "the Act"), the Commissioner of Income-tax, Amritsar-I, has prayed that the Income-tax Appellate Tribunal, Amritsar Bench (hereinafter referred to as the Tribunal), be directed to refer the following two questions of law to this court for decision: " (1) Whether, on the facts and in the circumstances of the case, the Tribunal has misdirected itself in holding that the claim made by the asses-see on account of bonus reserve did not arise from any fraud or any gross or wilful neglect on his part ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in- law in deleting the penalty imposed under Section 271 (1) (c) of the Act ?"
(2.) THE assessee is a registered firm carrying on business of manufacturing and sale of water meters and components. In the assessment order for the year 1967-68, the ITO made the following additions towards the total income of the assessee : (1) Rs. 1,394 towards car expenses on account of personal use of car by the partners of the firm, (2) Rs. 500 out of travelling expenses on account of fooding expenses of partners while on tour. (3) Rs. 1,008 out of repair account on account of capital expenditure relating to the electric fans. (4) Rs. 25,111 "reserve for bonus. "
(3.) THE ITO also initiated penalty proceedings and he referred the case to the IAC under Section 274 (2) of the Act. The IAC, after hearing the assessee, imposed a penalty of Rs, 24,925 in terms of the Explanation to Section 271 (1) (c) of the Act, This order was assailed by the assessee before the Tribunal. The Tribunal accepted the appeal and recorded a finding that disallowance of certain expenditure, claimed in good faith, cannot be the basis for the levy of penalty under Section 271 (1) (c) of the Act. Aggrieved by this order, the revenue filed a petition before the Tribunal to refer the above-mentioned two questions of law for the opinion of this court. This petition has been dismissed by the Tribunal holding that the above-mentioned questions are not questions of law as the finding recorded by the Tribunal is based on the material placed on the record and the findings recorded are essentially findings of fact.;