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Section 256, read with sections 68 and 271(1)(c), of the Income-tax Act, 1961 - Reference to High Court - Question of fact - Assessment year 1979-80 - Whether question of reliability of statements of creditors pertains to appreciation of evidence and is a question of fact - Held, yes FACTS For the assessment year 1979-80, penalty proceedings were initiated in respect of certain additions on account of cash credits and disallowance of interest thereon, and penalty was imposed. The order of levy of penalty was cancelled by the Commissioner (Appeals). The Tribunal endorsed the order of the Commissioner (Appeals). On an application for reference under section 256(2): HELD It was clear from a reading of the appellate order of the Tribunal that the assessee had offered evidence both of the capacity of the creditors to advance money as well as evidence of actual advance by producing the creditors themselves before the ITO who had examined them and such examination naturally must be relating to the actual advance of the cash credit. Whether statements of creditors were reliable or not pertains to appreciation of evidence and as such would constitute a pure question of fact as to concealment. Therefore, no question of law arose from the Tribunal's order. CASES REFERRED TO CIT v. Ashoka Marketing Ltd. [1976] 103 ITR 543 (SC) and CIT v. Kotrika Venkataswamy & Sons [1971] 79 ITR 499 (SC). P.K. Saxena for the Applicant. Bagadiya for the Respondent. ORDER Deo, J. - This is an application for calling a reference from the Tribunal under section 256(2) of the Income-tax Act, 1961 ('the Act'). 2. Briefly stated, the facts are that non-applicant assessee in the assessment year 1979-80 was allowed addition of Rs. 30,000 in respect of cash credits of Rs. 10,000 in the name of each of the three persons named by him and disallowance of Rs. 2,571 relating to interest paid on those cash credits. These findings were confirmed upto the stage of Tribunal. The ITO initiated penalty proceedings under section 271(1)(c) of the Act treating the said addition and disallowance as concealment of income and, consequently, levied penalty of Rs. 17,500 on the assessee. This order of levy of…

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