AJIT K. SENGUPTA, J.

( 1 ) AT the instance of the Commissioner of Income-tax, West Bengal-II, the following question of law has been referred to this court under Section 256 (2) of the Income-tax Act, 1961, for the assessment year 1964-65 :"whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no penalty under the provisions of Section 271 (1) (c) read with the Explanation thereto could be levied in the case of the assessee ?"

( 2 ) THE facts, shortly stated hereinafter are, that the assessee carried on business of printing, publishing and selling newspapers and periodicals known as Daily Basumati, Weekly Basumati and also some other periodicals. For the purpose of its business, the assessee-company purchased paper, ink and other miscellaneous materials. For the assessment year 1964-65, the assessee-company filed a return on October 20, 1964, disclosing a loss of Rs. 1,79,064. The Income-tax Officer rejected the book result of the assessee and completed the assessment on a total income of Rs. 89,085. The Income-tax Officer felt that the assessee must have inflated its purchases of paper and miscellaneous materials and disallo

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