1. - The Commissioner of Income-tax, jodhpur ("the CIT") has filed this application under section 256(2) of the Income-tax Act, 1961 (for short "the Act"), for a direction to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the Tribunal"), to state the case and refer the following question of law for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order under section 263 of the Act when the order of the ITO was erroneous and prejudicial to the interests of the Revenue on account of his failure to initiate penalty proceedings under section 271(1)(c) notwithstanding a clear confession of concealment of true particulars of income on the part of the assessee by the act of surrendering the cash credit appearing in the name of M/s. Bherunath Mohanlal & Co. as a havala entry ?"

2. The assessee-respondent is a registered firm comprising of five partners. During the course of assessment proceedings for the assessment year 1977-78, the Income-tax Officer (ITO) came across a cash credit of Rs. 10,000 in the name of M/s. Bherunath Mohanlal & Co., Pali, a concern belon