M.Y. Eqbal, J.

1. The Commissioner of Income Tax, Bihar-II, Ranchi filed two applications under Section 256(1) of the Income Tax Act, 1961 for the assessment years 1984-85, 1985-86 and prayed to the Appellate Tribunal to refer the question arising out of the order of the Tribunal for answer by this Court. Hence, after setting out the relevant facts, the Tribunal solicited the opinion of this Court on the following question of Law:

Whether on the facts and in the circumstances of the case the Honble Members of the Tribunal were justified in deleting the penalty of Rs. 2,97,631/-?

2. The brief facts of the case are that the assessee was assessed under the status of individual. He is the proprietor of M/s. S.R. & Co. The assessee maintained mercantile system of accountancy and the accounting period is the financial year ending on 31st March of each year. For both the assessment years, the assessments were completed under Section 143(3) of the Income-tax Act on 19.3.1985 and 20.12.1985. A search and seizure was conducted under Section 132 of the Act and in course of the said search operation, certain books of account papers relating to business of the assessee were found and sei