In this reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the Revenue, the following question of law has been referred to this court for its opinion

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the sum of Rs. 21, 000 being the deposit made by an intending buyer, forfeited and appropriated by the assessee, did not constitute income of the assessee and as such was not liable to be taxed ?"

The assessee is a private limited company, engaged in trading, investment and money-lending businesses. It negotiated for the sale of its asset, viz., a house property, and as the sale transaction fell through, an amount of Rs. 21, 000, deposited by an intending purchaser with the assessee, was forfeited by it. In the course of the assessment proceedings for the assessment year 1974-75, the assessee claimed that the amount forfeited cannot be treated as income liable to tax ; but the Income-tax Officer held that the amount was taxable under section 10(3) of the Act and subjected it to tax. On appeal by the assessee, reiterating that the receipt of Rs. 21,