The main legal point established in the judgment is that the Inspecting Assistant Commissioner had no authority to pass orders imposing penalty under section 271(1)(c) of the Act on and after April 1, 1976, due to the omission of sub-s. (2) of s. 274 by the Taxation Laws (Amend.) Act, 1975.

Rama Jois, J.—These two references have been made by the Income Tax Appellate Tribunal, Bangalore Bench, at the instance of the assessee and they have referred the following questions :

"1. Whether, on the facts and in the circumstances of the case and having regard to the amendments to the relevant provisions brought about by the Taxation Laws (Amendment) Act, 1975, the Tribunal was justified in concluding that the Inspecting Assistant Commissioner had jurisdiction to levy the impugned penalty ?

2. Whether the Tribunal was justified in coming to the conclusion that the order of penalty dated September 22, 1976, was not barred by limitation ?

3. Whether, on the facts and in the circumstances of the case, the upholding of the levy of penalty in a sum of Rs. 67,300 (Rs. 70,500 for 1970-71) by the Tribunal was justified although the Inspecting Assistant Commissioner had, while levying the penalty, taken into consideration the concealment as found both by the Income Tax Officer and by the Appellate Assistant Commissioner ?"

2. Briefly, the facts are as follows :

The assessee is the same in both these references ; the assessment years are 1969-70 and 1970-71. The Income Tax returns were filed by the assessee for the two years on September 10, 1969, and August 4, 1970 respectively. After the assessment were made, certain concealments were noticed and notices under s. 148 of the I.T. Act, 1961 (hereinafter called "the Act"), were issued to the assessee. Reassessments were made on March 12, 1973. The concealment noticed for both the years exceeded a sum of Rs. 25,000. Hence, the ITO referred the matter to the IAC in view of the provisions of sub-s. (2) of s. 274 as it stood on the said date.

3. Prior to April 1, 1976, and after April 1, 1971, the ITO was empowered to impose penalty under s. 271 in all cases in which the concealment was Rs. 25,000, he was required to refer the matter to the concerned IAC for passing necessary orders. The Taxation Laws (Amend.) Act, 1975, brought about certain changes in the relevant provisions of the Act. These amendments were given effect to from April 1, 1976. By s. 65 of the Amending Act, sub-s. (2) of s. 274 was omitted. Corresponding amendments were made to s. 271 also. According to the proviso to s. 271(1)(iii) of the Act, the ITO was required to take the previous approval of the IAC before imposing the penalty in all cases where the concealed income exceeded a sum of Rs. 85,000. The effect of the amendment was that the ITO was invested with unlimited jurisdiction to impose penalty but only subject to the condition that in cases where the concealment exceeded Rs. 25,000 he had to take the previous approval of the IAC. After the above amendment was made, the IAC passed orders imposing penalty on the assessee for both these years on September 22, 1976. The assessee preferred appeals against the orders before the Income Tax Appellate Tribunal. The Tribunal held that on and after April 1, 1976, the IAC had jurisdiction in respect of the proceedings which were referred and pending prior to April 1, 1976. The Tribunal also rejected the contention of the assessee that the penalty imposed was barred by limitation. Another contention urged before the Tribunal was that certain concealments which had not been noticed by the IAC were noticed by the AAC in the appeals against reassessment and, therefore, it was for the AAC to initiate the proceedings in respect of concealments and, therefore, the entire proceedings before the IAC was without jurisdiction. The Tribunal accepted this contention partly. It held that it was competent for IAC to levy penalty in respect of the concealments to the extent found by the ITO. Thereafter, the assessee made an application before the Tribunal to made a reference to this court under s. 256(1) of the Act. On the said application the Tribunal referred the three question set out earlier.

4. Sri K. R. Prasad, learned counsel for the assessee, contended that on and after April