Nazir Ahmad, J.

1. A statement of the case under Sec.256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has been submitted by the Income-tax Appellate Tribunal, A Bench, Patna, referring 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 correct in law in holding that the Inspecting Assistant Commissioner was not competent to levy penalty under Sec.271(1)(c) read with Sec.274(2) and Sec.275 of the Income-tax Act, 1961 ?"

2. The relevant short facts of this case may be culled out from the statement of the case which are as follows :

The assessee is a registered firm and the reference relates to the assessment year 1966-67 for which the accounting year was Dewali ending 1965. The Income-tax Officer completed the assessment on October 20,1970, and initiated penalty proceedings as the assessees returned income was found to be less than 80% of the assessed income and its claim of deduction of interest was found to be on bogus hundi loans. He referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable in this case exceeded Rs. 1,000. T