Mohammed, J.

These Income-tax References arise from a common order passed by the Incometax Appellate Tribunal, Cochin Bench, dated 30th May, 1983, in R.A.No. 314 (Coch) 80 at the instance of the assessee and R.A.No. 324 (Coch) 80 at the instance of the Revenue. Both the applications are from the order in I.T.A. No. 150 (Coch) 78-79 relating to the assessment year 1973-74.

2. The questions referred to this court at the instance of the assessee are as follows:

(1) Whether on the facts and circumstances of the case the Tribunal is right in holding that penalty is exigible u/s.271(1)(c) of the Incometax Act for the assessment year 1973-74?

(2) Whether there was a valid reference by the I.T.O. u/s.274(2) to the Inspecting Asstt. Commissioner? The questions referred to at the instance of the Revenue are as follows:

(1) Whether, on the facts and in the circumstances of the case, and also on an interpretation of S.271(1)(c) of the I.T. Act, the Tribunal is right in law and fact in holding that "he had concealed the particulars in respect of only that income which he should have disclosed in the return, namely, the capital gains arising from the transaction computed in accordance with the provisions of S.80-T and Sec.487?

(2) Whether, on the facts and in the circumstances of the case, for the purpose of determining the quantum of concealment should not the Tribunal in law first set off the capital loss of Rs. 8,355/- relating to the assessment year 1972-73 against the capital gains for the assessment year 1973-74?

(3) Whether, on the facts and in the circumstances of the case, does the Inspecting Asstt. Commissioner have jurisdiction to impose penalty?

3. The assessee who was doing business in manufacture and sale of beedies, had sold 23 cents of land with building thereon to his two daughters on 24-7-1972. The consideration for the sale was Rs.1 lakh. The assessee filed the return for the assessment year 1973-74 disclosing an income of Rs. 28,320/-. The Incometax Officer in the course of assessment proceeding noticed a debt of Rs. 50,000- in the capital account of the assessee. This was explained by the assessee as per his letter dated 12-9-1975 that the value of the property had been shown at Rs. 1,50,000/- in the capital account for obtaining loans from banks and a debt of Rs. 50,000/- was made in the capital account in as much has the property had been sold to his daughters for Rs.1 lakh. However, the officer computed the capital gain arising from the above sale at Rs. 1,09,900/-. Ultimately the Incometax Officer determined the total income as Rs. 94,380/- as per the assessment order for the year 1973-74. Penalty proceeding was also initiated for concealment of income and it was referred to the Inspecting Assistant Commissioner since the minimum penalty imposable was more than Rs. 25,000/-.

4. Though the assessee filed an appeal against the assessment order for the year 1973-74, the Appellate Assistant Commissioner confirmed the assessment. The assessee then filed a further appeal before the Tribunal. When the matter was pending before the Tribunal, the Inspecting Assistant Commissioner initiated the proceeding for levy of penalty under S.271(1)(c). He finally came to the conclusion that the assessee had concealed the particulars of his income to the extent of Rs. 1,09,900/-. He, therefore, levied a penalty equal to the amount concealed as per order dated 18-3-1976 (Annexure a). In appeal the Tribunal held that penalty was exigible, in view of the fact that the assessee had not disclosed the gains which arose from the sale of property in the return. As far as the amount of income concealed, the Tribunal held that the assessee could be said to have concealed only that income which he should have disclosed in the return, namely capital gains arising from the transaction computed in accordance with the provisions of S.80-T and S.48. The Tribunal also observed that the assessee had concealed only an income of Rs. 68,185/- in the ret