1. In this reference, made under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee, the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the Tribunal"), has referred the following questions for the consideration of this court:

"1. Whether the Tribunal was justified in holding that the penalty provisions which govern the levy of a penalty in a case are those which exist on the date on which the return is filed and that the law as in force on the first day of the assessment year will not govern the levy of penalty?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in applying the law of penalty contained in section 271(1)(c) as it stood on April 10, 1969, after the date on which the returns for the assessment years 1966-67 and 1967-68 were filed?"

2. This reference relates to the assessment years 1966-67 and 1967-68.

3. The assessee carries on business in purchase and sale of jewellery, precious stones and antiques. In respect of the assessment year 1966-67, the assessee filed a return declaring an income of Rs. 3,295. The Income-tax Officer, b