1. This reference under section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue is to answer the following question of law :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty order passed under section 271 (1)(c) of the Income-tax Act, 1961, holding that the Inspecting Assistant Commissioner of Income-tax had no jurisdiction to levy the said penalty on May 25, 1978 ?"

2. The relevant assessment year is 1973-74. The assessment was completed by the Income-tax Officer on a total income of Rs. 80,070 on March 30, 1976, by making an addition of Rs. 10,000 in the trading profit and of Rs. 15,500 as income from undisclosed sources. The Income-tax Officer also initiated penalty proceedings under section 27 l(1)(c) of the Act. Thereafter, the Income-tax Officer referred the penalty proceedings to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner imposed penalty of Rs. 16,000 by his order dated May 25, 1978. The Tribunal set aside the penalty holding that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty by an order passed after the deletion of sub-sect