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

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under section 271(1)(c) holding that the Inspecting Assistant Commissioner had no jurisdiction to levy the said penalty on March 23, 1978 ?"

2. The relevant assessment year is 1973-74. The Income-tax Officer completed the assessment on February 27, 1976, by including an amount of Rs. 53,457 to the returned income and he also initiated penalty proceedings under section 271 (1)(c) of the Act. Thereafter, the matter was referred by the Income-tax Officer to the Inspecting Assistant Commissioner since the amount of concealed income exceeded Rs. 25,000. The Inspecting Assistant Commissioner issued a show-cause notice to the assessee on March 1, 1978, and after obtaining the assessee's reply, imposed penalty under section 271(1)(c) of the Act by an order dated March 23, 1978.

3. The assessee contended that the amendment deleting sub-section (2) of section 274 in the Income-tax Act by the Taxation Laws (Amendment)