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

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Inspecting Assistant Commissioner had no jurisdiction to levy the impugned penalty on the assessee under section 271 (1)(c) of the Income-tax Act, 1961 ?"

2. The relevant assessment year is 1972-73. The assessee filed a return declaring an income of Rs. 29,390. The Income-tax Officer held that a sum of Rs. 40,550 was the assessee's income from undisclosed sources. Accordingly, t is amount was added to the total income of, the assessee and the assessment completed on a total income of Rs. 80,020. The Income-tax Officer also initiated penalty proceedings under section 271 (1)(c) of the Act on January 24, 1975, and referred the matter to the Inspecting Assistant Commissioner on February 5, 1976, since the question of penalty was not within the Income-tax Officer's jurisdiction according to the law as it existed then. This reference made by the Income-tax Officer for imposition of penalty was pending with the Inspecting