Satish Chandra, C.J.

1. FOR the assessment year 1970-71, the assessee filed its return on 27th June, 1970. The ITO added back a sum of Rs. 22,755. On appeal, the added back amount was reduced to Rs. 20,000. Since the returned income fell below 80% of the assessed income, the ITO drew penalty proceeding under Section 271(1)(c) of the I.T. Act read with the Explanation. He issued a notice because the concealed income was below Rs. 20,000. After hearing the assessee, he passed an order on the 28th February, 1975, imposing a penalty in the sum of Rs. 22,755 which was equal to the concealed amount of income.

2. ON appeal, the amount of penalty was reduced to Rs. 20,000. The assessee went up to the Tribunal. Before the Tribunal, it was argued that when penalty proceedings were drawn up, the ITO had no jurisdiction in the matter because the leviable penalty exceeded Rs. 1,000. Only the IAC had jurisdiction to initiate penalty proceedings. The Tribunal accepted the submission and quashed the order of penalty.

At the instance of the Commissioner, the Tribunal has referred for our opinion the following questions of law :

"1. Whether the Tribunal was in law justified in holding that t