Judgment :- K. A. THANIKKACHALAM J. In pursuance of the direction given by this court in T. C. P. No. 247 of 1978, dated February 23, 1981, the Tribunal referred the following two questions, for the opinion of this court, under section 256(2) of the Income-tax Act, 1961 "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in reducing the penalty levied under section 271(1)(c) to Rs. 2, 000, which is less than Rs. 45, 988 being the minimum imposable for the assessment year 1965-66 ? 2. Whether, on the facts obtaining in this case and having regard to the provisions of the Pondicherry (Taxation Concessions) Order, 1964, the Appellate Tribunal was within its powers to reduce the penalty below the minimum prescribed, especially when such powers vested with the Inspecting Assistant Commissioner ?" * The assessee, the late Sri Narayanaswami Pather, did not disclose income from investments in the name of Smt. Nagalakshmi Ammal, his wife and Sri Subramanian, his son. The original assessment for the assessment year 1965-66 was reopened and the following additions were made (i) Rs. 230 being the income from house property standing in the name of his wife ; (ii) Interest of Rs. 16, 868 in the account of Pather's son, Shri Subramanian ; (iii) Credits in the capital account in Smt. Nagalakshmi's name in the memoranda book to the extent of Rs. 29, 300 ; and (iv) Credits in the house account in the memoranda book to the extent of Rs. 37, 510 The Inspecting Assistant Commissioner, in pursuance of these additions, levied a penalty of Rs. 83, 908 on the ground that the assessee had concealed his transactions in the name of his wife and that the assessee has not established that the funds belonged to his wife. He, therefore, considered that the income was benami income of the assessee and by its non-inclusion the assessee was liable to be penalisedThe assessee's income-tax, wealth-tax and penalty appeals for this year came to be heard in the common order of the Tribunal in I. T. A. Nos. 485 and 1029/Mds/1974-75, I. T. A. No. 493/Mds/1974-75 and W. T. A. Nos. 138 and 139/Mds/1974-75, dated March 22, 1976. The Tribunal found that the addition of Rs. 230 as income from house property held in the assessee's wife's name was not justified. Similarly, the addition of Rs. 485 and 1029/Mds/1974-75, I. T. A. No. 493/Mds/1974-75 and W. T. A. Nos. 138 and 139/Mds/1974-75, dated March 22, 1976. The Tribunal found that the addition of Rs. 230 as income from house property held in the assessee's wife's name was not justified. Similarly, the addition of Rs. 20, 812 out of Rs. 37, 510 being credits in the account book in his wife's name came to be excluded. In other words, the addition only to the extent of Rs, 16, 698 out of Rs. 37, 510 was sustained on the merits. As regards penalty, the Tribunal noticed that Rs. 16, 868 relating to interest on deposit in the name of the minor son was includible only by virtue of section 64 being in the nature of deemed income and that concealment cannot be presumed in respect of this amount. It left only an amount of Rs. 29, 300 representing the capital account in the name of the wife in the account book and the further amount of Rs. 16, 698. The Tribunal proceeded to observe that Sri Pather was not without an explanation, inasmuch as he contended that the alleged credits were out of returns of earlier advances and he had no proof for such explanation. It was found that the assessee had admitted liability in respect of the assessment in a similar credit in his wife's name to the extent of Rs. 3, 000 in the return itself for the assessment year 1964-65. It was further found that Sri Pather himself voluntarily produced the account books. The Tribunal also noticed that it was the second year of extension of Indian tax laws to Pondicherry State. In view of all these facts, the Tribunal felt justified in invoking the provisions of the Pondicherry (Taxation Concessions) Order, 1964, which permits the imposition of penalty lower than the minimum penalty. It is under these circumstances that the Tribunal felt that though penalty is exigible, it could be limited to Rs. 2, 000Learned standing counsel appearing for the Department submitted that as per clause 16 of the Pondicherry (Taxation Concessions) Order, 1964, only the Income-tax Officer, the Inspecting Assistant Commissioner or the Appellate Assistant Commissioner were authorised to impose penalty under any provision of this Chapter and the Tribunal was not empowered to grant concession in the matter of reducing the quantum of penalty. It was, therefore, submitted that the Tribunal in the present case was not correct in reducing the quantum of penalty to Rs. 2, 000, while it was not having any power to do so It was further submitted that inasmuch as the Tribunal came to the conclusion on the merits that penalty is exigible under section 271(1)(c) of the Income-tax Act, 1961, the Tribunal ought not to have reduced the penalty to the extent of Rs. 2, 000. It was, therefore, pleaded that the order passed by the Tribunal is liable to be set aside We have heard learned standing counsel appearing for the Department and perused the records carefully. The fact remains that in reassessment for the assessment year 1965-66, the additions as stated hereinabove, were made to the extent of Rs. 230, plus Rs. 16, 868, plus Rs. 29, 300, plus Rs. 37, 510. In pursuance of these additions, the Inspecting Assistant Commissioner levied a penalty of Rs. 83, 908 on the ground that the assessee had concealed his transactions done in the name of his wife and also concealed his minor son's income. The assessee failed to establish that the funds belonged to his wife. Therefore, it was considered that the abovesaid amounts belong to the assessee In the quantum appeal, the Tribunal deleted the addition of Rs. 230. It was considered to be the income from the house property belonging to the assessee's wife. Similarly, the addition of Rs. 20, 812 out of Rs. 37, 510 was deleted, which were found credited in the books of account in the name of his wife. Therefore, the addition to the extent of only Rs. 16, 698 out of Rs. 37, 510 was sustained. The Tribunal also deleted Rs. 16, 868, since it is deemed income. A sum of Rs. 29, 300 found in the capital account in the name of his wife in the books of account was sustained. Thus, totally the Tribunal sustained Rs. 16, 698 plus Rs. 29, 300, on the merits in the quantum appeal. The Tribunal also noted that the assessee was unable to substantiate the plea that the alleged credits were out of returns of earlier advances. The assessee also admitted a sum of Rs. 3, 000 being the credit in the name of his wife in the return for the assessment year 1964-65. 29, 300, on the merits in the quantum appeal. The Tribunal also noted that the assessee was unable to substantiate the plea that the alleged credits were out of returns of earlier advances. The assessee also admitted a sum of Rs. 3, 000 being the credit in the name of his wife in the return for the assessment year 1964-65. The Tribunal also pointed out that the assessee co-operated with the Department and voluntarily filed the account books, etc., which were in his custody. Tax laws were also extended to Pondicherry territory with effect from April 1, 1963. According to clause 16 of the Pondicherry (Taxation Concessions) Order, 1964, notwithstanding anything contained in Chapter XXI of the Income-tax Act, 1961.