BALARAM S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference has been made by the Tribunal at the instance of the assessee and the following question has been referred to us for our decision :

(2.) THE assessee is an individual and the relevant assessment years are 1955 -56, 1957 -58 and 1960 -61. The assessee was carrying on business as an individual in the relevant years and was the recipient of income from some foreign concerns. He did not file returns under section 22(1) for the respective assessment years. His explanation for not returning the income from the foreign concerns for the respective relevant assessment years was ultimately rejected by the revenue authorities. The Income -tax Officer having come to know that the assessee had not disclosed the commission from the foreign firms, initiated proceedings for reopening the assessments under section 147 of the Income -tax Act, 1961. After the issue of the notice under section 148, the assessee compelled with the terms of that notice, filed the returns and disclosed the commission received by him from the foreign firms. The Income -tax Officer while making the reassessments under section 147 also issued notices under section 271(1)(a) read with section 274 of the Income -tax Act, 1961, for the default committed in not filing the returns under section 22(1) of the Indian Income -tax Act, 1922. The assessee's explanation in not filing the returns under section 22(1) was rejected and the Income -tax Officer levied penalties in different amounts for the three assessment years. The assessee filed appeals before the appellate Assistant Commissioner and it was contended that no penalty could be levied for the default under section 22(1) of the 1922 Act in proceedings under section 148 of the 1961 Act. The contention was that there was no default in proceedings taken under sections 147 and 148 and, in accordance with the language of section 271(1)(a) of the 1961 Act, the original default in not filing the return under section 22(1) could not be the subject -matter of penal proceedings. It was urged on behalf of the assessee that the language used in section 28(1)(a) of the 1922 Act and section 271(1)(a) of the 1961 Act, wherein the words 'as the case may be' occur at the end are different and that under the new Act it was only if a default was committed in respect of notice under section 148 that the penalty under section 271(1)(a) could be levied and not if the default had been committed in filing the return in the original proceedings. This argument on behalf of the assessee was accepted by the Appellate Assistant Commissioner and the orders of penalty were set aside. The revenue carried the matter in appeal before the Income -tax Appellate Tribunal and the Tribunal held that the original default under section 22(1) could be the subject -matter under section 148 of the 1961 Act. The Tribunal held that the addition of the words 'as the case may be' in section 271(12)(a) did not materially alter the position as it existed under the 1922 Act. Thus, the Tribunal held that in reassessment proceedings the original default committed by the assessee in not filing the return could be penalised. It is after this decision of the Tribunal that the question hereinabove set out has been referred to us at the instance of the assessee.

(3.) WE may point out that the Rajasthan High Court has taken the same view in Commissioner of Income -tax v. Indra and Co. The Rajasthan High Court has there held that an assessee is liable to penalty for not submitting his return as required in a notice under section 139(1) of the Income -tax Act, 1961, even though he subsequently files a return in pursuance of a notice under section 139(2) and an assessment is made on the basis of that return. The assessee in that particular case had not filed the return under section 139(1) of the Act before June 30, 1962, as required by law, applications for extension of time for filing the returns had been granted but the returns under section 139(1) were not filed even within the extended time. Ultimately, the Income -tax Officer issued notices under section 139(2) of the Act, calling upon the assesses to file returns within thirty days and the returns were filed. During the course of assessment proceedings, the Income -tax Officer issued notices against the assessees to show cause why penalty should not be imposed for failure to submit the returns under section 139(1) of the Act, and the explanation of the assessee was rejected and penalties were imposed on the assessee under section 271(1)(a) of the Act. Before the Rajasthan High Court reliance was placed on the words 'as the case may be' and, at page 704, the Rajasthan High Court observed :