COMMISSIONER OF INCOME TAX Vs. MARFATIA AND COMPANY

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the I.T. Act, 1961, made by the Income-tax Appellate Tribunal, at the instance of the department, whereby the following question has been referred for our opinion :

(2.) THE reference has been made to us in the following circumstances: Originally, assessments of the assessee, M/s. Marfatia & Co., for the assessment years (for short A.Ys) 1965-66, 1968-69 and 1969-70 were completed by the ITO under Section 143(3) of the I.T. Act, 1961 (for short, "the Act"), on January 13, 1970, January 21, 1970, and January 21, 1970, respectively. THEre was some delay on the part of the assessee in filing the returns of income for the aforesaid years. Accordingly, penalty notices were issued to the assessee. However, no penalty was actually levied on the assessee in the course of the original assessment proceedings. Later on the ITO issued notices under Section 148 of the Act in respect of the aforesaid assessment years and directed the assessee to file returns of their income in respect of the aforesaid assessment years on or before October 20, 1970. THE assessee, however, filed returns of income for the aforesaid years on August 30, 1971, and, hence, there was a delay of 10 complete months in filing the returns of income in pursuance of the aforesaid notices under Section 148 of the Act. Accordingly, the ITO initiated penalty proceedings under Section 271(1)(a) of the Act, but while levying penalty for the assessment year 1965-66, he treated the period of delay as 31 months. Similarly, for the A.Y. 1968-69, the period of delay was taken as 21 months. For the A.Y. 1969-70, however; the period of delay was taken as 10, months only. It appears that while levying the penalty for the A.Ys. 1965-66 and 1968-69, the ITO also took into consideration the delay on the part of the assessee in submitting the returns of income as required under Section 139(1) of the Act during the course of the original assessment proceedings. Thus, he imposed the penalties of Rs. 15,131, Rs. 2,827 and Rs. 4,001 in respect of the A.Ys. 1965-66, 1968-69 and 1969-70, respectively.

(3.) FROM the aforesaid facts, which are not in dispute, it is clear that originally assessments for the A.Ys. 1965-66, 1968-69 and 1969-70 were completed by the ITO under Section 143 on the dates stated above and in spite of the fact that there was some delay in filing the returns of income in respect of the aforesaid assessment years and in spite of the fact that penalty notices were issued to the assessee, no penalty was actually imposed on the assessee in the course of the original assessment proceedings. Having thus not imposed any penalty on account of the delayed submission of returns and having passed the assessment orders, it was not open to the ITO to have taken into account the period of default for purposes of imposition of penalty envisaged by Section 271(1)(a) of the Act. Now, Section 271(1)(a) of the Act reads as under :