K.L.Roy, J. -
(1.) Two orders imposing penalties under Sections 271 and 273 of the Income-tax Act, 1961, on the petitioners in respect of the assessment year 1959-60 have been challenged in this application under Article 226 of the Constitution. Difficult questions as to the legality of the assessment made for that year and the penalties imposed under the 1961 Act in respect of the assessment year 1959-60, for which the return was alleged to have been filed before the 1961 Act came into operation, were canvassed during the course of the arguments but in the view I have taken it is not necessary for me to decide those questions. It is claimed in the petition that a partnership firm styled, Onkarmull Kanailall & Co., was incorporated some time in the year 1943 and registered under the Indian Partnership Act and at the material time the partners of the said firm were, (1) Kanailall Jatia, (2) Ghanshyamdass Jatia, (3) Mahabir Prosad Jatia, (4) Deokinandan Jatia, (5) Sreemohan Jatia, (6) Smt. Tribeni Devi Jatia, (7) Smt. Rammurti Jatia, (8) Smt. Pushpa Jatia and (9) Smt. Ratni Jatia. The returns of the income of the business carried on by Onkarmull Kanailall & Co., up to and including the assessment year 1958-59, have been filed in the status of a registered firm but in all these years the business has been treated to be the proprietary concern of Kanailall Jatia and the income therefrom included in the personal assessment of Kanailall though as a protective measure assessments have also been made on the firm as an unregistered firm. For one of those years an appeal was taken to the Income-tax Appellate Tribunal which upheld the contention of the department that the business was the proprietary business of Kanailall Jatia. The said Kanailall Jatia died on the 19th January, 1958, leaving him surviving his four sons and his widow, who are the petitioners in the present application, as his heirs and legal representatives. In respect of the assessment year 1959-60, relevant to the accounting period 23rd October, 1957, to the 10th November, 1958, a return was filed on behalf of the partnership firm, Onkarmull Kanailall & Co., by Ghanshyamdass Jatia as a partner on or about the 27th October, 1959, showing the total income of the firm for that year at Rs. 1,03,893.91. This return was filed within the period of time to file the returns as extended by the respondent-Income-tax Officer. On the 12th October, 1963, two separate returns for the said assessment year, one for the period from 23rd October, 1957, to 19th January, 1958, and the other for the period 20th January, 1958, to 10th November, 1958, were filed by the firm through its aforesaid partner in place of the original return dated 27th October, 1959, accompanied by a letter of that date recording that as desired by the respondent-Income-tax Officer, during the hearing of the assessment of the firm two separate returns in place of the original return already filed were being enclosed. In the affidavit-in-opposition though it has been denied that the two new returns were filed at the direction of the Income-tax Officer, the receipt of the aforesaid letter is not denied. It is further claimed in the petition that the respondent-Income-tax Officer made an assessment on the firm in respect of the first period, i e., up to the date of the death of Kanailall Jatia in the status of an unregistered firm and made an assessment for the second period, i.e., on and from the death of Kanailall on Messrs. Onkarmull Kanailall & Co., a Hindu undivided family consisting of the heirs and legal representatives of the deceased. In the affidavit-in-opposition it is contended that the assessments for both the above periods were made on the heirs and legal representatives of Kanailall Jatia but in respect of the first period a protective assessment was also made on the firm as an unregistered firm. At the hearing the department could not establish that any assessment for the first period has been made on the heirs and legal representatives of Kanailall Jatia. It must, therefore, be accepted that for the period up to the 19th January, 1958, the assessment has been made on the unregistered firm of Onkarmull Kanailall & Co. By an order dated the 2nd February, 1966, purported to have been made under Section 27I(1)(a) of the Income-tax Act, 1961, a penalty of Rs. 27,709.66 was levied on the Hindu undivided family of Onkarmull Kanailall & Co. on the ground that the return for the above assessment year was filed voluntarily on the 14th November, 1963, when it should have been filed by the assessee by June, 1959, under Section 22(1) of the Income-tax Act, 1922. As there was a default in filing the return for four years and four months and as the assessee could not give any satisfactory explanation therefor, in spite of opportunity being given, the above amount was directed to be paid by the assessee as penalty under Section 271 (a). The penalty was calculated at 50 per cent. Of the total amount of tax demanded. On the same date the second order of penalty purported to be under Section 273 of the 1961 Act was made by the respondent-Income-tax Officer, directing the Hindu undivided family to pay a penalty of Rs. 4,081.40 for failure to file an estimate under Section 18A(2) of the 1922 Act.
(2.) It should be mentioned here that on the application of the petitioners a rule nisi was issued by this court directing the present respondents to show cause why the two assessments for the year 1959-60 should not be cancelled and/or set aside. The above rule has since been discharged by B. C. Mitra J., on the ground that it was not necessary to decide the issue as to whether the assessments were illegal.
(3.) The petitioners challenge the aforesaid orders of penalty on, inter alia, the following grounds :
(a) That the respondent-Income-tax Officer failed to consider the fact that the returns for the assessment year were filed by Onkarmull Kanailall & Co., as a firm through its partner and not as a Hindu undivided family; (b) that as the original return was filed under the Indian Income-tax Act, 1922, the proceedings for assessment should have been completed under that Act and the purported penalty proceedings under sections 271 and 273 of the 1961 Act were illegal and ultra vires. (c) That the assessee had a right to file a revised return at any time before the assessment was completed and as such the respondent-Income-tax Officer was in error in imposing the penalty on the ground that there has been a default in riling the return in time, (d) That as Onkarmull Kanailall & Co. was not a new assessee, Section 18A(3) of the 1922 Act did not apply and the purported order of penalty under Section 273 was illegal and void.;