Decided on September 17,1975



BAHARUL ISLAM, J. - (1.) UNDER S. 256(1) of the IT Act, 1961 (hereinafter referred to as "the 1961 Act"), the following two questions have been referred to us by the Tribunal, Gauhati Bench, for our decision : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty proceedings under S. 271(1)(a) has been legally initiated ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty was validly imposed taking into consideration the decision of the Supreme Court in the case of CIT vs. Kulu Valley Transport Co. (P.) Ltd. (1970) 77 ITR 518 ?"
(2.) THE facts of the case may be briefly stated as follows : A notice dated November 14, 1958, under S. 22(2) of the Indian IT Act, 1922 (hereinafter referred to as "the 1922 Act"), for the asst. year 1958 -59 was served on the assessee on November 15, 1958, requiring the assessee to submit the return of income within 35 days, from the date of the receipt of the notice. The assessee did not submit any return on the due date. He, however, submitted the return on May 25, 1961, which was long after the period of 35 days allowed under the notice. As the assessee had failed to submit the return within the date, a notice dated May 25, 1963, under S. 274 r/w S. 271 of the 1961 Act was issued. The notice was served on the assessee on March 28, 1963. By that notice the assessee was required to show cause why penalty should not be imposed for non -submission of the return within the time allowed. The assessee was asked to show cause on April 11, 1963. The assessee did not comply with the notice. Two other dates, namely, December 29, 1964, and February 12, 1965, were fixed for showing the cause. The assessee did not comply. On March 8, 1965, however, an application was filed on behalf of the assessee. In that application cause of the failure to furnish the return within the time allowed was not shown ; but two contentions of law were raised, namely, (i) that only proceeding under S. 274 r/w S. 271 was not a valid initiation of the proceeding in the eye of law, and (ii) that the assessment was completed under the 1922 Act and ; as such, the penalty proceeding under the 1961 Act was invalid. The ITO overruled the two objections of the assessee. He held that as the assessee had not furnished any reason why the return could not be filed in terms of the notice under S. 22(2) of the 1922 Act within the due date, he was satisfied that the default in filing the return was deliberate and as such the assessee rendered itself liable to penalty under S. 271(1)(a). So he directed the assessee to pay penalty of Rs. 14,090 at the rate of 2 per cent per month for 15 months from January 1, 1959, to April 30, 1961, under S. 271(1)(a) for the asst. year 1958 -59. The assessee preferred an appeal before the AAC, who has dismissed the appeal. The assessee then preferred a second appeal before the Tribunal. The Tribunal also dismissed the appeal.
(3.) COUNSEL for the assessee did not seriously challenge before us the finding of the Tribunal on the first question referred. The Supreme Court in the case of D. M. Manasvi vs. CIT 1972 CTR (SC) 437 : (1972) 86 ITR 557 has held : "What is contemplated by cl. (1) of S. 271 is that the ITO or the AAC should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub - section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. ;

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