Sabyasachi Mukharji, J. - (1.) In this reference under Section 66(1) of the Indian Income-tax Act, 1922, the following questions have been referred to this court: "(1) Whether, on the facts and in the circumstances of the case, the penalty proceedings under Section 28(1)(a) initiated in respect of a default of non-submission of return in the original assessment proceedings on August 17, 1960, could be completed after the reassessment was made on October 25, 1962? (2) Whether, on the facts and in the circumstances of the case, and on a proper interpretation of Section 28(1)(a) the Income-tax Officer could levy penalty, (a) after the original assessment in which the default arose was made; or (b) after the Appellate Assistant Commissioner disposed of the appeal against the original assessment ?"
(2.) The reference relates to the assessment year 1959-60 and the questions referred are in relation to penalty under Section 28(1)(a) of the Indian Income-tax Act, 1922. On the 8th July, 1959, notice was served under Section 22(2) of the Indian Income-tax Act, 1922. Thereafter, on the 15th March, 1960, reminder was sent to the assessee. On the 12th August, 1960, notice under Section 22(4) of the Indian Income-tax Act, 1922, was served for production of accounts as there was non-compliance with earlier notices. On the 17th August, 1960, notice was served for default under Section 28(1)(a) of the Act. Thereafter, on the 19th September, 1960, assessment was completed under Section 23(4) of the 1922 Act, and income was assessed at Rs. 3,25,000 and the demand notice was issued. On the 15th October, 1960, the assessee filed an appeal before the Appellate Assistant Commissioner. The appeal was disposed of on the 6th April, 1961, by the Appellate Assistant Commissioner reducing the total income to Rs. 2,95,000. Then, on the 19th March, 1962, notice was issued under Section 34(1)(a) of the Indian Income-tax Act, 1922, for reopening the assessment of the said year. On 24th April, 1962, the assessee filed return in response to the above notice. On the 25th October, 1962, the Income-tax Officer reassessed by adding Rs. 66,338 as business income to the original assessment. On the 30th March, 1963, the Income-tax Officer levied penalty of Rs. 50,000 under Section 28(1)(a).
(3.) There was an appeal before the Appellate Assistant Commissioner from the said order of the Income-tax Officer imposing penalty. In the appeal the assessee contended that once the assessment was completed there was no further power to levy penalty because the power to levy penalty was included in the power to assess. It was further submitted that penalty should have been levied before the 19th March, 1960, when assessment was completed. The Appellate Assistant Commissioner rejected the said contention and upheld the order of the Income-tax Officer. There was a further appeal to the Tribunal. Before the Tribunal it was urged that assessment having been reopened under Section 34(1)(a) the Income-tax Officer could not subsequently penalise for default, if any, in submitting the return to the original assessment proceedings. It was urged that penalty being in the nature of additional tax should have been levied simultaneously with assessment and inasmuch as the assessment order being dated 19th September, 1960, was no longer in existence, there could not be any order for levy of penalty. The Tribunal rejected the said contention and upheld the order of the Income-tax Officer. Thereafter, on an application being made, the aforesaid two questions have been referred to this court.;