C.S. Tiwana, J. - (1.) IN this reference made by the INcome-tax Appellate Tribunal at the instance of the Commissioner of INcome-tax, Patiala II, Patiala, the main point for determination is whether on the failure of an assessee to furnish a return, no penalty can be imposed prior to the date of the default made in pursuance of a notice issued under Section 148 of the I.T. Act, 1961 (hereinafter referred to as "the Act"). The other minor point upon which reference has been made is for determination of this fact whether an assessee can be allowed to raise a new ground of attack in appeal before the Tribunal in the absence of that ground having been taken before the ITO.
(2.) THE relevant facts of the case in hand may be stated with the help of the order of reference dated July 22, 1975. THE assessee is M/s. Dehati Co-operative Marketing-cum-Processing Society, Sangrur. THE assessee had to furnish the return of income under Section 139(1)(a) of the Act before June 30, 1969. A notice under Section 148 of the Act was served on the assessee on August 10, 1970, calling upon it to furnish a return before September 9, 1970. THE return was belatedly filed on February 24, 1971. THEre was thus a delay of five complete months. THE ITO, for the imposition of penalty, calculated the period of delay as being that of nineteen months commencing from June 30, 1969. THE explanation for the delay given before the ITO was that the assessee had the impression that a cooperative society was not chargeable to income-tax. THE delay after the service of the notice was tried to be explained on the ground that there had been transfer of an old accountant and the new accountant was unable to complete the return by the due date. Any of these grounds for escaping from the payment of the penalty did not find favour with the ITO. A penalty of Rs. 12,668 was imposed. THE AAC, by taking into consideration the payment of Rs. 21,130 made under Section 140A(1) of the Act by way of self-assessed tax, reduced the penalty to Rs. 4,638. At the time of hearing of the case before the Tribunal both the parties agreed that in view of the retrospective amendment of Section 271(1)(i) of the Act by virtue of the Direct Taxes (Amend.) Act, 1974, the reduction in penalty made by the AAC could not be sustained on the basis of the tax assessed under Section 140A of the Act. THE assessee was allowed by the Tribunal to support the order of the AAC in relation to the reduction of the penalty on a new ground, namely, that as the proceedings in the course of which the ITO had recorded his requisite satisfaction under Section 271(1)(a) of the Act were based on the return furnished in response to the notice under Section 148 of the Act, the date for furnishing the return under Section 139(1) became irrelevant for computing the period of default. THE Tribunal gave this finding that there was only a delay of five months as the return was furnished with that much delay after the receipt of the notice under Section 148 of the Act. THE proportionate penalty for five months amounted to Rs. 3,333 as against the penalty of Rs. 4,638 as upheld by the AAC. THE assessee had not appealed before the Tribunal. However, the reduction by AAC in the penalty was sustained by the Tribunal. The questions referred to this court for opinion were formulated as follows by the Tribunal : "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in allowing the assessee to raise a new ground of attack against the order of the Income-tax Officer (for the firs-t time) in the appeal filed by the revenue against the set-off of tax paid under Section 140A(1) of the Act ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that penalty in the instance case could be validly imposed for 5 months only instead of 19 months as calculated by the Income-tax Officer and the Appellate Assistant Commissioner ?" Rule 11 of the Rules and Orders relating to the Appellate Tribunal can be of some help in giving a decision on question No. 1. Under this rule an appellant can be allowed to urge such a ground in support of the appeal which has not been set forth by him in the memorandum of appeal. It has then been mentioned that the Tribunal, if it so desired in deciding the appeal, shall not be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. The only proviso to this rule is that the Tribunal cannot rest its decision on a new ground unless the party who would be affected thereby has had a sufficient opportunity of being heard on that ground. If the appellant can be allowed a concession of the nature contained in Rule 11, there is no justification for denying the respondent in an appeal a similar concession. There is even an authority of the Bombay High Court in support of the view which we intend to take. It is reported as CIT v. Hazarimal Nagji & Co. [1962] 46 ITR 1168. In it the respondent's right to support the AAC's order on a new ground is discussed. The law laid down in this authority with which we respectfully agree was summarised in the headnote as follows ; "The powers of the Appellate Tribunal are similar to the powers of the appellate court under the Civil Procedure Code. In so far as a respondent only wants to maintain the decree of the lower court which is in his favour, he is entitled to support it on fresh grounds if he can do so, and the appellate court also will have jurisdiction to permit him to do so, provided that the fresh grounds which he wants to urge do not require a further investigation into facts which are not already on record and are not based on facts which were neither alleged nor admitted nor proved and which the other side was never called upon to meet in the lower court."
(3.) FOR the determination of question No. 2, some provisions of the Act, even though otherwise well known, have to be recapitulated. Every person who has an assessable income has to furnish a return without any notice to him as required by Section 139(1) of the Act. If the return is not furnished by the date fixed by the statute, a notice under Section 139(2) of the Act can be issued by the ITO which has to be served before the end of the relevant assessment year. By such notice the assessee can be required to furnish within thirty days from the date of service of the notice a return of his income during the previous year. If the. ITO has failed to serve such a notice, he can make use of the power given to him under Section 148 of the Act. The matter relating to the income escaping assessment has at first to be considered under Section 147 of the Act. If the ITO has reason to believe that by reason of the omission or failure on the part of an assessee to make a return under Section 139 of the Act for any assessment year to the ITO, income chargeable to tax has escaped assessment for that year, he may assess such income for the assessment year concerned. Before making the assessment, he has to issue a notice under Section 148 of the Act. In this kind of notice all or any of the requirements which may be included in a notice under Section 139(2) of the Act can be mentioned. The ITO has, however, to record his reasons before issuing notice under Section 148 of the Act. Then the relevant provision for the imposition of penalty is contain- ed in Section 271(1) of the Act. This provision, omitting the words which are not relevant in this case, would read something like this : "If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act is satisfied that any person has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, he may direct that such person shall pay by way of penalty, in addition to the amount of tax, if any, payable by him, a sum equal to two per cent. of the assessed tax for every month during which the default continued." The view taken by the Tribunal in respect of the period of default is only supported by an authority of the Patna High Court reported as Addl. CIT v. Bihar Textiles [1975] 100 ITR 253. The question referred for decision was whether the delay under Section 139(1) of the Act is condoned if a notice under Section 139(2) was issued to the assessee. This question was answered in favour of the assessee. It was remarked that once a notice under Section 139(2) is duly issued during the relevant assessment year there cannot be any penalty for failure to furnish the return as required by Sub-section (1) of Section 139 of the Act. This reasoning was adopted in the body of the judgment that once a notice under Sub-section (2) of Section 139 of the Act is issued that precludes the penal provision being attracted in so far as the failure to furnish the return under Sub-section (1) of Section 139 is concerned. One reason given for this view was that an ITO was empowered under Section 139(2) of the Act to issue a notice even before the period prescribed under Sub-section (1) of Section 139 of the Act. When once it is held that under Sub-section (2) of Section 139 the ITO has power to curtail the period prescribed under Section 139(1), it does not stand to reason as to why the power for extending such a time within any point of time in the relevant assessment year be not held to be inherent in him. It was then remarked that it must be held that by the issuance of a notice under Section 139(2) within the relevant assessment year the period prescribed in Sub-section (1) of Section 139 was duly extended and no penalty could be levied for any default committed in respect of the provisions of Section 139(1).;