Section 275 of the Income-tax Act 1961 does not prescribe any requirement regarding the commencement of proceeding for the imposition of penalty.

CHINNAPPA REDDY, J.

( 1 ) THE Income-tax Appellate Tribunal, Hyderabad Bench has stated a case and referred to Bench has stated a case and referred to us for our decision the following question:"whether on the fact and in the circumstances of the case, proceedings for the imposition of penalty have been commenced validly and within the time limits, if any, prescribed by the Income-tax Act 1961?"the facts are as follows: - The assessee is a firm dealing in gunnies, twines etc. For the assessment year 1961-62 the firm returned a total income of Rs. 99,672. 00, The Income-tax Officer, however, held that the total income of the assessee was Rs. 1,57,434. He found that the firm had camouflaged certain of its transactions as those of a different firm and another individual. The assessment was completed on 5-6-1962 and in the order of assessment the Income-tax Officer observed:"since the firm has deliberately diverted its profits by creating a bogus firm and carried on business in the name of another person viz. , T. Narasimhamurthy, action under Section 28 (1) (c) has been taken separately", On 5-6-1962 itself the Income-tax Officer passed the following order in the order sheet: "order dictated. Please issue penalty notice", A Penalty notice under Section 28 (3) of the Indian Income-tax Act of 1922 was prepared under date 5-6-1962, signed by the Income-tax Officer 20-6-1962, and served on the assessee on 13-7-1962. The Indian Income-tax Act 1961 came into force on 1-4-1962 and as the assessment was completed after the coming into force of the 1961 Act, the penalty proceedings had to be taken under the Income-tax Act of 1961 only. That is provided by Section 297 (2) (g) of the 1961 Act. The Income-tax Officer who had issued the notice under Section 28 (3) of the Act of 1922 realised his mistake and wrote to the assessee on 9-4-1964 stating that the notice has been wrongly issued under Section 28 has been wrongly issued under Section 28 has been wrongly issued under Section 28 (3) and that it was a procedural mistake. The letter was accompanied by a fresh notice dated 9-4-1964 purporting to be under Section 274 read with Section 271 of the Income-tax Act 1961. The proceedings were subsequently referred to the Inspecting Assistant Commissioner under Section 274 (2) of the Income-tax Act of 1961. It was urged before the inspecting Assistant Commissioner that the notices dated 5-6-1962 and 9-4-1964 were not validly issued and that there was no notice before the completion of the assessment proceedings as required by Section 275 of the Income-tax Act 1961 and therefore, the penalty proceedings were void. The Inspecting Assistant Commissioner rejected the contentions of the assessee and imposed a penalty of Rs. 60,000. 00. The Income-tax Appellate Tribunal confirmed the order of the Inspecting Assistant Commissioner imposing the penalty. Thereafter, at the instance of the assessee, the Income-tax Appellate Tribunal stated a case and referred the question mentioned above for our decision.

( 2 ) THE first submission of the learned counsel for the assessee was that the notice dated 5-6-1962 was issued under notice dated 5-6-1962 was issued under Section 28 (3) of the Income-tax Act of 1922 and not under the provisions of the Act of 1961 and was, therefore, invalid. It is not disputed by the learned counsel for the Department that the notice should have been properly issued under the provisions of the 1961 Act in view of Section 279 (2) (g) of the Act of 1961. He, however, submitted that the mere mention of a wrong provision of law would not invbalidate the notice. In support of his contention the learned counsel for the department relied on Hazari Mal Kuthiala v. Income-tax Officer. 41 ITR 12 = (AIR 1961 SC 200 ). In that case the Commissioner of Income-tax purporting to act under Section 5 (5) and (7-A) of the Indian Income-tax Act made an order on 4-11-1953 that the assessment of the assessee firm would be done by the Income-tax Officer. Sp

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