Where a notice under Section 139(2) of the Income Tax Act, 1961, is issued to an assessee during the relevant assessment year, penalty can be imposed under Section 271(1)(a) for failure to furnish the return as required by Sub-section (1) of Sec.139, even if the return is filed within the time and in the manner required by the notice under Section 139(2).

Nazir Ahmad, J.

1. A statement of the case has been submitted, by the Income-tax Appellate Tribunal, "B" Bench, Patna, under Sec.256(1) of the I.T. Act, 1961 (hereinafter to be called is "the Act"), referring the follow­ing question for the opinion of this court:

"Whether, on an appeal against an order of penalty imposed by the Income-tax Officer under Sec.271(1)(a) for default under Sec.139(2) of the Act, the Tribunal on facts was right in sustaining the penalty for the period of default falling under Sec.139(1) ?"

2. The relevant facts of the case can be culled out from the statement of the case. The assessee is a firm and the assessment year involved is 1966-67.

3. The ITO imposed a penalty of Rs. 6,110 under Sec.271(1)(a) of the Act due to the default of delayed submission of return, rejecting the explanation of the assessee that a return was sent by post on June 23, 1966, since he found that the said return was not available in his record. The order of the ITO has been annexed and marked as annexure A forming part of the statement of the case.

4. The assessee went in appeal before the AAC and it was submitted that no notice under Sec.274 of the Act was served on the assessee and that the penalty proceeding was not started in the course of the assessment proceedings. It was also submitted that the assessee could not be treated as a defaulter as he had filed return under Sec.139(4) of the Act. The AAC after verification of the record found that notice under Sec.274 was issued on March 5, 1968, whereas the assessment was completed on April 3, 1969. He further found that the alleged certificate of posting could not prove sending of return. He, therefore, held that the assessee was a defaulter and was liable to penalty, and so he confirmed the order of the ITO. A copy of the order of the AAC has been annexed and marked as annexure B to the statement of the case.

5. Being aggrieved by the order of the AAC, the assessee appealed before the Tribunal and reiterated the same argument as was submitted before the AAC. A postal receipt was, however, produced before the Tribunal to show that the return was sent on June 23, 1966, by post. It was also submitted on behalf of the assessee that since the ITO issued notice under Sec.139(2) of the Act, the period of default should be calculated from the date of service of notice under Sec.139(2). The Tribunal found that the penalty proceeding was initiated by the ITO in the course of the assessment proceedings. It further found that the postal receipt produced by the assessees counsel did not mention any particulars of the document or letters said to have been sent by the assessee on June 23, 1966. The Tribunal also considered the fact that the assessee had not even informed the ITO about sending of any return on June 23, 1966, on receipt of notice under Sec.139(2) of the Act. The Tribunal, therefore, came to the conclusion that the asses­see was a defaulter for delayed submission of the return without any cause and was liable to penalty. As regards the period of default, the Tribunal held that the assessee may be saddled with penalty for his default in terms of Sec.139(1) of the Act, although he had furnished the return within the time and manner as required by notice under Sec.139(2). In coming to the said conclusion, the Tribunal relied on the case of CIT V/s. Indra and Co. [1971] 79 ITR 702 (Raj). The Tribunal, therefore, upheld the order of the AAC. A copy of the order of the Tribunal has been annexed and marked as annexure C forming part of the statement of the case.

6. Mr. K.N. Jain for the assessee has submitted that for the assessment year 1966-67, notice under Sec.139(2) of the Act was served on the assessee on November 14, 1966, and the assessees return was filed on March 21, 1968, and so the ITO held that it was a clear case of default under Sec.139(2) of the Act and so penalty was imposed for default under Sec.139(2) and, therefore, no penalty could be imposed for the de