The Chief Justice.-

The question for decision in this case has been framed by the Tribunal in the following manner:

“Whether on the assessee’s failure without reasonable cause to furnish a return of his total income as required by a notice under section 22(1), the Income-tax Officer was legally right in levying a penalty under section 28(1)(a) in the course of the proceedings taken by a him under section 34 read with section 22 (2) to assess such income, which had not previously been assessed at all.”

The facts are not in dispute. The applicant in spite of general notice under section 22(1) of the Act did not within the prescribed time submit his returns for two successive years ending 12th April, 1942, and 12th April, 1943. The department, however, did not proceed to issue notices under section 22(2) of the Act within the respective years of assessment. Subsequently on the 25th January, 1945, the Income-tax Officer issued notices under section 34 of the Act calling upon the assessee to deliver to him within 35 days of the receipt of the notices the returns in forms attached to the notices of the respective years. In pursuance of these notices, the assessee submitted his returns for the two years within the specified time on the basis of which assessments were made in respect of the two years. Pending these proceedings notices under section 28 of the Act were also issued by the Officer for levying penalty for failure of the applicant to file his returns pursuant to the general notices under section 22(1) of the Act and eventually imposed a penalty of Rs. 1,226-7-0 for the year ending 12th the April, 1942, and Rs. 7,981-3-0 for the year ending 12th April, 1943. The penalty levied was confirmed by the Appellate Assistant Commissioner and the Tribunal. An application was made or a reference to this Court, but it was confined to the penalty in respect of the assessment year ending 12th April, 1943, with which alone we are concerned in this reference.

Before us it was contended by the learned counsel for the applicant that it was not competent for the Income-tax Officer to levy a penalty in the course of a proceeding under section 34 of the Act for a default not committed in the course of that proceeding. He developed his contentions thus: the proceeding under section 34 relates to escaped assessment, i.e., assessment which escaped totally or partially and is separate and distinct from a prior proceeding which generally culminates in an assessment order or in a declaration that no assessment can be levied on the persons concerned. If there has been an assessment under section 23 of the Act and thereafter there is a proceeding under section 34 because of the -escape of any item of income from assessment, then penalty can be levied only in respect of defaults and other acts committed in the course of that proceeding only and not in the course of the proceeding which ended with the assessment. He relied upon the ruling of the Allahabad High Court in Mayaram Durga Prasad v. Commissioner of Income-tax, United Provinces1, in support of this contention. In that case (which was decided under the old Act of 1922) the assessee submitted a return for the year in question showing an amount of Rs. 2,650 as his income. This return was accepted and a tax levied on that basis. Subsequently it was discovered that the assessee had made a much larger income and proceedings under section 34 of the Act were commenced and the assessee was called upon to make a fresh return. This time he made a return showing an income of Rs. 38,327 and the Income-tax Officer accepted the figure. In addition to an assessment made on the income as thus disclosed, the Officer also imposed a penalty on the assessee for concealing particulars of his income and for furnishing inaccurate particulars of his income. The question of law referred to the High Court on these facts was as follows:

“When an assessee in answer to an original notice under section 22(2) has returned his inc

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