The issuance of a notice under Section 148 of the Income Tax Act, 1961 does not condone the delay in furnishing the return under Section 139(1) of the Act, and the assessee is liable to pay penalty for the entire period of default.

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.

3. 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 Assista