Penalty for failure to file after a general notice may be imposed during later Section 34 assessment proceedings when the default is established.

An income tax officer may impose a penalty for failure to furnish a return in response to a general notice when, during subsequent proceedings under Section 34 read with the proviso to Section 22(2), the officer becomes satisfied that the earlier default occurred; proceedings under Section 34 assessing the same period are not artificially distinct from the original assessment begun by a general notice. A limited exception may arise if an earlier officer with knowledge of the default irrevocably closed proceedings without exercising penalty powers, but the statutory language does not bar penalty imposition in the described circumstances.

---

---

Issues: Whether, where an assessee failed without reasonable cause to furnish a return in response to a general notice and proceedings under Section 34 read with Section 22(2) were thereafter taken to assess income for the same period, the Income-tax Officer was legally entitled to levy a penalty under Section 28(1)(a) in the course of those Section 34 proceedings.

Analysis: The Court examined the statutory scheme of the Income-tax Act and the nature of proceedings initiated by a general notice under Section 22(1) and subsequent proceedings under Section 34. It considered whether proceedings under Section 34 are distinct and separate from earlier assessment proceedings so as to preclude imposition of penalty for defaults occurring in relation to the same period. The Court rejected an artificial separation between proceedings when they relate to the same assessee and the same period, observing that Section 34 proceedings relate to the assessment for the same period as the original proceedings that commenced with the public notice under Section 22(1). The Court noted a possible limited qualification where an earlier officer who had knowledge of the default had irrevocably closed proceedings without exercising Section 28 powers, but found nothing in Section 28's language prohibiting an Income-tax Officer from levying penalty when satisfied in the course of Section 34 proceedings that a default under Section 22(1) had occurred. The Court also rejected the contention that the general notice lapsed at the end of the year and that a Section 34 notice could be treated as merely an extension of time under the proviso to Section 22(1).

Conclusion: The question is answered in the affirmative; the Income-tax Officer was legally right in levying the penalty under Section 28(1)(a) in the course of proceedings under Section 34 read with Section 22(2) relating to the same assessment period. The reference is answered accordingly and the applicant must pay the costs of the reference.

Ratio Decidendi: Where proceedings under Section 34 relate to assessment of the same period commenced by a general notice under Section 22(1), an Income-tax Officer who, in the course of those Section 34 proceedings, is satisfied that a default under Section 22(1) has occurred may lawfully impose a penalty under Section 28(1)(a).

---