Penalties Imposable for Late Tax Return Filing Despite Notice

The High Court held that penalties under section 271(1)(a) could be levied for the default under section 139(1) even if the assessee filed the return after receiving a notice under section 139(2). The Court disagreed with the Tribunal's reasoning that issuing a notice under section 139(2) condoned the delay under section 139(1. The default under section 139(1) continues until the return is filed, and the notice under section 139(2) does not absolve this default. The High Court ruled in favor of the revenue, directing the Tribunal to consider other points in the appeal and ordered the assessee to pay costs.

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Issues Involved:
1. Whether the Tribunal erred in holding that no penalty under section 271(1)(a) could be levied for the alleged default under section 139(1) when the assessee had filed a return pursuant to the notice issued under section 139(2).

Detailed Analysis:

Issue 1: Tribunal's Decision on Penalty under Section 271(1)(a)
The primary issue referred to the High Court was whether the Tribunal was correct in holding that no penalty under section 271(1)(a) could be levied for the default under section 139(1) when the assessee filed the return after receiving a notice under section 139(2).

Facts:
- The assessee, a partnership firm, failed to file returns for the assessment years 1963-64 and 1964-65 within the due dates under section 139(1).
- Notices under section 139(2) were served on December 3, 1963, and March 30, 1965, respectively.
- Returns were filed on May 4, 1965, and April 19, 1966, respectively, after the stipulated period in the notices.
- The ITO levied penalties under section 271(1)(a) for the delayed submission.
- The Tribunal held that penalties for default under section 139(1) were not justified since the returns were filed pursuant to notices under section 139(2).

Tribunal's Reasoning:
- The Tribunal reasoned that issuing a notice under section 139(2) implicitly condoned the delay under section 139(1).
- It relied on a decision by the Delhi Bench of the Income-tax Appellate Tribunal, which was later considered by the Rajasthan High Court in CIT v. Indra and Co. [1971] 79 ITR 702.

High Court's Analysis:
- The High Court examined the statutory provisions of sections 139 and 271.
- Section 139(1) mandates filing returns within a specified period.
- Section 139(2) allows the ITO to issue a notice requiring a return within 30 days.
- Section 271(1)(a) provides penalties for failing to furnish returns under sections 139(1) or 139(2).

Precedents:
1. Rajasthan High Court in CIT v. Indra and Co. [1971] 79 ITR 702:
- Default under section 139(1) continues until the return is filed.
- Issuing a notice under section 139(2) does not condone the default under section 139(1).

2. Delhi High Court in CIT v. Hindustan Industrial Corporations [1972] 86 ITR 657:
- Filing a return under section 139(2) does not absolve the default under section 139(1).
- The period of default starts from the due date under section 139(1) and continues until the return is filed.

3. Andhra Pradesh High Court in Mullapudi Venkatarayudu v. Union of India [1975] 99 ITR 448:
- The default continues until the return is filed under section 139(2) or section 139(4).
- Issuing a notice under section 139(2) does not imply condonation of the default under section 139(1).

4. Patna High Court in Addl. CIT v. Bihar Textiles [1975] 100 ITR 253:
- Contrary view that issuing a notice under section 139(2) precludes penalties for default under section 139(1).

Conclusion:
- The High Court disagreed with the Patna High Court's view and supported the interpretations of the Rajasthan, Delhi, and Andhra Pradesh High Courts.
- The default under section 139(1) continues until the return is filed, and issuing a notice under section 139(2) does not condone this default.
- The Tribunal erred in holding that no penalty under section 271(1)(a) could be levied for the default under section 139(1).

Judgment:
The High Court answered the question in the negative, in favor of the revenue, and directed the Tribunal to consider and decide the other points involved in the appeal. The assessee was ordered to pay the costs of the reference to the Commissioner.

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