Penalty proceedings for late return filing were not barred merely because the return was filed before assessment completion.

A return filed after the time allowed under section 139(1) or 139(2) could still attract statutory interest, and that interest was treated as a liability created by the Act rather than penalty in the strict sense. The High Court maintained a distinction between charging interest for delay and initiating penalty proceedings under section 271. Filing the return before completion of assessment did not, by itself, erase the earlier default where the relevant test was whether the return had been filed within the time allowed by the Income-tax Officer. The penalty notice was therefore not without jurisdiction or prima facie invalid, and the challenge failed.

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Issues: Whether a notice initiating penalty proceedings under section 271 of the Income-tax Act, 1961 was without jurisdiction on the ground that the return was filed before assessment was completed and interest had already been charged for delay in filing the return.

Analysis: The return filed after the time allowed under section 139(1) or 139(2) could attract statutory interest, but such interest was treated as a liability created by the Act and not as penalty in the strict sense. The distinction between the charge of interest and the institution of penalty proceedings was maintained. Filing the return before completion of assessment did not by itself make the earlier default disappear for the purpose of section 271, because the relevant question was whether the return had been filed within the time allowed by the Income-tax Officer. The Court also held that the Supreme Court decision relied on by the petitioner did not lay down that penalty proceedings were barred merely because the return was eventually filed before assessment.

Conclusion: The penalty notice was not without jurisdiction or prima facie invalid, and the challenge to it failed.

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