Govinda Bhat, J.
1. This is a reference under Section 256(1) of the Income-tax Act, 1961, hereinafter called 'the Act', made at the instance of the assessee and it relates to the assessment year 1964-65. The questions of law referred for the opinion of this court by the Income-tax Appellate Tribunal are:
'1. Whether, when the due date for compliance with the notice under Section 139(2) of the Income-tax Act, 1961, falls within the due date for compliance with the provisions of Section 139(1) of the Income-tax Act, 1961, the notice issued under Section 139(2) is illegal ?
2. Whether, on the facts and in the circumstances of the case, non-compliance with the provisions of Section 139(2) of the Income-tax Act, 1961, constitutes sufficient cause for exoneration from levy of penalty under Section 271(1)(a) of the Act ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the two assessees were liable to penalty under Section 271(1)(a) of the Income-tax Act, 1961 ?
4. Whether, on the facts and in the circumstances of the case, the fiction contained under the provisions of Section 271(2) of the Income-tax Act, 1961, applied in computing the penalty under Section 271(1)(a) of the Act in the case of partner of a firm and on that account whether the penalty would be 'nil' in the case of the partner, Shri S. Venkatasubbaiah Raju?'
2. The assesses-firm, M/s. Venkateswara Power Rolling Mills, Bangalore, consisted of five partners one of whom was Shri S. Venkatasubbaiah Raju. The previous year of the firm relevant to the assessment year 1964-45 was the year ended on 30th June, 1963. The firm was a registered firm. In the ordinary course, the assesses-firm could have filed its return of income before the 30th day of June, 1964, as provided under Sub-section (1) of Section 139 of the Act. But even before the said date the Income-tax Officer issued a notice under Section 139(2) calling upon the assesses-firm to file its return by 20th June, 1964. Notice was also issued to the aforesaid partner, Venkatasubbaiah Raju, requiring him to file his return of income before 20th June, 1964. The firm as well as the aforesaid partner did not file their returns within the dates mentioned in the Section 139(2) notices. On July 10, 1964, both applied for extension of time till 30th August, 1964. The extension prayed for was granted in both cases. But the assessee did not submit their returns, nor did they ask for further extension of time. Returns were filed on 21st December, 1964. Thereafter, assessments were made on the firm as well as on its partners. The partner, S. Venkatasubbaiah Raju, had no separate income apart from his share of the income from the assesses-firm.
3. Proceedings were taken under Section 271(1)(a) of the Act for levy of penalty on the assesses-firm as well as its partner, Venkatasubbaiah Raju. A sum of Rs. 1,895 was levied as penalty on the firm and Rs. 71 was levied as penalty on the partner, Venkatasubbaiah Raju.
4. The contention of the assessee before the Income-tax Officer as also the appellate authorities was that the notices issued under Section 139(2) were not legal. The argument was that the Income-tax Officer, in the exercise of his power under Section 139(2), has no power to fix a date for submission of return earlier to the expiry of the date prescribed by the statute under Sub-section (1) of Section 139. It was further urged that the return of income was not filed within the due dates as the audit of the firm's accounts was not complete till the end- of November, 1964. The Income-tax Officer as also the appellate authorities rejected the contention of the assessee and they held that the explanation offered by the assessees was not acceptable and that the failure to furnish returns was without reasonable cause.
5. The main question that arises in this reference is question No. 1. An identical question arose before the Allahabad High Court in Tarzan Hosiery Private Ltd. v. Income-tax Officer, and it was held that the power conferred on the Income-tax Officer by Sub-section (2) of Section 139 can be exercised at any time during the relevant assessment year not only after, but also before the expiry of the period prescribed for the return of income underSub-section (1) of Section 139. In the course of the judgment, this is what Broome J., who delivered the judgment, has stated :
'On a plain reading of the two Sub-sections (1) and (2) of Section 139, we find no force in the argument that Sub-section (2) can only operate after the period prescribed by Sub-section (1) is over. The two sub-sections in fact deal with two distinct and different aspects of the procedure for submitting returns : Sub-section (1) imposes an obligation on all persons whose income is assessable to tax to furnish a return within a certain specified time without being asked to do. so; while Sub-section (2) confers a power on the income-tax authorities to demand a return at any time before the expiry of the assessment year. We find no incompatibility or repugnance between these two provisions and we see no reason why both of them should not operate simultaneously to their full extent. Reading the two sub-sections harmoniously together, we are of opinion that the intention of the section is that all persons liable to assessment should be under an obligation to furnish a return of income within the time prescribed by Sub-section (1) (i.e., either by 30th of June or by 30th of September of the assessment year), provided they have not already been asked by the Income-tax Officer to furnish a return by means of a notice under Sub-section (2). There is nothing in the wording of these two sub-sections themselves that would lead to the inference that Sub-section (2) was not meant to operate during the period prescribed for the submission of the return under Sub-section (1).
Furthermore, it is clear from Sub-section (7) of Section 139 that a return under Sub-section (2) can be demanded and furnished before the return under Sub-section (1) is due.'
6. Sri K. Srinivasan, learned counsel for the assessee, submitted that if Sub-sections (1) and (2) of Section 139 are construed in a harmonious manner, then Sub-section (2) should be considered as conferring the power on the Income-tax Officer to issue a notice only after the expiry of the time limit fixed under Sub-section (1). Sub-section (1) imposes an obligation on every person who has a taxable income to furnish his return before the date mentioned; but Sub-section (2) confers a power on the Income-tax Officer to issue a notice during the assessment year to any person who, in the Income-tax Officer's opinion, is assessable under the 'Act, to furnish a return of his income within thirty days from the date of service of the notice. The two sub-sections are intended to serve different purposes. As held by the Allahabad High Court in the above referred decision, the time allowed under Sub-section (1) is available to every person liable to assessment provided he has not already been asked by the Income-tax Officer to furnish a return by means of a notice under Sub-section (2). We are in respectful agreement with the view taken in Tarzan Hosiery PrivateLtd.'s case by the Allahabad High Court. Accordingly, question No. 1 has to be answered in the negative and against the assessees.
7. On the second question, the explanation offered by the assesses-firm was that the audit of the accounts for the relevant year was not completed till the end of November, 1964, and, therefore, the firm could not file its return earlier. Another reason was that the notice issued under Section 139(2) was illegal. Both the reasons have not been accepted by the Tribunal. The question whether or not there was sufficient cause for not filing the return in time is essentially a question of fact and not one of law. We see no error in the view taken by the Tribunal so far as the assesses-firm is concerned and question No. 2 has to be answered in the negative and against the assesses-firm. But so far as the partner, Venkatasubbaiah Raju, is concerned, we are of the opinion that on the facts and circumstances of the case there was sufficient cause for him for not filing the return within the due date. As already stated his only income was the share income from the registered assesses-firm. He had no separate income. Unless the firm's accounts were ready and the firm files its return of income, the partner could not have filed his return. This difference between the case of the firm and its partner has not been taken notice of by the Income-tax Appellate Tribunal. The assesses partner had stated before the Income-tax Officer that he wanted to file a return of income after ascertaining his share of the income in the firm. In our opinion, therefore, the Tribunal ought to have held that the assesses partner had sufficient cause for not filing his return within the due date, In that view, question No. 2 has to be answered in the affirmative so far as the partner, Venkatasubbaiah Raju, is concerned and against thedepartment.
8. In view of our answer to questions Nos. 1 and 2, questions Nos. 3 and 4 do not require any answer and they are not pressed by the learned counsel for the assessees.
9. In the result, we answer questions Nos. 1 and 2 in the above manner. There will be no order as to costs.