Hardayal Hardy, J.
(1) The assessment year in this case is 1958-59 for which the relevant accounting year is the financial year ending on the 31st of March, 1958.
(2) The assessed is a registered firm on which a penalty of Rs. 1,21,112.70 was levied under Section 271(l)(a) of the Income-tax Act, 1961 hereinafter referred to as the new Act. The return was due on 23-7-1958, but the same was filed on 13-2-1961, that is roughly after a delay of 31 months. The Income-tax Officer applying the provisions of Section 271(l)(a) of the new Act calculated the penalty livable at 2 per cent of the tax for each month of default. That figure would come to Rs. 1,49,000.00 and odd which would have been in excess of 50 per cent of the tax. The Income-tax Officer accordingly restricted the quantum of penalty to 50 per cent of the tax thereby levying the aforesaid amount of penalty.
(3) On appeal one of the contentions inter alia, was that the initiation of the proceeding for the levy of penalty should have been taken within the time as required under Section 275 of the new Act. The Appellate Assistant Commissioner observed in respect of this contention that since the default had been committed by the assessed under the Indian Income-tax Act, 1922, hereinafter referred to as the old Act, and actually a notice under Section 28(3) was issued by the Income-tax Officer in April 1960 long before the new Act came into force, the initiation of the proceedings for levying penalty had already been validly commenced and the penalty was rightly levied under the new Act.
(4) On second appeal the Tribunal found that although a notice under Section 28(3) calling upon the assessed to show cause for default under Section 28(l)(a) had been issued as early as the 18th of April 1960, the penalty in question had however not been levied on the basis of the proceedings taken at that time. Much after the service of the aforesaid notice the assessed filed its return and almost two years after the filing of the return, the assessment was completed on' the 30th of March 1963. Having completed the assessment on that date, the Income-tax Officer did not choose to pursue the action for penalty taken under the old Act, but issued a fresh notice under Section 274 read with Section 271(l)(a) of the new Act. This notice was issued much after the completion of the assessment and was served on the assessed on 17-2-1964. The Tribunal thereforee observed that notwithstanding the absence of a reasonable cause, for the delay in filing the return, the commencement of the proceedings for penalty was not in accordance with the provisions of Section 275 of the new Act. Whereas the assessment proceedings were completed on 20-3-1963, the proceedings for penalty were started long after that date. There was thereforee no valid commencement of the proceedings for penalty and consequently the order of penalty could not be sustained.
(5) On behalf of the Income-tax Department it was argued that the notice under Section 274 should be deemed to be a notice in continuation of the notice under Section 28(3) which had admittedly been issued on 18-4-1960 i.e. much before the completion of the assessment proceedings.
(6) The Tribunal did not accept that argument because in its view the notice under Section 274 of the new Act could not be held to be a notice in continuation of the notice under Section 28(3) of the old Act. The Tribunal observed that the notice under Section 28(3) of the old Act was under an Act which was no more in existence and thereforee that notice had lost its sanction and force. The Tribunal accordingly quashed the order of penalty as being had in law.
(7) On these facts the under-mentioned question of law was referred to this Court by the Tribunal at the instance of the Commissioner of Income-tax:-
'WHETHERon the facts and in the circumstances of the case, the order of penalty u/s. 271(l)(a) of the Income-tax Act, 1961 had been validly quashed as proceedings having not been commenced in accordance with law?'
In a series of cases decided by this Court beginning with Durga Timber Works v. Commissioner of Income-tax (79 Itr 63), Commissioner of Income-tax v. K. L. Bagga (I.T.R. No. 3 of 1968 decided on 9-12-1971) 0 and Commissioner of Income-tax v. Shri Sumer Chand (I.T.R. No. 12 of 1968 decided on 14-12-1971) this court has taken the view that that the proceedings were validly commenced. This however is a peculiar case. The notice under Section 28(3) of the old Act was followed by a notice under Section 274 of the new Act. In two recent decisions of the Punjab and Haryana High Court, and the High Court of Allahabad this question has been considered. In Commissioner of Income-tax, Punjab v. Bipan Lal Kuthiala 83 Itr 182 a Bench consisting of Prem Chand Pandit and S. S. Sandhawalia JJ. decided that a notice under Section 28(3) of the old Act could be deemed to have been issued under the corresponding provision of the new Act viz- Section 274 and the imposition of penalty was valid. In Bankey Lal Him Lot Hathras v. Commissioner of Income-tax (I.T.R. No. 592 of 1968 decided on 23-12-1971), a Division Bench of Allahabad High Court dealt with a similar question. That was a case when the Income-tax Officer recorded in the assessment order that 'question for penalty for concealment of income under Section 271/274 will also be taken', and the notice was issued under the new Act long after the completion of the assessment order. The High Court observed that 'In our opinion, the contention is without force. No such implication can be spelled out from Section 275. The section, in its essential content, is a provision prescribing the period of limitation for making a penalty order. It is not a provision prescribing the point of commencement of the penalty proceedings. It is concerned with the order which concludes the penalty proceedings when it refers to the completion of the proceedings in the course of which the penalty proceedings is commenced, in substance it identifies the former proceeding for the purpose of defining the point of time from which the period of limitation for making the penalty order must be computed.'
(8) In Navayuga Traders Gunnies Firm, Rajahmundry v. Commissioner of income-tax, A.P. : 79ITR519(AP) , a Division Bench of Andhra Pradesh High Court also took the same view. A great deal of support for this view may be derived from a decision of the Supreme Court in Commissioner of Income-tax, Madras & another v. S. v. Angidi Chettiar : 44ITR739(SC) where it was said by J. C. Shah J. (as he then was) that the power to impose penalty under Section 28 depends upon the satisfaction of the Icome-tax Officer in the course of proceedings under the Act (old Act); it cannot be exercised if he is not satisfied about the existence of conditions specified in clauses (a), (b) or before the proceedings are concluded. The proceedings to levy penalty has however not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before completion of the proceedings under the Act, and not the issue of a notice or initiation of any step for imposing penalty, is a condition for the exercise of the jurisdiction.'
(9) In Kishanlal v. Commissioner of income-tax, M.P. : 64ITR285(MP) , a Division Bench of Madhya Pradesh High Court held that an assessed is liable to penalty under Section 271(1) of the new Act for his defaults referred to in Section 28(1) of the old Act in respect of any assessment for the year ending on 31st of March 1961, or any earlier year, which is completed on or after 1st April, 1962.
(10) In the case of Jain Brothers and others v. Union of India and others : 77ITR107(SC) , Their Lordships of the Supreme Court while construing the language of Section 271 observed:-
'WEare further unable to agree that the language of section 271 does not warrant the taking of proceedings under that section when a default has been committed by failure to comply with a notice issued under section 22(2) of the Act of 1922. It is true that clause (a) of sub-section (1) of section 271 mentions the corresponding provisions of the Act of 1961 but that will not make the part relating to payment of penalty inapplicable once it is held that section 297(2)(g) governs the case. Both sections 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962, or any earlier year which is completed after first day of April, 1962, the proceedings have to be initiated and the penalty imposed in accordance with the provisions of section 271 of the Act of 1961. Thus the assessed would be liable to a penalty as provided by section 271(1) for the default mentioned in section 28(1) of the Act of 1922 if his case falls within the terms of section 297(2)(g).'
Their Lordships referred to an earlier decision of that court namely, Third Income-tax Officer, Mangalore v. Damodar Bhaf : 71ITR806(SC) . That was a decision with reference to Section 297(2)(j) of the new Act. According to that decision, in a case falling within that section in a proceeding for recovery of tax and penalty imposed under the Act of 1922, it is not required that all the sections of the new Act relating to recovery or collection should be literally applied, but only such of the Sections will apply as are appropriate in the particular case and subject, if necessary to suitable modifications. In other words, the procedure of the new Act will apply to cases contemplated by Section 297(2)(j) of the new Act mutates mutants. Similarly, the provisions of Section 271 of the Act of 1961 will apply mutates mutants to proceedings relating to penalty initiated in accordance with Section 297(2)(g) of that, Act.
(11) Shri G. C. Sharma, counsel for the Commissioner of Income-tax, submitted that the provisions of S. 297(2)(j) are identical with the provisions of Section 297(2)(g).
(12) Shri D. S. Randhawa, appearing for the assessed, submitted that in the instant case there was no default on the part of the assessed at all. Hie conceded that in accordance with the period prescribed by S. 22(2) of the old Act returns should have been filed within thirty-five days of the receipt of the notice. That return was due on 23-7-1958. As the return was not filed a re- minder dated 2-12-1959 was issued requiring the assessed to furnish its return within a week of the receipt of the same. But there was no response from the assessed. A notice under Section 28(3) of the old Act was thereforee issued on 18-4-1960 which was duly served on 21-4-1960 requiring the assessed to show cause as to why an order imposing penalty should not be made under Section 28(l)(a) of the said Act. A second reminder was issued on 13-12-1960. Ultimately the assessed filed the return on 18-2-1961 followed by two revised returns. The assessment was completed on 30-3-63 i. e. after 1-4-1962 and the penalty proceedings were to be completed under the new Act in view of Section 297(2)(g) of the new Act. Thereupon a penalty notice under Section 274 read with Section 271 of the new Act was issued on 17-2-1964 giving the assessed an opportunity to show cause on or before 28-2-1964. The Explanationn offered by the assessed was not found tenable. Not only did the assessed not file the return in time but it also failed to do so despite several reminders.
(13) It is well settled that a return can always be filed at any time before the assessment is made and since in the present case the assessment was completed on 20-3-1963, it could not be held that there was delay in filing the return. He relied upon a decision of the Supreme Court in Commissioner of Income-fax, Punjab v. Kulu Valley Transport Co. P. Ltd. : 77ITR518(SC) . That case has however nothing to do with the question arising for decision in the present case. The only question involved in that case was with regard to the loss returns filed by the assessed and their consequences on the question of carrying forward that loss under Section 24(2) of the old Act. The question was answered in the light of the provisions of sub-section (2A) of Section 22 which was added to Section 22 by Section 14 of Act No. 25 of 1953 with effect from April Ii, 1952. That sub-section deals with a case of a person who has not been served with a notice under sub-section (2) of Section 22. In the instant case the assessed was served with a notice under sub-Section (2) of Section 22 of the old Act. The default in his case thereforee occurred, unless the time was extended by the Income-tax Officer when he failed to file a return within the time prescribed by the notice. The case has thereforee no bearing on the question before us.
(14) In the circumstance the question has to be answered in favor of the Revenue. The assessed will also pay costs. Counsel's fee Rs. 300.00.