P.K. Banerjee, J.
1. This rule is directed against a notice under Section 274 read with Section 271 of the Income-tax Act, calling upon the petitioner to show cause why an order imposing a penalty should not be made, for the petitioner without reasonable cause failed to furnish the return which the petitioner is required to furnish by a notice given under Section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922, or which the petitioner is required to furnish under Section 139(1) or by a notice given under Section 139(2)/148 of the Income-tax Act, 1961, or have without reasonable cause failed to furnish it within the time allowed and in the manner required by the said Section 139(1) or by another notice asking the petitioner why a penalty should not be imposed for failure to pay the advance tax as required under the law. The petitioner is a partnership firm. The petitioner applied for registration of the firm but it was not allowed. The petitioner appealed against the order of refusal to grant registration under the provisions of the Income-tax Act. The said appeal, it is alleged, is still pending. For the assessment year 1963-64, respondent No. 1 assessed the total income of the petitioner at a sum of Rs. 6,56,260 during the year as a non-registered firm. Thereafter, by a subsequent order under Section 154 of the said Act, respondent No. 1 rectified the original order of assessment and enhanced the figure of the total income from Rs. 6,56,260 to Rs. 6,66,760. The petitioner stated that the time for furnishing the return for the assessment year 1963-64 was 30th June, 1963. Thereafter, the petitioner made an application in the prescribed Form No. VI on 11th June, 1963, for extension of the said period to file the return but, it is alleged, that no communication was made to the petitioner allowing any extension. The petitioner, however, filed the return on 23rd May, 1967, showing an income of Rs. 1,17,217.50. Thereafter, on 14th September, 1967, a revised return was filed showing an income of Rs. 38,208.53. It is alleged that because of. the alleged default for not filing the return within the time, that is, before 31st December, 1963, the Income-tax Officer charged penal interest at the rate of 6% under Section 139(1)(b)(iii) of the Act. The penal interest, it is alleged, charged amounted to Rs. 87,020. Thereafter, the original order of assessment for the said year was passed. The petitioner stated that the penal interest under the provision of Section 139(1)(b)(iii) was charged on the petitioner for the defaulter-assessee not as a registered firm but on the hypothetical amount assessed on the income of the defaulter-assessee as it was an unregistered firm. Thereafter, the petitioner was served with a notice under Section 274 read with Section 271 of the Act for the penalty proceedings. Being aggrieved by the said notices, the petitioner moved this court and obtained the present rule.
2. Affidavit has been filed by the respondent stating inter alia, that the petitioner applied for extension of time to file the return after 30th September, 1969. Thereafter, no application was made. On the application by Form No. VI the petitioner was given extension till 30th September, 1964, as prayed for but no further time was asked for. The petitioner, it is alleged, became a defaulter within the meaning of Section 271(1)(b) of the Act after 30th September, 1964. It is further alleged that the interest was charged, however, with effect from 1st January, 1964, from the petitioner on the assessed amount under the proviso to Section 139. It is further stated that the said amount of interest cannot be said to be a penal interest, but is only a liability under the statute itself. It is denied that the charging of interest under Section 215 and initiation of penalty proceedings under Section 273 of the Act will be a case of double jeopardy. In reply to the affidavit-in-opposition the petitioner reiterated the statement and contention made in the petition.
3. Mr. Sanjay Bhattacharjee on behalf of the petitioner contended that Section 139 of the Income-tax Act, 1961, is similarly worded as Section 22 of the Indian Income-tax Act, 1922. It is argued by Mr. Bhattacharjee that Section 139(1) of the 1961 Act is identically worded as Section 22(1) of the 1922 Act. Section 139(2) corresponds to 22(2) of the old Act, and Section 139(3) to 22(2A) of the old Act Section 139(4), (5), (6) are more or less similar to Section 22(3) and (5) of the old Act. Mr. Sanjay Bhattacharjee argued that Section 22(3) is nothing but a proviso to Section 22(1) and (2) and as such if the return is filed before the assessment is completed then it cannot be said that the return was filed out of time; and, therefore, the notice under Section 148 is without jurisdiction. Mr. Bhattacharjee relied on the cases, Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd. : 77ITR518(SC) and S.C. Prashar v. Vasantsen Dwarkadas : 49ITR1(SC) . Mr. Bhattacharjee further contended that if the penal interest is levied under Section 139, the respondent cannot initiate proceedings under Section 271 for penalty inasmuch as it amounts to double jeopardy.
4. Mr. Sen Gupta on behalf of the revenue contended that the assessment proceeding and penalty proceeding are parallel proceedings. The argument of Mr. Sen Gupta is that the interest on the assessed amount is not penal interest. The interest is to be paid by the petitioner because he did not file the return within the time allowed by the Income-tax Officer under Section 139(1) or (2) and a penalty proceeding is attracted if the assessee does not file a return within the time allowed under Sub-sections (1) and (2) by the Income-tax Officer. If return has not been filed within the time allowed by the Income-tax Officer the penalty proceeding under Section 271 can be initiated. Mr. Sen Gupta referred to Gursahai Saigal v. Commissioner of Income-tax : 48ITR1(Bom) and Jain brothers v. Union of India : 77ITR107(SC) in support of his contention.
5. Section 22 of the old Act of 1922 and Section 139 in so far as subsection (1) of Section 5 is concerned is more or less similarly worded. It appears that in Kulu Valley Transport case referred to by Mr. Bhattacharjee the assessee filed the return under Section 22(3) of the old Act, that is, before the assessment order was made. In Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd. the facts are that in January, 1956, the respondent filed voluntary returns disclosing loss for the assessment years 1953-54 and 1954-55, and the question raised in that case is whether the loss had to be determined under Section 24(2) of the Indian Income-tax Act, 1922, though the returns were not filed within the time specified in the general notice under Section 22(1) and the time was not extended by the Income-tax Officer. It is also clear from the facts that no notice had been served on the assessee under Section 22(2) of the Act. In deciding the point raised, the Supreme Court held at page 529 as follows :
' Now, the question which was submitted for the opinion of the High Court, in the present case, consisted of two parts, viz., (1) whether the loss returned by the assessee for the assessment years in question was required in law to be determined by the Income-tax Officer, and (2) whether those losses could be carried forward after being set off under Section 24(2) of the Act. The first part of the question stood concluded by the decision of this court in Ranchhoddas Karsondas case : 36ITR569(SC) . The Income-tax Officer could not have ignored the return and had to determine those losses. Section 24(2) confers the benefit of losses being set off and carried forward and there is no provision in Section 22 under which losses have to be determined for the purpose of Section 24(2). The question which immediately arises is whether Section 22(2A) places any limitation on that right. This sub-section which has been reproduced before simply says that in order to get the benefit of Section 24(2) the assessee must submit his loss return within the time specified by Section 22(1). That provision must be read with Section 22(3) for the purpose of determining the time within which a return has to be submitted. It can well be said that Section 22(3) is merely a proviso to Section 22( I). Thus, a return submitted at any time before the assessment is made is a valid return. In considering whether a return made is within time Sub-section (1) of Section 22 must be read along with Sub-section (3) of that section. A return, whether it is a return of income, profits or gains or of loss, must be considered as having been made within the time prescribed if it is made within the time specified in Section 22(3). In other words, if Section 22(3) is complied with, Section 22(1) also must be held to have been complied with. It compliance has been made with the latter provision the requirements of Section 22(2A) would stand satisfied. '
6. Mr. Bhattacharjee, on the basis of this case contended that if, therefore, the return is filed under Section 139 before the assessment is made, then initiation of proceeding under Section 271 cannot at all be made because it cannot be said that the assessee has failed to file the return under Section 139(1) of the Act, as Section 139(4) and (5) is only a proviso to Section 139(1) and (2). In my opinion, the Supreme Court does not come to that conclusion whatsoever in so far as the penalty proceeding is concerned. It is quite clear that under Section 271 of the new Act the penalty proceeding can be initiated on the petitioner's failure to file the return within the. time allowed under Section 139(1) and 139(2) of, the Act. Under Section 139(1) if the assessee makes an application in Form VI, the Income-tax Officer may extend the date for furnishing the return but he can extend the said time up to 31st of December of the year without charging any interest and, beyond that, the interest on the assessed amount will be under the statute itself leviable. In the matter of penalty proceeding, if the Income-tax Officer has given extension of time, the penalty proceeding cannot be initiated but if no such extension is made or if the return has been; filed beyond the time allowed by the Income-tax Officer, the penalty proceeding can be initiated by the Income-tax Officer and it cannot be said that they are without jurisdiction. The view I take, in my opinion, is supported by the principle laid down by the Supreme Court in the case of Gursahai Saigal v. Commissioner of Income-tax. It is true that in Gursahai Saigal v. Commissioner of Income-tax, the Supreme Court was only considering the provision of Section 18 of the old Act. It has been stated that under Section 18A if an assessee fails to submit the return, by Section 18A(3) of the Indian Income-tax Act, 1922, the interest under Section 18A(8) is chargeable. Under Sub-section (8) of Section 18A the interest, for which liability is created, has to be calculated by a certain manner provided. In dealing with the said provision and in particular Sub-sections (6) and (9), the Supreme Court held that the penalty under Sub-section (9) of Section 18A is an addition to the liability which is not a penalty and is leviable under Sub-section (6) to Section 18A. In my opinion that principle applies in all force to the facts of the present case. If the assessee did not apply under Section 139(1) for extension of time to the Income-tax Officer and unless the Income-tax Officer extends the time on such application the interest will be charged. The Income-tax Officer has power to extend the time without charging any interest up to 31st December of the year but beyond that period, the Income-tax Officer has no power to exempt the assessee from paying interest in respect of the assessed amount. The said provision is a provision for calculation of the interest and it cannot be said to be a penal interest as it has been argued by Mr. Bhattacharjee. the penalty proceeding is a quite different proceeding. The condition precedent for the initiation of penalty proceeding is that the petitioner did not file the return within the time allowed under Section 139(1). Under Section 139(1) and (2), even if an assessee did not file the return within the time granted by the Income-tax Officer, but filed the return before the assessment proceeding came to a conclusion under Section 143(3), it cannot be said that he has filed the return within the time allowed by the Income-tax Officer, by Section 139(1) or (2). The case of Commissioner of Income-tax v. Kulu Valley Transport Co. P. Ltd.2 does not go to the extent that the penalty proceeding cannot be initiated if return is filed beforeassessment. It only held that the assessee can before the assessment is completed file the return but the said case cannot be said to have laid down that Section 271 proceeding cannot be taken if such return is filed before assessment is completed.
7. Mr. Bhattacharjee's next argument is that as soon as the penal interest is levied on the assessed amount, a proceeding under Section 271 cannot be taken. I have already held that interest under Section 139 is a liability under Section 139, proviso (iii), and that it is not by way of penalty in the real sense of the term as has been held by the Supreme Court in Gursahai Saigal v. Commissioner of Income-tax. The legislature has made a distinction about the interest which is to be paid under the statute itself under Section 139, proviso (iii), and the penalty proceeding under Section 271 of the Act. Section 271 of the Act only comes into play if the income-tax authority is satisfied that without reasonable cause the assessee has failed to furnish return of the total income which the assessee is required to furnish under Section 139(1) or (2) or under Section 148 or has failed to file it within the time allowed and in the manner required by Sub-section (1) of Section 139. It is quite clear that failure to furnish return within the extended time means the time allowed by the Income-tax Officer and that time can be allowed only on an application by the assessee concerned. It appears in the facts of this case that an application was made by the petitioner in Form No. VI and time was allowed up to 30th December, 1964, but the assessee filed the return some time in 1967.
8. In the circumstances, therefore, in my opinion, the notice under Section 271 cannot be said to be without jurisdiction or prima facie invalid.
9. The rule is, therefore, discharged. All interim orders are vacated. There will be no order as to costs.