H.N. Seth, J.—At the instance of the Commissioner of Income Tax, the Income Tax Appellate Tribunal has referred the following question for the opinion of this court.

" Whether, on the facts and in the circumstances of the case, the penalty of Rs. 6,600 levied u/s 271(1)(c) of the Act of 1961 was rightly cancelled "

2. The assessee (individual) filed a return of his income for the assessment year 1956-57 on 19th of September, 1956. The assessment was completed on 21st of November, 1956. Subsequently, the Income Tax Officer found that the assessee did not include in his return the value of certain perquisites which were received by him from the Raymond Woollen Mills, Bombay, as its director. He, therefore, reopened the assessment u/s 147(a) of the Income Tax Act, 1961. In response to the notice issued by the Income Tax Officer, for proceedings u/s 147(a), the assessee submitted a return declaring his income for that assessment year as Rs. 94,280 as against the figure of Rs. 67,087 originally declared by him. The income subsequently returned included a sum of Rs. 7,472 as the value of perquisites received by the assessee in the year relevant to the assessment year 1956-57. Thereafter, the Income Tax Officer reassessed the income of the assessee. The Inspecting Assistant Commissioner then initiated proceedings against the assessee for imposing penalty u/s 271 of the 1961 Act. In response to the show cause notice, the assessee filed an explanation for not including the value of the perquisites in his income for the assessment year 1956-57 as originally returned by him. He also claimed that no penalty could be imposed under the provisions of the new Act for having filed inaccurate particulars of income in a return covered by the old Act, and that in the circumstances, the provisions of Section 271 did not apply to the facts of his case. The Inspecting Assistant Commissioner rejected the explanation given by the assessee and held that he clearly committed a default by not declaring the value of the perquisites in the original return, which was punishable u/s 271(1)(c) of the Act. He also held that in view of the provisions of Section 297(2)(g) of the new Act, he had ample jurisdiction to impose the penalty. After rejecting the various contentions raised by the assessee he imposed a penalty of Rs. 6,600.

3. The assessee went up in appeal before the Income Tax Appellate Tribunal and raised a number of grounds against the order of the Inspecting Assistant Commissioner. The Tribunal considered that the appeal could be decided on a preliminary point and that it was not necessary for it to deal with other arguments raised by the assessee for questioning the correctness of the order imposing penalty. According to it, in the case of Mayaram Durga Prasad v. Commissioner of Income Tax [1931] 5 I.T.C. 471 (All.), this court has held that in proceedings u/s 34 of the Income Tax Act (which is equivalent to Sections 147 and 148 of the new Act) it is not open to the Income Tax Officer to levy a penalty u/s 28(1) (which corresponds to Section 271 of the new Act), in respect of concealment of income in the original return. In the instant case, the penalty has been imposed in respect, of default that was committed in relation to the original assessment proceedings and, therefore, the Income Tax Officer had no jurisdiction to impose the penalty. In the result the appeal filed by the assessee was allowed by the Tribunal on this preliminary ground without going into other questions raised in the case and the penalty order was quashed.

4. At the instance of the Commissioner of Income Tax, the Tribunal has now referred the question, mentioned earlier, to this court for opinion.

5. According to the learned counsel for the Commissioner of Income Tax, the case of Mayaram Durga Prasad v. Commissioner of Income Tax does not lay down correct law. According to him it was open to the Income Tax Officer while proceeding u/s 34 of the 1922 Act to impose a penalty u/s 28(1)(c) of the Act in respect of a default committed in the original assessment proceedings. In this connection he relied upon the decision of the Patna High Court in the case of K.C. Mukherjee and Another Vs. Commissioner of Income Tax, wherein it was held that the Income Tax Officer is competent, in reassessment proceedings of any year u/s 34 of the Income Tax Act, to impose a penalty on any of the grounds open to him u/s 28(1) with respect to a default or concealment in the original assessment proceeding of that year. According to this decision, Section 28 does not require that the default or act of concealment should necessarily occur in the same proceeding in the course of which the penalty is imposed. The case of Mayaram Durga Prasad v. Commissioner of Income Tax decided by this court was cited before the Patna High Court which doubted its correctness and declined to follow it.

K.C. Mukherjee and Another Vs. Commissioner of Income Tax, wherein it was held that the Income Tax Officer is competent, in reassessment proceedings of any year u/s 34 of the Income Tax Act, to impose a penalty on any of the grounds open to him u/s 28(1) with respect to a default or concealment in the original assessment proceeding of that year. According to this decision, Section 28 does not require that the default or act of concealment should necessarily occur in the same proceeding in the course of which the penalty is imposed. The case of Mayaram Durga Prasad v. Commissioner of Income Tax decided by this court was cited before the Patna High Court which doubted its correctness and declined to follow it.

K.C. Mukherjee and Another Vs. Commissioner of Income Tax,

wherein it was held that the Income Tax Officer is competent, in reassessment proceedings of any year u/s 34 of the Income Tax Act, to impose a penalty on any of the grounds open to him u/s 28(1) with respect to a default or concealment in the original assessment proceeding of that year. According to this decision, Section 28 does not require that the default or act of concealment should necessarily occur in the same proceeding in the course of which the penalty is imposed. The case of Mayaram Durga Prasad v. Commissioner of Income Tax decided by this court was cited before the Patna High Court which doubted its correctness and declined to follow it.

wherein it was held that the Income Tax Officer is competent, in reassessment proceedings of any year u/s 34 of the Income Tax Act, to impose a penalty on any of the grounds open to him u/s 28(1) with respect to a default or concealment in the original assessment proceeding of that year. According to this decision, Section 28 does not require that the default or act of concealment should necessarily occur in the same proceeding in the course of which the penalty is imposed. The case of Mayaram Durga Prasad v. Commissioner of Income Tax decided by this court was cited before the Patna High Court which doubted its correctness and declined to follow it.

6. Learned counsel also relied on a decision of the Andhra Pradesh High Court in the case of COMMISSIONER OF Income Tax, HYDERABAD Vs. ANGARA SATYAM., wherein also a view similar to that taken by the Patna High Court in the case stated above was taken. Both the aforementioned cases make a reference to a decision of the Madras High Court in the case of C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS., . In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

COMMISSIONER OF Income Tax, HYDERABAD Vs. ANGARA SATYAM., wherein also a view similar to that taken by the Patna High Court in the case stated above was taken. Both the aforementioned cases make a reference to a decision of the Madras High Court in the case of C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS., . In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

COMMISSIONER OF Income Tax, HYDERABAD Vs. ANGARA SATYAM.,

wherein also a view similar to that taken by the Patna High Court in the case stated above was taken. Both the aforementioned cases make a reference to a decision of the Madras High Court in the case of C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS., . In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

wherein also a view similar to that taken by the Patna High Court in the case stated above was taken. Both the aforementioned cases make a reference to a decision of the Madras High Court in the case of C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS., . In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS., . In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

C. Vs. GOVINDARAJULU IYER v. COMMISSIONER OF Income Tax, MADRAS.,

. In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

. In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income Tax was dissented from and it was held that it was open to the Income Tax Officer to impose a penalty u/s 28(1) in proceedings u/s 34 in respect of a default committed in earlier proceedings.

7. Our attention was also invited to a decision of the Supreme Court in the case of N.A. Malbari and Bros. Vs. Commissioner of Income Tax, Bombay, . In this case the assessee-firm which carried on business at Surat and had a branch at Bangkok did not include the profits of the Bangkok business in its return for the assessment year 1951-52. It also did not comply with the notice of the Income Tax Officer for the production of the accounts relating to the Bangkok branch. The Income Tax Officer estimated the profits of the Bangkok branch at Rs. 37,500 and completed the assessment on 31st January, 1952. On the same day he initiated proceedings for the imposition of penalty for concealment of income. After considering the explanation given by the assessee he imposed a penalty of Rs. 20,000 by his order dated January 22, 1964. In the meantime the assessment proceedings for the next year were taken up. In those proceedings the assessee disclosed that in the assessment, year 1951-52, it made a profit of Rs. 1,25,520 from the Bangkok branch. The Income Tax Officer then issued a notice u/s 34 of the Indian Income Tax Act, 1922, in respect of the assessment year 1951-52. In response to that notice the assessee submitted a return disclosing his correct profits from the Bangkok branch in that year. Thereupon, on 8th April, 1954, the Income Tax Officer issued a second notice u/s 28(3) and levied a penalty amounting to Rs. 68,501 for concealment of income in the original return filed by the assessee". The Appellate Tribunal ultimately confirmed the order imposing penalty of Rs. 68,501. It was contended that the Income Tax Officer had no jurisdiction to impose the second penalty so long as the order imposing the first penalty stood, specially as he had knowledge of the concealment in respect of which the second penalty was imposed when the first order was made on January 22, 1954.

N.A. Malbari and Bros. Vs. Commissioner of Income Tax, Bombay, . In this case the assessee-firm which carried on business at Surat and had a branch at Bangkok did not include the profits of the Bangkok business in its return for the assessment year 1951-52. It also did not comply with the notice of the Income Tax Officer for the production of the accounts relating to the Bangkok branch. The Income Tax Officer estimated the profits of the Bangkok branch at Rs. 37,500 and completed the assessment on 31st January, 1952. On the same day he initiated proceedings for the imposition of penalty for concealment of income. After considering the explanation given by the assessee he imposed a penalty of Rs. 20,000 by his order dated January 22, 1964. In the meantime the assessment proceedings for the next year were taken up. In those proceedings the assessee disclosed that in the assessment, year 1951-52, it made a profit of Rs. 1,25,520 from the Bangkok branch. The Income Tax Officer then issued a notice u/s 34 of the Indian Income Tax Act, 1922, in respect of the assessment year 1951-52. In response to that notice the assessee submitted a return disclosing his correct profits from the Bangkok branch in that year. Thereupon, on 8th April, 1954, the Income Tax Officer issued a second notice u/s 28(3) and levied a penalty amounting to Rs. 68,501 for concealment of income in the original return filed by the assessee". The Appellate Tribunal ultimately confirmed the order imposing penalty of Rs. 68,501. It was contended that the Income Tax Officer had no jurisdiction to impose the second penalty so long as the order imposing the first penalty stood, specially as he had knowledge of the concealment in respect of which the second penalty was imposed when the first order was made on January 22, 1954.

N.A. Malbari and Bros. Vs. Commissioner of Income Tax, Bombay,

. In this case the assessee-firm which carried on business at Surat and had a branch at Bangkok did not include the profits of the Bangkok business in its return for the assessment year 1951-52. It also did not comply with the notice of the Income Tax Officer for the production of the accounts relating to the Bangkok branch. The Income Tax Officer estimated the profits of the Bangkok branch at Rs. 37,500 and completed the assessment on 31st January, 1952. On the same day he initiated proceedings for the imposition of penalty for concealment of income. After considering the explanation given by the assessee he imposed a penalty of Rs. 20,000 by his order dated January 22, 1964. In the meantime the assessment proceedings for the next year were taken up. In those proceedings the assessee disclosed that in the assessment, year 1951-52, it made a profit of Rs. 1,25,520 from the Bangkok branch. The Income Tax Officer then issued a notice u/s 34 of the Indian Income Tax Act, 1922, in respect of the assessment year 1951-52. In response to that notice the assessee submitted a return disclosing his correct profits from the Bangkok branch in that year. Thereupon, on 8th April, 1954, the Income Tax Officer issued a second notice u/s 28(3) and levied a penalty amounting to Rs. 68,501 for concealment of income in the original return filed by the assessee". The Appellate Tribunal ultimately confirmed the order imposing penalty of Rs. 68,501. It was contended that the Income Tax Officer had no jurisdiction to impose the second penalty so long as the order imposing the first penalty stood, specially as he had knowledge of the concealment in respect of which the second penalty was imposed when the first order was made on January 22, 1954.

. In this case the assessee-firm which carried on business at Surat and had a branch at Bangkok did not include the profits of the Bangkok business in its return for the assessment year 1951-52. It also did not comply with the notice of the Income Tax Officer for the production of the accounts relating to the Bangkok branch. The Income Tax Officer estimated the profits of the Bangkok branch at Rs. 37,500 and completed the assessment on 31st January, 1952. On the same day he initiated proceedings for the imposition of penalty for concealment of income. After considering the explanation given by the assessee he imposed a penalty of Rs. 20,000 by his order dated January 22, 1964. In the meantime the assessment proceedings for the next year were taken up. In those proceedings the assessee disclosed that in the assessment, year 1951-52, it made a profit of Rs. 1,25,520 from the Bangkok branch. The Income Tax Officer then issued a notice u/s 34 of the Indian Income Tax Act, 1922, in respect of the assessment year 1951-52. In response to that notice the assessee submitted a return disclosing his correct profits from the Bangkok branch in that year. Thereupon, on 8th April, 1954, the Income Tax Officer issued a second notice u/s 28(3) and levied a penalty amounting to Rs. 68,501 for concealment of income in the original return filed by the assessee". The Appellate Tribunal ultimately confirmed the order imposing penalty of Rs. 68,501. It was contended that the Income Tax Officer had no jurisdiction to impose the second penalty so long as the order imposing the first penalty stood, specially as he had knowledge of the concealment in respect of which the second penalty was imposed when the first order was made on January 22, 1954.

8. The Supreme Court repelled the contention raised by the assessee and held that penalty u/s 28 had to be co-related to the amount of tax which would have been evaded if the assessee had got away with the concealment and when the Income Tax Officer ascertained the true facts and realised that a much higher penalty could have been imposed he had jurisdiction to recall the earlier order imposing penalty on the basis of the estimated income and pass the order imposing higher penalty. It ultimately upheld the second order of penalty. In this case, reference was made to the case of C.V. Govindarajulu Iyer v. Commissioner of Income Tax decided by the Madras High Court in which, as stated earlier, a view different from Mayarams case decided by this court had been taken. According to the learned counsel for the revenue, the Supreme Court indicated the extent to which it did not fully agree with the decision of the Madras High Court. In other respects, including that in respect of the power of the Income Tax Officer to take proceedings u/s 28 of the Act, while proceeding u/s 34 of the Act, in respect of a default committed by the assessee in the original proceeding, was approved by the Supreme Court, He further contended that the fact that the Supreme Court upheld the imposition of a second penalty imposed by the Income Tax Officer in proceedings u/s 34, in respect of original proceedings, shows that the Supreme Court was inclined to the view that it is open to an Income Tax Officer to impose penalty u/s 28, in proceedings u/s 34, in respect of default committed earlier. He contends that in view of the decision of the Supreme Court, the law laid down by this court in the case of Mayaram Durga Prasad is no longer good law.

9. Learned counsel for the assessee, on the other hand, contended that in N.A. Malbary and Bros, case, the question whether the Income Tax Officer has jurisdiction to impose penalty u/s 28 in proceedings u/s 34, in respect of a default committed in original assessment proceedings, was neither raised nor considered. Moreover, so far as the case of Govindarajulu Iyer v. Commissioner of Income Tax is concerned it was referred to only in support of the proposition that when the first order of penalty was passed, if the Income Tax Officer was in possession of the full facts which would have justified the imposition of higher penalty and that in spite of this knowledge he made an order imposing lower penalty, he could not change that order subsequently. In this connection reliance was placed on the latter part of the following observations made by Rajamannar C, J. in C.V. Govindarajulus case:

".........we are inclined to the view that so long as the proceedings u/s 34 relate to the assessment for the same period as the original assessment, the Income Tax Officer will be competent to levy a penalty on any ground open to him u/s 28(1), even though it relates to the prior proceeding. There may be one possible qualification of his power and that is when the default or the act which is the basis of the imposition of penalty was within the knowledge of the officer who passed the final order in the prior proceeding and if that officer had failed to exercise his power u/s 28 during the course of the proceedings before him."

10. The Supreme Court observed that while making the latter part of the the observation, Rajamannar C.J. did not wish to state that qualification on the power of the Income Tax Officer as a proposition of law and that such observation was certainly not necessary for the purpose of the case before him. Their Lordships made it clear that they did not wish to be understood as subscribing to that view. Thereafter, the Supreme Court proceeded to decide the case even on the footing that the latter portion of the observation made by Rajamannar C.J. was correct. It held that in that case the default in respect of which the penalty was imposed was not in the knowledge of the Income Tax Officer when he made the final order in earlier proceedings. The Income Tax Officer was, therefore, competent to levy the penalty. Learned counsel contends that no party relied on the earlier part of the. observation made by Rajamannar C.J. and there is not a word in the judgment of the Supreme Court to indicate that those observations have been approved by it. In the circumstances, it cannot be urged that the decision in N. A. Malbary and Bros. case has the effect of overruling the decision in Mayarams case. According to him the decision in Mayarams case continues to be binding on this Division Bench.

11. As pointed out above, three High Courts have taken a view different from that taken in Mayarams case. Although in Malbary Bros. case, no direct reference has been made by the Supreme Court to Mayarams case, and the point involved therein was somewhat different, still the fact that the Supreme Court upheld the imposition of second penalty order u/s 28, in proceedings u/s 34 in respect of default in original proceedings, indicates that its decision is more in line with the decisions which have taken a view contrary to that taken in Mayarams case.

12. Learned counsel for the assessee further argued that apart from what was laid down in Mayarams case, it was not open to the Inspecting Assistant Commissioner to issue a notice for imposing penalty u/s 271 of the new Act, as the default in respect of which the penalty was imposed had been committed in respect of an assessment which had been completed under the old Act before 1st of April, 1962. He contended that in such circumstances the provisions of Section 297(2)(g) did not apply. Learned counsel for the department, on the other hand, contended that the proceedings under Sections 147 and 148 were undoubtedly completed after 1st day of April, 1962, and the proceedings for imposition of penalty in respect of the default committed by filing the original return inaccurately was a default in respect of the- assessment so made after 1st April, 1962 and, therefore, in spite of the repeal of the 1922 Act, the penalty proceedings could be taken under the new Act as provided in Section 297(2)(g). He further argued that before the Appellate Tribunal, validity of the penalty was questioned on several grounds. The Appellate Tribunal, however, proceeded to decide the same on a preliminary ground and did not go into other questions raised by the assessee. It said so in so many words that the other points raised in its order in appeal were not being decided by it.

13. The question now sought to be raised, therefore, does not arise from out of the appellate order of the Tribunal and this court cannot go into it.

14. Learned counsel for the assessee then relied on the Supreme Court case of Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., and urged that the question referred to this court is whether on the facts and in the circumstances of the case the penalty levied u/s 271(1)(c) was rightly cancelled. The contention that the Income Tax Officer had no jurisdiction to impose that penalty under the repealed Act and that Section 297(2)(g) fead no application to the facts of the case was fully within the scope of the question as framed by the Tribunal and was merely one of the aspects of the same question. Even though this argument might not have been considered by the Tribunal, it is open to the assessee to urge it before this court.

Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., and urged that the question referred to this court is whether on the facts and in the circumstances of the case the penalty levied u/s 271(1)(c) was rightly cancelled. The contention that the Income Tax Officer had no jurisdiction to impose that penalty under the repealed Act and that Section 297(2)(g) fead no application to the facts of the case was fully within the scope of the question as framed by the Tribunal and was merely one of the aspects of the same question. Even though this argument might not have been considered by the Tribunal, it is open to the assessee to urge it before this court.

Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd.,

and urged that the question referred to this court is whether on the facts and in the circumstances of the case the penalty levied u/s 271(1)(c) was rightly cancelled. The contention that the Income Tax Officer had no jurisdiction to impose that penalty under the repealed Act and that Section 297(2)(g) fead no application to the facts of the case was fully within the scope of the question as framed by the Tribunal and was merely one of the aspects of the same question. Even though this argument might not have been considered by the Tribunal, it is open to the assessee to urge it before this court.

and urged that the question referred to this court is whether on the facts and in the circumstances of the case the penalty levied u/s 271(1)(c) was rightly cancelled. The contention that the Income Tax Officer had no jurisdiction to impose that penalty under the repealed Act and that Section 297(2)(g) fead no application to the facts of the case was fully within the scope of the question as framed by the Tribunal and was merely one of the aspects of the same question. Even though this argument might not have been considered by the Tribunal, it is open to the assessee to urge it before this court.

15. After considering the arguments raised on behalf of the parties we are of opinion that the case of Mayaram Durga Prasad decided by a Division Bench of this court requires further consideration in the light of the decisions of other courts reported in C. V. Govindarajulu Iyer v. Commissioner of Income Tax, Commissioner of Income Tax v. Angara Satyam, K.C. Mukherjee v. Commissioner of Income Tax and the Supreme Court decision in N.A. Malbary and Bros. v. Commissioner of Income Tax.

16. Other points raised before us are also of considerable importance and are likely to affect a number of cases that may come up for decision before this court.

17. In the circumstances we feel that this Income Tax reference should be decided by a larger Bench. Accordingly, we direct that the papers of this case be laid before Honble the Chief Justice for constituting a larger Bench for hearing this case.

Gulati, J.

18. This is a reference u/s 256(1) of the Income Tax Act, 1961, inviting the opinion of this court on the following question of law:

" Whether, on the facts and in the circumstances of the case, the penalty of Rs. 6,600 levied u/s 271(1)(c) of the Act of 1961 was rightly cancelled."

19. The assessee, who is an individual, filed a return of his income for the assessment year 1956-57 on September 19, 1956. The assessment was completed on November 21, 1956. Thereafter, the Income Tax Officer discovered that the assessee did not include in the return the value of perquisites received by him from the Raymond Woollen Mills, Bombay, of which he was a director. In his opinion the case fell u/s 147(1)(a) of the Act and he, accordingly, reopened the assessment and issued a notice u/s 148 calling for a fresh return. The assessee complied with the notice and filed a fresh return and included therein a sum of Rs. 7,472 being the value of the perquisites. The Income Tax Officer, however, assessed the value of the perquisites at Rs. 16,067 and completed a supplementary assessment. The Inspecting Assistant Commissioner of Income Tax being of the opinion that the assessee had concealed his income or had furnished inadequate particulars thereof, initiated proceedings for imposition of penalty u/s 271(1)(c) of the Act. The assessee filed a written explanation and raised two contentions. His first contention was that as the original assessment proceedings had been completed under the Indian Income Tax Act of 1922, penalty could not be levied u/s 271(1)(c) of the Act of 1961. His second contention was that he was not aware of the amendment introduced by the Finance Act of 1965, whereby perquisites had become taxable for the first time and, as such, was not guilty of any concealment or deliberately furnishing inaccurate particulars thereof. The Inspecting Assistant Commissioner of Income Tax held that the penalty under the new Act could be imposed by virtue of the provisions of Section 297(2)(g) of the new Act and as regards the second contention he took the view that ignorance of law was no excuse. He accordingly imposed a penalty of Rs. 6,600 u/s 271(1)(c) of the Act. The assessee Appealed to the Income Tax Appellate Tribunal. He reiterated the contention that Section 271(1)(c) of the new Act did not apply. He appears to have raised some other contentions also but the Income Tax Appellate Tribunal chose to decide the appeal only on one ground, which it called a preliminary ground, namely, that no penalty could be imposed during reassessment proceedings in respect of a default committed during the original proceedings. This is what the Tribunal observed :

" Sri Vaish, who appears on behalf of the assessee-pointed out first that so far as the return filed u/s 148 of the Income Tax Act, 1961, was concerned, the assessee had himself duly shown the perquisites income therein and in that view the provisions of the new Act were not attracted. Sri Vaish also put forward other contentions before us but in our opinion it is not necessary to consider the other submissions as the matter can be disposed of on the preliminary point which in our opinion is implied in the submissions of Sri Vaish mentioned above though not expressed by him in so many words."

20. The Tribunal then went on to observe:

" It is now well-settled that if an assessee conceals his income or commits any other default in the course of proceedings u/s 34 of the old Act or Section 147 of the new Act to assess a past years income which has escaped tax, penalty would clearly be leviable u/s 28(1)(c) of the old Act or Section 271(1)(c) of the new Act. But, there is a difference of judicial opinion as to whether in a case where an assessee is guilty of no default in such proceedings u/s 34, which is equivalent to Sections 147 and 148 of the Act of 1961, a penalty may still be imposed in such proceedings in respect of the original default which resulted in the escape of income from tax in the relevant assessment year. The Allahabad High Court in Mayaram Durga Prasad v. Commissioner of Income Tax has taken a view that in the course o! proceedings u/s 34 which is equivalent to Sections 147 and 148 of the new Act in respect of the escaped income of a past year, no penalty can be imposed for the default of concealing income in the original assessment proceedings and in this connection the Allahabad High Court has also referred to its earlier judgment in Seth Kashinath Bagla v. Commissioner of Income Tax. In our opinion so long as the Allahabad decision stands we are bound by it and though the Allahabad High Courts judgment was given while interpreting the sections of the old Act of 1922, the relevant sections of the new Act being in pan materia with the corresponding sections of the new Act, the Allahabad decision in Mayaram Durga Prasad v. Commissioner of Income Tax will still apply."

21. The Income Tax Appellate Tribunal, therefore, cancelled the penalty and observed :

" In view of the view taken by us above, it is not necessary to consider the other submissions put forward on behalf of the assessee."

22. At the instance of the Commissioner of Income Tax the Tribunal has submitted a statement of the case to this court for its opinion on the question of law indicated above.

23. The reference came up for hearing before a Division Bench of this court of which one of us (Honble R. S. Pathak J.) was a member. Before the Bench some decisions were cited in which other High Courts have taken a view contrary to the view of the Allahabad High Court in the case of Mayaram Durga Prasad v. Commissioner of Income Tax. Reliance was also placed on a decision of the Supreme Court in N.A. Malbary and Bros. v. Commissioner of Income Tax and it was urged by the learned counsel for the department that the Supreme Court had rendered the ease of Mayaram Durga Prasad bad law. The Bench considered that although the point involved in the instant case was not directly in issue before the Supreme Court yet the Supreme Court had approved the decision of the Madras High Court which had taken a contrary view to the view of the Allahabad High Court. Then there were two other High Courts which had taken a contrary view. There was thus a conflict of judicial opinion and the Bench was of the opinion that the case of Mayaram Durga Prasad required reconsideration. That is how the matter has been referred to a Full Bench.

24. The learned counsel for the assessee, no doubt, contended that the law laid down by this court in Mayaram Durga Prasad was still good law. He, however, tried to support the order of the Tribunal on other grounds. One of the grounds on which he wanted to support the order of the Tribunal was that as the return on the basis of which the penalty was sought to be imposed was filed while the old Act was in force and the assessment had also been completed before the coming into force of the new Act, the provisions of Section 271(1)(c) of the new Act under which the penalty had been imposed were not applicable. The other contention which the learned counsel wanted to raise was that Section 271 did not in terms apply to the facts of the present case. Section 271 seeks to penalise the defaults committed under the new Act whereas the default, if any, in the present case was committed during the proceedings under the old Act. These are no doubt important questions of law but we are not inclined to permit the learned counsel to canvass these questions before us. The Tribunal, as we have already shown, decided the case on only one ground leaving all other questions raised by the assessee open. In oar opinion, it is the jurisdiction of the Tribunal in the first instance to give its decision on all the questions raised before it and it is, thereafter, that we can tender opinion on any question of law referred to us. We cannot bypass the jurisdiction of the Income Tax Appellate Tribunal by pronouncing upon those questions upon which the Tribunal had specifically reserved its opinion. The question of law which the learned counsel for the assessee is seeking to raise may be questions arising out of the order of the Tribunal but those questions have not been referred to us. The only question which the Tribunal intended to refer was as to whether penalty could be imposed in the instant case in view of the decision of this court in Mayaram Durga Prasad. We would, therefore, answer that question alone.

25. However, the question as framed by the Tribunal is very wide and may include the points which the learned counsel for the assessee is seeking to raise before us. That clearly was not the intention of the Tribunal. We would, therefore, reframe the question as under :

" Whether, on the facts and circumstances of the case, the penalty of Rs. 6,600 levied u/s 271(1)(c) of the Income Tax Act, 1961, was rightly cancelled by the Income Tax Appellate Tribunal on the ground that no such penalty could be imposed during the course of proceedings u/s 148 in respect of a concealment committed during the course of original assessment proceedings "

26. Now the facts of the case of Mayaram Durga Prasad were briefly these. The assessee had filed a return of its income for the assessment year 1929-30 showing its total income as Rs. 2,650. The return was accepted and assessment was made accordingly. Later on it was discovered that the assessee had not shown its true income. Action was taken u/s 34 and a fresh return was called for. The assessee filed a fresh return showing income of Rs. 38,328. This return was also accepted. Being of the opinion that the original return was false, the Income Tax Officer inflicted a penalty of Rs. 2,900 on the assessee. A Division Bench of this court held that Section 28(1)(c) was not applicable and the penalty levied was illegal. One of the grounds upon which the penalty was held to be illegal was that proceedings u/s 34 were separate proceedings and in those proceedings penalty could not be imposed in respect of concealment in the original return. This is the ground upon which the Income Tax Appellate Tribunal in the present case has cancelled the penalty. It is necessary, therefore, to examine as to how far this ground is valid.

27. It is not disputed that the provisions contained in Section 271(1)(c) of the new Act are in pari materia with the provisions contained in Section 28(1)(c) of the old Act so far as the question involved in the present case is concerned. Section 271(1)(c), so far as material for our purpose, reads:

"271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the Income Tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person-- ....

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty,-- . . .

(iii) in the case referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income."

28. There are two requirements of this provision which must be satisfied before a penalty can be imposed. Firstly, the Income Tax Officer must be satisfied that the assessee has concealed his income or has deliberately furnished inaccurate particulars thereof. Secondly, the satisfaction of the Income Tax Officer must be arrived at " in the course of any proceedings under the Act". The first requirement presents no difficulty. The Income Tax Officer has to record a finding that the assessee has concealed his income or has deliberately furnished inaccurate particulars thereof. That would essentially be a finding of fact and in the absence of such a finding no penalty is leviable even if the return is incorrect. The second requirement, however, presents some difficulty. What is the meaning of the expression " during the course of any proceedings ". The expression is very widely worded but it has its obvious limitations. "Any proceedings" does not mean proceedings relating to other assessees or proceedings relating to other assessment years. The satisfaction of the Income Tax Officer must be arrived at in the course of proceedings relating to the assessee himself and to the assessment year in question. In Pt. Hazari Lal, Hatia Kanpur Vs. Income Tax Officer, Dist. II (ii), , this court, while interpreting the second proviso to Section 34(3) of the old Income Tax Act, held that the appellate authority while dealing with an appeal relating to a particular assessment year could not give a finding in respect of another assessment year. Similarly, in S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others, the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

Pt. Hazari Lal, Hatia Kanpur Vs. Income Tax Officer, Dist. II (ii), , this court, while interpreting the second proviso to Section 34(3) of the old Income Tax Act, held that the appellate authority while dealing with an appeal relating to a particular assessment year could not give a finding in respect of another assessment year. Similarly, in S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others, the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

Pt. Hazari Lal, Hatia Kanpur Vs. Income Tax Officer, Dist. II (ii),

, this court, while interpreting the second proviso to Section 34(3) of the old Income Tax Act, held that the appellate authority while dealing with an appeal relating to a particular assessment year could not give a finding in respect of another assessment year. Similarly, in S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others, the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

, this court, while interpreting the second proviso to Section 34(3) of the old Income Tax Act, held that the appellate authority while dealing with an appeal relating to a particular assessment year could not give a finding in respect of another assessment year. Similarly, in S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others, the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others, the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

S.C. Prashar, Income Tax Officer, Market Ward, Bombay and Another Vs. Vasantsen Dwarkadas and Others,

the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

the Supreme Court has held that in the proceeding in respect of a particular assessee no finding or direction could be given in respect of another assessee and the second proviso to Section 34(3) which permitted such a course was held to be ultra vires. The reason underlying these decisions is that according to the Scheme of the Income Tax Act the case of every assessee is separate and distinct from the case of other assessees and likewise every assessment year is a separate period of assessment. It follows therefore, that the satisfaction of the Income Tax Officer for the purposes of the imposition of penalty u/s 271(1)(c) must be arrived at in the course of proceeding relating to the assessee and such proceeding must relate to the assessment year in respect of which penalty is sought to be imposed.

29. Now the proceeding during which the penalty may be imposed would ordinarily be the assessment proceeding when the authority seeking to levy the penalty is the Income Tax Officer or the Inspecting Assistant Commissioner of Income Tax when the case falls u/s 274(2) of the new Act. The question is as to whether a penalty can be imposed in proceedings u/s 148 for a default committed not during those proceedings but during the original proceedings. It may be mentioned here that Sections 147 and 148 of the new Act and Section 34 of the old Act are in pari materia in so far as the controversy involved in the present case is concerned and, therefore, hereafter we shall refer, wherever necessary, to Section 34 of the old Act only. In Mayaram Durga Prasads case, this court took the view that proceedings u/s 34 were distinct proceedings and penalty could not be imposed during those proceedings for a default committed during the original proceedings which had come to an end.

30. It is true that proceedings u/s 34 are in some way proceedings distinct from the original proceedings. Where reassessment is made u/s 34, the Income Tax Officers jurisdiction is confined to the income which has escaped and does not extend to revision, reopening or reconsidering the whole assessment: See Kashinath Bagla v. Commissioner of Income Tax, [1930] 4 ITR 472 (All.) and Kevaldas Ranchhodddas Vs. Commissioner of Income Tax, Likewise, in proceedings u/s 34, the assessee cannot register questions which have been decided in the original assessment. The original assessment cannot be challenged in appeal against an assessment order u/s 34: See Commissioner of Income Tax, Bombay City Vs. A.D. Shroff, . But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

Kevaldas Ranchhodddas Vs. Commissioner of Income Tax, Likewise, in proceedings u/s 34, the assessee cannot register questions which have been decided in the original assessment. The original assessment cannot be challenged in appeal against an assessment order u/s 34: See Commissioner of Income Tax, Bombay City Vs. A.D. Shroff, . But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

Kevaldas Ranchhodddas Vs. Commissioner of Income Tax,

Likewise, in proceedings u/s 34, the assessee cannot register questions which have been decided in the original assessment. The original assessment cannot be challenged in appeal against an assessment order u/s 34: See Commissioner of Income Tax, Bombay City Vs. A.D. Shroff, . But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

Likewise, in proceedings u/s 34, the assessee cannot register questions which have been decided in the original assessment. The original assessment cannot be challenged in appeal against an assessment order u/s 34: See Commissioner of Income Tax, Bombay City Vs. A.D. Shroff, . But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

Commissioner of Income Tax, Bombay City Vs. A.D. Shroff, . But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

Commissioner of Income Tax, Bombay City Vs. A.D. Shroff,

. But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

. But, the proceedings u/s 34 even though not identical with the original assessment proceedings are nevertheless proceedings relating to the same assessment year. The purpose of the proceedings u/s 34 is to bring to tax the income which should have been assessed during the original assessment proceedings. A notice u/s 34 requires an assessee to file a fresh return but that return is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally. An assessment which is made in consequence of a notice u/s 34 is also a revised assessment and proceeds to compute the total income for that assessment year. The total income so computed is subject to tax and the rate at which the tax is levied is the rate applicable to the total income thus determined including the income originally assessed. Thus, the proceedings u/s 34 are supplementary to the original assessment proceedings and the assessment u/s 34 is a supplementary assessment, which are, in fact, an integral part of the entire assessment proceedings for the assessment year in question. In this view of the matter it is not correct to say that proceedings u/s 34 are unrelated to the original assessment proceedings so that no penalty can be levied in proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

31. In the case of Mayaram Durga Prasad it was "held that the use of the present perfect tense in the expression "has concealed the particulars of his income or has furnished inadequate particulars of such income" suggests that the default must relate to the assessment u/s 34. In our opinion nothing turns upon the tense of the verb. The Andhra Pradesh High Court in Commissioner of Income Tax v. Angara Satyam has dealt with this aspect elaborately. Quoting from a book on English Grammar by Wren and Martin it has been observed that the present perfect is also used instead of past tense to represent a past action as continuing to the present. We, respectfully, agree with this observation. The expression " has concealed the particulars of his income " would, in our opinion govern a situation where such particulars had been concealed in the original proceedings which had already terminated. Yet another ground which prevailed with the court in the case of Mayaram Durga Prasad was that if the Income Tax Officer had accepted the original return no penalty could be imposed in respect of the concealment in that return. Now, it is true that before a penalty can be imposed the return must be found to be incorrect but such a finding need not necessarily be given during the original assessment proceedings. In fact, such a finding cannot be given where the concealment is not detected during the course of the original assessment proceedings. If that view is accepted it will not be possible to levy penalty in cases where concealment leads to escapement of income. That would amount to a premium in favour of an assessee who succeeds in concealment of his income as against an assessee who merely mikes an attempt at concealment but is detected before the assessment is finalised. That could not have been the intention of the legislature. It must be remembered that a finding with regard to the correctness or otherwise of a return arrived at during the assessment proceedings is not final but is always open to review u/s 35 or Section 34. When an assessment is reopened u/s 34, the finding with regard to the original return stands reopened and the ultimate finding as to whether a return is correct or not is to be found in the order passed u/s 34. The ultimate finding recorded by the Income Tax Officer in the case of Mayaram Durga Prasad was that the original return was incorrect even though it was believed to be correct when the original assessment was made.

32. We are, therefore, of the opinion that penalty can be levied during the course of proceedings u/s 34 in respect of a default committed during the original assessment proceedings, and the case of Mayaram Durga Prasad does not lay down the law correctly. The same view has been taken by the Madras High Court in C.V. Govindarajulu Iyer v. Commissioner of Income Tax, by the Andhra Pradesh High Court in Commissioner of Income Tax v. Angara Satyam, by the Patna High Court in K. C. Mukherjee v. Commissioner of Income Tax and by the Bombay High Court in Malbary and Bros. Vs. Commissioner of Income Tax, Bombay North, .

Malbary and Bros. Vs. Commissioner of Income Tax, Bombay North, .

Malbary and Bros. Vs. Commissioner of Income Tax, Bombay North,

.

.

33. Coming now to the decision of the Supreme Court in N A. Malbary & Bros. v. Commissioner of Income Tax, we find that the precise question which we have been called upon to decide in this case was not raised before the Supreme Court, although it was raised before the Bombay High Court whose judgment was under appeal. However, the Supreme Court has approved the following observation of the Madras High Court in the case of C. V. Govindarajulu Iyer v. Commissioner of income tax:

"...so long as the proceedings u/s 34 relate to the assessment for the same period as the original assessment, the Income Tax Officer will be competent to levy a penalty on any ground open to him u/s 28(1), even though it relates to the prior proceeding. "

34. Learned counsel fur the assessee says that the Supreme Court case can be distinguished, firstly, because the question arising in the instant case was not raised before the Supreme Court and, secondly, the Income Tax Officer in that case had recorded his satisfaction during the course of original assessment when he levied the first penalty. There is no doubt that the facts of that case are slightly different from the facts of the present case and it may be possible to distinguish that case. However, it is not necessary to pursue this point further because we have independently come to the conclusion that penalty can be imposed during the course of proceedings u/s 34 in respect of a default committed during the original assessment proceedings.

35. For the reasons stated above, we answer the question as reframed by us in the negative, in favour of the department and against the assessee. As the question involved was not free from difficulty, we leave the parties to bear their own costs.