M.R. Sharma. J.
1. The Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, has referred the following question of law to us for our opinion:
' Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that no default within the meaning of Section 271(1)(a) of the Income-tax Act, 1961, was committed by the assessee and that being so, no penalty was imposable under Section 271(1)(i) of the Income-tax Act, 1961.?'
2. The assessee was a partnership firm. It was reconstituted with effect from March 1, 1972. For the assessment year 1972-73, the assessee filed a return for the period March 1, 1972, to March 31, 1972, on November 9, 1972. Another return was filed by the assessee for the earlier portion of the assessment year on March 7, 1974. In these two returns, the assessee declared its income for the two periods at Rs. 2,038 and Rs. 61,927, respectively. The ITO considered that since there was only a change in the constitution of the firm, the assessment was to be framed for the entire period from April 1, 1971, to March 31, 1972. Vide his order dated March 25, 1975, he framed an assessment on an income of Rs. 1,58,289.
2. The assessee went up in appeal. The AAC reduced the total income to Rs. 98,481.
3. During the course of assessment proceedings, the ITO had issued notices under Section 274 read with Section 271(1)(a) of the I.T. Act, 1961 (hereinafter called 'the Act'), to the assessee, requiring it to show cause as to why penalty for filing a belated return be not imposed on it. The assessee submitted a reply on June 30, 1976, stating therein that on account of serious differences and dissensions amongst the partners, the books of account were given to the arbitrator, that the assessee was not fully aware of its responsibility to file the return and that it filed applications dated July 31, 1972, and September 30, 1972, seeking extension of time for filing the returns up to the end of September, 1972, and end of November, 1972, respectively. The ITO did not accept this explanation and observed :
'The assessee's default is clear and deliberate. The fact of filing of the proceedings in the cases of the partners, when the return for the firm had not been filed and the only source of income of the partners was share from the firm, has no bearing on this case. Under the circumstances, I hold the assessee to have failed to file the return without any reasonable cause and impose a penalty of Rs. 18,223 worked out at36% from September 1, 1972, to February 28, 1974, on the tax payable in the status of unregistered firm as reduced by an amount of Rs. 7,870 paid under Section 210. Penalty imposed, Rs. 18,223.'
4. The assessee went up in appeal which was dismissed by the AAC with the following observations:
' As to the complaint filed before the S. S. P. neither any follow-up action has been taken by the partners nor the other partner is aware of it. On my specific query as to notice received by the partners from the arbitrators regarding the attendance of proceedings, the assessee showed its helplessness to place any such evidence before me. Thus, in the absence of any evidence to show that the books of account were lying with the arbitrator and that too till February, 1974, which is a long period, I am unable to accept the assessee's version. Coming to the counsel's plea that as the return for the latter period was filed there was no default, I am afraid that the plea is devoid of any force. In my opinion the return filed for the period from March 1, 1972, to March 31, 1972, was not a valid return. As there was a change in the constitution of the firm, as admitted by the assessee, the return should have been filed for the entire period and not for a broken period. Considering these facts, the penalty having been rightly levied is confirmed.'
5. Feeling still dissatisfied, the assessee filed a second appeal before the Income-tax Appellate Tribunal, which was allowed. The Tribunal observed:
' Before us, Shri G.C. Sharma, counsel for the assessee, argued that the case was not seen by the authorities below in right perspective. He urges that the fact is that the return had been filed within the extended period. Shri Sharma argues that the filing of an invalid return would not give rise to a default within the meaning of Section 271(1)(a). In his opinion, failure on the part of the (sic) of filing a return constitutes a default within the meaning of Section 271(1)(a) and when a return though invalid is filed within time, it cannot be said that a default has arisen under Section 271(1)(a). We agree with the submission of Shri Sharma. The fact is that a return was filed by the assessee within the extended time. The assessee sought extension up to November end, 1972, and the return was filed on November 9; 1972. The Income-tax Officer himself took the view that the assessee should have filed a single return, inasmuch as there was merely a change in the constitution of the firm and there was no dissolution of the firm on February 28, 1972. This being so, the return filed by the assessee was incomplete with reference to the time and income, both. Neither the total income of the whole year was shown nor the full period was written in the return dated November 9, 1972. When according to the Income-tax Officer himself the whole accounting period constituted one unit, as there was merely a change in the constitution of the firm, he was not justified to split the accounting period for the purpose of filing the return. Charge against the assessee is that the return was not filed within the time for the first period. In the circumstances of the case, there is no question of first period or second period. The assessee was required to file a single return showing total income of the whole accounting year. Instead of doing this, the assessee showed the part income of the part period. This being so, at the most, the assessee can be charged for filing an incomplete and incorrect return, but this charge is not sufficient to give rise to the default envisaged by Section 271(1)(a). When an incorrect and incomplete return was filed by the assessee, the duty of the Income-tax Officer was to make investigation for determining the correct income and proper assessment. We, therefore, hold that default not being there within the meaning of Section 271(1)(a), no penalty can be levied.'
6. This time the revenue felt dissatisfied and succeeded in getting the case stated to us for our opinion.
7. The main thing to be seen is whether the assessee had committed any default or not. The relevant portion of Section 271(1)(a) of the Act reads as under:
' 271. (1) If the Income-tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals), in the course of any proceedings under this Act, is satisfied that any person-
(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be.'
8. The important words of this section are ' within the time allowed and in the manner required by Sub-section (1) of Section 139......' Section 139(1)reads as under:
' 139. (1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed-
(a) in the case of every person whose total income, or the total income of any other person in respect of which he is assessable under this Act, includes any income from business or profession, before the expiry of four months from the end of the previous year or where there is more than one previous year from the end of the previous year which expired last before the commencement of the assessment year, or before the 30th day of June of the assessment year, whichever is later ;
(b) in the case of every other person, before the 30th day of June of the assessment year:
Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return, and, notwithstanding that the date is so extended, interest shall be chargeable in accordance with the provisions of Sub-section (8).'
9. A plain reading of this section shows that if the total income of a person during the previous year was taxable he was under an obligation to furnish a return of his income in proper form. The phrase ' total income ' has been defined in Section 2(45) of the Act as under:
' ' Total income' means the total amount of income referred to in Section 5, computed in the manner laid down in this Act.'
10. The phrase 'previous year' has been defined in Section 3(1)(a) of the Act as under :
'3. (1) For the purposes of this Act, ' previous year ' means-
(a) the financial year immediately preceding the assessment year.'
11. In short, the return envisaged under Section 139(1) of the Act is a return of total income earned by an assessee for the financial year immediately preceding the assessment year. If the return filed by it does not comply with all these requirements, it would be no return in the eye of law. Once this conclusion is arrived at, it becomes obvious that an assessee who deliberately files a return for a part of a year, which, does not disclose his income for the entire financial year prior to the assessment year, would be deemed to have failed to furnish a return within the meaning of Section 271(1)(a) of the Act. We would like to make it clear that we are only referring to the nature of return envisaged to be filed and are not adverting to the fact whether there was any reasonable cause or not for its non-filing. All that we need to observe is that in such a situation the Tribunals below are to take it that in the eye of law no return has been filed.
12. The learned Tribunal appears to have been swayed by the consideration that when an invalid return is filed, it cannot be said that a default has arisen. In this connection, it suffices to mention that the mere invalidity of a return in minor particulars is something different from a return which contravenes the fundamentals of Section 139(1) of the Act.
13. We, therefore, allow this petition and answer the question referred to us in the negative, i. e., in favour of the revenue and against the assessee. We might also add that the Tribunal did not advert to the plea raised on behalf of the assessee that there was some reasonable cause for late filing of the return. It perhaps did not consider it necessary to give a finding on this point on the ground that the legal issue had been decided against the revenue.
14. Furthermore, the ITO proceeded against the assessee on the ground that there was delay in filing the return. Shri Sharma, the learned counsel for the assessee, has argued that it is a different kind of default and the revenue should not be allowed to turn round and to seek the imposition of penalties on the assessee on an entirely different ground.
15. Our jurisdiction in these matters is quite limited. We have answered the question of law and it will now be for the Tribunal to dispose of the contentions raised by the assessee, some of which have been noticed above.
16. The petition stands disposed of accordingly with no order as to costs.