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JUDGMENT Sankar Prasad Mitra, J.-This is a reference under section 66(1) of the Indian Income-tax Act, 1922. The assessment year is 1960-61 The corresponding accounting year is the calendar year 1959. On the 13th June, 1960, a notice under section 22(2) dated the 1st June, 1960, was served on the assessee. In terms of this notice the assessee's return should have been filed by the 18th July, 1960. But, on that date, the assessee asked for two months' time to file its return. The Income-tax Officer allowed the extension but informed the assessee that there would be no further extensions. On the 16th January, 1961, the assessee was served with a notice under section 23(3). Then, on the 17th January, 1961, the assessee filed its return for the assessment year 1960-61. The Income-tax Officer, however, took more than two years to complete the assessment. The assessment was made on October 31, 1962, alter the commencement of the Income-tax Act, 1961. Under the provisions of section 297(2)(g) of the 1961 Act the proceedings for imposition of penalty had to be initiated and completed (sic). That is why the assessee was served with a fresh notice under section 274(1) of the 1961 Act. In response to the show cause notice, the assessee took a preliminary objection. The assessee contended that the notice under section 274(1) was issued on the 15th May, 1963, that is, after the completion of the assessment proceedings. The notice, therefore, was invalid and no penalty proceedings could be initiated. The Income-tax Officer rejected this contention. The assessee also submitted that its audited balance-sheet, owing to the absence of its accountant, was ready only in October, 1960. In these premises, the assessee could not file its return earlier. The Income-tax Officer did not accept this explanation as sufficient for the non-filing of the return. He imposed a penalty of Rs. 12,734 under section 271(1)(a) of the 1961 Act. The Appellate Assistant Commissioner agreed with the Income-tax Officer on both the points aforesaid and sustained the order of imposition of penalty. Before the Tribunal the assessee contended that the notice was issued long after the assessment was…

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