Law:

Section:

Section 139 of the Income-tax Act, 1961 - Return of income - Whether power conferred on ITO under section 139(2) can be exercised at any time during relevant assessment year i.e. not only after but also before expiry of period prescribed for return of income under section 139(1) - Held, yes - Whether, therefore, notice issued under section 139(2) for compliance on a date earlier to date specified under section 139(1) was not illegal - Held, yes Section 271(1)(a) of the Income-tax Act, 1961 - Penalty - For late filing of return - Assessee-firm failed to file return in time because it had to wait for completion of audit of account - Whether Tribunal in rejecting assessee's explanation and levying penalty committed any error - Held, no - Whether, however, in case of partner of assessee-firm whose only income was share income from firm, his explanation that he could not file his return till firm filed its return, was sufficient cause for delay in filing return - Held, yes - Whether, therefore, penalty imposed under section 271(1)(a) on said partner was liable to be set aside - Held, yes FACTS The ITO issued notices under section 139(2) calling upon the assessee-firm as well as one of the partners 'R' to file their respective returns on a date earlier to expiry of prescribed date. But the assessees did not submit their returns within the dates mentioned in section 139(2) notice. Subsequently, both applied for extension of time. Returns were later filed and assessments completed on the firm as well as on their partners. 'R' had income only from his share in the firm. Penalties under section 271(1)(a) were also levied on the firm and 'R'. On second appeal, the Tribunal upheld the levy of penalty as also the assessments. On reference: HELD In Tarzan Hosiery (P.) Ltd. v. ITO [1968] 69 ITR 842 (All.), the Allahabad High Court held that that the power conferred on the ITO under section 139(2) can be exercised at any time during the relevant assessment year not only after, but also before the expiry of the period prescribed for the return of income under section 139(1). It was further observed that according to section 139(7) a return under sub-section (2) can be demanded…

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