Law:

Section:

Section 271(1)(c), read with section 171 of the Income-tax Act, 1961 [Corresponding to section 28(1)(c), read with section 25A of the Indian Income-tax Act, 1922] - Penalty - For concealment of income - Assessment year 1943-44 - Whether where assessee-HUF became divided before procedure under section 28 of 1922 Act was invoked members of erstwhile assessee-HUF were not liable to be penalised under that section - Held, yes FACTS The assessee a HUF consisting of two brothers, filed its return on 15-7-1943. The assessment was completed on 23-2-1944 making certain additions and penalty proceedings were initiated for concealment of income. Penalty was imposed on 29-1-1947. But in the meanwhile in the course of 1944-45 assessment the assessee had filed a petition under section 25A claiming partition and the ITO by order dated 26-2-1946 recognised disruption of family as from 5-4-1943. The assessee contended that penalty could not be imposed on a defunct family. The Tribunal, however, confirmed this penalty but reduced the quantum. On reference : HELD Section 25A was introduced to provide machinery for assessing the disrupted members of a joint Hindu family to Income-tax and for collecting the share of the tax payable by each member of that family. Under the proviso, the members of the erstwhile family are liable to pay the tax assessed jointly and severally. But there was no provision authorising the authorities concerned to impose a penalty on the members of a divided family. Section 28, which enables the Income-tax authorities to impose penalty under the circumstances mentioned therein, says that if the ITO, the AAC or the Tribunal in the course of any proceedings under this Act is satisfied that any person has committed the defaults mentioned in clauses (a), (b) or (c), he may direct him to pay penalty in addition to any tax and super-tax. 'Person' is defined to include on HUF. Therefore, under this section an assessee who is an undivided Hindu family can be directed to pay the penalty. But, by reason of the disruption in the family at the time the proceedings were initiated, the Hindu family ceased to be a 'person' within the meaning of the said section. A…

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