Law: Income Tax Act, 1922

Section: 22,23,25A,28,28(1)(c),44

Income-tax Act, 1922 -- Section 28(1)(c) -- Penalty imposed on a dissolved firm -- Whether valid -- No penalty can be imposed on firm which has ceased to exist - ORDER (The Judgment was delivered by S. A. Mirza, Member sitting singly).-This appeal arises from an order of the Appellate Assistant Commissioner for the charge year 1954-55 upholding the imposition of the penalty of Rs. 2,000/- under section 28(1)(c). 2. The appellant here is a registered firm; it enjoys income from dyeing and printing of cloth. The facts of this case in short are that the firm had four partners and an income of Rs. 3,382/-only was shown for the year in question. It appears that an Inspector of Income-tax visited the assessee's business premises in September, 1954, and got hold a copy book in which certain payments to the assessee for calendaring done were found recorded. The assessee denied any such payments to it and asserted that the said amounts were paid to one of his Munshi for private business carried on by the latter. This story was not believed and the gross receipts for the relevant year estimated at Rs. 90,000/- and the income computed by applying a rate of 38% gross. The assessment thus made in August, 1957, was upheld on appeal by the Appellate Assistant Commissioner, no further appeal was filed in respect of the quantum of the assessment. The Income-tax Officer in the course of assessment proceedings issued a notice under section 28(1)(c) relating to the concealment of the income in the above manner and a penalty of Rs. 2,000/- was levied on 23rd October, 1957. It is now contended that the firm had already been dissolved in 1956 and no penalty could be levied on a defunct business. The fact that the firm was dissolved in 1956 is not in dispute. The Appellate Assistant Commissioner considered this point and also the rulings cited by the assessee. He relied on the decision of the Andhra Pradesh High Court reported as Mareddi Krishna Reddy v. Income-tax Officer Tenali in [(1957) 31 I.T.R. 681] and quoted the following observations of the learned Chief Justice in support of his view point: "Section 44 in an abbreviated form provides for the joint and several liability of…

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