Law:

Section:

Section 271(1)(c) , read with section 177 of the Income-tax Act, 1961 (corresponding to section 28, read with section 44 of Indian Income-tax Act, 1922) - Penalty - For concealment of income - Assessment years 1947-48 to 1949-50 - Whether word "assessment" could not be read as meaning "penalty" also - Held, yes - Whether section 44 of 1922 Act, prior to its amendment, did not empower department to resort to section 28 of 1922 Act - Held, yes Section 177 of the Income-tax Act, 1961 (corresponding to section 44 of the Indian Income-tax Act, 1922) - Association dissolved or business discontinued - Assessment years 1947-48 to 1949-50 - Whether section 44 of 1922 Act applies to discontinuance of business of a dissolved firm - Held, yes Interpretation of statue: Cardinal rule of construction FACTS The assessee was a firm which was engaged in the manufacture and sale of ground-nut oil. During the relevant accounting years, the assessee firm consisting of five partners was in existence but it was dissolved on 31-12-1949. The assessment for the three years was completed after that date. Having come to his notice during those proceedings that the assessee had concealed part of the income, the ITO started penalty proceedings under section 28(1)(c) of the 1922 Act by the issue of a notice under section 28(3) of the 1922 Act for each of the three years and ultimately certain amounts were levied as penalties. On appeal before the AAC, it was urged that, as this firm was not in existence at the time of the initiation of the penalty proceedings, it was not competent for the Department to invoke section 28(1) of the 1922 Act. This proposition was not accepted by the AAC with the result that the appeal was dismissed. In a further appeal to the Tribunal, this contention was repeated and it prevailed with the Tribunal which accepted the appeal. On reference: HELD There can be no doubt that if the assessee is found to have concealed or wantonly furnished inaccurate particulars, he incurs the penal consequences contemplated by section 28 of the 1922 Act. The pertinent point for consideration is whether section 28 of the 1922 Act can be invoked in a case of a dissolved partnership as…

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