Law: Income Tax Act, 1922

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

Income-tax Act, 1922 -- Section 28(1)(b) -- Firm dissolved -- Assessments made and penalty levied thereafter -- Legality thereof -- Penalty cannot be imposed on firm which on date of imposition has ceased to exist - Corresponding Sections: Income-tax Ordinance, 1979 -- section 110 -- ORDER (The Judgment was delivered by Syed Ali Khan, President).- The first two appeals arise out of an order imposing a penalty under section 28(1) of the Act with respect to the assessment years 1955-56 and 1956-57. The other two appeals arise out of an order refusing registration in respect of the same assessment years. 2. The registration appeals were not eventually pressed and they will stand dismissed. 3. I now come to the penalty appeals. It is common ground that the firm was dissolved, and its business was discontinued, on the 31st of March, 1956. The assessments for both the years under consideration were made on the quondam firm on the 28th of February, 1957, that is to say, after the firm had ceased to exist. Notices under section 28 with respect to both the years were served on the 13th of March, 1957. As a result of the proceedings thus initiated the Income-tax Officer imposed a penalty of Rs. 2154/- under section 28(1)(b) for each year on the 30th of January, 1958. It would thus appear that the assessments as well as the orders imposing a penalty in respect of both the years were made after the firm had ceased to exist and its business had been discontinued. The Income-tax Officer has in fact noted the fact of dissolution in the assessment order relating to 1956-57. It is, therefore, contended by the appellant that a penalty under section 28 cannot be levied on a firm which had ceased to exist. On behalf of the Department reliance is placed on section 44 of the Act which provides as follows: "Where any business, profession or vocation carried on by a firm or association of persons had been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution a partner of such firm or a member of such association shall, in respect of the income, profits and gains of the firm or association be jointly and…

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