Law: Income Tax Act, 1961

Section: 189,271

Section 271, read with section 189, of the Income-tax Act, 1961 (Corresponding to section 28(1), read with section 44, of the Indian Income-tax Act, 1922) - Penalty - For failure to furnish returns, comply with notices, concealment of income etc. - Assessment years 1947-48 to 1950-51 - Whether if a registered firm is exposed to liability of paying penalty, by committing any of defaults contemplated by clause (a), (b) or (c) of section 28(1) of 1922 Act, by virtue of section 44 of 1922 Act, notwithstanding dissolution of firm assessment proceedings are liable to be continued against registered firm, as if it has not been dissolved - Held, yes FACTS For the assessment years 1947-48 to 1950-51, the assessee, a registered firm, concealed particulars of its income in submitting its returns, and the ITO, in the course of assessment proceedings, directed payment of penalty. Against the orders imposing penalty one of the partners of the firm moved the Commissioner in revision but without success. On writ, the petitioners submitted that by agreement between the partners the firm stood dissolved on 13-4-1951, and intimation in that behalf was given to the ITO, and that in any event the firm stood dissolved on 5-5-1953, when one of the partners died and the ITO could not, in exercise of the power under section 28(1) of the 1922 Act, make an order imposing penalty after dissolution of the firm. The High Court accepted the plea of the petitioners and directed that the orders of the ITO and the further action of the Commissioner thereon declining to revise the order of the ITO in each of the petitions be set aside. On appeal to the Supreme Court : HELD There is nothing in section 44 of the 1922 Act, or the context in which it occurs to indicate that it does not apply to registered firms. The expression 'person' is defined in section 2(a ) of the 1922 Act as including 'a Hindu undivided family and a local authority'. That evidently is not an exhaustive definition and recourse is permissible to the General Clauses Act which says in section 3(42) that a 'person' includes 'any company or association or body of individuals whether incorporated or not'. A firm is manifestly a body…

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