TMI Blog1957 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1947-48. That was signed by the partner Talluri Suryanarayana. During the scrutiny of the accounts, the assessee admitted that some cash credits found in the accounts represented the firm's own income and the Income-tax Officer also found that for some other credit items the assessee had no explanation. The assessment was completed on a total income of ₹ 50,776. Thereafter, a notice was issued under section 28(1)(c) of the Indian Income-tax Act for the admitted concealment of income by the firm. On 31st August, 1953, a penalty of ₹ 9,300 was levied on the firm and the said order and the notices of demand were duly served on the partner T. Suryanarayana, who represented the firm. As the firm discontinued the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the section only makes the partners liable jointly and severally for assessment and for the amount of tax and does not provide for levying and collecting any penalty from the said partners and, therefore, there is no provision whereunder penalty can be levied on the partner of a discontinued firm. In support of this contention, reliance is placed on the judgment of a Division Bench of the Patna High Court in Commissioner of Income-tax, Bihar and Orissa v. Sanichar Sah Bhim Sah ([1955] 27 I. T. R. 307). That decision turned upon the provisions of section 25A(2) of the Act. Section 25A was introduced to provide for the contingency of a division in a joint family by enacting that profits could be computed as if the said family continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich had become divided in the course of the assessment year. It does not empower the Income-tax Officer to impose a penalty on the divided members of a Hindu family. Adverting to section 28(1)(a), which enables penalty to be imposed on an assessee under certain circumstances, Ramaswami, J., observed at page 313 : It is clear in these circumstances that the Hindu undivided family was not existing on the date the Income-tax Officer started the proceeding under section 28(1)(c) and also on the date the Income-tax Officer imposed the penalty. In my opinion the proceeding initiated by the Income-tax Officer under section 28(1)(c) of the Act is legally invalid since the Hindu undivided family was non-existent on that date. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28(1), after the assessee had ceased to exist. The question is whether the said decisions on the interpretation of section 25A would govern section 44 of the Act. The wording of the two sections is not in pari materia. They differ in essential respects. Section 25A provides for the assessment of a Hindu undivided family after partition and says that the Income-tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such as if no partition had taken place and that each member or group of members shall be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or to it. The proviso further adds that all the members shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 25A of the Act. It is argued by the learned counsel that a person can be penalised only if he has mens rea and, therefore, one of the members of a quondam partnership cannot be punished if the firm has been discontinued for a default made by another partner. It is not an inflexible rule of law that mens rea is a necessary ingredient of every default. One of the exceptions to that rule is where an Act excludes the said factor. Section 44 specifically provides for joint assessment in the case of discontinuance, of a firm. The position, therefore, is that, despite the discontinuance, all the partners would be jointly liable for assessment. If section 28 applies, the word person in that section whose default attracts the penal consequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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