TMI Blog1980 (1) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notices in the case which were addressed to the firm after its dissolution by, the death of one of its partners, Tiwari Govind Narain, on June 9, 1957, were valid, within the meaning of section 63 of the Indian I.T. Act, 1922 ? " The material facts, which have given rise to these references, may be briefly stated : The asseesee is a firm carrying on business of stone quarrying. Proceedings under s. 34(1)(a) of the Indian I.T. Act, 1922 (hereinafter referred to as " the old Act "), were initiated against the assesee and in response to the notice issued by the ITO under s. 34, the assessee filed its returns in respect of the assessment years 1949-50, 1951-52, 1952-53 and 1953-54. The reassessment proceedings in respect of each one of these years were completed on March 21, 1964. At the time of passing the order of reassessment, the ITO felt satisfied that the assessee had made a deliberate attempt to conceal its income or furnish inaccurate particulars thereof during the relevant years and he, therefore, issued notices to the assessee on March 21, 1964, in respect of all the aforesaid assessment years. As the minimum penalty imposable for each year exceeded Rs. 1,000, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section for the assessment years 1949-50 to 1953-54, while another consolidated order, in respect of Bharatpur section, for all the aforesaid assessment years, was passed by the Tribunal on April 10, 1968. Thereafter, the revenue filed 8 reference applications while the assessee filed 9 applications for making references, in respect of Hindaun-Karauli and Bharatpur sections, relating to the aforesaid assessment years. All these 17 reference applications were disposed of by the Tribunal by common order dated April 3, 1970, referring the three questions, reproduced above, to this court, two at the instance of the revenue and the third one at the instance of the assessee. It is not in dispute that penalty under s. 271(1)(c) has been imposed upon the assessee in respect of the assessment years prior to April 1, 1962, when the new Act came into force. It is also not in dispute that the proceedings for reassessment under s. 34 of the old Act were initiated in respect of the relevant assessment years, except 1950-51, prior to the promulgation of the new Act and notices for reassessment were issued under s. 34(1)(a) of the old Act. In respect of the year 1950-51, notices for reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty may be imposed as if this Act had not been passed ; (g) any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act ;...... " The Tribunal, following the decision of the Mysore High Court in Magavi's case [1967] 64 ITR 409, held that the proceedings for the imposition of penalty were included in the proceedings for assessment for the purposes of s. 297(2)(a) of the new Act and that applying the provisions of s. 297(2)(d)(i), the proceedings for the imposition of penalty are a continuation of the proceedings for assessment. Thus, according to the Tribunal, a penalty could be imposed under the old Act, in respect of assessment relating to the assessment year 1961-62, and any year earlier thereto, under s. 28 of the old Act, as s. 271 of the new Act could apply only to defaults made or discovered in respect of proceedings under the new Act. So far as the proceedings for reassessment under s. 34 of the old Act, which were initiated by the issuance of a notice befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs for imposition of penalty would be governed by the provisions of cl. (g) of s. 297(2) of the new Act and such proceedings for imposition of penalty could be initiated and penalty could be imposed only under the new Act. The crucial date, for the determination of the question as to whether the penalty could be imposed under the new Act or under the old Act, is the date of completion of the proceeding for assessment or reassessment. If the assessment proceeding is completed prior to 1st April, 1962, the proceeding for imposition of penalty will have to be taken under the provisions of the old Act, but if the assessment proceeding in such a case is completed on or after April 1, 1962, then the proceeding for imposition of penalty can be taken only under the provisions of the new Act. To our mind, cls. (f) and (g) of s. 297(2) are exhaustive and provide for all the contingencies for the purpose of initiating and imposing penalty in respect of assessments relating to assessment year ending on March 31, 1962, or earlier years. In Magavi's case [1967] 64 ITR 409 (Mys), their Lordships of the Mysore High Court considered merely the provisions of cl. (g) of s. 297(2) of the new Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposition of the penalty it is not the assessment year or the date of the filing of the return which is important but it is the satisfaction of the income-tax authorities that a default has been committed by the assessee which would attract the provisions relating to penalty. Whatever the stage at which the satisfaction is reached, the scheme of sections 274(1) and 275 of the Act of 1961 is that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion." In Jain Brothers' case [1970] 77 ITR 107 (SC), their Lordships of the Supreme Court have categorically held that penalty can be imposed under the provisions of the new Act even in respect of defaults, which were committed under the old Act, provided they squarely fall within the provisions of s. 297(2)(g) of the new Act. The aforesaid view was again reiterated by their Lordships of the Supreme Court in CIT v. Singh Engineering Works P. Ltd. [1970] 78 ITR 90 and it was held that if an assessment relating to the year ending on March 31, 1962, or any earlier assessment year, have been completed after April 1, 1962, s. 297(2)(g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l at the instance of the assessee is concerned, we may observe that the matter stands concluded by the decision of their Lordships of the Supreme Court in Shivram Poddar v. ITO [1964] 51 ITR 823, wherein it was held by their Lordships that if a firm has been dissolved but its business has not been discontinued, there being merely a change in the constitution of the firm, the assessment can be made in respect of the firm. Even after the discontinuance of the business of the firm, it does not cease to be liable to pay tax on the income earned by it during its existence and a procedure different from the one prescribed in Chap. IV of the old Act could not apply to the assessment of income of such a firm. Thus, a notice which is issued in respect of a dissolved firm, under s. 34(1)(a) of the old Act read with s. 22(2) thereof, addressed to a person, who was a partner of the firm before the dissolution of the firm, calling upon him to submit a return was a valid notice. In CIT v. Devidayal and Sons [1968] 68 ITR 425, Division Bench of the Bombay High Court held that even after the discontinuance of the business of a firm, either by dissolution or otherwise, the firm can be treated as co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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