1976 (5) TMI 1 - SC - Income Tax

In the present case, there was not a whisper of the application u/s 25A(1) of the Act by the appellant on March 15, 1957, when the penalty proceedings were initiated against it. Even on March 25, 1958, when the penalty was imposed, there was no order u/s 25A(1) of the Act. It was only on March 26, 1962, that the partition was recognised and order u/s 25A(1) of the Act was passed. There was thus no bar to the imposition of the impugned penalty - assessee s appeal is dismissed

Summary

Issues:
Imposition of penalty on a Hindu undivided family after disruption under section 25A of the Indian Income-tax Act, 1922.

Analysis:
The case involved an appeal by a Hindu undivided family against a penalty imposed by the Income-tax Officer for concealing income and furnishing an inaccurate return. The family claimed a partition had taken place on June 22, 1956, which was accepted by the Income-tax Officer in 1962. The main issue was whether the penalty imposed after the family's disruption was lawful.

The Tribunal upheld the family's contention that the penalty imposed after the disruption was invalid. However, the Commissioner of Income-tax challenged this decision, leading to the High Court's negative answer to the question of law regarding the penalty's validity. The family then appealed to the Supreme Court.

The Supreme Court analyzed section 25A of the Act, which deems a Hindu family as undivided until an order recording partition is passed. Legal precedents were cited to support the view that the Income-tax Officer's jurisdiction to assess a family as undivided remains until such an order is recorded.

The Court noted that at the time of penalty imposition in 1958, no order under section 25A(1) had been passed. The partition was recognized in 1962, after the penalty was imposed, indicating no legal bar to the penalty. Consequently, the Court dismissed the appeal, holding that the High Court's negative answer to the question was correct.

In conclusion, the Supreme Court affirmed that the penalty imposed on the Hindu undivided family after its disruption was lawful based on the legal fiction in section 25A of the Act. The Court's decision was in line with established legal principles and precedents, leading to the dismissal of the appeal without costs.