1967 (7) TMI 23 - HC - Income Tax

Advance tax - ITO made an order under s. 18A(9)(b) read with s. 28(1)(a) imposing a penalty upon the assessee on the ground that it was bound to pay advance tax under s. 18A(3)- imposition of penalty - whether branches bound to pay advance tax until order u/s 25A is passed - Held, yes

Summary

Issues:
Interpretation of provisions of Income-tax Act, 1922 regarding penalties on assessee under sections 18A(3), 18A(9)(b), and 28(1)(a) in relation to Hindu undivided family's tax liability and partition status.

Analysis:
The High Court of Allahabad addressed a reference under section 66(1) of the Income-tax Act, 1922, concerning penalties imposed on a Hindu undivided family (HUF) for not paying advance tax under section 18A(3) for the assessment years 1952-53 and 1953-54. The HUF was previously part of a larger family, and an order under section 25A(1) recognizing the partition was made on March 29, 1956. The issue revolved around whether the penalties were justified under sections 18A(3), 18A(9)(b), and 28(1)(a).

The HUF argued that until the partition order under section 25A(1) was made, the larger family should be deemed to continue, and thus, they were not obligated to pay advance tax under section 18A(3). However, the court held that once the partition order was issued, the HUF came into existence from the partition date, and as a new assessee, they were liable to comply with section 18A(3) provisions.

The court rejected the argument that section 25A(3) applied during the pendency of a claim under section 25A(1) and concluded that once the partition date was determined, the HUF was liable to pay advance tax from that date. Therefore, the court ruled against the assessee, upholding the penalties imposed by the Income-tax Officer under sections 18A(9)(b) and 28(1)(a).

In conclusion, the court answered the reference question in the negative, affirming the tax authorities' decision to levy penalties on the HUF. The Commissioner of Income-tax was awarded costs, and the court assessed counsel's fee at Rs. 200.