Penalty liability for registered firms under the Income-tax Act survives even without separate assessable income, the Calcutta HC clarified.

A registered firm may be subjected to penalty under Section 28(1)(b) of the Income-tax Act, 1922, even though it is not separately assessable to income-tax or super-tax. The phrase "if any" in the closing part of Section 28(1) was treated as qualifying liability to tax itself, not merely super-tax, so penalty could still arise where no assessable income was ultimately found. Clause (b) of the proviso was read as limiting the quantum of penalty in cases without assessable income, while clause (d) was viewed as supplying the method of computation for a registered firm rather than creating the liability. The question was answered in favour of the Revenue.

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Issues: Whether a registered firm could be subjected to penalty under Section 28(1)(b) of the Income-tax Act, 1922, notwithstanding that the firm itself was not separately assessable to income-tax or super-tax.

Analysis: The Court held that the words "if any" in the concluding paragraph of Section 28(1) qualify the liability to tax itself and not merely super-tax. The scheme of the provision shows that a person may incur penalty even where no assessable income is ultimately found. Clause (b) of the proviso was read as limiting the quantum of penalty in cases where there is no assessable income, not as creating liability afresh. The insertion of clause (d) in the proviso was treated as supplying the method of computation for a registered firm, whose own tax liability is not separately determined, rather than as creating the liability to penalty.

Conclusion: A registered firm is liable to penalty under Section 28(1)(b) of the Income-tax Act, 1922, and the question referred was answered in the affirmative, in favour of the Revenue.

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