Penalty and reassessment timing rules govern pre-1962 tax cases, including notices against dissolved firms for past income.

Penalty for concealment relating to assessment years ending on or before 31 March 1962 depends on the date of completion of the assessment or reassessment, not on when the default occurred. Where reassessment was completed after 1 April 1962, penalty proceedings fall under the Income-tax Act, 1961, and notices under sections 271 and 274 are valid. The notes also state that a dissolved firm may still be proceeded against for income earned during its existence, and that notice addressed to the firm and served on a former partner can remain valid for reassessment of pre-dissolution income.

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Issues: (i) Whether penalty for concealment in respect of assessment years ending on or before 31 March 1962, where reassessment was completed after 1 April 1962, was governed by section 297(2)(g) of the Income-tax Act, 1961, so that notice under sections 271 and 274 of the 1961 Act was valid; (ii) Whether notices issued to a firm after the death of one partner and dissolution of the firm were valid for reassessment under the Indian Income-tax Act, 1922.

Issue (i): Whether penalty for concealment in respect of assessment years ending on or before 31 March 1962, where reassessment was completed after 1 April 1962, was governed by section 297(2)(g) of the Income-tax Act, 1961, so that notice under sections 271 and 274 of the 1961 Act was valid.

Analysis: The relevant distinction was between cases covered by section 297(2)(f), where assessment had been completed before 1 April 1962, and section 297(2)(g), where assessment for the relevant year was completed on or after that date. The crucial date for penalty was the date of completion of the assessment or reassessment, not the date when the default was committed. Since the reassessments here were completed on 21 March 1964, the penalty proceedings fell within section 297(2)(g) and had to be initiated and imposed under the 1961 Act. Section 297(2)(d)(i) was held to be inapplicable to penalty proceedings in such a situation.

Conclusion: The notices under sections 271 and 274 of the Income-tax Act, 1961 were valid and the penalty orders were sustainable. The issue was decided in favour of the Revenue.

Issue (ii): Whether notices issued to a firm after the death of one partner and dissolution of the firm were valid for reassessment under the Indian Income-tax Act, 1922.

Analysis: A dissolved firm could still be assessed in respect of income earned during its existence, and the reassessment machinery under the old Act continued to apply for that purpose. A notice addressed to the firm and served on a former partner was valid where the business had continued and the firm had been reconstituted. The death of one partner did not extinguish the tax liability for pre-dissolution income or invalidate the reassessment notice.

Conclusion: The reassessment notices were valid notwithstanding the dissolution of the firm and the death of one partner. The issue was decided in favour of the Revenue.

Final Conclusion: Both references were answered against the assessee, upholding the validity of the penalty proceedings under the 1961 Act and the reassessment notices issued to the firm under the 1922 Act.

Ratio Decidendi: For penalty relating to assessment years ending on or before 31 March 1962, the controlling factor is the date on which the assessment or reassessment is completed; if completion occurs on or after 1 April 1962, penalty proceedings are governed by section 297(2)(g) of the Income-tax Act, 1961, and a dissolved firm may still be validly proceeded against for pre-dissolution income.

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