Penalty must follow the assessed entity; individual penalty could not stand where assessment was in the hands of a Hindu undivided family.

Penalty under the Income-tax Act can be imposed only on the same person or entity against whom the assessment is made. Where the assessee's status is finally determined as a Hindu undivided family, penalties under sections 271(1)(a), 271(1)(b) and 273(b) cannot be levied on a member in his individual capacity for the same income, because the assessed person and the penalised person must be identical. On that basis, cancellation of the penalties was held valid and the issue was decided in favour of the assessee.

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Issues: Whether penalties levied under sections 271(1)(a), 271(1)(b) and 273(b) of the Income-tax Act, 1961 were valid when the assessee's status had been finally determined as a Hindu undivided family.

Analysis: Penalty can be imposed only on the same person or entity against whom the assessment is made. Where the assessment has been made in the hands of a Hindu undivided family, penalty in respect of that income cannot be levied on a member of the family in his individual capacity. The person assessed and the person penalised must be identical.

Conclusion: The cancellation of the penalties was valid and the question was answered in favour of the assessee and against the department.

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