Penalty on discontinued firm can be pursued where tax law treats assessment as including enforcement machinery despite dissolution.

Section 44 of the Income-tax Act, 1922 treated a discontinued firm as continuing for assessment purposes, and the word "assessment" was construed broadly to include the machinery for determining and enforcing tax liability. On that footing, penalty under Section 28(1)(c) formed part of the assessment process and could be imposed where the statutory conditions for concealment were met. Dissolution after the default did not prevent penalty proceedings, because discontinuance did not create a gap in the Act. The partners could not escape liability by dissolving the firm after the relevant default had been committed.

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Issues: Whether penalty under Section 28(1)(c) of the Income-tax Act, 1922 could be imposed on a firm after its business had been discontinued on dissolution, by virtue of Section 44 of the Act.

Analysis: Section 44 treated a discontinued firm as continuing for the purpose of assessment and applied all provisions of Chapter IV so far as may be. The expression "assessment" was construed in its wider sense to include the whole machinery for determining and enforcing tax liability, not merely computation of income. Penalty under Section 28 formed part of that assessment machinery and was attracted where the statutory conditions for concealment were satisfied. The discontinuance of the firm did not create a gap in the Act, and the partners could not avoid penalty by dissolving the firm after the default had been committed.

Conclusion: Penalty was validly imposable on the discontinued firm under Section 44 read with Section 28(1)(c), and the objection based on dissolution failed.

Ratio Decidendi: Where a fiscal statute deems a discontinued firm to continue for assessment and applies the assessment provisions of the chapter to it, penalty proceedings that are part of the assessment machinery may also be pursued notwithstanding dissolution.

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