Accepted partition of a Hindu undivided family can defeat a pending penalty order when the disruption relates back to an earlier date.

Where a Hindu undivided family's partition is accepted under section 25A(1) with effect from an earlier date, the fiction in section 25A(3) does not preserve the family's existence for all purposes once that order is passed. The accepted disruption relates back to the specified date, so a penalty under section 28(1)(c) cannot be sustained against the family if the partition order is made while the penalty proceedings are still pending. The analysis distinguishes cases where no partition order exists and treats the later acceptance of partition as ative for the validity of the penalty.

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Issues: Whether, after an order under section 25A(1) of the Indian Income-tax Act, 1922 accepting partition with effect from an earlier date, a penalty imposed under section 28(1)(c) on the Hindu undivided family could still stand when the family had in fact disrupted before the penalty order was made.

Analysis: The decisive question was the meaning of section 25A(3) and its interaction with section 28(1)(c). A Hindu undivided family is a separate taxable person, but once partition is accepted under section 25A(1) with effect from a specified earlier date, the statutory fiction in section 25A(3) cannot be read as preserving the family's existence for all purposes merely until the date of the order. The word used is "where", not "until", and the fiction continues only so long as no order under section 25A(1) has been passed. Since the order accepting partition was made during the pendency of the penalty appeal and expressly operated from March 31, 1956, the penalty proceedings had to be tested in light of that accepted disruption. The Court also distinguished cases where no partition order had been passed at all, and followed the reasoning that the later acceptance of partition could invalidate the penalty while the matter was still pending in appeal.

Conclusion: The penalty under section 28(1)(c) could not be sustained against the disrupted Hindu undivided family. The question referred was answered in the affirmative, in favour of the assessee.

Final Conclusion: The accepted partition related back to the date specified in the order, and once that order was made during the pendency of the penalty appeal, the impugned penalty order could not survive against the Hindu undivided family.

Ratio Decidendi: Where partition of a Hindu undivided family is accepted under section 25A(1) with effect from an earlier date, the legal fiction in section 25A(3) does not preserve the family's existence for sustaining a penalty order under section 28(1)(c) once the partition order is passed while the penalty proceedings are still pending.

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