1969 (3) TMI 14 - HC - Income Tax

Court Invalidates Penalty on Hindu Undivided Family Post-Partition

The court ruled against the revenue, finding that the penalty imposed on a Hindu undivided family post-partition under section 28(1)(c) was not valid in ... Levy of penalty u/s. 28(1)(c) - validity Issues:Validity of penalty under section 28(1)(c) for a Hindu undivided family post-partition.Analysis:The judgment pertains to a reference related to the assessment year 1955-56 for a Hindu undivided family. The karta of the family passed away, and the assessment was completed with a penalty imposed on the family. The main issue raised was whether the levy of penalty under section 28(1)(c) was valid in law considering the partition that took place in the family. The court referred to previous cases and emphasized that for penalty proceedings under section 28, a Hindu undivided family must exist not only at the initiation but also at the point of levy. The court clarified that the power to tax income earned by the family attaches itself when the income is earned or accrued, and the quantification is done later. Section 25A deals with tax incidence in case of partition, ensuring the joint and several liability of divided members. The court distinguished between assessment/reassessment under section 23 and penalty under section 28, stating that penalty does not attach itself to escaped income immediately but is imposed separately based on section 28 provisions.The court rejected the revenue's argument to reconsider based on a specific case, stating that the case in question dealt with reassessment and did not impact the current issue. The court explained the limited scope of the mentioned case and its relevance to reassessment procedures under section 25A. The court highlighted that the power to reassess a disrupted Hindu undivided family exists under section 25A, and the case in question focused on the notice requirement for reassessment. Ultimately, the court concluded that the reference should be answered against the revenue, indicating that the penalty levy was not valid post-partition. The court awarded costs to the assessee, including counsel's fee.In conclusion, the judgment clarifies the legal position regarding penalty imposition on a Hindu undivided family post-partition. It underscores the distinction between tax assessment/reassessment and penalty proceedings, emphasizing the requirement for the family's existence at the time of penalty levy. The court's analysis of relevant sections and previous cases provides a comprehensive understanding of the issue at hand and establishes a clear precedent for similar cases in the future.