Penalty on a Hindu undivided family after partition fails where the family had already ceased to exist legally.

Penalty under section 28(1)(c) of the Income-tax Act, 1922 could not be imposed on a Hindu undivided family after its actual partition and cessation as a legal person. Section 28 applies only to a person in existence who can be given a reasonable opportunity of being heard, and section 25A deals only with assessment consequences after partition, not the machinery for penalty. Where partition is recognised under section 25A(1) with effect from an earlier date, the family ceases from that date for section 28 purposes; the later date of the order does not control. The revenue's reliance on section 25A(3) failed because that fiction does not continue penalty proceedings against a disrupted family.

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Issues: Whether penalty under section 28(1)(c) of the Income-tax Act, 1922 could be imposed on a Hindu undivided family after its actual partition and cessation as a legal person, where the order under section 25A recognising partition was passed later.

Analysis: Section 28 authorises penalty only against a person in existence who is afforded a reasonable opportunity of being heard, and a Hindu undivided family is a distinct legal person under the Act. Section 25A concerns assessment after partition and does not provide the machinery for imposing penalty. Where an order under section 25A(1) records partition with effect from an earlier date, the family ceases to exist from that date for the purposes of section 28, and the later date of the section 25A order is not controlling. The fiction in section 25A(3) applies only where no order under section 25A(1) has been made, and cannot sustain penalty proceedings against a family that had already disrupted.

Conclusion: Penalty could not validly be levied on the disrupted Hindu undivided family, and the question was answered against the revenue and in favour of the assessee.

Ratio Decidendi: Penalty under section 28 can be imposed only on a person in existence on the date of the penalty order, and an order under section 25A recording partition operates from the date of actual partition, not from the date of the order itself.

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