TaxTMI 
TaxTMI 
1957 (1) TMI 35
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.... 7th August, 1950, the firm filed a return disclosing an income of Rs. 2,389 for the assessment year 1947-48. That was signed by the partner Talluri Suryanarayana. During the scrutiny of the accounts, the assessee admitted that some cash credits found in the accounts represented the firm's own income and the Income-tax Officer also found that for some other credit items the assessee had no explanation. The assessment was completed on a total income of Rs. 50,776. Thereafter, a notice was issued under section 28(1)(c) of the Indian Income-tax Act for the admitted concealment of income by the firm. On 31st August, 1953, a penalty of Rs. 9,300 was levied on the firm and the said order and the notices of demand were duly served on the partn....
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....ld be jointly and severally assessed and made liable for the tax. The argument is that the section only makes the partners liable jointly and severally for assessment and for the amount of tax and does not provide for levying and collecting any penalty from the said partners and, therefore, there is no provision whereunder penalty can be levied on the partner of a discontinued firm. In support of this contention, reliance is placed on the judgment of a Division Bench of the Patna High Court in Commissioner of Income-tax, Bihar and Orissa v. Sanichar Sah Bhim Sah ([1955] 27 I. T. R. 307). That decision turned upon the provisions of section 25A(2) of the Act. Section 25A was introduced to provide for the contingency of a division in a joint f....
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.... " It will be seen from the aforesaid provision that section 25A only refers to the assessment of a Hindu undivided family which had become divided in the course of the assessment year. It does not empower the Income-tax Officer to impose a penalty on the divided members of a Hindu family. Adverting to section 28(1)(a), which enables penalty to be imposed on an assessee under certain circumstances, Ramaswami, J., observed at page 313 : " It is clear in these circumstances that the Hindu undivided family was not existing on the date the Income-tax Officer started the proceeding under section 28(1)(c) and also on the date the Income-tax Officer imposed ....
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.... 28(3) requires that the assessee should be heard before an order is passed under section 28(1). That assessee had ceased to exist when the order under section 28(1) was passed in this case . . . . . We are referring to this aspect only to emphasise that there is no machinery provided by the Act to impose the penalty under section 28(1), after the assessee had ceased to exist. " The question is whether the said decisions on the interpretation of section 25A would govern section 44 of the Act. The wording of the two sections is not in pari materia. They differ in essential respects. Section 25A provides for the assessment of a Hindu undivided family after partition and says that the Income-tax Officer shall make an assessment of the total....
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....section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV. We cannot say that there is a lacuna in section 44 such as that found in section 25A of the Act. It is argued by the learned counsel that a person can be penalised only if he has mens rea and, therefore, one of the members of a quondam partnership cannot be punished if the firm has been discontinued for a default made by another partner. It is not an inflexible rule of law that mens rea is a necessary ingredient of every default. One of the exceptions to that rule is where an Act exclude....