Oak, C.J. - (1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). The assessee was a Hindu undivided family. At one time the family consisted of Gauri Shanker and his three sons. The family was assessed to income-tax for the assessment year 1946-47. The corresponding accounting period was from 13th April, 1945, to 2nd April. 1946. On 19th March, 1957, an application was moved before the Income-tax Officer claiming that a partition had taken place in the family on 22nd June, 1956. The Income-tax Officer was satisfied on this point. On 26th March, 1962, he recorded an order under Section 25A(1) of the Act to the effect that partition had taken place with effect from 22nd June, 1956.
(2.) IN the meanwhile, penalty proceedings were initiated against the Hindu undivided family. On 15th March, 1957, the INcome-tax Officer issued a notice to the assessee to show cause why penalty under Section 28(1)(c) of the Act should not be imposed on the assessee. After hearing the assessee, a penalty of Rs. 26,000 was imposed by the INcome-tax Officer on 20th March, 1958. IN appeal the penalty was reduced to Rs. 15,000. The assessee went up in appeal before the Appellate Tribunal. A number of points were urged before the Tribunal. One of the points urged for the assessee was that, in view of the partition of the joint family with effect from 22nd June, 1956, the order dated 20th March, 1958, imposing penalty was illegal. This contention was accepted by the Appellate Tribunal. The order imposing penalty was cancelled. At the request of the Commissioner of Income-tax, U.P., the Appellate Tribunal has referred the following question of law to this court: " Whether, in the facts and circumstances of the case, the imposition of penalty under Section 28(1)(c) on the Hindu undivided family after it had disrupted within the meaning of Section 25A is bad in law. " In view of the form of the question referred to this court, we have, merely to consider the effect of the partition, dated 22nd June, 1956, It was urged for the assessee that no penalty could be imposed on the joint family after its partition. On the other hand, it was pointed out for the department that the partition was not recognised by the Income-tax Officer until 26th March, 1962.
(3.) SECTION 25A of the Act provides for assessment after partition of a Hindu undivided family. SECTION 25A consists of three sub sections. Sub-section (1) enables the Income-tax Officer to record an order to the effect that partition has taken place. Sub-section (2) provides for assessment, in a case where such an order has been passed under Sub-section (1). Although Sub-section (2) provides for assessment of income-tax, it does not expressly refer to any proceeding for imposing penalty. Sub-section (3) is important. Sub-section (3) of SECTION 25A states : " Where such an order has not baen passed in respect of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family. " The main question for consideration in the present reference is whether the order imposing penalty is protected by Sub-section (3) of Section 25A of the Act.;