JAGANNATH RAMESHWAR PRASAD Vs. COMMISSIONER OF INCOME TAX U P

JUDGEMENT

(1.) A reference under section 66(1) of the Income-tax Act, 1922, has been made to this court for its opinion on the following question: "Whether the penalties levied on the assessee are exigible under the provisions of section 18A (3) read with section 18A (9) (b) and section 28(1) (a)?"

(2.) THE assessee is a Hindu undivided family, which admittedly before May 7, 1950, was part of a lager Hindu undivided family carrying on business under the name Baij Nath Rameshwar Prasad. During the assessment proceedings for the year 1950-51, in respect of the larger Hindu undivided family an application was made under section 25A (1) for an order that the larger family had been partitioned on May 7, 1950. That application remained pending until March 29, 1956, when an order was made by the Income-tax Officer accepting the claim and recognizing that the larger family had been partitioned on May 7, 1950. The assessee Hindu undivided family did not pay any advance tax under section 18A (3) for the assessment years 1952-53 and 1953-54, the relevant accounting periods being, respectively, the years ending October 30, 1951, and October 17, 1952. The Income-tax Officer made an order under section 18A (9) (b) read with section 28(1) (a) imposing a penalty upon the assessee on the ground that it was bound to pay advance tax under section 18A (3) in respect of the assessment years 1952-53 and 1953-54 and had failed to do so. The penalty orders were challenged in appeal by the assessee before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner allowed the appeals. The Income-tax Officer proceeded in appeal to the Income-tax Appellate Tribunal and the Tribunal having found in favour of the Income-tax Officer restored the orders of penalty. At the instance of the assessee, the instant reference has been made. The contention of the learned counsel for the assessee is that, as no order under section 25A (1) had been made until March 29, 1956, it must be deemed on the strength of section 25A (3) that the larger Hindu undivided family continued in existence and that the assessee was under no obligation to pay any tax by reference to section 18A (3). Section 18A (3) provides:

(3.) THE submission of learned counsel for the assessee is that so long as a claim under section 25A (1) is pending, it cannot be said that an order has been made under that provision and, therefore, the provisions of section 25A (3) are attracted as that provision speaks of a case where no order is made under section 25A (1). Applying section 25A (3), the argument proceeds, it must be deemed that the parent Hindu undivided family continued in existence as long as the claim under section 25A (1) remained undetermined. The claim having been determined on March 29, 1956, when the order under section 25A (1) was made, the parent Hindu undivided family must be deemed to have continued all along up to March 29, 1956, and therefore the assessee Hindu undivided family cannot be said to have been in existence before that date. Consequently, it is urged, the assessee was not liable to comply with the provisions of section 18A (3). There is no force in the submission. Section 25A (3) cannot be read in the manner in which learned counsel seeks to persuade us. That provision applied to a cease where either no claim under section 25A (1) has been made or such a claim having been made it has been rejected and the Income-tax Officer has declined to make an order recording the partition alleged. There is no doubt that section 25A (3) could have been framed in happier language, but it appears clear to us that is does not contemplate a case where a claim has been made under section 25A (1) and that claim is pending consideration. When an order is made recording that partition took place on a particular date, it is an order under section 25A (1) and in giving effect to that order, the Hindu undivided family will be considered to have been partitioned as from the date recorded in that order. That date in the instant case is May 7, 1950, and it must be held that from that date the assessee-family came into existence. Upon that view of the matter, the provisions of section 18A (3) were clearly attracted.