MAHANKALI SUBBA RAO MAHANKALI NAGESWARA RAO Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Madras, had submitted the following question under section 66 (1) of the Indian Income-tax Act.

(2.) THE assessee, Mahankali Subba Rao and Nageshwara Rao, Eluru, was a Hindu undivided family, which carried on business at Eluru and Vijayawada as agents of the Standard Vaccum Oil Co. for sale of petrol, Kerosene oil, etc. THE family comprised of two brothers, Subba Rao and Nageshwara Rao. It is now found that they became divided on 5th April, 1943. In respect of the year 1943-44, the assessee filed a return on 15th July, 1947, declaring a total income of Rs. 32, 073. THE Income-tax Officer did not accept the figure but added a sum of Rs. 40, 000, on the ground that the assessee had dealings in blackmarket and suppressed his income there from. He also took proceedings under section 28 of the Income-tax Act and imposed a penalty of Rs. 21, 960 by his order dated 29th January, 1947. THE question is whether the members of a disrupted family are liable to pay penalty under section 28 of the Act. Section 25A of the Income-tax Act reads :

(3.) RAJAGOPALAN and Rajagopala Ayyangar, JJ., of the Madras High Court had to consider a similar question in Raju Chettiar v. Collector of Madras. The observation of the learned Judges in the context of the applicability of section 28 (1) of the Act to the members of a disrupted family May usefully be extracted. At page 244, the learned Judges observed :