COMMISSIONER OF INCOME-TAX Vs. SAT PARKASH

JUDGEMENT

(1.) THE matter here pertains to the liability of the partners of a firm for payment of penalty under Section 271 (1) (iii) of the Income-tax Act, 1961, in respect of the amount received by way of refund of sales tax paid by the firm. The relevant assessment year here is 1968-69.

(2.) TO give the factual background, in 1958, the firm, Behari Lal Piarey Lal, consisted of three partners, namely, Piarey Lal and his two sons, Lachhman Dass and Sat Parkash. Piarey Lal died on February 18, 1960, whereupon a fresh partnership deed was executed on February 22, 1960, with effect from February 18, 1960, bringing in Piarey Lal's widow, Basanti Devi, as a partner. Besanti Devi, in turn, died on March 22, 1962, and on her death, the partnership was reconstituted with Onkar, son of Kishan Chand, being taken in as a partner. This Onkar later went out of the partnership when the firm was again reconstituted leaving Lachhman Dass and Sat Parkash as its partners and this is how the firm was constituted during the relevant assessment year 1968-69.

(3.) THE firm, Behari Lal Piarey Lal, had a sales tax liability of Rs. 8,261 which it discharged during the assessment years 1961-62 and 1962-63. On September 7, 1967, a sum of Rs. 4,498 rounded off to Rs. 4,500 was received as refund of sales tax by the firm. This amount, when received, was credited in equal shares to the account of the two partners, namely, Lachh-man Dass and Sat Parkash. It was not, however, shown in the return either of the firm or of the two partners.