JUDGMENT The order of the Court was delivered by RAJAGOPALAN, J.
Petitioners were members of a Hindu undivided family, of which Balagurumurthi was the kartha till January 25, 1946, when a partition was effected.
Assessment proceedings for 1943-44 were completed on September 30, 1944. During the pendency of those proceedings, on September 4, 1944, a notice was issued which was served upon Balagurumurthi, who represented the assessee family. Proceedings for levy of penalty for concealment of income were thus initiated under section 28 of the Income-tax Act. Those proceedings terminated only on March 18, 1948, when a penalty of Rs. 83,000 : was imposed on the assessee, which it should be remembered was the Hindu undivided family.
Meanwhile, steps had been taken under section 25A of the Act to get the partition dated January 25, 1946, recorded by the departmental authorities. The application was preferred on September 18, 1946. That application was allowed by the Income-tax Officer on December 31, 1948. In that partition the business in cloth, in connection with which penalty was subsequently levied, was allotted to Balagurumurthi.
Balagurumurthi appears to have paid a portion of the penalty. He died on April 20, 1946. Even before Balagurumurthi died, in February, 1949, itself proceedings were taken to recover as an rarer of land revenue meanwhile become divided in status. Those proceedings were dropped in September, 1950. They were, however, revived in February, 1953, and the Collector finally rejected the objections of the petitioners in December, 1953. The petitioner thereupon applied under article 226 of the Constitution for the issue of a writ of prohibition, to restrain the respondents from collecting the penalty from any of the petitioners.
The contention of the leaned counsel for the petitioners was that, neither in fact nor in law, was any penalty imposed on any of the petitioners. It was further urged that there could be no question of any liability under the order dated March 18, 1948, being enforced against any of the petitioner, or against the properties of any of them. These contentions, in our opinion, are well founded and should prevail.
The joint family, of which the petitioners and Balagurumurthi had been coparceners, ceased to exist on January 25, 1946, even for purposes of the Income-tax Act. The order of the Income-tax Officer under section 25A of the Act concluded that question, though the order itself was passed only on December 31, 1948. It was a Hindu undivided family of which Balagurumurthi was the kartha, that was the assessee in 1943-44. No doubt the notice prescribed under section 28 of the Act was issued to the assessee. It was addressed to Balagurumurthi. The notice itself was issued on September 4, 1944, before the disruption of the Hindu undivided family, and when Balagurumurthi was still the kartha; he was entitled to and did in fact represent the assessee family at that stage. But the family had ceased to exist as a "person" for purposed of the Income-tax Act long before the penalty was imposed on March 18, 1948.
Under section 28(1) of the Act, any person, in whose case it is held that the requirements of that section have been satisfied, is liable to be penalised. A Hindu undivided family is within the scope of the expression "person" : see section 2(9) of the Act. It was that "person", the Hindu undivided family, that was the assessee. Section 28(3) requires that the assessee should be heard before an order is passed under section 28(1) was passed in this case. That Balagurumurthi was heard before the order was passed would not, in the circumstances of the case, satisfy the requirements of section 28(2). We are referring to this aspect only to emphasis that there is no machinery provided by the Act to impose the penalty under Section 28(1), after the assessee has ceased to exist. Section 28(2), on the other hand, provided for the imposition of a penalty, but still the person to be penalised is not the registered firm; but the individual partner.
Learned counsel for the petitioners referred to the decision in Commissioner of Income-tax, Bihar and Orissa v. Sanichar Sah Bhim Sah. No doubt even the initiation of proceedings under section 28 of the Act, when the notice was issued, was after the Hindu undivided family in that case had ceased to exist, and the order passed under section 28 itself directed the divided members of the family to pay the penalty. The learned Judge observed at pate 313 : "It is clear in these circumstance 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 the penalty. In my opinion the proceeding initiated by the Income-tax Officer under section 28(1)(c) of the Act is legally invalid since the Hindu undivided family was non existent on that date. It follows that the order of the Income-tax Officer imposing the penalty on the of April 24, 1950, is also legally invalid." Thus both the requirement have to be satisfied on the date proceedings are initiated under section 28 of the Act; the person, and it that person in a Hindu undivided family that family, must be in existence; that family must be also in existence on the date the order imposing the penalty on that family as a "person" is passed. We respectfully agree with the principle laid down by the learned Judges in Commissioner of Income-tax, Bihar and Orissa v. Sanichar Sah Bhim Sah.
Learned counsel for the respondent referred to section 25A(3), which runs : "Where such an order has not been 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 Hindu undivided family."
Learned counsel contended that, since the order that was passed by the Income-tax Officer was only on December 31, 1948, the Hindu undivided family should be deemed to have continued in existence till that date. We are unable to accept this interpretation of section 25A(3). Each of the clauses under section 25A begins with the expression "where". To construe "where" as "until" does not seem to fit in with the scheme underlying section 25A of the Act. Besides such a contention put forward in Commissioner of Income-tax, Madras, v. K.M.N.N. Swaminathan Chettiar, was specifically repelled by a Division Bench of this Court.
Section 47 of the Act provides for recovery of the penalty imposed. But that postulates the existence of a valid order imposing the penalty. Section 28 is a complete code in itself, regulating the procedure for the imposition of the penalties prescribed. The provisions for the assessment an levy of the tax will not as such apply. As pointed out by the learned Judges in Commissioner of Income-tax, Bihar and Orissa v. Sanichar Sah Bhim Sah, there is a lacuna, but it is not for the Court to fill up.
In our opinion no penalty was impose don any of the petitioners. The order dated March 18, 1948, did not amount in fact or in law to an imposition of a penalty under section 28 of the Act on any of the petitioners. It follows that no portion of the penalty imposed by the order dated March 18, 1948, can be recovered from any of the petitioners as an arrear of land revenue.
The rule is made absolute. The petitioner is allowed with costs. Counsels fee Rs. 250.