COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA, PATNA versus M/S. KIRKEND COAL COMPANY

Citation: [1969] 3 S.C.R. 983 · Decided: 12-03-1969 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Judgment (excerpt)

98~ 
A 
COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA, 
PATNA 
B 
c 
D 
E 
F 
G 
H 
v. 
MIS. KIRKEND COAJ, COMPANY 
March 12, 1969 
[J. C. SHAH A~D A. N. GROVER, JJ.) 
Indian Jnrome-tax Act, 1922, ss. 26, 28, 44 and 66-Pena/ty leviah/e 
on firn: for assess1nent year 194849-Firin reconstituted in later years 
but business not discontinued-Penalt,v in respect of 
1948-49 whether 
/eviable on reconstituted firm-Sect.ion 44 not apjJlicable to such Clllls-
Applicahility of ss. 26 and 28-Question not rc.·ised before Tribunal can-
not he raised in reference under s. 66. 
The respondent was a firm on which penalty under s. 28(1)(c) ot 
the Indian Income-tax Act, 1922 was imposed by the Income-tax Officer 
in respect of the assessment year 1948-49. At the time when the penalty 
was imposed the cpnstitution of the firm had changed though the same 
business was continued by the reconstituted firm. 
The appeals filed by 
the respondent before the Appellate Assistant Commissioner and the Tri-
bunal were rejected. In reference the High Court held that penalty could 
be legally imposed upon the original firm constituted in the account year 
relevant to the assessment year 194849 and not upon the new firm con-
stituted in 1952. 
In coming to their conclusions the Tribunal as well a! 
the. High Court proceeded on the assumption that the source and power 
of the Income-tax Officer to impose a penalty was in s. 44 of the Indian 
Income-tax Act, 1922. 
In appeal by the Revenue to this Court, 
HELD : (i) Section 44 only applies to those <ases in which· there has· 
been discontinuance of the business and not to cases in which the busi-
ness continues after the reconstitution of the firm, or there is succession 
to the business. Cases of reconstitution df the firm or succeso;ion to the 
business are covered by ss. 26(1) and (2~. The Tribun•l and the High 
Court were therefore in ctr.or 
in relying on s. 44 of the Act. [988 A; 
985 D-E] 
(ii) Assessment in Ch. IV of the Income-tax Act 1922 includes 
a 
proceeding for imposition of penalty and the expression 'per~on' includes 
for the purpose of s. 28 a firm registered or unregistered. If there is re-
cbn·stitution of the firm by virtue of s. 26, the Income-tax Officer will in 
imposing the penalty proceed against the firm. lf there is discontinuance 
of the business penalty will be imposed against the partners of the firm. 
[988 B-0] 
In the present case, however, this Court could not go into the question 
\vhether penalty on the respondent firm was leviahle under the terms of 
ss. 26 and 28 even though the question raised by the Tribunal was irt terms 
sufficiently comprehensive 
to 
embrace 
the enquiry. 
In a 
refetence 
under s. 66 of the Indian Income-tax Act. 1922, only the question which 
was either raised or argued before the Tribunal may be answered, even if 
the language of the question framed by the Tribunal may apparently in-
clude an enquiry into other matters which could have been but were not. 
raised or argued. [988 D-Fl 
Shivr.m Poddar v. lncom•-tax Officer, Central Circle ll, Calcutta ~ 
Anr., 51 I.T.R. 823, C. A. Abraham v, Jncom•-tax Officer, Kottav•m qnd 
98.& 
Sl!PUM• OOUllT llPOlln 
[1909] 3 S.C.L 
Anr., 41 I.T.R. 425 and Comml1Sloner of lnco-.t=, Madr01 A Anr. v. 
S. V. Angidl Chtttlar, 44. I.T.R. 739, applied, 
S. M. S. Karuppl•h Pillai Y. Comml'11oner qf lncom<·t= Madr01, 9 
I.T.R. 1, approved. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2456 of 
1966. 
Appeal from the judgment and order dated January 27, 1964 
of the Patna High Court in Misc. Judicial Case No. 299 of 1958. 
D. Narsaraju, S. K. A.iyar, R. N. Sachthey .and B. D. Sharma, 
· for the appellant. 
C. K. Daphtary, Narain Rao, V. D. Narayan and D. Gobur-
dhun, for the respondent. 
The Judgment of the Court was delivered by 
A 
B 
c 
Shah, J. In determining the taxable income of the respon· 
dent firm for the assessment year ~948-49 the Income-tax Officer 
added to the income returned a sum of Rs. 1,60,000 as 'undis· 
closed rcc.~ipts'. The order was confirmed in appeal by the 
D 
Appellate Assistant Commissioner, and by the Tribunal. The 
Income-tax Officer had in the meantime commenced a proceeding 
for the levy of penalty and in exercise of the power under s. 28 
( 1 )( c) of the Indian Income-tax Act, 1922 he directed the res· 
pendent firm to pay Rs. 60,000 as penalty. The Appellate Assis-
tant Commissioner in appeal confirmed the order. The Income- z 
tax AJ)pellate Tribunal rejected the contention o

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