Judgment

SHAH, J. : M/s. Bhikaji Dadabhai & Co. - hereinafter called the assessees - owned an oil mill at Khammamath in the area of the former State of Hyderabad. For the year of assessment Fasli 1357 (October 1, 1946, to September 30, 1947), the assessees returned an income of Rs. 50,384/-. The income-tax Officer found that the books of account maintained by the assessees were unreliable and by his order dated February 10, 1950, he assessed their total income at Rs. 1,63,131/-. The Income-tax Officer had, before finalising the assessment, issued on December 22, 1949, a notice to the assessees under S. 40 of the Hyderabad Income-tax Act requiring them to show cause why penalty should not be imposed upon them and by order dated October 31, 1951, directed the assessees to pay by way of penalty Rs. 42,000/- in addition to the tax. This order was confirmed in appeal by the Appellate Assistant Commissioner. In appeal, the Income-tax Appellate Tribunal observed that by virtue of the provisions of S. 13(1) of the Indian Finance Act, 1950, the Hyderabad Income-tax Act had ceased to have effect and as the power to impose penalty under S. 40 of the Hyderabad Income-tax Act was not saved, the