FACTS :- The following question was referred to the High Court :

Whether in the circumstances of the case a penalty could have been imposed upon the assesses firm even though the Income-tax (Amendment) Act, 1940 (XL (40) of 1940) came into force on 3rd December 1940 ?

The facts leading to this question will be found in the judgment of the High Court.

Chagla, C.J. :- The question that arises in this reference is whether the assessees are liable to pay a certain penalty imposed upon them by the Income-tax Officer under S. 28 of the Act.

2. The facts which led up to this reference may be briefly stated. On 16th January 1940, the Income-tax Officer issued a notice under S. 22, sub-s. (4), Income-tax Act, for production of certain accounts and documents. The assessees failed to comply with that notice. The assessment of the assessees was completed by the Income-tax Officer on 8th February 1940. In completing the assessment, a note was made by the Income-tax Officer that proceedings should be taken against the assessees under s. 28(1)(a) and (b). On 17th February 1940, pursuant to that note, a notice was issued by the Income-tax Officer under S. 28 of the Act. Now when the assessmen