A registered firm could be liable to pay a penalty under s. 28(1)(b) of the IT Act despite not being assessed to income-tax or super-tax.

CHAKRAVARTTI, C. J.

1. THIS is a reference under s. 66(2) of the IT Act, made by the Calcutta Bench of the Tribunal under the directions of this Court. Previously, the Tribunal had rejected the assessee's application for a reference in the view that no point of law arose out of the appellate order.

2. THE assessee is a registered firm and was assessed in that status. It appears that in the course of its assessment for the asst. yr. 1942-43, a notice under s. 22(4) of the Act was served upon it for the production of certain Sauda Khata, Pattan Bahis and Sahi Bahis for the Diwali year 1997-98. THE assessee failed to comply with that notice and accordingly a penalty of Rs. 15,000 was imposed on it under the provisions of s. 28(1)(b) of the Act. THE assessee's appeals against that imposition were successively dismissed by the AAC and the Tribunal.

The grounds of appeal before the Tribunal appear to have been all grounds of fact. In the course of the argument, however, a point appears to have been taken that s. 28 of the IT Act was not applicable to a registered firm at all, because a "person", as contemplated by s. 2(9) of the Act, was a physical person and not a notional person like a firm. The Tribunal rejected that argument the view that the word "person", as defined in the Act, was not limited to physical persons but comprised persons of other kinds as well and, particularly with regard to registered firms, it pointed out that in cl. (d) of the proviso to s. 28 itself, a specific reference had been made to a registered firm as a person liable to penalty.

3. THEREUPON the assessee required the Tribunal to refer to this Court certain questions of law, including the question as to the liability of a registered firm to penalty. That application, as I have already stated, was rejected. The assessee next moved this Court under s. 66(2) of the Act and it appears that for the first time in that application, it raised a question to the effect that no penalty could be legally imposed upon a registered firm, since a firm, if it was a regsitered firm, was not, as such, either assessable to, or liable to pay, any tax under the IT Act. Dr. Sen Gupta, who had appeared at the hearing of the application, informed us that that was the principal question which he had urged before the Bench to which he had applied for a rule.

4. A rule was issued and the Tribunal was asked to show cause why it should not state and refer to this Court a case with reference to the following question :--

"Whether on the facts and circumstances of the above mentioned case, the Tribunal was right in holding that the imposition of a penalty on the petitioner, a registered firm under s. 28(1)(b) of the IT Act, was justified in law."

As the question framed by the Bench which issued the Rule was undoubtedly a question of law, the Rule was, in due course, made absolute and it is that question which has since been referred. On behalf of the CIT, a preliminary objection was taken by Mr. Meyer. He contended that if the assessee attempted to raise a question that no penalty was leviable from a registered firm, because no income-tax or super-tax was payable by it as such, it could not be allowed to do so, since no such question arose out of the appellate order. I am entirely in agreement with Mr. Meyer in thinking that the question, as sought to be raised before this Court, cannot possible be said to raise out of the appellate order. But at the same time I feel bound to say that when this Court framed the question at the hearing of the application under s. 66(2), it must have had in mind the question as sought to be raised to-day. I cannot imagine any Bench directing the Tribunal to refer a question as to whether a registered firm is a person, particularly after the Tribunal had declined to do so and given its reasons for the view taken by it. It appears from the application upon which the Rule was issued that the question as sought to be raised to-day was embodied in the