SATISH CHANDRA, C. J.

( 1 ) BEING of the opinion that the Division Bench decision of this court in Shiv Shanker Lal [1977] 106 ITR 342 and a Full Bench decision in Badri Narain [1978] 115 ITR 858, may require reconsideration, a Bench has sent the reference made by the Tribunal to a larger Bench. That is how the case has come before this Full Bench.

( 2 ) IN substance, the question of law is whether on reconstitntion of a partnership firm a new taxable entity comes into existence. The two aforesaid decisions have held in the affirmative with the result that according to these decisions two assessments have to be made on the firm : one, as it stood prior to reconstitution and another on the reconstituted firm.

( 3 ) IN the present reference, the question is of levy of penalty Under Section 271 (1) (c) of the I. T. Act, 1961. The submission on behalf of the asscssee was that since a new assessable entity comes into existence after reconstitution of a partnership firm, penalty cannot be levied on the reconstituted firm for the default committed by the old firm. Before we deal with this question we may state the material and relevant facts.

( 4 ) INITIALLY M/s. Vishwanath Seth carried on business in silver, bullion and speculation, etc. Their income was assessed to tax in the status of HUF. After a partition in the family the business was converted into a partnership firm with effect from August 1, 1955, relevant to the assessment year 1957-58. This partnership consisted of Vishwanath Seth and his three sons as partners. His two minor sons were admitted to its benefits. The two minor sons became major in 1958. They elected to remain as partners. The firm, thereafter, consisted of six partners, Vishwanath Seth and his five sons.

( 5 ) VISHWANATH Seth died in 1964. His five sons continued the partnership business in the same firm name. No outsider was, at any stage, a partner in this firm.

( 6 ) THE business premises of the firm were raided by the I. T. authorities on February 10, 11 and 12, 1965. Incriminating material was found. Investigation and negotiations for settlement followed. Eventually, the firm surrendered a total sum of Rs. 15,62,326 as undisclosed income. Itwas agreed that this amount be added to the income of the firm already returned in respect of assessment years 1957-58 to 1966-67. The break-up of the amount in respect of each assessment year was also agreed upon. It was agreed that the firm shall be treated as a registered firm for all these assessment years. The assessee further agreed that in all Rs. 3,00,000 be imposed as penalty. The assessments were revised accordingly.

( 7 ) THE IAC by orders made on June 7, 1972, and October 4, 1972, imposed penalties on the firm for various years as follows:

1.

22,800

2

195758

3

24,600

4

195859

5

26,700

6

195960

7

5,400

8

196061

9

48,950

10

196162

11

47,000

12

196263

13

27,200

14

196364

15

22,600

16

196465

17

26,500

18

196566

19

30,500196667

20

Total 2,82,250

( 8 ) THE assessee felt aggrieved and went up in appeal to the Tribunal. One of the submissions made by the assessee before the Tribunal was that after the death of Vishwanath Seth in 1964 there was a change in the firm. Previously it had six partners and after his death it was constituted by five partners only. Since the two firms were different no penalty could be imposed on the new firm for the period prior to the reconstitution. The Tribunal repelled this submission. It held that in the present case there was no dissolution of the firm in 1964. The same business was continued by the five sons in partnership. The appeals were dismissed.

( 9 ) AT the instance of the assessee this Court required the Tribunal to refer the following question of law for its opinion : "whether tbe Tribunal is right in confirming the penalty levied on the reconstituted firm when the concealment was by the previous firm ?"

( 10 ) THE finding recorded by tbe Tribunal that in the present case there was

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