G.P. Singh, C.J.
1. The questions of law referred in this case by the Income-tax Appellate Tribunal are as follows :
' (1) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal, that the transfer of the truck by the applicant to the firm of which he was a partner constituted a ' sale ' and thereby attracted the provisions of Section 41(2) was correct in law ?
(2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that penalty was legally imposed on the assessee, Ganesh Das Narang, who had expired on May 16, 1974, when during penalty proceeding representation was made on behalf of the legal representative of the deceased assessee ?
(3) Whether, on the facts and in the circumstances of the case stated above, the order of the Tribunal sustaining the penalty of Rs. 7,000 was legally correct ?'
2. The reference arises out of penalty proceedings for the assessment year 1972-73. Ganesh Das Narang who was the assessee died on 16th May, 1974. He was being assessed in his individual capacity. He was also a partner in a firm carrying on business in the name of M/s. Ram Prakash Ganeshdas. The assessee transferred a truck belonging to him to the partnership. The sale price obtained by the assessee from the firm was Rs. 6,835 more than the written down value. In the assessment proceedings, the ITO added this amount as assessable income under Section 41(2) of the I.T. Act, 1961. The assessment order became final after it was upheld in appeal by the AAC. The ITO initiated penalty proceedings for concealment of income of Rs. 6,835 under Section 271(1)(c) of the Act. In these proceedings, the assessee submitted that the transaction by which the truck was transferred to the firm did not amount to a sale and Section 41(2) was not attracted. It was also submitted that at any rate it was A debatable question and if the assessee honestly believing that the amount of Rs. 6,835 was not taxable as income did not disclose it in the return, he could not be held liable for concealment of income under Section 271(1)(c). It was further submitted that the assessee having died on 16th May, 1974, penalty proceedings could not be continued.
3. Having heard learned counsel for the legal representative of the assessee and the learned standing counsel for the Department, we have reached, the conclusion that Section 271(1)(c) was not attracted. A partnership firm is not a legal entity. The name of the partnership is only a convenient mode of naming the partners collectively. On the principle that a person cannot sell to himself, the Madras High Court has held in D. Kanniah Pillai v. CIT : 104ITR520(Mad) that when a partner transfers assets to a partnership there is no sale and Section 41(2) is not attracted. It is not necessary for us to express any definite opinion on this question. All that we need say is that it is a possible view to take that when a partner sells his individual property to a partnership of which he is a partner, the transaction does not amount to a sale. If the assessee, in this background, did not disclose the income of Rs. 6,835, which was added under Section 41(2), it was not possible to hold that the assessee concealed his income under Section 271(1)(c). The ITO, therefore, was not justified in imposing penalty. In view of this finding, it is also not necessary to consider whether, in view of the death of the assessee on 16th May, 1974, penalty proceedings could be continued.
4. For the reasons stated above, we decline to answer questions Nos. 1 and 2. Our answer to question No. 3 is that the Tribunal was not justified in sustaining the penalty of Rs. 7,000. There will be no order as to costs of this reference.