Calcutta High Court Upholds Quashing Of ₹7.29 Crore Penalty Imposed On Dissolved HUF

The Calcutta High Court upheld the quashing of ₹729 crore penalty imposed on a dissolved HUF, ruling that penalties can't survive the entity's dissolution unless specifically preserved. Justice Shekhar Saraf noted the penalty order came two years after the HUF's voluntary dissolution through partition deed. The judgment reinforces that tax liabilities (including penalties) must be determined against existing entities, except in cases of fraudulent dissolution. This provides relief to families who properly dissolved HUFs before demands arose. The court emphasized that revenue authorities must act promptly if they suspect dissolution aims to evade taxes. The decision brings clarity to HUF taxation, especially regarding timing of assessments vis-à-vis dissolution dates. Tax professionals suggest this may prompt authorities to expedite proceedings against HUFs showing signs of impending partition.