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Issues:
1. Validity of notices issued by Tax Recovery Officer under sections 222 and 223 of the Income-tax Act, 1961. 2. Liability of the petitioner to clear arrears of income-tax due from a defunct firm. 3. Interpretation of the petitioner's partnership status with the defunct firm. 4. Settlement proceedings before the Settlement Commission and its impact on the petitioner's liability. Analysis: 1. The petitioner sought to quash notices P-4 and P-6 issued by the Tax Recovery Officer under sections 222 and 223 of the Income-tax Act, 1961, demanding arrears of income tax from a defunct firm. The petitioner argued that as he was not a partner of the firm, the notices were invalid. However, the court noted that the firm had applied for settlement of tax liabilities before the Settlement Commission, as evidenced by exhibit P-2, where the petitioner appeared as a partner alongside an advocate. The court found that the amounts demanded in notices P-4 and P-6 were settled as per exhibit P-2, establishing the validity of the notices. 2. The communication in exhibit P-6 stated that the petitioner and others were jointly and severally responsible to clear the arrears as partners of the defunct firm. The petitioner's contention that he was not a partner was challenged based on the proceedings before the Settlement Commission. The court highlighted the Settlement Commission's observation that the firm was not genuine and its registration was cancelled, indicating the petitioner's partnership status. Therefore, the court concluded that the petitioner's liability to clear the arrears was established based on the Settlement Commission's findings. 3. The petitioner's argument regarding his partnership status with the defunct firm, Wynad Financing Corporation, was refuted by the court in light of the proceedings before the Settlement Commission. Despite the petitioner's submission of a revised statement of facts and terms of settlement, exhibit P-2 confirmed his partnership involvement. The court emphasized that the petitioner's claim of not being a partner lacked substance, as the Settlement Commission's findings determined his liability for the arrears. 4. The Settlement Commission's proceedings, as evidenced by exhibit P-2, played a crucial role in determining the petitioner's liability for the arrears of income tax due from the defunct firm. The court relied on the Settlement Commission's decision to cancel the firm's registration and treat it as an unregistered firm for the assessment year in question. This decision directly impacted the petitioner's responsibility to clear the arrears, as confirmed by the Settlement Commission's findings presented in exhibit P-2. Consequently, the court dismissed the original petition, upholding the validity of the notices issued by the Tax Recovery Officer based on the settlement proceedings before the Settlement Commission. This comprehensive analysis highlights the court's interpretation of the petitioner's partnership status, the impact of the Settlement Commission's proceedings on his liability, and the validity of the notices issued by the Tax Recovery Officer in light of the settlement findings.
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