1965 (4) TMI 131 - HC - Income Tax

Summary

Issues Involved:
1. Competency of the Commissioner of Income-tax to move the Board of Revenue.
2. Continuation of certificate proceedings against partners after the firm's dissolution.
3. Powers of the Board of Revenue to add petitioners as certificate-debtors.
4. Authority of the Board of Revenue to cancel the order of cancellation of the certificate case.

Issue-wise Detailed Analysis:

1. Competency of the Commissioner of Income-tax to Move the Board of Revenue:

The petitioners argued that the Commissioner of Income-tax, on behalf of the Union of India, was not competent to move the Board of Revenue against the order of the Commissioner, Presidency Division. They contended that the certificate-creditor should be the Collector and not the Union of India, as per section 46(2) of the Indian Income-tax Act. However, the court rejected this argument, stating that the amount due was to the Union of India as arrears of income-tax, and the Collector's role was merely to recover that sum. The court concluded that the petition to the Board of Revenue by the Union of India was valid and the argument of the petitioners was without merit.

2. Continuation of Certificate Proceedings Against Partners After the Firm's Dissolution:

The petitioners contended that the firm, being dissolved after the assessment, could not have certificate proceedings continued against the partners without issuing fresh demand notices under section 29 of the Income-tax Act and fresh requisition under section 46(2). The court examined section 3 of the Income-tax Act, which treats a firm as a "person" for assessment purposes. The court noted that the firm was assessed as a unit and that the requisition and certificate were issued in the firm's name. The court referred to section 44 of the Income-tax Act and section 49 of the Indian Partnership Act, concluding that upon dissolution, the partners become liable to pay the firm's debt. Thus, the continuation of certificate proceedings against the partners was valid, and the argument of the petitioners was rejected.

3. Powers of the Board of Revenue to Add Petitioners as Certificate-debtors:

The petitioners argued that the Board of Revenue had no powers to add them as certificate-debtors. The court noted that the Board of Revenue did not actually direct the addition of parties but left it to the income-tax department to apply to the Collector if they wished to proceed against the partners. The court emphasized that the partners would have the opportunity to contest such addition under sections 9 and 10 of the Public Demands Recovery Act. The court found no merit in the petitioners' argument and upheld the powers of the Board of Revenue.

4. Authority of the Board of Revenue to Cancel the Order of Cancellation of the Certificate Case:

The petitioners contended that the Board of Revenue could not cancel the order of the certificate officer, who had cancelled the certificate case. The court reviewed the sequence of events and the orders passed by the Commissioner and the Board of Revenue. It concluded that the Board of Revenue had actually revived the certificate case, not the certificate itself, which had never been cancelled. The court found that the Board of Revenue's order to proceed against the partners after they are added as certificate-debtors was correct. Therefore, the argument of the petitioners was overruled.

Conclusion:

All the objections raised by the petitioners were overruled, and the rule was discharged with costs. The court held that the Commissioner of Income-tax was competent to move the Board of Revenue, the continuation of certificate proceedings against the partners was valid, the Board of Revenue had the authority to add certificate-debtors, and the cancellation of the certificate case by the certificate officer was rightly set aside by the Board of Revenue.