1962 (1) TMI 81 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the notice issued under section 34 of the Indian Income-tax Act.
2. Jurisdiction of the Income-tax Officer.
3. Applicability of section 44 of the Indian Income-tax Act to a dissolved firm.
4. Alternative remedy under the Income-tax Act versus invoking jurisdiction under Article 226 of the Constitution.

Detailed Analysis:

1. Validity of the Notice Issued under Section 34 of the Indian Income-tax Act:
The primary issue in this case was the validity of the notice issued under section 34 of the Indian Income-tax Act. The notice was challenged on the grounds that it was issued after the dissolution of the firm. The court examined the notice dated 28th March, 1958, addressed to the appellant "as partner of the firm of Messrs. Balmukund Radheshyam at the time of its dissolution." The court held that the notice was valid, considering the various authorities and precedents, including the case of C.A. Abraham v. Income-tax Officer, Kottayam, which clarified that assessment proceedings could be continued against a firm as if discontinuance had not taken place.

2. Jurisdiction of the Income-tax Officer:
The appellant challenged the jurisdiction of the Income-tax Officer, Central Circle II, Calcutta, to issue the notice under section 34. The court found that the jurisdiction was properly exercised as the Central Board of Revenue had transferred the income-tax cases of the firm to the Income-tax Officer, Central Circle II, Calcutta. The correspondence and subsequent actions by the Income-tax Officer were in compliance with the procedural requirements, thereby affirming the jurisdiction.

3. Applicability of Section 44 of the Indian Income-tax Act to a Dissolved Firm:
The court examined whether section 44 of the Indian Income-tax Act, as it stood before the amendment by the Finance Act of 1958, applied to a dissolved firm. The original section 44 did not explicitly mention a dissolved firm, leading to judicial interpretations that excluded dissolved firms from its ambit. However, the amendment in 1958 clarified this by including dissolved firms. The court noted that the dissolution of the firm in February 1950 resulted in the discontinuance of its business, falling within the scope of the original section 44. The court referred to previous judgments, including Manindra Lal Goswami v. Income-tax Officer and R.N. Bose v. Manindra Lal Goswami, which had interpreted the old section 44 to exclude dissolved firms. The amendment in 1958 was seen as a legislative clarification to include dissolved firms within its scope.

4. Alternative Remedy under the Income-tax Act versus Invoking Jurisdiction under Article 226 of the Constitution:
The respondent argued that the Income-tax Act provided a complete machinery for assessment and obtaining relief, thereby barring the invocation of the High Court's jurisdiction under Article 226 of the Constitution. The court acknowledged this argument but did not delve deeply into it, as the main issue was the validity of the notice under section 34 and the applicability of section 44. The court referred to several cases, including C.A. Abraham v. Income-tax Officer, Kottayam, and Calcutta Discount Co. v. Income-tax Officer, Calcutta, but chose not to express a definitive opinion on this point.

Conclusion:
The court dismissed the appeal, upholding the validity of the notice issued under section 34 and affirming the jurisdiction of the Income-tax Officer. The court concluded that section 44 of the Indian Income-tax Act, as it stood before the 1958 amendment, applied to the dissolved firm, thereby making the partners jointly and severally liable for the firm's pre-dissolution income. The appeal was dismissed with costs, certified for two counsel.