1976 (11) TMI 26 - HC - Income Tax

Act Of 1922, Act Of 1961, Appellate Assistant Commissioner, Assessment Order, Income Tax, Provisional Assessment, Regular Assessment

Summary

Issues Involved:
1. Legality of Exhibits P-1, P-2, and P-4 prohibitory orders.
2. Liability of the petitioner for the tax dues of the dissolved firm.
3. Application of the Full Bench decision in Income-tax Officer v. C. V. George.
4. Relevance of Section 44 of the Indian Income-tax Act, 1922, and Section 189 of the Income-tax Act, 1961.
5. Validity of recovery proceedings under Section 297(2)(j) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of Exhibits P-1, P-2, and P-4 Prohibitory Orders:
The petitioner challenged Exhibits P-1, P-2, and P-4 prohibitory orders, arguing they were issued without jurisdiction and were illegal. Exhibit P-1 prohibited the 3rd respondent from making payments to the petitioner due to outstanding tax liabilities. Exhibit P-2 informed the petitioner that the refund could not be processed due to the prohibitory order. Exhibit P-4 reiterated the prohibition on payments to the petitioner.

2. Liability of the Petitioner for the Tax Dues of the Dissolved Firm:
The respondents contended that the petitioner, as a partner of the dissolved firm, was jointly and severally liable for the tax dues. The court upheld this view, citing Section 44 of the Indian Income-tax Act, 1922, which states that every partner is jointly and severally liable for the tax or penalty payable at the time of the firm's dissolution.

3. Application of the Full Bench Decision in Income-tax Officer v. C. V. George:
The petitioner relied on the Full Bench decision in Income-tax Officer v. C. V. George, which held that recovery proceedings could only be against the assessee in terms of the assessment order. The court distinguished this case, noting that the Full Bench decision applied to registered firms, whereas the present case involved an unregistered firm dissolved before the Income-tax Act, 1961, came into force.

4. Relevance of Section 44 of the Indian Income-tax Act, 1922, and Section 189 of the Income-tax Act, 1961:
The court emphasized that Section 44 of the 1922 Act and Section 189 of the 1961 Act impose joint and several liability on partners for tax dues of a dissolved firm. The court found that the petitioner's liability was governed by these sections, given that the assessments were made before the 1961 Act came into force.

5. Validity of Recovery Proceedings under Section 297(2)(j) of the Income-tax Act, 1961:
The petitioner argued that recovery proceedings should be under the 1961 Act, per Section 297(2)(j). The court rejected this argument, stating that the liability was established under the 1922 Act, and the principles of joint and several liability applied. The court concluded that the Full Bench decision did not extend immunity to partners from being proceeded against for the firm's liabilities.

Conclusion:
The court dismissed the writ petition, finding no grounds to quash Exhibits P-1, P-2, and P-4 or to issue a writ of mandamus for the refund. The court held that the petitioner was jointly and severally liable for the tax dues, and the prohibitory orders were valid. The court also noted that it would not assist in delaying or evading tax payments on trivial grounds. The petition was dismissed without any order as to costs.