2020 (4) TMI 454 - HC - Income Tax

Joint and several liability of partners for tax payable by firm - legality and validity of order passed u/s 188A directing to make payment of the tax arrears as mentioned in the order - HELD THAT - When learned counsel for the petitioner pointed out the anomaly, Mr. Walve, learned standing counsel submitted on the basis of the instructions received from respondent No.1 who is present in the Court that there is no demand payable by the firm for the assessment years 2011-12 and 2012-13 and consequently, question of raising of any demand against the petitioner does not arise. Further, petitioner having retired as partner of the firm with effect from 31.03.2012 raising any demand against the petitioner for assessment year 2013-14 and onwards also does not arise. - Notice quahsed.

Summary

Issues:
1. Validity of the order passed by the Income Tax Officer under Section 188A of the Income Tax Act, 1961.
2. Liability of the petitioner as a partner for tax arrears of the firm.
3. Anomaly in raising a demand for the assessment year after the petitioner retired from the firm.

Analysis:
1. The petitioner challenged the legality and validity of the order dated 01.12.2019 passed by the Income Tax Officer under Section 188A of the Income Tax Act, 1961. The petitioner, an individual assessee, was a partner in a partnership firm until 31.03.2012. The order directed the petitioner to pay tax arrears of the firm for the assessment years 2011-12 and 2012-13. The petitioner contended that there was no pending demand against the firm for those years as the appeals filed by the firm were allowed by the first appellate authority. The petitioner responded to the show cause notice with this information.

2. Despite the petitioner's reply, the Income Tax Officer held the petitioner jointly and severally liable with the firm for the tax arrears. The order also included a demand for the subsequent assessment year 2013-14, even though the petitioner had retired from the firm before that period. The petitioner filed a writ petition challenging this decision. During the hearing, it was clarified that there was no demand payable by the firm for the assessment years 2011-12 and 2012-13. Additionally, since the petitioner had retired as a partner from the firm before the assessment year 2013-14, there was no basis for raising any demand against the petitioner for that period.

3. In light of the clarifications provided during the hearing, the High Court set aside the impugned order dated 01.12.2019 issued by the Income Tax Officer. The writ petition was allowed, and no costs were imposed. The judgment rectified the anomaly in raising a demand against the petitioner for a period after the petitioner had retired from the partnership firm, thereby providing relief to the petitioner in this matter.