1971 (9) TMI 65 - SC - Income Tax

A Partner, Appeal Against Assessment, Excess Profits Tax, Firm Assessment, Garnishee Order, High Court, One Partner, Writ Petition

Summary

Issues:
1. Excess profits tax assessment and appeal process.
2. Refund of tax paid and claim for refund.
3. Writ petition under article 226 of the Constitution.
4. Appeal against the writ petition judgment.
5. Maintainability of the writ petition due to the absence of a party.
6. Legal discharge of funds to the Income-tax Officer, Bombay.
7. Liability of the Excess Profits Tax Officer, Rajahmundry for refund.
8. Decision to remit the case back to the High Court for further consideration.

Analysis:

The case involved the assessment of excess profits tax on a firm by the Excess Profits Tax Officer, which was later appealed against and reversed by the appellate authority and the Income-tax Appellate Tribunal. During the appeal process, two partners of the firm passed away. One of the deceased partner's son deposited the tax assessed, seeking a refund after the order was reversed. However, the Income-tax Officer of Bombay claimed a portion of the refund towards the deceased partner's tax arrears, leading to a dispute over the refund.

The appellants filed a writ petition under article 226 of the Constitution seeking a direction for the refund. The single judge allowed the writ petition, directing the respondents to refund the amount. The respondents appealed the decision, arguing that the writ petition was not maintainable as the Income-tax Officer of Bombay was not made a party. The Division Bench allowed the appeal solely on the ground of non-maintainability due to the absent party, without considering other grounds raised by the department.

The Supreme Court held that the writ petition was maintainable even without the Income-tax Officer of Bombay being a party, as the funds transferred were part of the dissolved firm's assets, and the deceased partner's share had not been determined. The Court emphasized that the payment to the Income-tax Officer, Bombay, was unauthorized and did not discharge the liability to refund. Therefore, the appeal was allowed, and the case was remitted back to the High Court for further consideration of the remaining issues.

The Court directed the parties to bear their own costs in the Supreme Court, maintaining the decision to remit the case for the High Court's review of the unresolved matters. The judgment clarified the legal standing regarding the refund claim and the necessity of involving relevant parties in such proceedings for a comprehensive resolution.