1968 (9) TMI 8 - SC - Income Tax

Case of the appellant was that he had ceased to be a partner at the time of the assessment and was not liable to pay the income-tax assessed upon the partnership firm. It was also stated that no notice of the assessment proceedings was given to that appellant, nor was any notice of demand issued under s. 29 - held that tax can be recovered from partner without serving notice of demand on him

Summary

Issues:
1. Whether a separate notice of demand is necessary against a partner of an unregistered firm for recovery of income-tax assessed against the firm.
2. Whether the Collector can recover income-tax dues from a partner of an unregistered partnership firm under section 46(2) of the Income-tax Act.

Analysis:
1. The appellant contended that a separate notice under section 29 of the Income-tax Act was required before initiating recovery proceedings against him. However, the court held that the phrase "other person liable to pay" in section 29 should be construed as per the Income-tax Act, not the Partnership Act. The liability of a partner of an unregistered firm is not imposed by the Income-tax Act itself, and thus, a separate notice of demand is not necessary for recovery proceedings under section 46(2) of the Act.

2. The appellant argued that the Collector could not recover income-tax dues from him under section 46(2) of the Act. The court disagreed, citing section 25 of the Partnership Act, which holds partners jointly and severally liable for the firm's liabilities. Referring to Order XXI, rule 50 of the Civil Procedure Code, the court found that the Collector could execute the certificate against the appellant as a partner of the unregistered firm. Since the appellant did not dispute his partnership, the recovery proceedings against him were legally valid.

The court referenced decisions from the Calcutta High Court supporting its view and noted conflicting decisions from the Mysore and Allahabad High Courts. However, the court held that the latter decisions did not correctly interpret the law. Consequently, the appeal was dismissed, and the appellant was not entitled to a writ under article 226 of the Constitution.