1966 (11) TMI 13 - HC - Income Tax

Dissolved firm - Notices under s. 22(2) and 22(3) were issued to a dissolved firm - held that assessments made on the firm after its dissolution without issuing separate notices to all the partners of the defunct firm was valid

Summary

Issues: Validity of assessments made on a dissolved firm without issuing separate notices to all partners.

Analysis:
The judgment pertains to a case stated under section 66(1) of the Indian Income-tax Act, 1922, questioning the validity of assessments made on a firm for the assessment years 1953-54 and 1954-55 after its dissolution without serving separate notices to all partners of the defunct firm. The material facts reveal that notices were issued to the firm, Messrs. Nand Kishore Sita Ram, for the relevant assessment years but were served on only one partner. The return of income for 1953-54 was filed by a partner, while no return was filed for 1954-55, leading to assessments under section 23(4) in 1958. The firm had applied for registration for 1953-54 but not for 1954-55. Despite non-compliance with notices, assessments were completed under section 23(4) for both years. Appeals were filed challenging the assessments, contending they were illegal as they were made after the firm's dissolution. The Appellate Assistant Commissioner ruled in favor of the assessee, holding assessments on a dissolved firm as impermissible.

The department appealed to the Tribunal, arguing assessments on a dissolved firm were valid if notice was served on a partner. The Tribunal referred the matter, and the question was answered based on Supreme Court decisions. The Supreme Court rulings, including C. A. Abraham v. Commissioner of Income-tax, emphasized that assessment proceedings against a discontinued firm could continue as if the discontinuance had not occurred. The provisions of section 44 of the Act ensure continuity in assessment proceedings even after a firm's discontinuance. The court cited other cases reiterating this view, including Commissioner Income-tax v. Raja Reddy Mallaram and Shivram Poddar v. Income-tax Officer. A Division Bench of the High Court also followed these Supreme Court decisions in a previous case.

In conclusion, the court held that assessments made on the dissolved firm were valid in law based on the Supreme Court rulings and the provisions of the Income-tax Act. The question referred was answered against the assessee, affirming the legality of the assessments. No costs were awarded, and counsel's fee was assessed at Rs. 250.