1972 (9) TMI 22 - HC - Income Tax

This is a petition for the issue of a writ of prohibition prohibiting the respondent from pursuing the reassessment proceedings in pursuance of the notice dated July 6, 1967, issued under section 148 - notice under section 148 served on an erstwhile partner who had retired long ago and was not a partner immediately before the dissolution of the firm was not valid

Summary

Issues:
1. Validity of the notice served on a retired partner for reassessment proceedings.
2. Interpretation of the phrase "immediately before" in relation to the dissolution of a firm.
3. Requirement of a notice as a condition precedent for reassessment proceedings.
4. Mode of service of notice in cases of dissolved firms.

Detailed Analysis:
1. The petition sought a writ of prohibition against the respondent from pursuing reassessment proceedings for the assessment year 1963-64 based on a notice issued under section 148 of the Income-tax Act, 1961. The petitioner firm had undergone changes in partners, with retirements and dissolution. The key contention was the validity of the notice served on a retired partner, which was deemed invalid as per section 283(2) since the partner was not part of the firm immediately before its dissolution. The court held that the notice was not valid, rendering the proceedings illegal and void.

2. The interpretation of the phrase "immediately before" in section 283(2) was crucial in determining the validity of the notice. The court analyzed that the notice should be issued to partners preceding the date of dissolution, emphasizing that partners at the time of dissolution are liable for tax obligations. This interpretation clarified that the notice served on a retired partner was not valid, aligning with the requirements of the Act regarding partners' liability and dissolution of firms.

3. The judgment delved into the necessity of a notice as a condition precedent for reassessment proceedings under section 147. Drawing parallels with past decisions, the court established that the notice under section 148 is foundational for initiating reassessment proceedings and is a prerequisite for the validity of any reassessment. The court's stance was supported by a previous ruling, emphasizing the significance of serving the prescribed notice on the assessee for the reassessment's validity.

4. The mode of service of notice, particularly in cases of dissolved firms, was scrutinized to ascertain the validity of the reassessment proceedings. The court highlighted that strict compliance with the provisions of the Act regarding service is imperative for jurisdiction. Citing precedents, the court emphasized that unless the mode of service is strictly adhered to, reassessment proceedings lack jurisdiction. Therefore, the court concluded that the absence of a valid notice for initiating reassessment proceedings deprived the respondent of jurisdiction to proceed further, leading to the allowance of the writ petition.