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TMI Blog1983 (4) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... service on him. An application under section 5 of the Limitation Act was filed by Mehandi Hussain. The Assistant Commissioner (judicial) rejected the application under section 5 of the Limitation Act and dismissed the appeal filed by Mehandi Hussain on behalf of the firm as barred by time holding that the service on Nawi Hussain shall be taken as service on the firm. Mehandi Hussain again filed an appeal on behalf of the firm before the Tribunal. The Tribunal allowed the appeal and remanded the matter to the Assistant Commissioner (judicial) as the Tribunal held that all the partners of the firm were not served. Aggrieved, the Commissioner of Sales Tax has come in revision. The only question in this case is whether in view of the provision of section 3-C(1)(b) of the U.P. Sales Tax Act, service on all the partners was necessary or not. The standing counsel urges that the service on one partner was sufficient service on the firm, in view of the provisions of section 3-C(1)(b). In this connection he has relied upon a decision in the case of Commissioner of Sales Tax v. Sampat Ram Jain [1971] 27 STC 307. The question in that case was whether in the circumstances of this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be assessed and determined as if no such discontinuance has taken place. He then urges that under section 3-C(1)(b) the liability of all the partners of the firm to pay the tax or penalty is there but he says that the words "subject as aforesaid, the provisions of this Act shall apply as if every such person or partner were himself a dealer" should be interpreted to mean that each partner has to be assessed as a dealer. He further argues that section 8(1-A) requires that the dealer shall deposit in the manner specified the tax within 30 days of the service of the notice of demand and he submits that such a notice is mandatory as each partner has to be treated as a dealer. He submits that under section 9(1) an appeal may be filed by a dealer or other aggrieved person within 30 days of the service of the copy of the order. He submits that as no notice was served on the other partners of the firm, the appeal presented by the firm was within time and the Assistant Commissioner (judicial) was wrong in rejecting the appeal as barred by time. In support of his argument, Sri Bharatji Agrawal relied upon a decision of this Court in the case of Moti Dal Mills, Agra v. Sales Tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. Consequently, the only valid mode of service would be by affixation of a copy at some conspicuous place at the residence of the dealers, viz., respondents (sic) (petitioners) Nos. 2 and 3. But no such attempt was made. It is evident that the mode of service was bad. The recovery proceedings would, in the eye of law, be deemed to have been continued without service of the notice of demand and the assessment orders. Such recovery proceedings are without jurisdiction ab initio. They are liable to be quashed." Sri Bharatji Agrawal also relied upon a decision the case of Mrs. A. Sattler v. Income-tax Officer (Collection), Circle I, Bangalore [1970] 76 ITR 306. In that case, two persons, namely, Mr. Sattler and Mr. K.S. Gandhi, were partners in a firm known as Inka Corporation. The firm was dissolved in view of the insolvency order with effect from 17th February, 1953. The assessment order was made on 31st March, 1956, and a notice of demand was served on one of the quondam partners, Mr. K.S. Gandhi. No notice was served on Mr. Sattler. It was held by the High Court that on the basis of the assessment made on the dissolved firm, Inka Corporation, the notices of which were given on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned standing counsel, to refer back these revisions as what can be done by a single judge can, surely, be done by a Division Bench. Converse may not be true. Further, propriety restrains us from adopting this course as each judge, whether exercising jurisdiction as single judge or in a Division Bench, acts as High Court. And, a learned single judge having expressed his opinion it would not be proper for us to ask him to decide the revision on merits as in our opinion there was no conflict. Before examing the rival submissions it may not be out of place to mention the back ground in which this section was added. As far back as 1957 in Jagat Behari Tandon v. Sales Tax Officer, Etawah [1957] 8 STC 459, problem of assessment of a dissolved firm arose. And, a Division Bench following decisions rendered under the Income-tax Act ruled: "In our judgment, as assessment order cannot be made under the U. P. Sales Tax Act on a firm after it has dissolved..........." In order to overcome this difficulty and avoid any attempt by partners of a firm to evade payment of tax the legislature intervened and enacted this section by the U.P. Sales Tax (Second Amendment) Act (32 of 1957) with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very" was significant. Said the learned counsel, it was expressive of the legislative intent permitting every partner, who thus became a dealer, to file appeal. Recovery also could not be made from a partner unless he was served with notice of demand. The learned counsel maintained, that the expression used by the legislature could not be considered either to be redundant or superfluous and if this be so, then the only reasonable construction that could be placed on this provision was that although for the purposes of assessment a firm may be deemed to continue but as the liability is fastened on every partner of the firm or person who is a member of family, it was necessary to safeguard his interest by providing that each person or partner should be deemed to be a dealer. The learned counsel urged that this was a safety measure provided by the legislature to check any arbitrary recovery or deprive a partner or a person, who is vitally interested in pursuing his remedy of challenging the order by way of appeal or revision. On the surface the argument is no doubt attractive, but if it is accepted it may frustrate the entire objective of the fiction created by the subsection and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting firm? If the argument of the learned counsel is accepted then service on one partner of an existing firm is sufficient whereas service on each partner is mandatory in the case of a dissolved firm. Such could not be the intention of the legislature nor the provision is susceptible of such construction. Expression "every such person" was used in sub-section (3) of section 44 of the Income-tax Act of 1922, a provision in pari materia with section 3-C(1) of the Sales Tax Act. While explaining its meaning the Supreme Court in Commissioner of Income-tax v. Raja Reddy Mallaram [1964] 51 ITR 285 (SC) observed, "He urged that the expression 'every person' in section 44 means all persons, and that by enacting that such person shall be liable to assessment 'jointly and severally' it was intended that after the association is dissolved only the members on the date of dissolution can be assessed in respect of the income of the association. As a corollary to the argument it was submitted that all members who are sought to be assessed must be individually served with notice of assessment and those not served will not be bound by the assessment. The argument is plainly inconsistent with wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided, it did not render ineffective or infructuous another appeal filed by another partner. The decisions were given on the language of section 30 which permitted the partners of a firm, who were individually assessable on their shares, to file an appeal against the order of the Income-tax Officer to the Appellate Assistant Commissioner. In view of the statutory provisions it was held that the Tribunal could not have dismissed the appeal of the other partner and rightly so. These decisions are not in any manner helpful in construing section 3-C(1). In fact, reliance was placed on these decisions to demonstrate that if each partner was treated as dealer and each of them filed appeal under section 9 then by virtue of statutory provisions each appeal was maintainable and the argument of the learned standing counsel of incongruity or chaos was not sustainable. The decisions were given on the peculiar language of section 30 and the contingency contemplated by it. It related to individual assessment of a partner's share. It cannot be extended or applied to a situation like section 3-C(1) read with section 9. Here, the unit of assessment is not the partner but the firm. There could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moti Dal Mills' case (printed at page 405 infra) 1978 UPTC 606 recovery proceedings were challenged by the partners as they were being made without any service of notice of demand on them. The Division Bench found that the firm had dissolved and the notice was served by affixation on the last known place of business of the firm. It was held that as the firm had dissolved, the service, which could have been effective, should have been made on any of the partners of the firm and as this was not done, the recovery proceedings could not go on. The Division Bench was not concerned with the question whether service on one partner was sufficient or that service on each partner was necessary. The two decisions were dealing with different situations. In our opinion there is no conflict in them. Yet another decision on which reliance was placed was Kanodia Brothers v. Sales Tax Officer (1965-69) Reports of Sales Tax journal, page 41. At page 43 it was observed by Satish Chandra, J., (as he then was): "If each individual partner becomes a dealer then he will be liable to pay tax under section 8. Thus a partner of a dissolved firm cannot be made responsible to pay tax assessed on the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by affixation did not care to file an appeal obviously because the firm was dissolved. It may be that he was not possessed of any assets, and therefore, he was not bothered. There may be cases where due to change of circumstances, one of the erstwhile partners of a dissolved firm, out of spite for others, with nothing to lose, may not take any steps despite service and thereby jeopardise the interest of others. In such cases, an application under section 5 of the Limitation Act for condonation of delay should be construed liberally. Fairplay and justice demand hearing. No one should be denied this right unless he does not act bona fide. We also consider it necessary to clarify that the department, in the case of a dissolved firm, should make all possible effort to serve all the partners with notice of demand. Serving one or a few partners should be an exception rather than the rule. In the result, both the revisions filed by the Commissioner of Sales Tax succeed and are allowed. The question of law raised is decided by saying that Nawi Hussain, one of the partners of the dissolved firm, having been served, the dealer was served and limitation for filing an appeal was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the modes aforesaid is practicable, by affixing of a copy thereof in some conspicuous place at the last known place of business or residence of the dealer." We will assume that the modes provided under clauses (a) to (c) were not practicable, therefore, affixation was permissible. But the affixation is to be made at a conspicuous place on the last known place of the business or residence of the dealer. The question is who was the dealer in 1961 and 1962 when the service was sought to be effected through affixation. Section 3-C provides for the contingencies where a firm has discontinued its business. Under clause (b) of clause (1) of section 3-C it has been provided that every person who was at the time of such discontinuance a partner of such firm shall be liable severally and jointly for the payment of the tax assessed and the penalty imposed and payable by such firm and the provisions of this Act shall apply "as if every such person or partner was himself a dealer'. It is not disputed that the firm discontinued its business in 1958. Therefore, when the service was being effected in 1961 or 1962, the petitioners Nos. 2 and 3 who were the erstwhile partners, were liable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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