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TMI Blog1996 (5) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... e share of profits due to the respondent paid to him before his retirement.] On February 23, 1972, the Income-tax Officer sent a communication to the respondent that in respect of the arrears of tax due from the firm for the aforesaid assessment years, he too is jointly and severally liable along with the other partners inasmuch as he was a partner of the firm during the relevant accounting years. The respondent denied his liability on the ground that he ceased to be a partner long ago, that there was a change in the constitution of the firm after his retirement and that such reconstituted partnership alone is responsible for paying the said arrears. The Income-tax Officer did not agree with the respondent's contentions. Recovery proceedings were initiated and the respondent's properties attached, whereupon he approached the Madras High Court by way of two writ petitions. The High Court allowed the writ petitions mainly relying upon and following the decision of a Full Bench of the Kerala High Court in ITO v. C. V. George [1976] 105 ITR 144 which dissented from the decision of the Allahabad High Court in Sahu Rajeshwar Nath v. ITO [1964] 54 ITR 755. The reasoning of the High Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 185 prescribes the procedure to be followed on receipt of such application. Section 186 deals with cancellation of registration. Sections 187 to 189 deal with changes in the constitution of the firm, succession of one firm by another and with dissolution of the firm. Sub-section (1) of section 187 provides that "where, at the time of making an assessment under section 143 or section 144, it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time making the assessment". Sub-section (2) of section 187 specifies what the expression "change in the constitution of the firm" means in the said section. Section 156 provides for issuance of a notice of demand upon the assessee specifying the sum payable. If the tax is not paid pursuant to the notice of demand, it has to be recovered in accordance with the Rules contained in the Second Schedule to the Act. In the Indian Income-tax Act, 1922, section 46 provided that the arrears of income-tax shall be recovered as arrears of land revenue by the Collector. The proviso to sub-section (2) provided that " without prejudice to any other powers of the Collector in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in this case, to repeat, is whether the respondent who was a partner of the aforesaid firm during the accounting years relevant to the assessment years 1962-63 and 1963-64 is liable to pay the arrears of tax due from the said firm notwithstanding his retirement from the said firm on and with effect from April 19, 1963. Before we answer this question, we may well ask which is the provision in the Act which says that the partners [i.e., continuing partners] are liable to pay the tax due from the firm which is continuing. Neither learned counsel for the Revenue, nor Mrs. Ramachandran, learned counsel for the assessee, could point out any provision stating expressly that the partners are liable to pay, whether jointly or severally, the tax due from the firm. It is true that the tax due from the firm will be recovered in the first instance by proceeding against the assets of the firm but it may happen that either the firm has no assets or the assets of the firm are not sufficient to satisfy the demand. In such a case, can the said demand be enforced against the partners, i.e., against persons who were partners during the period to which the demand relates and who are continuing as pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm, for a man cannot be his own employer." Section 25 of the Partnership Act expressly states that every partner is liable, jointly with all the other partners, and also severally, for all acts of the firm done while he is a partner. It is worthy of note that section 25 does not make a distinction between a continuing partner and an erstwhile partner. Its principle is clear and specific, viz., that every partner is liable for all the acts of the firm done while he is a partner jointly along with other partners and also severally. If a continuing partner is liable to pay the tax due from the firm relating to the period when he was a partner of the firm, we see no reason, in principle, to hold that the said liability ceases merely because a partner has cease to be a partner subsequent to the said period. We do not think that the absence of a provision corresponding to the proviso to section 46(2) of the 1922 Act in the present Act (we may remind ourselves that we are dealing with the provisions obtaining prior to April 1, 1989, i.e., prior to the introduction of section 188A) makes any difference to the position, since the liability of the partners to pay the dues of the firm does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. No contention was raised in this case that no demand notice was served upon the respondent. We must presume that such a notice was served before attaching his properties. The second contention urged on behalf of the assessee in the said appeal was that since the certificate of recovery mentions only the arrears of tax due from the firm, they cannot be recovered from the partner. This argument was rejected with reference to the proviso to section 46(2) of the Act which conferred upon the Collector the powers of a civil court in the matter of recovery of the amount due under a decree. The court also referred to rule 50 of Order XXI in this behalf. And then observed (page 622 of 72 ITR) : " In the present case we see no reason why the Collector should not execute the certificate for demand of income-tax against the appellant who admits that he was a partner of the unregistered firm for the relevant accounting year.... It is manifest that the provisions of Order XXI, rule 50(2), apply to the present case mutatis mutandis and since the appellant does not dispute that he was a partner of the unregistered firm for the relevant accounting year, the Collector could lawfully proceed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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