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TMI Blog1965 (4) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... mand notice was ever served upon any of the petitioners or their predecessors-in-interest. The Income-tax Officer, thereafter, issued a requisition under section 46(2) of the Indian Income-tax Act to the Collector of 24-Parganas against the said firm. On the basis of the said requisition, a certificate, No. 556 I.T. (C)/54-55, under the Bengal Public Demands Recovery Act, was filed in the office of the certificate officer on the 31st March, 1955. It is further stated in the petition that no notice under section 7 of the said Act was served upon the firm. The notice under section 7, however, was served on the 11th February, 1957, on the petitioner No. 1 and one Kishore Lal Khemka, since deceased, whose heirs and legal representatives are the petitioners Nos. 2 to 5. On the 13th March, 1957, the petitioner No. 1 and late Kishore Lal Khemka filed a petition of objection. It was stated in that petition of objection that the firm having been discontinued long ago, the present assessment on the discontinued firm itself is illegal and invalid. Mr. Jyotish Chandra Pal, who appeared on behalf of the petitioners, referred us to a letter of the Income-tax Officer, District 24-Parganas, dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes a firm. But it was not urged before us that the firm being dissolved there was no certificate-debtor and that the firm was dissolved before the certificate was issued. The argument proceeded on the basis that the firm did not discontinue its business nor was it dissolved at the date of the certificate. But the firm discontinued its business or was dissolved subsequently and it is Mr. Jyotish Chandra Pal's argument, whether the firm was dissolved or not, in any case the certificate officer had no authority to proceed in execution against persons on whom no notice under section 29 of the Income-tax Act was. served. We shall come to that matter later on. After the certificate was issued and filed, as we have stated, objections were filed on behalf of the petitioners. All objections were overruled by the certificate officer who is the Additional District Magistrate, 24-Parganas. Thereafter, an appeal was filed by the certificate debtor to the Commissioner of Presidency Division. There the petitioners described the respondents as follows : Union of India represented by Income-tax Officer, Companies District IV. The order of the Commissioner dated the 8th November, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding pending before them as against the order dated the 22nd November, 1957. Mr. Jyotish Chandra Pal has referred to section 46(2) which shows that the Income-tax Officer will forward to the Collector a certificate specifying the amount of arrears due from an assessee and the Collector on receipt of such certificate shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue. Hence, according to Mr. Pal, the certificate-creditor should not be the Union of India at all but should be the Collector because arrears of land revenue fall due to the Collector as such and section 46(2) refers to the Collector. Hence, the petition to the Board of Revenue being filed by the Union of India represented by the Commissioner of Income-tax, the petition is bad and the Board of Revenue should have rejected the petition on that ground alone. If we refer to the petition of appeal filed by the petitioners before the Commissioner against the decision of the certificate officer, we will find the respondent to be described as follows: Union of India represented by the Income-tax Officer, Companies District IV. If we accept Mr. Jyotish Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as Provincial, would include a firm. Mr. Pal has asked us further to accept the position that the firm did not cease to function as a firm at the time when the assessment was made. Therefore, the firm could be assessed as a unit for assessment. The requisition was in the name of the firm, the certificate was also in the name of the firm. Mr. Jyotish Chandra Pal urges, if the requisition is in the name of the firm, no notice under section 7 of the Public Demands Recovery Act could be issued on the partners of the firm even if the firm had not been dissolved because the sum of money did never become due as against the partners of the firm as distinct from the firm. Mr. Jyotish Chandra Pal refers to section 3 and says there is a distinction between a firm and the partners of the firm. If arrears of income-tax are to be realised from the partners, it would at least require that notice under section 29 should be served upon the partners as such and it is then and then only that the sum of money would become due from the partners. Mr. Jyotish Chandra Pal refers to a decision of the Judicial Committee in the case of Doorga Prasad Chamaria [1945] 13 ITR 285 (PC) and says that a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him ; one of them is a decision, Union of India v. Satyanarayan Khan [1961] 42 ITR 42 where it was held by this court that tax payable by a firm before its dissolution could be recovered from the partners and there was no necessity for a further assessment of the partners and issue of a demand notice to them. It was further held in that case that the certificates as prepared and filed, i.e., in the name of the firm, could not be executed against the plaintiffs only so long as it was not amended by adding the names of the plaintiffs as certificate-debtors therein and so long as notice under section 7 of the Public Demands Recovery Act was not served on the plaintiffs. But they could execute against a partner after the certificate was amended by adding the name of the partner and after the notice under section 7 was served. We may add that the Board of Revenue followed this judgment and directed the names of the partners to be added by amendment of the certificate and tax would then be realised against the partners. What happened in this case was that a notice under section 7 was served on the partners ; but they were not added as parties to the certificate. The Board had directed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the Board of Revenue could not direct addition of parties under the Public Demands Recovery Act, because, if they added the partners, as certificate debtors, they merely introduced persons who are not bound to pay tax as no demand has been served upon them individually and, consequently, no tax is due from them. Finally, the Board of Revenue passed an order restoring the certificate, but the Board had no powers to restore the certificate. The certificate was cancelled by the certificate officer ; there was no appeal against the order of the certificate officer and no prodceedings by anybody against the order of the certificate officer cancelling the certificate ; hence, the Board could not restore the certificates. We now consider the second point urged by Mr. Pal. Section 3, as we have referred to already, makes a firm a unit for purposes of assessment. It also makes the partners of the firm different units for assessment. Therefore, there is no difficulty in saying that a firm as such could be assessed just in the same manner as a firm as such can sue or be sued under Order 30 of the Code of Civil Procedure. We have also been referred to section 23(5), clause (b), of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is not a matter within the scope of the Income-tax Act : the Income-tax Act deals with rights and liabilities as between the Union and the assessee, but it does not deal with rights and liabilities of the assessee inter se or between an assessee and third party. We need, therefore, refer to some other law for that purpose and that law is the Indian Partnership Act. In order, therefore, to understand what are the relative liabilities as between the partners of the firm and the firm itself, we cannot but refer to the Indian Partnership Act. If the firm is dissolved, section 49 says, when there are joint debts from the firm and also separate debts due from the partners, the property of the firm shall be applied in the first instance in the payment of the debts of the firm ..... Separate property of any partner shall be applied first in the payment of separate debts and surplus, if any, in the payment of the debts of the firm. Therefore, on the dissolution of a firm under section 49, the partners become liable to pay the debt of the firm. The Income-tax Act does not include such provisions. There is no provision in the Income-tax Act itself which provides anything contrary to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as undoubtedly a partner, was liable to pay the tax assessed on the firm before discontinuance : It is clear from sections 45 and 46 of the Act dealing with recovery of tax that proceedings under section 46(2) could be initiated only against an assessee in default. Section 45 states when an assessee is to be treated as an assessee in default. Their Lordships then proceeded to observe : The highest that can be said therefore of the petitioner is that he must be taken to be an assessee by virtue of his liability to pay tax under section 44. No notice under section 29 having been admittedly issued to him, he cannot be said to have failed to pay the amount demanded in the notice and cannot, therefore, be described as an assessee in default. In our opinion, if the firm was not dissolved before assessment and if the firm was served with a notice under section 29, the firm became a debtor to the Union. In such circumstances, if the firm is subsequently dissolved, the liability of the partner would be under section 49 of the Indian Partnership Act and the partners need not be deemed to be assessed under section 44. That section 44 will apply only if the firm was dissolved befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were land revenue. The word Collector in the Central General Clauses Act, X of 1897, means the chief officer in charge of revenue administration of a district. The definition of the word Certificate Officer under the Bengal Public Demands Recovery Act is as follows : Certificate Officer means a Collector, a Sub-divisional Officer, and any officer appointed by a Collector with the sanction of the Commissioner to perform the functions of a Certificate Officer under this Act. The word Collector for the purpose of this Act has now been defined and the word Collector means the chief officer of the revenue administration of a district and includes an Additional District Magistrate. The word Collector for the purpose of the Income-tax Act means the chief officer-in-charge of the revenue administration and under the Bengal Act that chief officer is also designated as the Collector even if he is an Additional District Magistrate. We, therefore, find no substance in this argument. Finally, it is urged that the Board of Revenue could not set aside the order of the certificate officer cancelling the certificate. Mr. Balai Pal has referred us to the order of the appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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