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TMI Blog1958 (12) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ond respondent a certificate under section 46(2) of the Act specifying the amount of arrears due from the assessee firm. Sometime later it stated that the first respondent gave certain details as to the constitution of the firm to the second respondent. But no separate notice of demand was issued to the petitioner, nor was he named in the certificate as the assessee from whom arrears were due. The second respondent proceeded to attach and sell properties belonging to the petitioner and in the notice of auction it was mentioned that the petitioner was liable to pay 1/4 of ₹ 67,923-1-3. The petitioner contends that the assessee in the case was the unregistered firm of Unni Co., which was assessed as a separate entity distinct from its partners, that, therefore, he, one of the partners, could not be said to be either an assessee or a person liable to, pay the tax assessed on the firm, and that even on the assumption that he could be said to be either an assessee or a person liable to pay the tax, no notice of demand under section 29 having been served upon him, proceedings for recovery of the tax could not have been validly initiated against him and further, that the collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent view taken in regard to assessment of firms under the Income-tax Act. Their Lordships of the Supreme Court in Ravulu Subba Rao v. Commissioner of Income-tax [1956] 30 ITR 163 clearly state as follows : Thus under section 3 of the Act the charge is imposed on the total income of a firm, the partners as such being out of the picture, and accordingly under section 23 of the Act, the assessment will be on the firm on its total profits. Section 23(5) enacts an exception to this in the case of firms registered under the Act..... If a firm is registered, it ceases to be a unit for purposes of taxation and the profits earned by it are taken, in accordance with the general law of partnership, to have been earned by the individual partners according to their shares, and they are taxed on their individual income including their shares of profits.... Thus, registration confers on the partners a benefit to which they would not have been entitled but for section 26A. It is clear, therefore, that an unregistered firm is a unit for assessment under the Income-tax Act having a separate status and existence distinct and different from its partners. The assessment is imposed on the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessment cannot for the first time be made on the partners. Subsequently, section 44 was amended so as to state expressly the liability of the partners to assessment after discontinuance. In our opinion the clear intention behind the amendment was to give effect to the opinion expressed by the Full Bench of the Madras High Court by clarifying the wording of the section and it is too much to expect, as the learned counsel for the petitioner wants us to do, that the Legislature intended to take away from the Department a privilege which according to the ruling of the Madras High Court it undoubtedly had under the unamended section. We, therefore, hold that by virtue of section 44 the petitioner, who was undoubtedly a partner of Unni Co. at the time of the discontinuance of its business, is liable under section 44 to pay the tax assessed on the firm before discontinuance. This conclusion, however, is not sufficient to conclude the case in favour of the Department. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice of demand was served on the petitioner himself and the only argument was that it was not a valid notice because it was not accompanied by the assessment form. Their Lordships distinguished the judgment of the Calcutta High Court in Manindra Lal Goswami v. Income-tax Officer [1956] 30 ITR 550 , on the ground that in the Calcutta case no notice of demand had been served on any party and that in the absence of any such demand, proceedings for recovery of the tax from individual partners individually was not valid. The alternative argument of the learned Government Pleader is that under section 46(2) the Collector has all the powers which under the Code of Civil Procedure a civil court has for the purpose of recovery of an amount due under a decree. He, therefore, contends that just as an executing court can under rule 50 of Order XXI of the Code of Civil Procedure, execute a decree passed against a firm even against a partner individually, so also the Collector under section 46(2) of the Income-tax Act acting under a certificate for recovery of tax due from a firm can recover the tax from the partners individually. This argument, however, is not available because under Order XX ..... X X X X Extracts X X X X X X X X Extracts X X X X
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