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TMI Blog1955 (12) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... essment: I therefore propose to assess the said (a), escaped assessment: I hereby require you to deliver to me not later than 5-1-45 : Or within thirtyone days of the receipt of this notice a return in the attached form of your total income and total world income assessable for the said year ending 31st of March 1944. 2. It will be observed that the notice was not on the firm but on an individual partner calling for a return of his income, that is to say, his total world income, which would include not only his income from the firm but from other sources as well. I am informed that a similar notice was issued to the partner B. R. Das Gupta. The notice was received by the petitioner on 30-11-1944. It appears that he received the notice but did nothing about it. On the other hand, Sri Das Gupta filed a return. At the hearing before the Income-tax Officer, which took place on 12-12-1947 Daa Gupta appeared and the firm was assessed for the year 1943-44. A copy of the assessment order dated 12-12-1947 is annexed to the petition and is marked 'A'. In the assessment order, the name of the assessee is stated to be Dyes Chemical Agency: represented by Mr. B. R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said Act were served on the partners. The petitioner and P. C. Mukherji, another partner, filed objections before the Certificate Officer which, were rejected on 30-11-1953. Thereupon appeals were preferred before Mr. K. C. Basak, Commissioner, Presidency Division. Three points were taken before the Commissioner. The first point was that the partners were not served with any demand notice. Secondly, it was urged that the Income-tax Officer had issued a certificate under S. 46(2), Indian income-tax Act against the firm and not its partners and consequently the Certificate Officer could not proceed against a partner under the Public. Demands Recovery Act. Thirdly, St was urged that the firm having been discontinued the partners would have to be separately assessed because the liability was of a discontinued firm, and under Section 44, Indian Income-tax Act, proceedings could be taken against the partners jointly or severally by assessing them as such. This rule was issued on 25-8-1954 upon the respondents to show cause why an order in the nature of a Writ of Certiorari should not be issued and why ia Writ in the nature of Mandamus should not be made directing the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment to proceed under the Public Demands Recovery Act, and they may proceed in other ways. Mr. Meyer on behalf of the Income-tax authorities very fairly submitted that he was not going to take technical stand but wished to have a decision on the point as to whether such an assessment could be made and having been made, whether it could be realised from the partners. I will therefore proceed to consider this point. 4. The argument of Mr. Pal who followed Mr. Meyer is based on Section 44, Indian Income-tax Act which runs as follows: Where any business, profession or vocation carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution a partner of such firm or a member of such association shall, in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chap. IV and for the amount of tax payable and all the provisions of Chap. IV shall, so far as may be, apply to any such assessment. 5. Mr. Pal argues that the words jointly or severally liable to assessment mean no more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clear that the liability was a liability to assessment , either jointly or severally. 8. The second case referred to by Mr. Pal la -- 'A. G. Pandu Rao v. Collector of Madras' . This was a case under the Excess Profits Tax Act, but as Mr. Pal pointed out, the law applicable was the same as under the Indian Income-tax Act. In this case, the assessment was against the firm which was a registered firm but had been dissolved. Rao J. said as follows: It therefore follows that assuming that by the date of the issue of the notice under Section 13, the firm became dissolved, still the machinery provided by by Sections 13 - 14 of the Excess Profits Tax Act could be availed of and the partners even after the dissolution continued to be jointly and severally liable to assessment under Section 14 of the Act and for the amount of tax payable after determination. The result of S, 44 as amended by the Central Board of Revenue is to attract the procedure applicable to an undissolved firm to a dissolved, firm, and, therefore, if two or three persons carried on a business as a firm assessment could be made on the partnership in the partnership name and the persons who carried on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Madras High Court that though according to the Partnership Act a partnership firm was not a single legal person, still for the purpose of income-tax the firm was regarded as haying separate status and existence and as a distinct entity apart from the individual partners who carry on the business of the firm, although a few exceptions were recognised in the Act itself. The same principle was laid down in another Divisional Bench of the Madras High Court, -- 'Commissioner of Income-tax, Madras v. Karuppiah Pillai' 1941 Mad 355 (AIR V 28) (D). That this is a correct proposition of law appears from the provisions of the Act itself. In the charging section viz., Section 3 a firm has been mentioned as a distinct assessable entity. Kanga in his Annotations to the Act says as follows : A firm may be charged as a distinct assessable entity or the partners of the firm may be assessed individually. In the case of an unregistered firm the levy is on the firm while in the case of a registered firm it is on the partners individually. Prior to the amendment of this Act in 1939 even in the case of a registered firm the levy was on the firm, itself and not on the partners indivi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If he failed to make a return, he could be assessed ex parte upon an estimate of his total world income. But why should the notice result in an assessment of the firm as such ? 12. The next point taken by Mr. Roy is that a firm having been discontinued and the fact - of such discontinuance being intimated, at least before the assessment, there is no warrant in the Act by which the discontinued firm can be assessed, as it ceased to have a legal existence. He has referred me to cases where it has been held that where an assessee dies pending an assessment, the assessment cannot be on the deceased assessee. The only way that the assessment can proceed after the discontinuance of a firm is under Section 44 of the Act. The words in that section must therefore be strictly construed. I cannot see anything in the section which authorises assessment of a firm as such, after its discontinuance or dissolution. This does not, however, mean that its liability is gone. The liability itself which continues is specifically set out in the section, which says that notwithstanding such discontinuance or dissolution, a partner of such firm shall be jointly and severally liable to assessment under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quate. Against an assessment order, an appeal lies. But the assessment order in this case is not against the petitioner and he could not appeal. He received no notice of assessment of the firm and no demand notice was ever served upon him By the time he came to know of the assessment order, the time to appeal, assuming that he could prefer an appeal, was barred by limitation. He therefore cannot be said to have an alternative remedy which is adequate. . 14. This Rule must therefore be made absolute in part. I do not think that it is necessary to quash the assessment order against the firm. It would be sufficient if the enforcement thereof against the petitioner is prohibited. There would be a writ in the nature of Mandamus directing the respondents to forbear from enforcing the assessment order dated 12-12-1947 in the petition mentioned, against the petitioner. But this will not in any way exonerate the petitioner from liability or prevent the respondent from proceeding against the petitioner or against any partner of the dissolved, firm in accordance with law. Nothing in this order relates to the validity of the notice under Section 34 issued to the petitioner on 25-11-1944. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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