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TMI Blog1976 (11) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... , and exhibit P-4 prohibitory order of the 2nd respondent dated July 29, 1976. There is also a prayer for the issue of a writ of mandamus to compel the 3rd respondent to effect the refund in obedience of exhibit P-1A order of the Government of Kerala dated June 19, 1976. By exhibit P-1A (G.O. Rt. 494/76/TD, Taxes (C) Department, dated June 19, 1976) the Government of Kerala ordered the refund to the petitioner of a sum of Rs. 26,292.50 collected as sales tax from him for the period from September 6, 1955, to December 31, 1965, by M/s. Imperial Tobacco Company, Coimbatore, and paid over to the State Government; the Board of Revenue was directed to take necessary action for the refund of the amount Thereafter, the 1st respondent issued exhibit P-1 notice undersection 226(3) of the Income-tax Act, 1961(43 of 1961), dated July 12, 1976, prohibiting the 3rd respondent from making payments due to the petitioner for the reason that a sum of Rs. 35,951 was due from the petitioner, for M/s. Trivandrum Tobacco Combines, Trivandrum, on account of income-tax, penalty, etc., and that amounts due to the petitioner from him had to be applied to satisfy the claims towards the arrears of tax. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest up-to-date, the 2nd respondent had not done so. In paragraph 4 of the counter-affidavit filed by the 2nd respondent, he has explained the error he had committed in stating in the prohibitory order No. T.R. 358/69 dated July 8, 1976, that a sum of Rs. 1,79,254.85 was due from the petitioner. Along with the counter-affidavit he has produced exhibit R-1 prohibitory order T.R. No. 358/69 dated July 29, 1976 (the same as exhibit P-4) and exhibit R-2 covering letter dated July 29, 1976, under which exhibit R-1 (exhibit P-4) was sent by him to the 3rd respondent. In exhibit R-2 it was stated that the correct amount due from the petitioner was Rs. 35,714, not Rs. 1,74,254.85, as stated in exhibit P-2. In paragraph 4 of the counter-affidavit, the 2nd respondent has expressed regret for the wrong figure, as to the amount outstanding from the petitioner, shown in exhibit P-2 on the basis of the prohibitory order dated July 8, 1976, without noting the fact that a sizable portion of the arrears was already collected. Though in the original petition the correctness of the amount shown in exhibit P-2 as arrears due from the petitioner has been challenged, it has little relevance now, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrears of income-tax due from the firm could not be recovered from them. The stand taken by the department was as stated below : As per the provisions of the Partnership Act, the partners are jointly and severally liable to the dues of the firm. This position, in law, is not in any way affected by the Income-tax Act, 1961, and, therefore, your contention that the arrears on account of income-tax dues of the firm can only be recovered from the firm is not acceptable ........." Though the assessment admittedly stood in the name of the firm, the recovery proceeding against the partners was sought to be justified placing reliance on section 25 of the Partnership Act which provided : " 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. After having examined the relevant provisions of the Income-tax Acts. 1922 and 1961, the Full Bench observed as follows at page 149 of the report : " Under the provisions of the Act there can be assessments made either on a firm as such or on the partners of the firm in given circumstances. When there has been only an assessment on the firm as in the case before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sri Ravindranatha Menon pointed out that the discontinuance of business by the firm, " Trivandrum Tobacco Combines " was on and from July 1, 1960, and that from the said firm for the assessment years 1957-58 to 1960-61 a sum of Rs. 53,565 in the aggregate was due by way of income-tax. The assessment for the respective years was made on July 11, 1960, August 25, 1960, August 25, 1960, and September 30, 1961, all before the coming into force of the Income-tax Act of 1961 (43 of 1961). It, therefore, goes without saying that the liability to income-tax with respect to the firm is governed by the provisions of the Indian Income-tax Act, 1922 (11 of 1922). The relevant provisions of section 44 of the 1922 Act provide as follows : " 44. Liability in case of firm or association discontinued or dissolved.-- (1) Where any business, profession or vocation carried on by a firm or other association of persons has been discontinued or where a firm or other association of persons is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm or other association of persons as such as if no such discontinuance or dissolution had taken place ...... (3) Every pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t he is or was one of the partners of the firm. As we have already noticed, the real test for the application of the dictum laid down in the Full Bench decision referred to above is whether there had been a joint and several liability in so far as the partner is concerned in relation to the firm's liabilities or whether there are separate assessments on the firm and on the partners. If there are separate assessments on the firm and on the partners and no joint liability by the operation of the provisions of section 44 of the Act 11 of 1922 or section 189 of the Act 43 of 1961 exists, the principles laid down in the Full Bench decision would be applicable. On a careful consideration of the provisions of the Acts and the rationale behind the decision of the Full Bench in the case in Income-tax Officer v. C. V. George [1976] 105 ITR 144 we are of the view that the immunity from being proceeded against the partner for realisation of the amount assessed on the firm could not be considered to extend to cases where, under the provisions of the Income-tax Act, there is a joint and several liability cast on the partner for the amounts due by way of tax from the firm. This is the reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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