SEGU BUCHIAH SETTY Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) IN this writ petition preferred under article 226 of the Constitution of India, the petitioner has challenged the action taken by respondents Nos. 1 and 2 (Income -tax Officer, Kolar Circle, and Deputy Commissioner, Kolar) for recovery of income -tax assessed on an unregistered firm by name Messrs. Segu Buchiah Sett : P. Venkatachaliah and Co., Srinivasapur, for the assessment years 1954 -55 and 1955 -56. The petitioner was a partner in the firm of Messrs. Segu Buchiah Sett : P. Venkatachaliah and Co., Srinivasapur, hereinafter called 'the firm' during the period from 1st February, 1953, to 30th June, 1955. That firm was assessed to tax for the assessment years 1954 -55 and 1955 -56 as an unregistered firm by separate assessment orders made on 31st August, 1956. The notices of demand for payment of tax were issued to and served on the firm on 31st August, 1956. Petitioner's case is that the firm discontinued its business with effect from 1st October, 1956. It is stated that the date 1st July, 1955, mentioned in the affidavit is a mistake, and the correct date ought to be 1st October, 1956, on which date the firm intimated respondent No. 1 (Income -tax Officer) that the firm having suffered heavy loss, they were not interested in continuing the partnership business any longer. It is stated in the affidavit filed by the petitioner in support of the writ petition that the firm had been dissolved and the fact of dissolution has been brought to the notice of respondent No. 1.

(2.) ON 5th March, 1957, respondent No. 1 issued a certificate under section 46(2) of the Indian Income -tax Act, 1922, hereinafter called 'the Act', to respondent No. 2 specifying therein the amount of arrears of arrears of income -tax due from the firm for the assessment years 1954 -55 and 1955 -56. Pursuant to the said certificate, respondent No. 2 initiated action under the Mysore Land Revenue Code for recovery of a sum of Rs. 10,607.63 nP. by attachment and sale of the immovable properties belonging to the family of the petitioner. On 24th February, 1963, the Tahsildar of Srinivasapuram Taluk issued a demand notice to the petitioner under rule 95 of the rules framed under the Mysore Land Revenue Code, demanding payment of arrears of tax assessed on the firm. Thereafter, a notice proposing to auction the immovable properties of the family of the petitioner, which, according to him, had been allotted to the share of his son under a partition effected on 18th April, 1959, was served on the petitioner on 3rd August, 1963. The petitioner has averred that no notice of demand had been served on him under section 29 of the Act, and, therefore, he is not a defaulter and further, the certificate issued by respondent No. 1 under section 46(2) of the Act does not authorise the recovery of the tax from the petitioner.

(3.) ON the basis of the uncontroverted facts, Sri. K. Srinivasan, learned counsel for the petitioner, has urged that in the absence of notice of demand under section 29, the respondents have no jurisdiction to initiate recovery proceedings against him under section 46. In support of that contention, he relied on a decision of this court in T. Govindaswamy v. Income -tax Officer, Special Survey Circle, Bangalore. The facts in Govindaswamy's case are identical to the facts of the present case. In that case, the assessment was made on the firm 'Union and Co.' as an unregistered firm and notice of demand under section 29 was served on the firm. No notices had been served on the partners of the said firm under section 29. The Deputy Commissioner, pursuant to the certificate under section 46(2), issued by the Income -tax Officer, proceeded to attach and sell the properties belonging to one of the partners. That action was challenged before this court in a writ petition filed under article 226 of the Constitution. This court held that an unregistered firm is unit for assessment under the Income -tax Act having a separate status and existence distinct and different from its partners and assessment is on the firm itself and not on the partners. This court further held that a partner of an unregistered firm, though liable under section 44 of the Act, to pay the tax assessed on the firm on its dissolution or discontinuances of business, the partner becomes an assessee only as a person by whom tax is payable under section 44 and he does not become a defaulter unless and until a notice of demand under section 29 is issued to him and section 46 confers jurisdiction to recover the tax due from a defaulter. This is what Narayana Pai J. stated in Govindaswamy's cas :