TARAPORE J H Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner herein was a partner in the firm of M/s. Tarapore and Company consisting of himself and one C. S. Loganathan. THE said C. S. Loganathan died on May 11, 1971, and, consequently, the said firm stood dissolved. Subsequently, the petitioner has been carrying on business under the same name and style. After the death of the said Loganathan a settlement is said to have been arrived at between his legal representatives and the petitioner, and the assets and liabilities of the said firm had been divided in terms of the said settlement.

(2.) ON March 5, 1973, the petitioner had been served with a notice purporting to be under Section 182(4) of the I.T. Act calling upon M/s. Tarapore and Company, the new concern, to pay a sum of Rs. 1,49,287 stated to be 30% of the share income of C. S. Loganathan for the assessment years 1962-63 to 1965-66 and 1967-68, Subsequently, an order under Section 154 dated March 30, 1976, has been passed by the first respondent whereby the original notice dated March 5, 1973, issued under Section 182(4) was modified and an additional demand for Rs. 8,49,353 in addition to the demand of Rs. 1,49,287 was made. The order dated March 30, 1976, passed under Section 154 further stated that the share income of the partner had undergone a change as a result of appeals, etc., and 30% of the share income as the basis of the revised figures worked out to Rs. 9,98,640.

(3.) IN the original counter-affidavit filed by the respondents it has been stated that the revision of the demand issued to the petitioner under Section 182(4) of the Act became necessary as a result of an arithmetical mistake in the calculation of 30% of the share income and that, therefore, a revised order dated March 30, 1976, was passed by the first respondent determining the income as Rs. 9,98,640. According to the respondents, the erstwhile firm was bound to retain 30% of the share income of the partner, and if the tax becomes irrecoverable from the partner, the firm is automatically liable to pay the amount and that it is the statutory duty of all the firms to retain the prescribed percentage of the share income of a partner till the tax liability in respect of that share income is satisfied. It is also the respondent's case that under the provisions of Section 189(3) of the Act and the Explanation thereto any demand issued under Section 182(4) can be enforced even after the dissolution of the firm by proceeding against the surviving partner or the continuing partner, as the case may be, that the total arrears payable by the deceased, Loganathan, as on November 30, 1977, was Rs. 50,64,880 and the value of the known assets left by him was only Rs. 20,00,000, and that as the assets left are not enough to meet the tax liabilities, the demand issued against the petitioner under Section 182(4) is tenable in law.