MANOHAR LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE two writ petitions raise similar questions of law and fact for consideration and hence they are being disposed of by a common judgment.

(2.) THE petitioners in the above two writ petitions along with Rajendra Kumar and Rakesh Prakash Agarwal were partners of a firm known as M/s. Raghunandan Prasad Manoharlal. THE aforesaid firm was dealing in gold and silver ornaments and bullion. THE petitioners in the two writ petitions were partners of the firm in their capacity as karta of their respective Hindu undivided families. THE assessment year under consideration is 1981-82. THE firm was dissolved on January 28, 1981. THE firm was assessed to an income of Rs. 8,48,063, in the beginning as an unregistered firm but, on appeal, the amount was reduced to Rs. 2,65,005 as is evident from annexure II attached to the writ petitions. It appears that through annexure III attached to the writ petitions, the petitioners have indicated that the firm owns property, a three-storeyed building, shop No. 496 (old) and new number 116 situate at Sarafa Market, Meerut City, and, therefore, the tax liability should be realised from the aforesaid property of the firm. Notices of demand under rule 2 of the Second Schedule to the Income-tax Act, 1961, have been served upon the petitioners as is evident from annexure IV in Writ Petition No. 754 of 1986 as well as annexure VII in Writ Petition No. 830 of 1986. THE notices of demand were in the name of the firm through the petitioners. In Writ Petition No. 754 of 1986, the petitioners' status has been described as" Hindu undivided family", Again, through annexure V in the writ petition of Manohar Lal and annexure VIII in the writ petition of Padam Prakash, the petitioners have requested that the demand may be recovered by attachment and sale of shop No. 116 owned by the firm. THE Tax Recovery Officer through annexure VII of the first writ petition and annexure IX of the second writ petition has asked the petitioners to show cause why the tax amount along with interest may not be realised from the petitioners and the date fixed in the notice was March 20, 1986. THE petitioners have taken the stand that the tax liability of the firm should be realised from the property of the firm and not from the petitioners in their individual capacities. It appears that under rule 73 of the Second Schedule to the Income-tax Act, 1961, the petitioners have been served with a notice to show cause why they should not be arrested as they have failed to pay the tax demanded of the firm. In the aforesaftd circumstances, the petitioners in the two writ petitions have prayed for quashing the notices issued by the Income-tax Officer mentioned in relief (I); secondly, they have prayed for restraining the respondents from arresting the petitioners in pursuance of the recovery proceedings ; thirdly, they have prayed for declaring the notices under rule 73 of the Act as void ; fourthly, they have prayed for declaring the order of the Tax Recovery Officer under rule 32 of the Second Schedule to the Act as illegal; fifthly, they have prayed for general relief; and sixthly, they have prayed for the costs of the writ petitions.

(3.) THE third contention raised on behalf of the petitioners is that the Department is proceeding against the petitioners in an arbitrary and unreasonable manner and they have taken contradictory stands regarding the property of the firm suggested by the petitioners. THErefore, their action against the petitioners is mala fide and the petitioners are entitled to the reliefs claimed in the writ petitions.