RAMNIWAS HANUMANBUX SOMANI Vs. VENKATARAMAN S ITO

JUDGEMENT

(1.) THIS appeal arises out of a writ petition filed by the appellant under Art. 226 of the Constitution of India, on the original side of this Court, wherein he had prayed for the issue of a writ in the nature of certiorari or other appropriate writ or direction, calling for the records of the case and, after going into the question of the legality thereof, quash and set aside the notices issued by the ITO, C -III Ward, Bombay, under S. 34(1) and S. 22(4) of the Act. The appellant further prayed for the issue of a writ in the nature of prohibition and/or mandamus or other appropriate writ under Art. 226 of the Constitution, restraining and prohibiting the respondents, their officers, servants and agents from taking any steps or proceedings in enforcement, furtherance, pursuance or implementation of the aforesaid notices.

(2.) THE material facts averred by the appellant in his petition were that in 1940, a firm called Motilal Somani & Co., was started with Nathmal Hazarimal, Ramprasad Benilal, Rameshwar Mahadeo and the appellant as its partners. Ramprasad Benilal died in or about 1946. Thereupon, another partnership was formed in 1947 in the same name and style of Motilal Somani & Co., with Nathmal Hazarimal, Rameshwar Mahadeo, Puranmal Pannalal and the appellant as its partners. (During the course of the judgment, we will refer to this partnership as the second partnership.) This partnership was dissolved in the year 1948. The exact date of dissolution has not been stated. Thereafter, in 1948 another partnership was formed in the name and style of Motilal Somani & Co., with Puranmal Pannalal and the appellant as partners. (We will refer to this partnership as the third partnership.) This partnership was also dissolved in 1955. After the dissolution of the said partnership, the business was carried on by the appellant alone in the name and style of Motilal Somani & Co. On 15th Dec., 1955, the appellant sent an intimation to the ITO under S. 25(2) of the IT Act, to the effect that the firm of Motilal Somani & Co., was dissolved as and from 14th Nov., 1955, by the mutual consent of both the partners, and on and after 14th Nov., 1955, the business had become the sole proprietary concern of the appellant, Ramnivas Hanumanbux. The business of the aforesaid firms was carried on, and the present business of the appellant also is being carried on at 158/64 Kalbadevi Road, Bombay.

(3.) THE challenge raised on behalf of the appellant before the learned judge, dealing with the petition, was two -fold. In the first instance, it was contended that the notice under S. 34 addressed in the name of M/s Motilal Somani & Co., was bad in law. A notice under S. 34 ought to have been addressed in the names of the partners, who were partners at the time relevant to the asst. yr. 1949 -50, i.e., who were partners during the accounting year 1947 -48. The argument of Mr. Palkhivala was that that firm was dissolved in the year 1948, and was not in existence at the time the notice under S. 34 was issued some time in March, 1958, and, therefore, the notice in the name of the firm could not have been issued. When an assessment is sought to be made against a firm that stood dissolved, it could only be made either under S. 26 or under S. 44. Sec. 26, however, was not applicable to the facts of the present case, because the business of the firm of the firm of Motilal Somani & Co., was discontinued in the year 1948 upon its dissolution, and, therefore, the apposite provisions of law were S. 44 of the Act, and that required issuing of notices against the partners, who were partners of the firm during the accounting year 1947 -48, i.e., the asst. year 1949 -50. The second contention raised was that, at any rate, the service of notice under s. 34 effected by affixing it on the premises of the firm was bad in law. On the basis of these two contentions, it was urged that as there was no valid notice issued under S. 34 and/or it was not validly served, the proceedings started by the IT Department under S. 34 of the Act were without jurisdiction and bad in law. The appellant thus prayed for the aforesaid reliefs.