MEKA VENKATAPPAIAH Vs. ADDITIONAL INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is an appeal against the order of our learned brother Satyanarayana Raju, J., dismissing the application filed by the appellant under article 226 of the Constitution of India The appellant is a partner of the firm of Messrs. Gopala Krishna Manure Depot and Turmeric Co., Tenali. Before 1947, the firm was assessed to income-tax as an unregistered firm. Admittedly, the appellant was not assessed to income-tax at any time before 1947-48 as an individual. The Additional Income-tax Officer, Tenali Circle, for the first time assessed the appellant to income-tax as an individual for the assessment year 1947-48 on a taxable income of Rs. 39, 080 and determined the tax payable at Rs. 12, 385-1-0. Against the said order, the appellant preferred an appeal to the Appellate Assistant Commissioner, Madras. In the appeal, the Appellate Assistant Commissioner gave him some relief. On further appeal to the Tribunal, the tax payable was reduced to Rs. 2, 479-11-0. Pending the appeal to the Appellate Assistant Commissioner, the Additional Income-tax Officer, Tenali, issued a notice to the appellant on 25th June, 1952, under section 18A(8) of the Income-tax Act (hereinafter referred to as the Act) alleging that he had not paid the advance tax payable under section 18A(8) and, therefore, he has liable to pay penal interest under the said section in a sum of Rs. 3, 632-10-0, being the amount of interest payable from 1st April, 1947, to 13th March, 1952, at 6 per cent. per annum on Rs. 12, 227-8-0 and directing the said amount to be paid before 25th July, 1952. The appellant filed objections denying his liability to pay the said amount. On 31st October, 1953, the appellant again received a notice under section 35 of the Act proposing to rectify the assessment under that section on the ground that, while completing the assessment for 1947-48, the penal interest under section 18A(8) was not charged by mistake. The appellant filed his objections contending that the omission to charge penal interest was not due to any mistake apparent on the face of the record and, therefore, the provisions of section 35 of the Act were not applicable. His contention was negatived both by the Income-tax Officer, and on revision by the Commissioner of Income-tax, Hyderabad. The appellant filed the aforesaid application under article 226 of the Constitution of India for issuing a writ of certiorari to quash the proceedings of the Income-tax Officer dated 31st October, 1953. Satyanarayana Raju, J., rejected the contentions of the appellant and held that the rectification of the order of assessment was made in due compliance with section 35 of the Act and, on that finding, dismissed the application. Hence, the appeal Learned counsel for the appellant contends that he was not liable to pay penal interest under section 18A(3) of the Act and, therefore, there was no mistake apparent on the face of the record to be rectified under section 35 of the Act. Section 18A of the Act provides for the advance payment of tax, in respect of income whereof deduction of income-tax is not provided for at the time of payment. Under section 18A(3) any person, who has not hitherto been assessed, shall before the 15th day of March, in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed the prescribed amount, send to the Income-tax Officer an estimate of the tax payable by him and pay the amount on such of the dates specified in sub-section (1). Sub-section (8) enjoins on the Income-tax Officer, if on making the regular assessment he finds that no payment of tax has been made in accordance with the provisions of the section, to add the interest calculated in the manner laid down in sub-section (6), to the tax assessed by him. Section 35 of the Act enables the Income-tax Officer at any time within four years from the date of any assessment order passed by him on his own motion to rectify any mistake apparent from the record of the assessment. Section 35, therefore, enabled the Income-tax Officer, in the present case, to rectify the omission to add the interest to the original assessment if such omission was a mistake apparent from the record. Under sub-section (3) of section 18A, if no payment of tax had been made in accordance with the provisions of section 18A, a duty was cast on the Income-tax Officer to add the interest in the manner laid down in sub-section (6) to the regular assessment. If such an addition was not made by mistake, we have no doubt that the omission was a clear mistake apparent from the record of assessment, and, therefore, liable to be rectified under section 35 of the Act. It is, therefore, contended by the learned counsel for the assessee that no interest was payable by the assessee under sub-section (6) of section 18A as no duty was cast upon the assessee to send to the Income-tax Officer an estimate of the tax payable by him within the meaning of sub-section (3). The material portion of sub-section (3) reads

(2.) THE contention is that the provisions of the sub-section apply only to a person, who has not hitherto been assessed, but as the appellant's unregistered firm was assessed before the financial year 1947-48, he was not bound to send his estimate of the income, and, therefore, he was not liable to pay interest calculated under the Act. THE short question is whether the assessment of the income of an unregistered firm, of which the assessee was a partner, could be relied upon by the appellant to escape his liability under sub-section (3). To put it differently, on the basis of such an assessment, can it be said that the appellant "has not hitherto been assessed" within the meaning of sub-section (3). THE answer to the question raised depends upon whether an unregistered firm is a distinct assessable entity as distinguished from the individual partners of the said firm. To ascertain the legal characteristics of a firm, it will be convenient to collect the sections of the Act pertaining to an unregistered firm

(3.) AS we have pointed out earlier, in the case of unregistered firms just like in the normal case, the firm, whose income is being computed, is also the person who pays the tax. For the purposes of income-tax, with a few deviations, it is equated to that of any other person in that it is assessed for the purpose of computation of income as well as for the purpose of recovering the tax A Division Bench of the Madras High Court in Talipatigala Estate v. Commissioner of Income-tax, Madras, considered the question whether proceedings under section 34 of the Act could be initiated against a firm, which was not assessed previously but one of the partners of the firm only had been assessed on his share in the firm. The learned Judges, in rejecting the applicability of section 34 to such a case, observed at page 327 thus