ALI SHAH Vs. TAX RECOVERY OFFICER

JUDGEMENT

(1.) THE petitioner seeks to quash the impugned orders forming annexs. " F " and " G " to the petition by issuance of a writ of certiorari and mandamus directing the respondent not to proceed against the petitioner for the recovery of the tax amount.

(2.) IT is averred that the petitioner along with Bakshi Bashir Ahmed, Bakshi Ghulam Hassan and Bakshi Ghulam Ahmed constituted a partnership firm known as ' M/s. Kashmir Motors '. This firm was dissolved on December 31, 1960. Thereafter, the statement of assets and liabilities of this firm was drawn up according to which the petitioner did not take over the liabilities of the income-tax of the dissolved firm. According to the petitioner this remained the responsibility of the other three partners. Even according to the finding of the one man Tribunal presided over by the late Justice lyyengar, the entire assets of the Kashmir Motors were appropriated exclusively by the above-said partners excluding the petitioner. Respondent No. 1 issued notice No. 83 of demand asking the petitioner to pay the amount of Rs. 2,55,600 allegedly as arrears of tax of the defunct firm of Kashmir Motors, This notice forms annex. " B " to this petition. The petitioner submitted his objections and pleaded that the responsibility to pay the tax amount did not rest with the petitioner inasmuch as he was not a partner of the defunct firm. He also pleaded that no demand or notice of assessment as required under Sections 143 and 156 of the I.T. Act or that of imposing a penalty under Section 274 had been given to him. The petitioner also raised either factual and legal plea before the I.T. authority. The respondent, however, recorded that no notice to the petitioner was necessary as notice to one of the parties of the firm would be deemed a notice on the petitioner also and on this ground the recovery of the tax was ordered. Consequently, the respondent issued three notices of demand amounting to Rs. 2,55,600 out of which Rs. 1,55,505 related to the penalty imposed by virtue of certificate No. 5354 dated March 20, 1974. The remaining sum of Rs. 50,309 and Rs. 50,632 were in response to the certificate Nos. 20/p36 and 21/p36. The petitioner submitted his further objections in regard to this demand notice. The respondent, however, finally passed the impugned order dated September 20, 1974, rejecting the objection of the petitioner. The petitioner has characterised the order of the respondent as arbitrary, illegal, and without jurisdiction. He has further averred that the impugned orders forming annexs. " F " and " G " to the petition are void, illegal and against the provisions of the I.T. Act, they are without jurisdiction, and also violate Articles 14, 16 and 19 of the Constitution of India. The firm according to the petitioner having admittedly been dissolved and no notice of demand or assessment or penalty as required under Sections 143, 156 and 274 of the I.T. Act having been given to the petitioner, notice on the other partners could not be deemed to be a notice on the petitioner, because the firm did not exist as a person on the date the assessment is alleged to have been made in the absence and behind the back of the petitioner. The impugned order has vested the arbitrary discretion in the respondent in exercise of which he has so far chosen to proceed only against the petitioner for the whole amount of tax and penalty. The other partners have not at all been proceeded against so far. In this way the action on the part of the respondent is a colourable exercise of power and is mala fide in law. For these reasons, the petitioner seeks the annulment of the impugned orders.

(3.) IN the rejoinder affidavit filed by the petitioner it is stated that it having been conceded by the respondent that Bakshi Bashir and Bakshi Gulam Hassan had retired from the partnership on December 31, 1960, and also that notice of demand under Section 156 of the I.T. Act was served upon Bakshi Gulam Hassan, admittedly a retired partner through his father, therefore, this could not constitute service on the assessee as required by Section 156 of the I.T. Act. No implied authority can be presumed in the case of a retired partner under Section 19 of the Partnership Act to receive a notice from any statutory authority so as to bind the other partners. It having been admitted by the respondent that notice under Section 148 was issued for the assessment years 1960-61 and 1961-62 on July 31, 1965, and served through the partners on August 3, 1965, it is clear that such service could not be deemed service on the assessee and could not bind the petitioner as no notice was admittedly served on the petitioner but only to the partners who had already retired. The impugned order was, therefore, violative of the provisions of the I.T. Act and the assessment proceedings are void and without jurisdiction. There was no acquiescence by conduct on the part of the petitioner as alleged by the respondent in his affidavit. The matter relates to the enquiry proceedings started by Mr. Anand Prakash, ITO, who was deputed by the Central Government to make a special enquiry into the affairs of the firms of the family of Bakshi Ghulam Mohammad. Any statement made by the petitioner referred to in the reply affidavit of the respondent was not a statement in the assessment proceedings of " Kashmir Motors " but related in general to the firms of the family of Bakshi Ghulam Mohammad as in the same sequence enquiry was held by Mr. Justice Iyyangar. The statements made by the petitioner before Mr. Anand Prakash, ITO, or Mr. Justice lyyangar, which are sought to be relied upon against the petitioner have no reference to the assessment proceedings. The averments made in the reply affidavit are utterly misconceived as there can be no estoppel against a statute. Under Section 187 of the I.T. Act where a change occurs in the constitution of the firm, assessment is to be made on the firm as constituted at the time of making the assessment. As a matter of fact the previous firm was reconstituted ; therefore, under the I.T. Act, the assessment proceedings should have culminated in the impugned order by having been held to be in violation of the provisions of the Act. It is denied that the petitioner was ever associated with the assessment proceedings and that any notice was served in the name of the firm on him. As these notices were served on retired partners who could not be said to be partners at the time of assessment, the notice is had in law. That the petitioner had to avail another legal remedy available to him has been answered by stating that no notice was served on the petitioner and by the time the impugned order was issued on the basis of the illegal notice, the time for filing of the appeal against the assessment order which was not conveyed to the petitioner, had expired, and, secondly, the alternate remedy was so onerous that huge amount of tax of nearly three lakhs of rupees had to be deposited before the appeal could be filed. Therefore, the alternate remedy could not be deemed to be easy and efficacious for the petitioner.