DAYA RAM Vs. ADDITIONAL COLLECTOR JAIPUR

JUDGEMENT

(1.) THIS is a writ petition under Art. 226 of the Constitution filed by Daya Ram and Jeth Mal, who were at one time partners of a firm, K. Gunamal and Company, at Jaipur, challenging the recovery proceedings taken up by the Addl. Collector of Jaipur on a demand of income -tax to the tune of Rs. 1,42,150.57 nP. issued by the ITO, A -Ward, Jaipur, as a result of the assessment proceedings taken against the firm, K. Gunamal and Company.

(2.) THE petitioners along with some other persons started a business of manufacturing biscuits and confectionery in the City of Jaipur under the name and style of K. Gunamal and Company some time in September, 1950. The deed of partnership is said to have been executed on 5th Feb., 1950, before the business was started by the firm. On 5th Feb., 1952, an application was made on behalf of the firm for its registration under the IT Act before the ITO, A -Ward, Jaipur, but the application was rejected by the ITO. The petitioners' case is that one of them, namely, Daya Ram, left the firm from 30th May, 1953, and by a deed of relinquishment executed between Daya Ram and other partners, he was discharged from all the liabilities and obligations of the firm. Later on, three other partners, with whom we are not concerned, are also said to have left the firm. Some time in September, 1954, petitioner No. 2, Jeth Mal, also left the firm and when he left the firm, the same was dissolved by a deed of dissolution dt. 27th Sept., 1954, and thereafter, Gunamal became the sole proprietor of the firm. Amongst the assets of the firm was a factory which came under the exclusive control of Gunamal. The firm was assessed to income -tax as an unregistered firm for the asst. yrs. 1951 -52 and 1952 -53 by the ITO, D -Ward, Jaipur. For the asst. year 1951 -52, the income -tax that was assessed was Rs. 461 -13 -0 and for the year 1952 -53, the amount of income -tax assessed was Rs. 37,451 -12 -0. Notices of demand were issued in the name of the firm. Gunamal, the sole proprietor of the firm, applied for extension of time to pay the tax and the ITO granted him time to make the payment up to 15th March, 1955. As this amount was not paid during the time allowed, the ITO issued a certificate under the Public Demands Recovery Act against the firm for the aggregate amount of Rs. 37,915 -9 -0 and forwarded it to the Collector, Jaipur, for making the recovery. The Collector in his turn transferred the certificate to the Addl. Collector, Jaipur, who, on 1st Aug., 1955, attached the factory building along with the goods lying there. On 2nd Aug., 1955, Gunamal applied to the Inspecting Asstt. CIT, Rajasthan and Madhya Bharat, for releasing the factory and he offered to pay Rs. 4,000 by two instalments of Rs. 2,000 each within one month and also undertook to furnish security for the balance. This offer of Gunamal seems to have been accepted by the IT authorities who, consequently, requested the Collector to withdraw the attachment. The Collector accordingly withdrew the attachment and released the factory and the goods. Gunamal did pay Rs. 4,000 in two instalments as promised, but it appears that no security was actually taken from him for the amount remaining in balance. The result was that after the factory was released from attachment Gunamal and his son claiming to be the sole proprietors of the firm mortgaged the factory building with other parties.

(3.) THE ITO then proceeded to assess income -tax for subsequent years 1953 -54 and 1954 -55. As a result of the assessment proceedings a new demand of tax was created and on 22nd May, 1958, the ITO issued a certificate for a sum of Rs. 1,12,020.11 nP. representing the aggregate amount of tax for the asst. yrs. 1951 -52, 1952 -53 and 1953 -54, and sent the same to the Collector for making the recovery. Gunamal then filed returns for the asst. year 1954 -55, showing a loss of Rs. 33,000 and odd, but as the ITO was not satisfied with the correctness of the returns and Gunamal did not produce the account books when asked to do so, the ITO made a best judgment assessment and assessed the tax for that year at Rs. 30,030.15 nP. A consolidated. certificate for the entire amount of Rs. 1,42,150.57 nP. was issued by the ITO in respect of the four assessment years and the recovery proceedings were started by the Addl. Collector, Jaipur. The petitioners filed their objections before the Addl. Collector disputing their liability for the amount demanded of them, but they were dismissed. The petitioners then went up in appeal to the Revenue appellate authority who dismissed the appeal holding that the same was not competent inasmuch as the proceedings had commenced under the Rajasthan Land Revenue Act, which did not provide for any appeal.