1982 (5) TMI 30 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the civil court to entertain the suit.
2. Validity of the assessment orders made under the Indian Income Tax Act, 1922.
3. Legality of the certificate issued under section 46(2) of the Indian Income Tax Act, 1922.
4. Plaintiff's liability as a partner of the unregistered firm.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Civil Court to Entertain the Suit:
The court concluded that the civil court did not have jurisdiction to entertain the suit due to the express bar under section 67 of the Indian Income Tax Act, 1922, which excluded civil court's jurisdiction in matters of tax assessment. The plaintiff did not challenge the vires of any provisions of the Indian Income Tax Act, 1922, or the Bengal Public Demands Recovery Act. The court cited the Supreme Court decision in Dhulabhai v. State of Madhya Pradesh, which emphasized that when a statute provides an adequate remedy, the civil court's jurisdiction is barred. The plaintiff did not seek any determination from the authorities under the said Acts before filing the civil suit, making the suit non-maintainable in the civil court.

2. Validity of the Assessment Orders Made Under the Indian Income Tax Act, 1922:
The court noted that the plaintiff, Madar Bux, did not pray for any relief in respect of the assessment orders in his plaint. The learned subordinate judge erroneously entered into the correctness of the assessments and indirectly set aside the assessment order of the ITO. The court emphasized that the assessment orders were not challenged before the appropriate tax authorities and that the plaintiff did not deny his liability before the Certificate Officer. The court held that the learned subordinate judge could not declare the assessments as illegal without determining their correctness.

3. Legality of the Certificate Issued Under Section 46(2) of the Indian Income Tax Act, 1922:
The court held that the certificate issued under section 46(2) of the Indian Income Tax Act, 1922, was valid. The plaintiff did not challenge the certificate before the appropriate authorities and instead sought time to pay the dues. The court referenced several decisions, including Union of India v. Satyanarayan Khan and Ramgopal Khemka v. Union of India, to support the validity of the certificate proceedings. The court concluded that the plaintiff was liable for the tax dues and the certificate was legally issued.

4. Plaintiff's Liability as a Partner of the Unregistered Firm:
The court affirmed the finding that the plaintiff, Madar Bux, was a partner of the unregistered firm, M/s. Moula Bux. The court noted that the plaintiff himself filed returns in the name of the unregistered firm and was present during the assessments. The court referenced the Supreme Court decision in Sahu Rajeshwar Nath v. ITO, which held that tax dues from a dissolved unregistered partnership firm could be recovered from the partners. The court concluded that the plaintiff was liable under section 49 of the Partnership Act and rule 50(2) of Order 21 of the CPC for the tax dues of the firm.

Conclusion:
The appeal was allowed, the judgment and decree of the learned subordinate judge were set aside, and the suit brought by the plaintiff-respondent was dismissed. Both parties were directed to bear their respective costs throughout.