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1978 (10) TMI 38 - SUPREME COURTWhether the three partners can be held liable for the tax assessed against the firm ? Whether the sanction given by the Commissioner for prosecution under section 46(1)(c) is sustainable in law? Held that:- Non-payment of tax against a firm cannot be visited on individual partners of the firm. It was only the firm that was assessed for liability for tax for all the three periods. In spite of repeated notices the firm did not pay the assessment or the penalty that was imposed. In the absence of a specific provision as found in s. 18 of the Bombay Act the partners of the firm cannot be held liable for the tax assessed on the firm. On this point, we agree with the High Court that the partners cannot be made liable for the tax assessed on the firm. In the present case, it is seen, under s. 46 before a prosecution can be launched, it is necessary that the assessee should have failed to pay the tax due within the time allowed without reasonable cause. The duty of the Commissioner is, therefore, to be satisfied that the assessee has failed without reasonable cause and without recourse to prosecution under s. 46(1)(c) the tax due cannot be collected. The provisions of s. 22(4A) can be read as being applicable to cases in which the stringent step of prosecution is considered not necessary. The option is with the Commissioner and if he thinks levy of penalty would achieve the purpose of collection of the tax he can have recourse to the provisions of s. 22(4A). Before levying a penalty under s. 22(4-A), the Commissioner shall give reasonable opportunity of being heard as to why the penalty should not be levied. Reading the two provisions harmoniously, we are of the view that the discretion is given to the Commissioner to resort to one of the two remedies as the facts of the case may require. In graver cases, he will be justified in taking the drastic remedy and resorting to prosecution in the criminal court if he is satisfied that such a course is necessary for the collection of the tax expeditiously. On a consideration of the decisions on the point we are satisfied that there is nothing illegal in conferring different procedures on the authorities. Thus the provisions of the Act conferring different procedures for collection of tax cannot be held to be invalid.
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