TMI Blog1992 (11) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... was inordinate delay in communicating the assessment orders passed, the assessment orders became bad in law and unenforceable. The assessment year, the date of the assessment order, the total income determined, the tax determined and the date of the receipt of the assessment order are furnished in the table below for the sake of convenience : -------------------------------------------------------------------------------------------------------------------------------------------------- Asst. Date of Total Income Tax Date of receipt Year asst. order determined determined of asst. order -------------------------------------------------------------------------------------------------------------------------------------------------- 1966-67 16-12-1970 Rs. 14,310 Rs. 1,854 23-12-1987 1967-68 25-10-1971 Rs. 27,737 Rs. 8,554 23-12-1987 1970-71 25-03-1972 Rs. 25,000 Rs. 4,675 23-12-1987 1971-72 29-03-1973 Rs. 20,000 Rs. 3,204 23-12-1987 In support of his contention that the inordinate and unreasonable delay in communicating the assessment orders make the demands invalid and make the assessment orders unenforceable was sought to be substantiated by the assessee's cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act and also without passing a fresh assessment order before issuing the demand notice against the erstwhile partner. When the matter came up in writ petition before the Mysore High Court one of the contentions raised against the notice of demand was that it was issued about 4 years after the assessment order was passed and, therefore, that notice of demand cannot be considered to be a valid notice. However, this contention was rejected by the Mysore High Court holding that the petitioner was asked to pay arrears of tax due not because there was an order of assessment against him as such. His liability to pay the arrears of tax arises as a consequence of section 44 of the Indian Income-tax Act, 1922. Under section 44 of the Indian Income-tax Act, 1922 the partners are made liable for the payment of tax due from the firm which has discontinued its business. In such a case there need not be vicarious liability cast specifically on the partners. What is being collected is the tax due from the partners of the firm. The notice of demand is based on the order of assessment made against the firm. Before issuing a notice under section 29 there need not be necessarily an order of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It would not be correct to assume that every claim to be valid must be made within some period and that if no period of limitation is prescribed by the statute. then it should be done within a reasonable time. Unless a period of limitation is prescribed, Courts are not justified in prescribing any period in the nature of limitation. Again our attention is drawn to the decision of the Calcutta High Court in CIT v. Kamani Industrial Bank Ltd. [1978] 113 ITR 380. In the above case also, the delay caused while issuing notice under section 29 of the IIT Act, 1922 came to be considered by the Calcutta High Court. It held the following as per head note : " The purpose of a notice of demand under section 29 of the Act is to bring to the attention of and demand from the assessee the order of assessment and the amount of tax including interest and other items due from the assessee. It is a statutory duty of the Income-tax Officer concerned to issue this notice and there is no bar to the issue of such a notice if a proper or correct notice has not been issued earlier. Though an assessment has to be completed within four years from the completion of the assessment year, a notice of demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all. Notice under section 29 of the Income-tax Act pre-supposes an order of assessment under section 23(1) or 23(3). Notice under section 29 can only be served after an order of assessment is made. Thus, the making or passing of an assessment order, the issue of notice under section 29, and service of notice or communication of the assessment order are different stages or steps before an assessee pays the assessed tax. In other words, the date of making the order, the date of issue of notice and the date when the order is communicated need not necessarily be the same date. Admittedly, in the instant case, the order' of assessment was made on 26-3-1959 which is a date within 4 years after the end of the assessment year. " The Calcutta High Court relied upon the Madras High Court's decision in Rm. P.R. Viswanathan Chettiar v. CIT [1954] 25 ITR 79, the decision of the Mysore High Court in N. Subba Rao's case as well as the decision in Bcdri Prosad Bajoria's case, for the proposition that though the assessment has to be completed within four years from the completion of the assessment year, a notice of demand can be validly issued even after that period. In Sampath lyengar's 'Law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it was despatched. From the despatch seal it is easy to be seen that the said assessment order was despatched to the assessee on 6-12-1971. The income-tax which was assessed against the assessee firm was duly furnished in the assessment order. Again a notice of demand for 1966-67 was sent on 17-12-1971 and it was served at least against two partners of the assessee. On 19-2-1971 the assessee firm addressed a letter to the Income-tax officer requesting that penalty notice under section 273(b) may be dropped. The penalty relates to assessment year 1966-67. Thus we are satisfied from the evidence on record that the assessment order for 1966-67 was despatched to the assessee even as early as on 6-12-1971. So also page 17 at which the office copy of the assessment order for 1970-71 was furnished, disclosed that whereas it was passed on 25-3-1972, it was despatched on 19-4-1972 to the assessee firm. Further the office copy of the assessment order for 1971-72 dated 29-3-1973 discloses that it was despatched on 3-5-1973 since the initials of the concerned officer as well as the date of despatch appeared on the office copy of the assessment order. Therefore, we hold that there is tangibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 45 of the Income-tax Rules as well as to section 2(47) of the Income-tax Act. Section 140 deals with the subject as to who should sign the return. In section 140(cc) the following is what is stated : " In the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor. " Rule 45(2)(cc) of the IT Rules as it stood prior to 18-5-1989 speak about the form of appeal to be filed before the Appellate Assistant Commissioner as well as the Commissioner (Appeals) and prescribed the procedure as to who should file the appeal for and on behalf of the firm. It states as under : " In the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor. " Thus it is the contention of the learned Departmental Representative that if it is an income-tax return as per requirement of section 140(cc) it should be signed either by the Managing P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re adversely affected, he has no right of appeal against the firm's assessment. Though section 140(cc) precludes a minor from signing the appeal memo, it does not mean that his right of appeal to file the appeal is denied to his natural guardian. He further contends that there is no express prohibition in the Income-tax Act that the minor does not have right to challenge an adverse order passed on the firm whereby his interests are adversely affected. The right of appeal though a creature of statute should be construed in reasonable, practicable as well as liberal manner. If section 140(cc) is not attracted, clause (f) can be invoked in such an instance. The opening words of section 246 and 253 state that any assessee aggrieved, may file an appeal. In this case the minors are the assessees who were aggrieved. Hence those sections themselves provide right to file an appeal. The Rules should be interpreted harmoniously with the section and cannot be read inconsistently with the meaning of the section. It would be inappropriate to state that a minor cannot challenge the assessment made on the firm. If for any reason, the Tribunal holds that a minor had no right of appeal and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth these two matters should be agitated in an appeal filed on behalf of the firm and not in an appeal filed against an individual partner's assessment order. Thus in this case the appeals are filed challenging the quantum assessed in the hands of the assessee U.R.F. Relief sought for in each of these appeals is correct determination of the income of the firm. It can be done only in an appeal preferred for and on behalf of the firm and it cannot be permitted in an appeal filed on behalf of the partners arising from out of their individual assessments. Therefore, firstly since Poonamchand Toshniwal is not a partner of the assessee firm which he falsely represented at the time of filing the appeals before the Tribunal, he should not now be allowed to change his front and contend that he should be permitted to represent his minor sons in these appeals. The minor sons by themselves cannot file the appeals since they cannot be considered as partners of the firm. For this proposition he relied upon the decision Aruppukottai Chandra Bus Lines v. CIT [1973] 87 ITR 154 (Mad.). In that case a partnership firm was found to have been comprised of more than 20 persons including the minors. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrears for and on behalf of the minor as well as major partners of the firm and thus he stepped into the shoes of all the partners of the firm and having regard to the true facts obtaining in this case we have to see whether in such circumstances Shri Poonamchand Toshniwal is entitled to file the appeal for and on behalf of the firm as a person who stepped into the shoes of the firm and is a person who himself made liable for all the tax arrears of the firm. In this connection, the learned Departmental Representative sought to argue that even then Shri Poonamchand Toshniwal cannot have the right of appeal. He cannot be considered as a successor of the firm. He invited our attention to the decision of the Calcutta High Court in CEPT v. Ramnath Bajoria [1951] 19 ITR 79. In that case the assessment to excess profits tax was made on an unregistered firm in respect of the chargeable accounting period commencing from 1st May and ending on 30-4-1945. In July, 1946, the firm sold its business to 'B' under an agreement which provided inter alia that all income-tax and excess profits tax in respect of the business made and outstanding for the year 1-5-1945 to 30-4-1946 would be on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bank Limited is competent and in that connection, the scheme of amalgamation prepared, the provisions of the scheme etc. were all examined by the Calcutta High Court. In the provisions of the scheme inter alia, it is recorded that from such prescribed date all liabilities, duties and obligations of the Southern Bank Ltd. would become the liabilities, duties and obligations of the United Industrial Bank Ltd. In that connection the Calcutta High Court considered the question whether by reason of succession by the United Bank Limited, the Southern Bank Limited was competent to proceed with the appeal thereafter. The Calcutta High Court decided the question as follows : " The findings of the Tribunal that it was the Southern Bank Ltd. who had filed the appeals and that it was the United Industrial Bank Ltd. which continued to proceed with the appeals have not been challenged by the revenue. We also note that the assessment proceedings of Southern Bank Ltd. were pending till the 30-1-1965, when they were disposed of by the ITO. On that date under the scheme it was the United Industrial Bank Ltd. which could continue the proceedings and necessarily had the right to file appeals therefr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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