TMI Blog1992 (11) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. yr. Date of asst. order Total income determined Tax determined Date of receipt of asst. order 1966-67 16.12.1970 Rs. 14,310 Rs. 1854 23.12.1987 1967-68 25.10.1971 Rs. 27,737 Rs. 8554 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 made the demands invalid and make the assessment orders unenforceable was sought to be substantiated by the assessee's counsel by citing the following decisions: (1) Khetmal Parekh Co. vs. State of A.P. (1976) 38 STC 531 (2) M. Ramakrishnaiah Co. vs. State of A.P. (1976) 38 STC 537 Photostat copies of one of the above decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 s. 44 of the Indian IT Act, 1922. Under s. 44 of the Indian IT 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 s. 29 there need not be necessarily an order of assessment on the partner against whom the notice is later issued. Sec. 29 of Indian IT Act, 1922 as well as the definition of `assessee' under s. 2(2) of the Indian IT Act, 1922 after having been extracted in their judgment their Lordships held that a person against whom proceedings are taken in pursuance of s. 44 is also an `assessee' within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Cal). In the above case also, the delay caused while issuing notice under s. 29 of the Indian IT 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 s. 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 ITO 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 under s. 29 of the Indian IT Act, 1922, can be validly issued even after that period as there is no statutous limit for the issue of the notice of demand. The right to appeal against the demand arises from the date of service of the correct notice of demand and the assessee's right is not prejudiced in any way." In that case for asst. yr. 1956-57, the assessment was completed and it was recorded in the assessment order that interest would be charged under s. 18A(6) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same date. Admittedly, in the instant case, the order of the assessment was made on 26th March, 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 vs. CIT (1954) 25 ITR 79 (Mad), the decision of the Mysore High Court in N. Subba Rao vs. ITO (Third) (1963) 48 ITR 808 (Mys) as well as the decision reported in (1967) 64 ITR 362 (Cal), 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 Iyengar's Law of Income-tax, 8th Edn., Vol. 4, page 4525, the following is stated to be the law: "Since the demand notice arises in consequence of an order passed under the Act, which must have been passed before the issue of the notice of demand and its service gives a right of appeal to the assessee, though there is no statutory provision to that effect, it is desirable that the order on the basis of which the demand is raised is also served simultaneously on the assessee; however, the failure to do so will not render the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 6th Dec., 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 25th March, 1972, it was despatched on 19th April, 1972 to the assessee-firm. Further the office copy of the assessment order for 1971-72 dt. 29th March, 1973 discloses that it was despatched on 3rd May, 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 tangible evidence on record to show that the assessment order for 1970-71 was despatched to the assessee-firm on 9th April, 1972 whereas for asst. yr. 1971-72, it was despatched on 3rd May, 1973. Notice under s. 221(1) was sent to Poonamchand Toshniwal in which tax demands due for asst. yrs. 1966-67, 1967-68, 1970-71 and 1971-72 were demanded from him for the reason that the firm was dissolved and that as per the dissolution deed Shri Poonamchand Toshniwal undertook to pay taxes on behalf of minors and also to indemnify other partners and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 s. 140(cc) it should be signed either by the managing partner or in his absence by any partner not being a minor and if it is an appeal under r. 45(2)(cc) of the IT Rules, 1962, then also, the appeal form namely, Form No. 35 should be signed and verified, in case the firm is the appellant by the managing partner of the firm or in his absence by any partner not being a minor. He strongly contended that there is no scope for any third party to file the appeal on behalf of the firm and since Shri Poonamchand Toshniwal filed Form No. 36 before the Tribunal describing himself as partner of the firm which is wrong and misleading and since he has no capacity whatsoever to file the appeals, they should be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 natural guardian cannot also sign on their behalf, the Tribunal should permit the assessee to rectify the defect by an amendment to cause title for which separate petition is filed by Shri Poonamchand Toshniwal. 6. The matter was completely heard on 5th Nov., 1992 and when it is reserved for judgment Shri Poonamchand Toshniwal filed a petition seeking leave to file appeal and for amendment of appeal memo in which it is stated that the Tribunal may be pleased to permit the petitioner to present IT appeals bearing Nos. 81 to 84/Hyd/1989 on behalf of his minor children, Suraj Prakash and Buchi Prakash who are admitted to the benefits of partnership, M/s Jyothi Tin and Allied Industries and it may also permit the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w 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 vs. CIT reported in (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 question was whether such a firm was entitled for registration. It was held that under s. 11(2) of the Companies Act, the partnership consisting of more than 20 persons for the purpose of carrying on any business or gain is prohibited and while considering the number of partners, minors are to be eliminated since they are incompetent to enter into contract. Only adult partners should be counted and if they are less than 20 in number they are entitled for registration of the firm. Thus, when minors are prohibited to file appeals on behalf of the firm, much less his guardian who is representing him can do so and, therefore, the guardian is also incompetent to file appeal for and on behalf of the firm. We have already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 30th April, 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 1st May, 1945 to 30th April, 1946 would be on account of the purchaser. The demand notice in respect of the period 1st May, 1944 to 30th April, 1945 was served on `B'. The question before the Calcutta High Court was whether the said demand can be realised from `B'. In that connection, the Calcutta High Court held the following at page 83: "It is, however, suggested that by reason of cl. 7 of the agreement Bajoria may be liable, but that is an entirely indefensible proposition. Clause 7 only says that Bajoria would be liable to excess profits tax for the year beginning with 1st May, 1945, and ending on 30th April, 1946. The demand to which I have referred is not for that period for an earlier period namely from 1st May, 1944, to 30th April, 1945. Even if Bajoria was liable under cl. 7 of the agreement the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 30th Jan., 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 therefrom." Now in this case also, the IT returns for the assessment years in question were filed by the assessee-firm. By the date of filing of these appeals, the firm was dissolved as per deed dt. 20th Jan., 1971 and as per the obligation undertaken Shri Poonamchand Toshniwal, undertook the obligation to pay the income-tax arrears due on behalf of the partners of the firm and therefore, he stepped into the shoes of the partners of the firm. As a successor in interest of the partners of the firm who specifically undertook to discharge their income-tax arrears on their behalf and applying the ratio of the Calcutta High Court's decision in (1979) 120 ITR 92 (Cal), we are of the opinion that Shri Poonamchand Toshniwal is entitled to file the appeals and he has got requisite competence to maint ..... 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