TMI Blog1965 (11) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... July 11, 1953. It was dissolved on July 11, 1953. An inti- mation of the dissolution of the firm under section 16 of the East Punjab General Sales Tax Act, 1948, hereinafter called the Act, was sent to the department on July 18, 1953. The firm was assessed to sales tax on May 30, 1953, by the Sales Tax Officer under the provisions of the Act in respect of its turnover for the period between October 4, 1952, and March 31, 1953; but the said assessment order was quashed on April 11, 1955, by the Financial Commissioner on the ground that the authority which made the assessment had no jurisdiction to do so. On September 3, 1955, the Sales Tax Officer made a fresh assessment on the turnover of the said firm. Its taxable turn- over was fixed at ₹ 15,04,091-11-3 and was assessed to sales tax in a sum of ₹ 47,002-14-0. It is not clear from the record whether after the order of the Financial Commissioner fresh proceedings were initiated by the Sales Tax Officer or whether the earlier proceedings initiated by him before the dissolution of the firm were continued thereafter. But from the question formulated for the decision of the Full Bench of the High Court, which is the subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the assessing authority was quashed by the Financial Commissioner, but in fact after the said order of the Financial Commissioner, the assessment proceedings started before the dissolution of the firm were continued. On that assumption, the argument proceeded, that the proceedings validly started against a firm could be continued though the said firm was dissolved and the notice of such a dissolution was given to the appropriate authority till the registration of the firm was cancelled. Mr. M.S. Gupta, learned counsel for the firm, contended that a firm under the Act, just like a firm under the Indian Income-tax Act, was a separate assessable legal entity and that, unlike under the Income-tax Act, there was no machinery provided under the Act for making the assessment on such a firm after its dissolution and that, irrespective of the fact whether the proceedings were initiated before or after its dissolution, the assessing authority had no power or jurisdiction to assess the firm after such a dissolution. He further argued that in the present case the High Court proceeded on the assumption that the assessment proceedings were started de novo after the order of the Financia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No dealer shall, while being liable to pay tax under this Act, carry on business as a dealer unless he has been registered and possesses a registration certificate. Section 16. If any dealer to whom the provisions of sub- section (2) of section 10 apply- (b) discontinues his business or changes his place of business or opens a new place of business, he shall within the prescribed time inform the prescribed authority accordingly; and if any such dealer dies, his legal representatives shall in like manner inform the said authority. Section 17. When the ownership of the business of a registered dealer is transferred, any tax payable in respect of such business remaining unpaid at the time of the transfer shall be payable by the transferee as if he was the registered dealer; and the transferee shall within 30 days of the transfer apply for registration under section 7. Rule 40 of the East Punjab General Sales Tax Rules, 1949, reads: (1) A dealer and his partner or partners shall be jointly and severally responsible for payment of the tax, penalty, or any amount due under the Act or these Rules. The scheme of the Act is a simple one. A firm is a dealer: the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution and that made in a proceeding started after the dissolution. In either case, unless there is an express provision, no assessment can be made on a firm which has lost its character as an assessable entity. To get over this legal position, a strong plea was made on the basis of section 16 of the Act. Section 16, so far relevant to the present enquiry, only says that if a dealer discontinues his business, it shall within the prescribed time inform the prescribed authority accordingly. This section does not expressly state that a dealer, if it happens to be a firm, continues to have legal existence even if it has ceased to be a firm. Nor does the section permit a necessary implication to that effect. It serves only a limited purpose. It is enacted for administrative purposes so that the appropriate authority may take the necessary action. Nor does rule 40 of the East Punjab General Sales Tax Rules, 1949, carry the matter further. It only imposes a joint and several liability on the dealer and its partners for the payment of tax, penalty or any amount due under the Act or the Rules. It does not provide for a case of the dissolution of a firm and the assessment of the diss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. The Orissa High Court in Commissioner of Sales Tax, Orissa v. Aurobindo Auto Service [1963] 14 S.T.C. 46., also sustained the assessment after dissolution inter alia, on the ground that no notice of dissolution was given under section 18(b) of the Orissa Sales Tax Act, 1947, read with rule 14 of the Orissa Sales Tax Rules, 1947. But the main reason for that decision was based upon section 19(3) of the Orissa Sales Tax Act which is Pari materia with section 44 of the Income-tax Act, which has been construed by this Court to confer a power on the assessing authority to make such an assessment. All these decisions, if we may say so with respect, were overburdened with the consequences of a contrary construction on the incidence of taxation and also by their mixing up the question of the statutory power of assessing a dissolved firm with the liability of the partners thereof to pay the tax so assessed on the firm before dissolution. For the reasons we have already given earlier, we cannot accept the validity of the reasons given in the said judgments for maintaining an assessment on a dissolved firm, whether the proceedings were initiated before or after the firm was dissol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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