TMI Blog1959 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... l Somani Co. as the sole proprietor thereof. It is not in dispute that in spite of the changes made in the constitution of the firm of Motilal Somani Co. the same business was carried on all throughout. Even when the petitioner carried on business in the name of Motilal Somani Co. as the sole proprietor thereof, the business so carried on by him was the same business as was carried on by the partnership of M/s. Motilal Somani Co. since 1940. On the 15th of December, 1955, the petitioner informed the Income-tax Department that the firm of M/s. Motilal Somani Co. was dissolved as from 14th November, 1955, and that on and after the 15th of November, 1955, the business carried on by that firm prior to its dissolution had become the sole proprietary concern of the petitioner. It may also be observed that the business carried on by the petitioner on and after the 15th of November, 1955, was continued by him in the same premises where the firm of M/s. Motilal Somani Co. prior to its dissolution was carrying on the said business. On the 25th of March, 1958, the first respondent took out a notice under section 34(1) against M/s. Motilal Somani Co. on the ground that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. having been dissolved, (of which fact notice was given to the Income-tax Department by the petitioner's letter dated 15th December, 1955) the notice under section 34 ought to have been addressed in the names of the partners who were partners at the time relevant to the assessment year 1949-50 and that the notice cannot be addressed in the name of the dissolved firm, the dissolved firm, according to him, not being liable to assessment. In other words, the contention of Mr. Palkhivala was that the dissolved firm cannot be said to be the assessee within the meaning of section 34 and, therefore, the notice having been addressed in the name of the dissolved firm, was invalid. Mr. Palkhivala argued that in the case of a firm, which no longer exists at the time when assessment is sought to be made, an assessment can be made either under section 26 or under section 44- Mr. Palkhivala urged that in this case, however, section 26 cannot be made applicable as the business of the firm of M/s. Motilal Somani Co. was discontinued upon its dissolution and, therefore, it would be only section 44 that would be applicable. Section 26 of the Act provides that where, at the time of maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear therefore that on the facts expressly stated by the petitioner himself in the petition this would be a case of succession within the meaning of section 26(2). It must however be remembered that this is not a case of an ordinary assessment under section 22 and 23 but a case where a notice has been served under section 34 for reopening the original assessment on the ground that there has been an escapement of certain income, profits or gains form assessment for the assessment year 1949-50. It would therefore be a relevant consideration to find out who was the person liable to be assessed under section 34 in respect of the escaped income. In other words who would be the assessee for the purpose of section 34 to whom a notice has to be served under that section in order that the Income-tax Officer would have the jurisdiction under the section to re-assess? The relevant part of section 34(1) is as follows: If the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners of that firm at the date of its dissolution who would be liable to assessment as also for the amount of tax payable. Therefore the notice under section 34 had to be addressed in the names of those partners and not in the name of the firm. Section 44 provides that where any business carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of such discontinuance or dissolution a partner of such firm or member of such association shall, in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable and all the provision of Chapter IV shall, so far as may be, apply to any such assessment. It is clear from the terms of section 44 that that section contemplates discontinuance of business which was till then carried on by a firm and provides that in that case it would be the person who were the partners in the firm at the date of such discontinuance who would be liable jointly and severally for the assessment and for the amount of tax payable. Now, if Mr. Palkhivala were to be cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se v. Manindra Lal [1958] 33 I.T.R. 435 would be an authority only for the proposition that where discontinuance of a business of a firm is established or is a fact over which there is no dispute, then by reason of section 44 the liability to assessment would be that of the partners and not of the firm. The question, therefore, is one of fact whether on the date of the notice dated 25th March, 1958, (1) who was the assessee within the meaning of section 34(1), and (2) for the purpose of deciding who was the assessee, that is to say, the person liable to assessment, whether there was a discontinuance of business so as to attract the provision of section 44 as contended for by Mr. Palkhivala. Taking the second question first, the facts, are, as I have already pointed out, that after the partnership consisting of Pruanmal Pannalal and the petitioner was dissolved in 1955, the petitioner carried on the same business in the name of Motilal Somani Co. as the sole proprietor thereof. It is true that in December. 1955, the petitioner have notice of dissolution of the firm of Motilal Somani Co. and of his having taken over the business of that firm as the sole proprietor thereof. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued to be a partner until the 14th November, 1955, and, as stated by him in the petition, the same business was taken over by him and continued by him in the name of Motilal Somani Co. He being the sole proprietor of M/s. Motilal Somani Co. on and after the 15th November, 1955, a notice addressed in the name of Motilal Somani Co. of which he was at the date of serious the sole proprietor, even if section 44 were to be applicable, would be a notice upon him as a partner of those dissolved firm and, therefore, it would be a valid notice so far as he is concerned, as under section 44, as urged by Mr. Palkhivala himself, he would be liable jointly and severally for the assessment on the income of the firm whose business has been discontinued. Therefore, the contentions raised by Mr. Phalkivala on the validity of the notice under section 34 cannot be accepted. The notice under section 34(1) both on the consideration of section 34 as also under section 26(2) were valid notices and the Income-tax Officer became entitled to proceed with the assessment on the basis of that notice. The next contention urged by Mr. Palkhivala was with regard to the invalidity of the service of the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed from the affidavits was in fact in accordance with the terms of order V, rule 17, of the Code of Civil Procedure which provides that where the serving officer, after using all due and reasonable diligence, cannot find the defendant and there is no agent empowered to accept service on his behalf, nor any other person on whom service can be made, the service officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business and shall then return the original to the court from which it was issued with a report endorse thereupon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did no and the name and address of the person, if any, by whim the house was identified and in whose presence the copy was affixed. Thade, who served the two notices in question, has in his affidavit stated that he took all due and reasonable diligence and care to ding out the residential addressees of the partners of Motilal Somani Co., that he was prevented from getting these addresses and that in to circumstances the only way in which he could serve the no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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