TMI Blog1957 (9) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. The return which I submitted may be allowed to be amended or I may be permitted to submit a revised return . This request of the assessee was not accepted by the I.T.O., and he made two assessment orders one in respect of each assessment year --against the unregistered firm. 3. Against these orders of the I.T.O. appeals were filed by Gokuldas before the Appellate Assistant Commissioner; and one of the grounds of appeal was as follows : Having regard to circumstances of the case status be taken as individual, and not U. R. F. (unregistered firm) and the concern may be taxed as proprietary concern. The A.A.C. dismissed the appeals on 9-12-1947. Thereaiter on 3-3-1948 Kikabhai's property was attached for the payment of the tax levied on the unregistered firm, and Kikabhai filed an appeal before the Appellate Tribunal against the order of the A.A.C. in the assessment for both the years. In this appeal he made only the I.T.O. as the respondent and Gokuldas was not a respondent in that appeal. The Tribunal raised a preliminary question as to whether Kikabhai was competent to file this appeal and held that he was. The Tribunal then on 19-8-1949 made a remand ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order, but what he denies is that on such appeal he can raise any question as to his not being a partner, because he says that the question as to whether he is or he is not a partner can only be determined at the stage of recovery proceedings. Under the provisions of the Indian In-comc-tax Act, recovery of tax can ultimately be made through the Collector as if it was recovery of land revenue, and says Mr. Pandit, the Collector has all the powers under the Civil Procedure Code, 1908 for the purpose of recovering the amount, which powers would include the power to determine whether Kikabhai was or was not a partner if recovery was sought to be made from him. Against this contention Mr. Palkhiwalla for Kikabhai urges that there is jurisdiction in the I.T.O. to determine in the course of assessment of an unregistered firm the question as to who are the partners of such a firm. He further says that in fact the I.T.O. who passed the order in this case implicitly, if not explicitly, determined that Kikabhai was a partner. This order affected the liability of Kikabhai and since he denied his liability to be assessed, he was entitled to appeal to the Appellate Assistant Commissioner und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest is due in consequence of any order passed under or in pursuance of this Act, the Income-tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable. Now, in the case of an unregistered firm, the firm itself is assessed and its partners would fall, in our opinion, within the expression other persons liable to pay such tax in Section 29 and if it is sought to enforce the liability against any such person, in our opinion, it is essential that a notice of demand should be served on such person under Section 29. Incidentally, no such notice was served on Kikabhai in this case, but the question is when and in what proceedings does the I.T.O. determine whether an alleged partner was in fact a partner of the unregistered firm and, therefore, a person liable to pay the tax imposed on the unregistered firm. It might have been arguable that the power to determine whether he was so liable was implicit in Section 29 and should be exercised after the assessment on the unregistered firm had been completed; but that leads to the result that the persons so held liable is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this, there are further Sub-clauses of Section 46 which confer powers on the I.T.O. in respect of recovery of tax. Sub-section (3) empowers the Income-tax Commissioner to direct that arrears of tax may be recovered by any process enforceable for the recovery of arrears of Municipal tax or a local' rate and the I.T.O. may proceed to recover it accordingly. Sub-section (5) provides that the Income-tax Officer may direct any person from whom salary is due to the assessee to deduct from the salary any arrears due in respect of income-tax and such person shall be bound to comply with the requisition. Section 5 (a) empowers the Income-tax Officer to issue a prohibitory order requiring any person from whom money is due to the assessee to pay to the I.T.O. so much of the moneys as is sufficient to pay the tax. Here again, if these powers are resorted to, the alleged partner is absolutely without a remedy if during the assessment proceedings there was no adjudication that he was a partner and if there was no power in the I.T.O. so to adjudicate. Therefore, although it is not strictly relevant for the purpose of determining whether there is such a power in the I.T.O. to consider what t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners of any unregistered firm are as stated in the Return, he has the power or authority implicit in this section to make an investigation and to determine whether any one or more of the persons mentioned in the Return are or are not partners. This determination is also necessary for other essential purposes of assessment. One of such purposes is the computation of the income of a business under Section 10. When one turns to Section 10(4) (b), it in effect provides that any interest, salary or remuneration paid to a partner shall not be allowed as an exception under Section 10, Sub-clause (2) (xv) of the Act. Obviously for the purpose of giving effect to this proviso, the I- T. O., must know who the partners are. Similarly, under Section 26 Sub-section (1) if there is a change in the constitution of a firm, the assessment is required to be made on the firm as constituted at the time of making the assessment. This is a mandatory provision and in order to give effect to it, the I. T. O. must of necessity determine who were the partners in the accounting year and who are the partners at the time of making the assessment. It is important also to note that the Section requires in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal a further appeal shall in an appropriate case lie to the Tribunal. If the I. T. O. determines the question without notice to the parties concerned, then his determination will be liable to be set aside in appeal at the instance of an aggrieved party because the determination in the absence of the party concerned cannot bind him; and if the I. T. O., does not exercise his power and perform his duty to determine who the partners of an unregistered firm are, the I. T. O.. would have no right or authority to seek to enforce the payment of the tax against an alleged partner, whose liability has not been adjudicated upon by him in the assessment proceedings. Such, we conceive, is the true position on the construction of the relevant sections to which we have already drawn attention. 7. Turning next to the facts of the matter before us, a great many things appear to have been done quite irregularly. In the first instance there is the I. T. O's order and in that order the I. T. O. states that a Deed of Partnership had been produced and since no application for registration of the partnership had been made, the concern would be treated as an unregistered firm and subjected to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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