TMI Blog1993 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... made on Messrs. Nagarmal Baijnath, a firm, which was dissolved and whose business was discontinued at the time of the assessments, were validly made ? " The appellant-assessee, Messrs. Nagarmal Baijnath, was a firm which did business during the accounting years relevant to the assessment years 1946-47 and 1947-48, the previous years being the years ending November 4, 1945, and March 31, 1946, respectively. By a deed of dissolution dated December 2, 1946, the firm was dissolved and its business discontinued. Notice under section 22(2) of the Act relating to the assessment year 1946-47 was issued in the name of the partnership firm and served on one Satyanarayan who accepted it on behalf of the firm, on August 19, 1946, Subsequent notices under sections 22(4) and 23(2) were also issued in the name of the firm and assessment completed on March 23, 1951, on the firm. The same procedure was adopted with respect to the assessment year 1947-48 and assessment completed on the firm on March 10, 1952. So far as the assessments under the Excess Profits Tax Act were concerned, notices were issued again in the name of the firm and assessments completed in the name of the firm. Indeed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the Revenue to make an assessment upon a dissolved firm after its dissolution and discontinuation of business. Accordingly, it answered the question referred to it in the affirmative, i.e., against the assessee and in favour of the Revenue. In this appeal, it is contended by Sri V. Rajagopal, learned counsel for the appellant, that under the unamended section 44, no assessment could have been made upon a firm which was dissolved by the date of the assessment. Learned counsel laid emphasis on the language of the section. He pointed out that so far as the discontinuance is concerned, it referred both to association of persons as well as to the firm, but when it referred to dissolution, it only referred to an association of persons but not to the firm. This was a clear pointer, says counsel, to the fact that the section did not apply to dissolution of a firm though it may have applied to its discontinuation. He further submitted that the mere application of the provisions of Chapter IV for the purpose of assessment did not mean that an assessment could be made upon a non-existent entity. He contrasted the language of the unamended section 44 with the language employed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on by a firm or association of persons was discontinued ; and (2) where an association of persons was dissolved. In either of these situations, every person who, at the time of such discontinuance or dissolution, was a partner of such firm or member of such association, was made jointly and severally liable to assessment under Chapter IV in respect of the income, profits and gains of the firm or association, as the case may be. The joint and several liability extended to the payment of the tax held payable. All the provisions of Chapter IV, so far as the case may be, were made applicable for such assessment. In this case, we are dealing with the situation where the dissolution of the firm resulted in discontinuation of its business. We are not concerned herein with the situation where the firm was dissolved but its business was not discontinued. It is necessary to bear this factual premise in mind. Indeed, on a pointed query from us, counsel for the appellant stated that this was a case where the dissolution resulted in discontinuance of business. The question is whether, in such a case, section 44 does not enable the Income-tax Officer to make an assessment on the dissolv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, in March, 1955, notice was issued under section 34 of the Act proposing to reopen the assessment for the said assessment year whereupon Shivram Poddar approached the Calcutta High Court for issuance of a writ of mandamus commanding the Income-tax Officer to forbear from giving effect to the said notice. The High Court dismissed the writ petition whereupon the matter was brought to this court. The question arising for consideration was stated by Shah J., speaking for the Bench, in the following words (at page 824 ) : " The question which falls to be determined in this appeal is whether the income earned by the firm in the year ending March, 1950, could be assessed to tax under section 44 of the Indian Income-tax Act, 1922, after the firm was dissolved. " The learned judge set out the unamended section 44 and its object as adumbrated in Abraham's case [1961] 41 ITR 425 (SC) and observed thus (at page 826 ) : " Section 44 operates in two classes of cases: where there is discontinuance of business, profession or vocation carried on by a firm or association, and where there is dissolution of an association. It follows that mere dissolution of a firm without discontinuance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssess the first petitioner firm as a firm despite its dissolution." The very same idea was repeated at a later stage in the following words: "If there is discontinuance of the business, section 44 would apply and the Revenue would be entitled to proceed to assess the firm as if no dissolution had taken place. (Vide C. A Abraham v. ITO [1961] 41 ITR 425 (SC), CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) and CIT v. Rais Reddy Mallaram. But if there is no discontinuance of the business and there is succession, the case would fall within section 26(2). That section, however, does not enact a provision enabling the Revenue to assess dissolved firm on its pre-dissolution income in case of succession." We are, therefore, of the opinion that the said decision does not lay down any principle contrary to the one enunciated in Abraham's case [1961] 41 ITR 425 (SC) or Shivram Poddar's case [1964] 51 ITR 823 (SC). In this view of the matter, we do not think it necessary to deal with the facts and principles enunciated in the decisions of the Bombay High Court referred to in the order under appeal. Suffice it to say that the decisions in CIT v. Devidayal [1968] 68 ITR 425 (Bom), L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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