TMI Blog1959 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the assessment year 1949-50. An order of assessment was made on October 28, 1952. It is said that the income-tax assessed was duly paid. This firm had an income-tax file in the office of the Income-tax Officer, Special Survey Circle III, Calcutta, and another file in the office of the Second Income-tax Officer, Bombay, in which, however, no return was filed and no assessment was made. By an order dated August 3, 1955, the Central Board of Revenue, in exercise of powers under sub-section (7A) of section 5 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act ) transferred the pending income-tax case in respect of the Bombay and Calcutta files to the file of the Income-tax Officer (Central) Circle II, Calcutta. By a letter dated October 13, 1955, the Income-tax Officer (Central) Circle II, Calcutta, called upon the ex-partners of the said firm to produce books of the firm for the year 2004-05, and particularly all the documents relating to the speculation in cotton and silver. On October 22, 1955, the said Income-tax Officer issued a notice under section 34 of the said Act on the petitioner. A copy of the said notice is annexed herewith and marked wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Radheshyam at the time of it dissolution c/o M/s. Anandram Gajadhar, 33, Netaji Subhas Road, Calcutta. The relevant part of this notice runs as follows: Whereas I have reason to believe that M/s. Balmukund Radheshyam (name of the firm) was dissolved on or about February 24, 1950: And whereas the income of the said firm assessable to income-tax for the assessment year 1949-50 has been under-assessed: And whereas I propose to reassess the said income: And whereas under section 44 of the Indian Income-tax Act, 1922, you, the said Shivram Poddar and Ramnarain Ojha (deceased) 33, Netaji Subhas Road, Calcutta, who were partners of the said firm of M/s. Balmukund Radheshyam at the time of its dissolution, are jointly and severally liable to assessment in respect of the income, profits and gains of the said firm before its dissolution and for the amount of tax payable thereon; Now therefore under section 34 read with section 22(2) of the said Act, I require you, the said Shivram Poddar to deliver to me within 35 days of the receipt of this notice a return in the attached form of the. total income and the total world income of the said firm assessable for the year en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act of 1958 received the assent of the President on April 28, 1958. The argument of the learned standing counsel appearing on behalf of the petitioner in this case is shortly as follows. He argues that under section 44 of the Act before the amendment it was not possible to assess a firm which had been dissolved under any circumstances, and that this has been upheld by Chakravartti, C. J., in the decision mentioned above. He says that in the case of the dissolution of a firm, not only was it impossible to assess the firm as such, but also the partners of the firm which had been dissolved could not be assessed. In other words, under section 44 as it stood before the amendment, once a firm had been dissolved neither the firm nor its partners could be assessed. Strange as this proposition may seem, the learned standing counsel argues that such was the law before the 1958 amendment, and if there was any lacuna in the law, his client is entitled to take advantage of it. Section 44 as it stood before the amendment speaks about two categories, namely, a firm and an association of persons . A firm means, of course, a partnership firm. What is a partnership firm has been defined in sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to submit a return of your total income and the total world income assessable for the year ending March 31, 1944. When the matter came up before me in the original court, I held that the notice was bad because a firm which has been dissolved cannot be assessed as such. I also held that the proper way to proceed was to assess the partners. This was upheld by the court of appeal in the decision mentioned above. The learned Chief Justice, however, made a statement which has been strongly relied upon by the learned standing counsel and which runs as follows R.N. Bose's case (supra): The question, as presented to us, turns on the true construction of section 44 of the Indian Income-tax Act. That section speaks of a case where any business, profession or vocation carried on by a firm or association of persons has been discontinued and a case where an association of persons is dissolved. It does not speak of a case, at least expressly, where a firm has been dissolved. It will be noticed that when speaking of the discontinuance of a business, profession or vocation, the section speaks of both a firm and an association of persons, but when speaking of dissolution, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner and partnership have the same meanings as in the Indian Partnership Act, 1932. The word partnership has been defined in section 4 of that Act as follows: 4. 'Partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually 'partners' and collectively 'a firm', and the name under which their business is carried on is called a 'firm'. Therefore the essential feature of a partnership firm is that it must carry on a business. It may be, as the learned Chief Justice points out, that a firm temporarily discontinues its business. That involves no consequences. But where the business has been permanently discontinued as is the case here, the firm must be taken to have been dissolved and discontinued. That it has been dissolved is also the petitioner's own case. I therefore do not understand how a firm which has been dissolved, and has ceased to exist, can be said to have been not discontinued. Discontinuance must relate either to the relationship of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the purposes of winding up. Indeed, as Mr. Meyer pointed out, the respondents would gladly accept the position that the firm had not yet been dissolved and that it has not discontinued business, because then they can proceed against the firm. This is a position however which the petitioner does not accept with any degree of enthusiasm. Mr. Meyer has taken several minor points which I may briefly refer to, although in view of my decision upon the main issue it is unnecessary to do so. He has stated that in the pleadings there has been an attempt by the petitioner to mislead the court. The facts stated in the pleadings, particularly with reference to the previous application, might have been more precisely and accurately stated, but I do not think that it can be said that there has been any actual attempt to mislead the court. Mr. Meyer next takes a point of res judicata. He says that in the previous application the same point arose and the party proceeded on the footing that section 44 applied and it is now not open to the petitioner to take up the position that under section 44 he should not be made liable. There can be no doubt that the petitioner is taking two inconsistent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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