TMI Blog1993 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... that the petitioners were partners of the firm during the financial years ending March 31, 1981, and March 31, 1982. The firm had been granted registration under section 184 of the Income-tax Act, 1961 ("the Act"). Assessments, exhibits P-4 and P-5, were completed on March 13, 1986, holding that the firm had no income assessable to tax under the Act. These orders were, however, reopened and fresh orders, exhibits P-8 and P-9, passed on August 14, 1987, assessing the firm to tax on the capital gains arising consequent on the sale of certain trees in its plantations. There were consequent demands for Rs. 2,94,590 by way of tax and other amounts for the assessment year 1981-82 and Rs. 1,54,313 for the year 1982-83. The assessments were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in S. N. Govinda Prabhu and Bros. v. Addl. STO [1985] 59 STC 33 ; [1984] KLT (Sh N) 92. Counsel for the Revenue, on the other hand, submits that section 188A does not create any new liability, but incorporates merely a machinery provision for enforcement of that liability through the processes envisaged by the Act. Being a machinery provision, it applies to all cases when amounts are in arrears from firms even though the liability might have accrued prior to April 1, 1989. He also refutes the allegation of violation of the principles of natural justice in completing the assessment, pointing out that the assessment has been completed under section 187 of the Act, in accordance with the procedure prescribed thereby. In C. V. George's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevance. The scope of the ratio in George's case [1976] 105 ITR 144 (Ker) [FB] was delineated by a Bench of this court in E. P. Eapen v. ITO [1978] 112 ITR 829 in these words (at page 834) "From the passages from the Full Bench decision quoted it is clear that what has been laid down is that recovery proceedings could be only against the assessee in terms of the assessment order, without importing the notion of joint and several liability contained in section 25 of the Partnership Act. The words 'as the scheme of the Act visualises proceedings being taken against the firm or the partners only if a liability is imposed under the provisions of the Act against the firm or the partners thereof' employed in the passages at page 149 of the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability of partners for tax payable by firm.-Every person who was, during the previous year, a 'Partner of firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable along with the firm for the amount of tax, penalty or other sum payable by the firm for the assessment year to which such previous year is relevant, and all the provisions of this Act, so far as may be, shall apply to the assessment of such tax or imposition or levy of such penalty or other sum. " What the section has purported to do is to make the partners jointly and severally liable, along with the firm, for the amount of tax, penalty or other sum payable by the firm. It is really a projection of the principle underlying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm from the partners during the subsistence of the firm. As stated by the Supreme Court in Gursahai Saigal v. CIT [1963] 48 ITR 1 (SC), the provisions of a taxing statute laying down the machinery for the calculation of the tax or the procedure for its collection have to be construed so as to effectuate the intention of the Legislature, which is to make the charge effective and to make the machinery of assessment workable. In my view, section 188A which does not cast any new liability on the partners, is liable to be invoked for recovery of all amounts remaining unpaid by firms, and authorises proceedings against the partners thereof even though the firms continue to subsist. The notices, exhibit P-7, series are thus warranted by the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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