TMI Blog1961 (3) TMI 141X X X X Extracts X X X X X X X X Extracts X X X X ..... l Somani Co., was started with Nathmal Hazarimal, Ramprasad Benilal, Rameshwar Mahadeo and the appellant as its partners. Ramprasad Benilal died in or about 1946. Thereupon, another partnership was formed in 1947 in the same name and style of Motilal Somani Co., with Nathmal Hazarimal, Rameshwar Mahadeo, Puranmal Pannalal and the appellant as its partners. (During the course of the judgment, we will refer to this partnership as the second partnership.) This partnership was dissolved in the year 1948. The exact date of dissolution has not been stated. Thereafter, in 1948 another partnership was formed in the name and style of Motilal Somani Co., with Puranmal Pannalal and the appellant as partners. (We will refer to this partnership as the third partnership.) This partnership was also dissolved in 1955. After the dissolution of the said partnership, the business was carried on by the appellant alone in the name and style of Motilal Somani Co. On December 15, 1955, the appellant sent an intimation to the Income-tax Officer under section 25(2) of the Income-tax Act, to the effect that the firm of Motilal Somani Co., was dissolved as and from November 14, 1955, by the mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. The challenge raised on behalf of the appellant before the learned judge, dealing with the petition, was two-fold. In the first instance, it was contended that the notice under section 34 addressed in the name of Messrs. Motilal Somani Co., was bad in law. A 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, i.e., who were partners during the accounting year 1947-48. The argument of Mr. Palkhivala was that that firm was dissolved in the year 1948, and was not in existence at the time the notice under section 34 was issued some time in March, 1958, and, therefore, the notice in the name of the firm could not have been issued. When an assessment is sought to be made against a firm that stood dissolved, it could only be made either under section 26 or under section 44. Section 26, however, was not applicable to the facts of the present case, because the business of the firm of the firm of Motilal Somani Co., was discontinued in the year 1948 upon its dissolution, and, therefore, the apposite provisions of law were section 44 of the Act, and that required issuing of notices aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the last known address of the firm. Consistently with these findings, the learned judge dismissed the petition. Feeling aggrieved by that decision, the appellant has preferred this appeal. 6. Mr. N. A. Palkhivala, who appears for the appellant, raised before us also two contentions. In the first instance, he contends that on the date of the issue of the notice, i.e., in March, 1958, the firm that was doing business for the accounting year 1947-48 (Samvat year 2004) had been dissolved, and, therefore, the issuing of notice in the name of the non-existent firm was bad in law. During the course of the argument, he stated that he accepts the findings of the learned judge that this was not a case of discontinuance of the business falling under section 44 of the Act, but was a case of succession of the business within the meaning of section 26 of the Act. But, according to him, sub-section (2) of section 26 has no application to the facts of the present case. The subject-matter of that sub-section is apportionment of profits of an accounting year when in the middle of an accounting year, a person carrying on business, profession or vocation, has been succeeded in such capacity by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, it would not be apposite to say that it was 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. Turning to the averments made by the appellant in the petition, we do not find any specific averment that the third firm succeeded to the business of the second firm. On the other hand, as already stated, the case urged by the appellant before the learned judge was that the business of the second firm was dissolved. No doubt, there is some material on record, namely, the letter written by the appellant on December 15, 1955, to the Income-tax Officer which may lead to an inference that the appllant had succeeded to the business of the third firm but there is no material at all on record to show that the third firm had succeeded to the business of the second firm. On the averments in the petition, and the contentions raised by the appellant at the trial stage, the case urged by him was one under section 44. If that be the true position, then the submission made on behalf of the appellant that in a case falling under section 44, notice cannot be issued against the firm, but wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is actual share, if any, of the income, profits and gains of the previous year. To accept the contention of Mr. Palkhivala, it would be necessry to read during the course of accounting year after the clause in such capacity occurring in the sub-section make it abundantly clear that sharing of profits of any particular accounting year between the person carrying on business and the person succeeding to him is not a condition precedent to its application. On the terms of sub-section (2), in our opinion, case where succession takes place at the end of the accounting year would also fall within the scope and ambit of that sub-section. The finding recorded by the learned judge, therefore, on this aspect of the case is not open to challenge. 10. Even assuming that the provisions of sub-section (2) of section 26 are not attracted to the facts of the present case, the succession to the business of the second firm by the third firm having taken place at the end of the accounting year 1947-48, in our opinion, it was open to the Income-tax Officer to issue a notice under section 34 of the Act in the name of the firm even though it stood dissolved at the time of the issue of the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the second firm even though at that time it had already been dissolved. No objection was raised to the assessment by the second firm on the ground of its dissolution. The second firm thus being the original assessee, section 34 enables the Income-tax Officer to issue notice against that assessee, and, therefore, in our view, the notice issued under section 34 in the name of the second firm was not bad in law. It is, therefore, not possible to accept the contention of Mr. Palkhivala that the dissolution of the second firm in 1948 came in the way of the Income-tax Officer from issuing a notice under section 34 in the name of the firm. We find support for the view taken by us in the two dicisions of their Lordships of the Supreme Court in Lakshminarain Bhadani v. Commissioner of Income-tax and Y. Narayana Chetty v. Income-tax Officer, Nellore. In Laxminarain Bhadani v. Commissioner of Inconme-tax the facts were that a joint Hindu family, of which the appellant before their Lordships was the karta, was assessed to income-tax for the year 1939-40. In 1944 the Income-tax Officer considered that certain income of the family taxable in 1939-40 had escaped assessment. In the meanwhile, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solved firm. A contention was raised before their Lordships that, in view of the dissolution of the firm, notice under section 34 ought to have been issued against the individual partners of the firm. That not having been done, the proceedings taken under section 34(1) were invalid and bad in law. Repelling this contention, their Lordships observed : Mr. Sastri concedes that under section 63(2) a notice or requisition under the Act may in the case of a firm be addressed to any member of the firm but his contention is that this applies to a firm in existence and not to a firm dissolved. If the appellants' case is that as a result of dissolution of the firms, the firms had discontinued their business as from the respective dates of dissolution, they ought to have given notices of such discontinuance of their business under section 25(2) of the Act. Besides, in the present case, the main appellant has in fact been served personally and the other partners who may not have been served have made no grievance in the matter. We are, therefore, satisfied that it is not open to the appellants to contend that the proceedings taken by the Income-tax Officer under section 34(1) are inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould have considered the report and then held the service good. Suffice it to say that exhibit G , page 19 of the record, collectively shows that Mr. Thade, the serving officer, before effecting the service, by affixing it to the business premises, had made a report to the Income-tax Officer. On a perusal of the report, the Income-tax Officer ordered Mr. Thade to effect service by affixing it to the business premises. thereafter, Mr. Thade went to effect the service. He again was unable to get information about the whereabouts of the assessee. He then effected service of the notice under section 34 by affixing a copy thereof to the business premises. Thereafter, he made a report of these facts to the Income-tax Officer (page 18 of the record) and on perusal of the report, the Income-tax Officer has made an order on March 28, 1958, in the following terms : I am satisfied that the service is in order . This being the material on record, it is difficult to accept the contention of Mr. Palkhivala that the provisions of Order V, rule 19 had not been complied with. The second contention, therefore, in our opinion, also should fail. 14. In the result, the appeal fails and is dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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