TMI Blog1987 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... it petitions, the petitioners have indicated that the firm owns property, a three-storeyed building, shop No. 496 (old) and new number 116 situate at Sarafa Market, Meerut City, and, therefore, the tax liability should be realised from the aforesaid property of the firm. Notices of demand under rule 2 of the Second Schedule to the Income-tax Act, 1961, have been served upon the petitioners as is evident from annexure IV in Writ Petition No. 754 of 1986 as well as annexure VII in Writ Petition No. 830 of 1986. The notices of demand were in the name of the firm through the petitioners. In Writ Petition No. 754 of 1986, the petitioners' status has been described as " Hindu undivided family ". Again, through annexure V in the writ petition of Manohar Lal and annexure VIII in the writ petition of Padam Prakash, the petitioners have requested that the demand may be recovered by attachment and sale of shop No. 116 owned by the firm. The Tax Recovery Officer through annexure VII of the first writ petition and annexure IX of the second writ petition has asked the petitioners to show cause why the tax amount along with interest may not be realised from the petitioners and the date fixed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm and, therefore, the Department is within its jurisdiction to proceed against the petitioners and the grievances of the petitioners are wholly wrong and unjustified and that they deserve no relief in the writ petitions. The second submission made by counsel for the Department is to the effect that regarding the property of the firm known as shop No. 116 situate at Sarafa Market, Meerut, a suit by Satya Prakash Agarwal, Devi Prasad Agarwal and Smt. Padmavati is pending in the Court of the Civil judge, Meerut, as is evident from annexure I to the counter-affidavit. Therefore, the Department could not in law sell that property and realise the tax dues standing against the firm, M/s Raghunandan Prasad Manoharlal, from that property. In this connection, learned counsel for the Department has placed reliance upon the provisions of section 52 of the Transfer of Property Act and has emphasised that the allegations of the petitioners that the Department is proceeding against them in contradictory as well as arbitrary manner are wholly wrong and unjustified on the facts and circumstances of the present case. Learned counsel for the Department has submitted that relevant notices have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent or imposition of penalty or other sum. Explanation.-The amount of tax referred to in this sub-section shall also include that part of the share of each partner in the income of the firm before its discontinuance or dissolution which the firm could have retained under sub-section (4) of section 182, but which has not been so retained." To our mind, the aforesaid section only indicates joint and several liability of the partners of a dissolved firm to pay the tax levied against the firm. A similar question, as is involved in the present case, arose before the Mysore High Court which has been answered by a learned single judge of that court in P. Balchand v. TRO [1974] 95 ITR 321. The learned single judge has indicated that the mere existence of a liability to pay tax is not sufficient to recover the tax from the partners of the firm under the provisions of the Act of 1961. According to him, it is only from the defaulter shown in the certificate that the Tax Recovery Officer can recover the tax. A bare reading of annexures 2, 4, 7 and 13 attached to the writ petition numbered as 754 of 1986, Sri Manohar Lal v. CIT, would indicate that the aforesaid papers were in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut we have not been able to find any such provisions and learned counsel for the Revenue was unable to indicate any provision which deems a partner of an unregistered firm to be an assessee though the unregistered firm may itself have been assessed; or which deems a partner of an unregistered firm to be an assessee in default where the unregistered firm admittedly is the assessee in default." In the present case, the documents attached to the writ petition as well as the counter-affidavit indicate that the firm known as M/s. Raghunandan Prasad Manoharlal is the assessee and in the facts and circumstances of the present case, only the firm would be an assessee in default. Therefore, the action of the Department against the petitioners regarding their property in individual capacity and the notices under rule 73 of the Second Schedule to the 1961 Act are beyond the powers of the Tax Recovery Officer and the petitioners are entitled to the reliefs claimed in the writ petition with regard to the notices under rule 73 of the Second Schedule as well as the order issued regarding their properties under rule 32 of the Second Schedule. It is noteworthy that the petitioners were partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are strictly in accordance with law. It would not be out of place to mention here that learned counsel for the petitioners had halfheartedly contended that the recovery proceedings in the facts and circumstances of the present case stood vitiated in law as no fresh demand notice had been served upon the assessees in pursuance of the order passed by the Appellate Assistant Commissioner whereby the amount of tax was substantially reduced. Learned counsel for the Revenue met this argument by inviting our attention to the ruling in ITO v. Seghu Buchiah Setty [1964] 52 ITR 538 (SC) and the ruling in Gopi Chand v, Union of India [1976] 102 ITR 707 (P H) as well as the ruling in Union of India v. Jardine Henderson Ltd. [1979] 118 ITR 112 (SC). Our attention was also invited to the provisions of sections 3 and 5 of the Taxation Laws (Continuation and Validation of Recovery Proceedings) Act, 1964. A perusal of the ruling and the provisions of the Validation Act leads to an inference that no fresh notice of demand need be served upon the assessee in pursuance of reduction or enhancement of the tax in appeal. In the ruling in Union of India v. Jardine Henderson Ltd. [1979] 118 ITR 112, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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