TMI Blog1976 (9) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... The defendant No. 1 was a partnership firm and the other defendants were the partners thereof. On the 21st September, 1967, a decree was passed in the said suit against the defendants Nos. 1, 2, 4 and 5 for Rs. 70,672.74 with interest. On 11th of March, 1968, a decree was passed in the said suit against the defendant No. 3 only for Rs. 69,172.74 with interest. In execution of the said decree an order was made, on the application of the plaintiff-decree-holder, directing the Sheriff of Calcutta to sell by public auction the undivided right, title and interest of the defendants-judgment-debtors Nos. 2, 3 and 4 in the said premises. The said premises thereafter was attached and put up for sale by public auction by the Sheriff of Calcutta. Prior to the sale of the said property an application was made by the Union of India praying for the reliefs mentioned hereinabove. No ad interim order was passed staying the sale of the said premises and the same was sold during the pendency of the application and the sale proceeds are now lying in the hands of the Sheriff of this court. The notice of motion in respect of this application was taken out on behalf of the Union of India on the 10th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the aforesaid tax and penalty were not paid in spite of the notice of demand, the Income-tax Officer issued certificates under section 222 of the said Act. It was also stated that on 15th January, 1968, an application was made on behalf of the firm for registration of the firm for the assessment year 1967-68 under the Income-tax Act, 1961. Together with the said application for registration a copy of a new partnership deed dated 16th July, 1966, was filed. It appears that a dispute had arisen between Budhmull Sethia, the defendant No. 6. and the other partners of the said firm. The dispute had been sent for arbitration and an award was made pursuant to which Budhmull Sethia left the partnership firm and a new partnership firm came into existence on 15th April, 1966, which has been carrying on business under the name and style of Gulab Chand Dhanraj in co-partnership at No. 11, Noormull Lohia Lane in Calcutta, and the branch office at Ahmedabad. The partners of the new partnership firm are Champalal Sethia, Dhanraj Sethia, Tarachand Sethia and Manickchand Sethia. It is further stated that notices of demand to defaulters were served between 24th June, 1968, and 28th Aug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient to discharge the tax." He has submitted that there has been a discontinuance or dissolution of the firm within the meaning of section 189 of the said Act. The respondents Nos. 2, 3 and 4 were admittedly persons who were, at the time of such discontinuance or dissolution, the partners of the firm. The amount of tax and penalty as stated hereinabove was payable by the firm. The notices of demand were served on the firm. Under these circumstances these ex-partners are jointly and severally liable for the payment of taxes and penalty payable by the said firm in view of sub-section (3) of section 189 of the said Act. Accordingly, these persons are assessees within the meaning of section 2(7) of the said Act. Therefore, sub-section (4) of section 226 of the said Act was attracted and the Union of India was entitled to proceed against the said ex-partners for the amounts due by the said firm. In this connection Mr. Pal relied on the following decisions: C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC), Additional Income-tax Officer v. E. Alfred [1962] 44 ITR 442 (SC), Daya Ram v. Additional Collector [1966] 62 ITR 411 (Raj), Commissioner of Income-tax v. S. K. Basu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approach should be to assist the revenue authorities in recovering their just and legitimate dues. He submitted that the principles of strict interpretation, though applicable to a taxing statute, do not apply to all the taxing provisions. In this connection he relied on the following decisions: Commissioner of Income-tax v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC), Gursahai Saigal v. Commissioner of Income-tax [1963] 48 ITR 1 (SC) and other cases. Dr. Pal, followed by Mr. P. K. Pal, appearing on behalf of the respondents, at the outset submitted that the appellants should not be allowed to agitate the first point which involves questions of fact. On the merits he submitted that when a firm is an existing firm it is a distinct entity. It was strongly disputed that the said firm was dissolved or discontinued was no sufficient material before the court to come to such a finding, and accordingly section 189 had no application. In any event, he submitted that even if section 189 of the said Act applied, in the facts and circumstances of this case, the ex partners cannot be made liable for the amount of taxes payable by the firm. It was contended that a tax does not become due or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Madras Full Bench in Manickam Chettiar v. Income-tax Officer [1938] 6 ITR 180 (Mad) [FB] was no longer good law because that was a decision under the old 1922 Act. According to him the new Act provides a complete machinery for the recovery of the dues under the said Act and that it was exhaustive in nature. He also submitted that, in the absence of service of notice of demand, no tax or penalty was due either from the firm or any of its partners. The claim of the revenue authorities was very much disputed. Further, he drew our attention to section 49 of the Partnership Act and submitted that the procedure set out therein had to be followed in such a case. We shall take the third submission made on behalf of the appellant first inasmuch as, having regard to the conclusion we have arrived at regarding the same, we do not consider it necessary to express our opinion regarding the first two submissions of Mr. Pal. This amount was due, owing and payable by the said firm. Apart from anything else, the service of notice is a question of fact and having regard to the affidavit filed on behalf of the Union of India there is sufficient material before us to hold that there was suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody of the court in the course of the execution of a decree obtained by the decree-holder against the assessee, the arrears of income-tax due by the assessee might be paid in the first instance. Two questions were raised before the lower court by the decree-holder, namely, (1) whether the Government was entitled to priority, and (2) whether, as a matter of procedure, the petition by the Income-tax Officer to the civil court was sustainable. On both the points the lower court held against the decree-holder and directed payment to the Government in the first instance. A revision petition was filed against the same by the decree-holder before the Madras High Court. The matter was referred to a Full Bench. The Full Bench held that inasmuch as the Crown has priority over unsecured creditors in the payments of debts, the court can, on application and without a formal attachment being issued, order the payment of a Crown debt due by the debtor where there are funds in the court belonging to the debtor. Leach C.J. referred to the argument of the assessee that section 46 of the Income-tax Act (old) provides the modes of recovery and that the Crown was not entitled to adopt a different metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an application as it did. We are unable to accept the contention of Dr. Pal that the remedy provided by the said Act was the only remedy. This position has been made clear by the decision of the Madras High Court which was approved by the Supreme Court. In any event, this has been now made clear by the legislature by enacting section 232 of the said Act which is as follows: Section 232 "The several modes of recovery specified in this Chapter shall not affect in any way-- (a) any other law for the time being in force relating to the recovery of debts due to the Government; or (b) the right of the Government to institute a suit for the recovery of the arrears due from the assessee; and it shall be lawful for the Income-tax Officer or the Government, as the case may be, to have recourse to any such law or suit, notwithstanding that the tax due is being recovered from the assessee by any mode specified in this Chapter." We are also of the opinion that section 49 of the Partnership Act has no application in the facts of this case. Having regard to our findings as above it is not necessary to express any opinion regarding the first two submissions made on behalf of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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